Indiana Land Trust Company, f/k/a Lake County Trust Company TR 4340 v. XL Investment Properties, LLC, and LaPorte County Auditor , 130 N.E.3d 630 ( 2019 )

FILED
Jul 30 2019, 5:52 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
Greg A. Bouwer XL INVESTMENT PROPERTIES,
Jeff Carroll LLC
Koransky Bouwer & Poracky, P.C. Matthew J. Hagenow
Dyer, Indiana Newby, Lewis, Kaminski & Jones,
LLP
LaPorte, Indiana
ATTORNEY FOR APPELLEE
LAPORTE COUNTY AUDITOR
J. Alex Bruggenschmidt
Buchanan & Bruggenschmidt,
P.C.
Zionsville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Indiana Land Trust Company, July 30, 2019
f/k/a Lake County Trust Court of Appeals Case No.
Company TR #4340, 18A-MI-2150
Appellant-Movant, Appeal from the LaPorte Superior
Court
v.
The Honorable Richard R.
XL Investment Properties, LLC, Stalbrink, Jr., Judge
and LaPorte County Auditor, Trial Court Cause No.
Appellees-Respondents 46D02-1509-MI-1642
Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019 Page 1 of 15
Baker, Judge.
[1] Indiana Land Trust Company, f/k/a Lake County Trust Company TR #4340
(Trust 4340), appeals the judgment of the trial court denying its motion to set
aside a tax deed and quiet title judgment issued to XL Investment Properties,
LLC (XL Investment). Trust 4340 argues that the trial court erroneously
determined that the motion to set aside was untimely filed and the tax sale
notice process employed by the LaPorte County Auditor (the Auditor) was
statutorily and constitutionally insufficient. Finding that the motion to set aside
was not untimely and that the notice process was constitutionally insufficient,
we reverse and remand for further proceedings.
Facts 1
[2] Peter Dellaportas is a decades-long real estate developer who owns many
investment properties. At some point in the past, Dellaportas purchased a 140-
acre property, which used to be a municipal airport, in Michigan City. The
property has since been subdivided into multiple parcels, some of which have
been developed for commercial use.
[3] Dellaportas’s company, located in Chicago, is called Midwest Investment. In
June 1993, Dellaportas put one of the undeveloped parcels, totaling
approximately thirty acres (the Property) into a trust, Trust 4340, with either
1
We held oral argument in Indianapolis on July 2, 2019.
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himself or Midwest Investment as the beneficiary. Lake County Trust
Company (the Trust Company) was the entity that helped him process and
finalize the trust.
[4] The deed directed that property tax bills for the Property should be sent to
Midwest Investment at 415 North LaSalle Street, Suite 700, in Chicago. In
1994, Midwest Investment relocated to Suite 200 in the same building and
remained there for approximately ten2 years. In 2014, Midwest Investment
moved to 432 North Clark Street, Suite 304, in Chicago. Midwest Investment
did not update the Auditor with its changes of address.
[5] Midwest Investment paid the property taxes on the Property from 1993 through
2008 but failed to pay any property taxes from 2009 through 2015. In 2015,
LaPorte County (the County) determined that the Property’s outstanding tax
liability totaled $230,017.26.
[6] The County held a tax sale in 2015 (the Tax Sale); the certified Tax Sale list
included the Property. The County engaged SRI, Inc. (SRI), a local
government contractor, to assist with various aspects of the tax sale process,
including the mailing of thousands of tax notices. The Work Plan Agreement
entered into between the County and SRI stated that the parties (including SRI,
the Auditor, and the Treasurer) would “individually or collectively perform or
2
Dellaportas testified that Midwest Investment remained in Suite 200 for ten years, but the next change of
address he mentioned occurred in 2014. Tr. Vol. II p. 25, 27.
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cause to be performed by employees of their organization the actions defined
herein which are required to execute the County Tax Sale in compliance with
Ind. Code 6-1.1-24 and Ind. Code 6-1.1-25.” Tr. Ex. 21. The Work Plan
Agreement also stated that “the Auditor agrees to search its internal records for
a better address for the owner(s) of properties for which the certified mail
notices are returned and provide the results of said searches to SRI . . . .” Id.
[7] In 2015, the General Assembly amended Indiana Code section 6-1.1-24-4.
Following that amendment, the Auditor believed it no longer had an obligation
to search for a better address if certified mail notices were returned as
undeliverable.
[8] On July 31, 2015, SRI prepared the notice of the tax sale of the Property and
sent it by certified mail (the Certified Mail Notice) to Trust 4340 at Suite 700 on
North LaSalle Drive. The Certified Mail Notice did not contain a street
address or common description of the Property. The Certified Mail Notice was
returned, stamped “Return to Sender, Not Deliverable as Addressed, Unable to
Forward,” and bore a handwritten note stating “refused.” Tr. Ex. 24. The
notice was also mailed to the same address on the same date by regular, first-
class mail (the First Class Notice). The First Class Notice was not returned.
