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What Process Is Due in Tax Sale Cases?; Indiana Land Trust Company v. XL Investment Properties

On Behalf of | Jan 10, 2023 | Blog

People are always entitled to due process before their property is taken away in a judicial proceeding. But this begs the question—what process is due in a particular case?

In this case, the Indiana Supreme Court dealt with this question in tax sale cases, and the answer is, “It depends.”

Dellaportas owns Midwest Investment, Inc. He bought 140 acres in Michigan City in the early 1990s, and he developed that property for commercial tenants. Lot 2 was a nearly 30-acre undeveloped plat contained within the greater development.

Dellaportas transferred the property to Trust 4340 in 1993. The deed for that transfer said that tax bills should be sent to Midwest on LaSalle Drive in Chicago. Midwest moved numerous times after this, landing at Clark Street in Chicago in 2016.

Lot 2’s property taxes were paid through 2008, but no taxes were paid from 2009 to 2015. This resulted in a tax liability of over $230,000.

An adjacent lot placed in the same trust underwent a tax sale and was ultimately redeemed. Midwest updated its address with the Auditor on this other property, but the records for Lot 2 were not updated in the Auditor’s system.

In the meantime, the LaPorte County Auditor hired SRI to prepare tax sale notices. SRI agreed to skip trace addresses for owners if notices were not successfully delivered via the mail. The Auditor also agreed to search its records for a better address.

SRI sent notice of the tax sale on Lot 2 on July 31, 2015 via first-class and certified mail. The first-class mail was not returned, but the certified mail was returned as undeliverable. The Auditor then published the notice in local newspapers three times.

SRI performed a skip trace, but it was unsuccessful. And the Auditor did not search its own internal records to see if it had a better address because it believed it had no obligation to do so as the first-class mail was not returned. Lot 2 was eventually sold to XL Investment.

After XL Investment bought the property, notices of redemption and of filing a petition for a tax deed were returned as undeliverable, and the notices were again published in the newspaper. XL Investment obtained the tax deed and filed a quiet title action. At this point, Trust 4340’s registered agent was identified, and the Trust was successfully notified of what had occurred.

Trust 4340 moved to set aside the tax sale, but that motion was denied. The trial court found that SRI and the Auditor substantially complied with the tax sale notice statute and that the proceedings complied with due process. This was reversed on appeal, and the Indiana Supreme Court granted transfer.

On transfer, the Court made it clear that it was looking at what happened in this case, not to the constitutionality of the notice scheme generally.

The basic issue presented in this case is not whether Indiana’s tax sale notice statute is constitutional. As we discuss below, it is not our duty to prescribe the form of service the government should follow when certified mail is returned as undeliverable. Rather, we must ensure the basic requirements of due process are met in a particular case. Whether a county auditor could or should search its own records for a better tax sale notice address depends on the information revealed to him or her when mail is returned. Necessarily, it follows that these determinations depend on the facts and circumstances of each case.

When deciding whether the notice in this case gave Trust 4340 due process, the Court looked to a recent case from the Supreme Court of the United States, Jones v. Flowers, 547 U.S. 220 (2006), which “made several foundational observations” that guided the Indiana Supreme Court’s analysis. After reviewing Jones and cases to which the Indiana Supreme Court had applied Jones, the Court summarized “several key lessons” from these decisions:

First, we know that the Due Process Clause of the Fourteenth Amendment “requires the government to provide notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Second, while actual notice is not required, id. (citation omitted), the government must take additional reasonable steps if practical when notice via certified mail is returned. Third, to assess the constitutional adequacy of the means of notice employed, “the interest of the State” must be balanced against “the individual interest sought to be protected by the Fourteenth Amendment.” This balancing of interests depends on the class of interest
at stake.

Thus, the Court framed the question in this case as “whether the Auditor acted or failed to act ‘as one desirous of actually informing’ Trust 4340 of the impending tax sale.” And it found that the Auditor met this test.

Indiana’s notice statute requires that notice be sent via both first-class and certified mail to the last address on record at the date the tax sale list is certified. And the statute only requires that “the auditor take an additional reasonable step if practical” if both notices are returned. And a returned notice does not require that an auditor review its records in all cases.

That is not to say a county auditor is never required to search his or her internal records. Rather, an auditor’s responsibility lies in what is learned after notice is given in a particular case. In addition to striking this internal-search requirement, the 2015 amendments to the tax sale notice statute also added the requirement that the auditor “take an additional reasonable step to notify the property owner, if the county auditor determines that an additional reasonable step to notify the property owner is practical.”

In this case, Trust 4340 argued that since the notice sent via certified mail was returned as “Not Deliverable as Addressed—Unable to Forward,” rather than “Unclaimed,” that the Auditor should have known that the notice sent via first-class mail to the same address would not have been delivered. But the Court disagreed.

The first-class mail in this case, however, was sent contemporaneously with the certified letter. … One could reasonably assume the unreturned first-class mail in this case indicated to the Auditor that the mail was received by the intended recipient. We do not think that under these circumstances, the Auditor was required to speculate any further.

Thus, the notice sent by SRI was sufficient, and the tax sale properly took place. The trial court’s order denying the motion to set aside that sale was affirmed.

1. An auditor must notify a property owner by regular and certified mail if real estate is subject to a tax sale.
2. An auditor’s obligation to send a second notice if the first is returned depends on what the auditor learns from the manner of return.
3. If the notice sent by regular mail is not returned and the one sent via certified mail is returned as undeliverable, then the auditor has no further obligation to send notice.