[9] SRI generated a “returned mail to search” list for all entities that were sent
notices of the Tax Sale; the list included Trust 4340. In August 2015, SRI
performed an additional search for addresses of those entities, but evidently was
unable to find the current address for Trust 4340 and/or Midwest Investment.
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[10] On August 7, 2015, the address for tax notices for Trust 4340 and the adjacent
parcel was changed in the LaPorte County system used by the Auditor and
assessor. Beginning on that date, the system listed the correct, current address
on North Clark Street.
[11] The Auditor did not undertake any effort to find current addresses for property
owners whose certified mail was returned as undeliverable. Although SRI
posted to its website if first class or certified mail was returned, no one from the
Auditor’s office ever checked that website to determine if mail had been
returned. There was never a point in the process when the Auditor looked for
returned mail or took any action related to it. Indeed, employees of the Auditor
readily admitted they took no action:
• “Q: Did you search your internal records for this parcel, to your
knowledge? A: I just answered that. We did not because the first-class
mail was not returned. Shall I say it slower?” Tr. Vol. II p. 71.
• “Q: You didn’t have to do anything[?] A: No. Q: So you didn’t make
any type of determination on whether or not to search for another
address? A: No, we did not. We didn’t search for anything. Q: So you
could [not] have cared less if the notices were returned[?] A: That’s
right.” Appellant’s App. Vol. III p. 59.
The Auditor published notice of the Tax Sale in the local newspaper three times
before the Tax Sale.
[12] Dellaportas and Midwest Investment remained unaware of the Tax Sale. In
October 2015, the Tax Sale took place, but the Property did not sell. Therefore,
the County placed it for sale at a Live Certificate Sale in February 2016. The
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County published notice of the Live Certificate Sale. XL Investment purchased
the Property for $155,000. XL Investment filed a petition for a tax deed for the
Property. The trial court entered an order issuing the deed on August 30, 2016.
The deed was signed on September 30 and recorded on October 4, 2016. At
some point, XL Investment filed a quiet title action, which finally resulted in
notice to Trust 4340 on December 9, 2016.
[13] On March 9, 2017, Trust 4340 moved to set aside the judgment and tax deed.
A bench trial took place on April 13, 2018, and on August 9, 2018, the trial
court denied Trust 4340’s motion. In pertinent part, the trial court found as
follows:
44. [The Notice] was sent by first class mail and certified mail
to the owner of record at the last address of record. The
first class mailing was not returned, leaving the Auditor
under no obligation to take additional steps to notify the
property owner.
***
46. Per statute, the owner of the Property was to notify the
County of a change in address and did not.
***
48. The Court finds that although the Tax Sale notice did not
include the property address or other description of the
property, the Auditor and SRI still substantially complied
with Indiana Code § 6-1.1-24-4 by providing the pin
number and legal description and could not provide any
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address or other description because the property was
vacant.
***
77. Due process does not require that a property owner receive
actual notice before the government may take his property.
Rather, we have stated that due process 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.” Jones v. Flowers, 547 U.S. 220(2006).
78. When mailed notice of a tax sale is returned unclaimed,
the State must take additional reasonable steps to attempt
to provide notice to the property owner before selling his
property, if it is practicable to do so. Id.
79. . . . In the present case, the Auditor sent two mailings, one
via first class mail and one via certified mail. Although the
certified mail was returned, the first class mailing was not
returned.
80. The Court in Jones held that when a mailing is returned
unclaimed, additional steps must be taken to provide
notice. Id. The County in the present case took that
additional step when they sent two mailings through two
different methods. They also went a step further and
published notice of the pending Tax Sale three times in the
local paper.
***
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84. Therefore, the County’s efforts to notice the Trust prior to
the tax sale were reasonably calculated to appraise [sic]
Trust 4340 of the tax sale proceedings against the property
and it was reasonably certain that the first class mailing
informed those affected because it was never returned.
***
90. The Court finds that the Trust did not file its petition for
relief within a reasonable amount of time for the following
reasons:
1. The Trust did not pay real estate taxes on the
Property for eight (8) years.
2. The Trust acquired the property in 1993. Despite
multiple moves over several years, the Auditor was
never provided with an updated address by the
Trust.
***
4. Peter Dellaportas testified to be an experienced real
estate developer who knew or should have known
that real estate taxes are due each year and the
subsequent consequences for not paying them.
Appealed Order p. 8-16. Trust 4340 now appeals.
Discussion and Decision
[14] Trust 4340 raises multiple arguments on appeal, which we reframe and restate
as follows: (1) the trial court erroneously determined that Trust 4340’s motion
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to set aside the tax deed and judgment was untimely filed; and (2) the trial court
erroneously determined that the notice was sufficient under statutory and
constitutional law and under the Work Plan Agreement.
I. Timeliness
[15] As noted above, the trial court found that Trust 4340's petition to set aside was
untimely filed. It based this conclusion on several factors: (1) Trust 4340 did
not pay real estate taxes on the Property for eight years; (2) Trust 4340 did not
update the Auditor on its address changes; (3) XL Investment took the extra
step of publishing notice of the tax proceedings in a local newspaper; and
(3) Dellaportas is an experienced real estate developer who knew or should
have known about the consequences of failing to pay property taxes on
time. Trust 4340 maintains that these are improper reasons to find that its
petition was untimely filed.
[16] As a general rule, a property owner may not contest a tax deed if more than
sixty days have passed since the trial court entered its order issuing the
deed. Ind. Code § 6-1.1-25-4.6(l). There is a due process exception extending
this period to a “reasonable time,” which will vary with the circumstances of
each case. Edwards v. Neace, 898 N.E.2d 343, 347-48 (Ind. Ct. App. 2008)
(noting that delays in excess of one year can be reasonable depending on the
circumstances).
[17] Here, XL Investment served Trust 4340 with the summons and complaint in a
quiet title action on December 9, 2016. It is undisputed that this was the first
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notice of the tax proceedings that Trust 4340 actually received. It filed its
motion to set aside on March 9, 2017, exactly three months later (over six
months after August 30, 2016, when the trial court ordered the Auditor to issue
a tax deed to XL Investment).
[18] The trial court’s rationale for finding the motion untimely filed primarily
focuses on the length of tax delinquency, as well as Trust 4340’s actions, before
the tax sale, rather than the period of time that elapsed after the tax deed was
issued. There is no caselaw supporting this analysis. By their very nature, tax
sales always occur after a period of tax delinquency, often a lengthy
one. Therefore, if trial courts could focus on the period of delinquency as
opposed to the period of time elapsed after the tax sale occurred, there would be
no point in the “reasonable time” exception.
[19] We find that under the circumstances of this case, a delay of six months after
the trial court ordered the Auditor to issue a tax deed—which was only three
months after Trust 4340 first received notice of the proceedings—was
reasonable. Therefore, the trial court erred by finding the motion to set aside
untimely filed.
II. Notice of Tax Sale
[20] Before the legislature amended Indiana Code section 6-1.1-24-4 in 2015, it was
well established that due process required county auditors to search their own
records. E.g., City of Elkhart v. SFS, LLC, 968 N.E.2d 812, 817 (Ind. Ct. App.
2012) (noting that due process “requires the county auditor to search the
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records that it maintains” in its office); Hullett v. LaFevre, 926 N.E.2d 524, 528
(Ind. Ct. App. 2010) (same); Edwards, 898 N.E.2d at 349 (same); Reeder Assocs.
II v. Chicago Belle, Ltd., 778 N.E.2d 828, 834 (Ind. Ct. App. 2002) (same).3 This
caselaw does not condition the records search on other events, nor does it deem
it a factor in a totality of the circumstances type of determination as to whether
proper tax sale notice has been provided. Instead, it is black and white: an
auditor is charged with knowledge of the contents of its records and is
constitutionally obligated to search those records.
[21] It is axiomatic that the General Assembly may not legislate away constitutional
due process protections. See Flanner House of Indianapolis, Inc. v. Flanner House
Elem. Sch., Inc., 88 N.E.3d 242, 252 (Ind. Ct. App. 2017) (noting that legislative
actions “must not interfere with constitutional rights”); cf. State v. Rendleman,
603 N.E.2d 1333, 1336 (Ind. 1992) (noting that the legislature may modify or
abrogate common law rights “so long as such change does not interfere with
constitutional rights”). Indeed, the purpose of Indiana Code section 6-1.1-24-4
is “to codify the applicable due process protections and instruct the auditor on
how to provide constitutionally sufficient notice.” Farmer Mut. Ins. Co. v. M
3
The Auditor argues that the United States Supreme Court upended years of Indiana caselaw when it
decided Jones v. Flowers, 547 U.S. 220, 229 (2006). But in the years following Jones, Indiana courts have
continued to enforce unequivocally an auditor’s constitutional obligations to be aware of and search its own
records. See City of Elkhart, 968 N.E.2d at 817; Hullett, 926 N.E.2d at 528; Edwards, 898 N.E.2d at 349; see
also Marion Cty. Auditor v. Sawmill Creek, LLC, 964 N.E.2d 213, 218-20 (Ind. 2012) (noting that Jones informed,
but did not alter, the long-standing due process protections put in place by Mullane v. Cent. Hanover Bank &
Trust Co., 339 U.S. 306 (1950)).
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Jewell, LLC, 992 N.E.2d 751, 759 (Ind. Ct. App. 2013).4 Therefore, “to interpret
the statute in a manner that conflicts with or provides less protection than the
Due Process Clause would frustrate its clear legislative purpose.” Id. In fact, in
this case, the Work Plan Agreement between SRI and the Auditor required the
Auditor to search its own records for a better address for the owners of the
properties for which certified mail notices were returned—a provision that SRI
believed was intended to ensure that the tax sale notices complied with due
process. Tr. Vol. II p. 113.
[22] Therefore, regardless of the language of Indiana Code section 6-1.1-24-4, the
Auditor is charged with knowledge of the contents of its records and is
constitutionally obligated to search those records. Here, it is undisputed that it
did not do so.
[23] The attempts the Auditor made to locate Trust 4340 were constitutionally
insufficient. First, the Auditor published notice of the sale in a local newspaper,
but notice by publication is looked on with extreme disfavor in a tax sale
situation. Jones, 547 U.S. at 237-38 (noting that publication is adequate only
where it is not reasonably possible or even practicable to give more adequate
warning). Second, the Auditor, through SRI, conducted an additional search
after the certified mailing was returned as undeliverable. But a search of other
4
The Auditor directs our attention to Badawi v. Orth for the proposition that tax sale notices comport with
due process requirements if they are sent in accordance with relevant statutes. 955 N.E.2d 849, 853-54 (Ind.
Ct. App. 2011). But Badawi concerns statutory due process rather than constitutional due process—a key
distinction that renders Badawi inapposite.
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records and databases does not comport with due process where the Auditor
failed to search its own records first. See Reeder Assocs. II, 778 N.E.2d at 835(holding that while “a county auditor may go beyond the minimum
requirements of due process and engage in a search of outside records, it may
not do so in lieu of a search of its own record”).
[24] Third, the fact that the Auditor mailed a notice by first class mail (which was
not returned) in addition to certified mail is not enough to satisfy due process
given that the certified mail attempts were returned as undeliverable. Our
appellate courts have distinguished between different ways in which certified
mail is returned. If it is returned as “unclaimed and unable to be forwarded,”
the auditor satisfies due process when it also sent the notice via first class mail
and took other reasonable steps to attempt to notify the property owner. Floor
Essence, LLC v. Marion Cty. Auditor, 14 N.E.3d 883, 885 (Ind. Ct. App. 2014). If,
on the other hand, it is returned and stamped “not deliverable as addressed,
unable to forward,” as it was in this case, then “re-mailing the notice by first
class [is] unreasonable.” Marion Cty. Auditor v. Sawmill Creek, LLC, 964 N.E.2d
213, 220 (Ind. 2012); see also M&M Inv. Group, LLC v. Ahlemeyer Farms, Inc., 994
N.E.2d 1108, 1117 (Ind. 2013) (affirming Sawmill reasoning).
[25] It is true that here, in addition to being stamped as undeliverable and unable to
forward, the first certified mail attempt was returned bearing the word
“refused” in handwriting. Not only is there no indication of who wrote it or
who “refused” it, the official Post Office stamp indicates that the mail was not
deliverable. Given such a conflict and our preference for erring on the side of
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due process protections, we believe that the official Post Office stamp and label
must control. Here, the Post Office deemed the notice to be not deliverable as
addressed and unable to forward; therefore, the act of sending the notice via
first class mail was insufficient to comply with constitutional due process.
[26] It has long been settled in Indiana that to comply with due process in tax sale
proceedings, county auditors are charged with the knowledge of their own
records and are required to search those records.5 The General Assembly does
not have the authority to codify away constitutional protections. Therefore,
despite the language of Indiana Code section 6-1.1-24-4, the Auditor was
required to search its records for a better address for Trust 4340 after the
certified mail notice was returned as not deliverable. 6 Under these
circumstances, the trial court erred by denying Trust 4340’s motion to set aside
the tax deed and quiet title judgment. Consequently, we reverse and remand. 7
5
We note that in this day and age of digitized records, this is not a monumental task. The unchallenged
testimony provides that after August 7, 2015, the Auditor would have been able to locate the correct address
for Trust 4340 in its internal, searchable “Low” system. Tr. Vol. II p. 115; Tr. Ex. 8. And in any event,
courts of this State have rejected an argument that such a search would be difficult or futile. E.g., Farmers
Mut. Ins. Co., 992 N.E.2d at 756 (holding that this Court “could not agree that noncompliance . . . may be
excused if it is later determined that such a search would have been fruitless”).
6
We note that the fact that Trust 4340 did not keep its changes of address updated with the Auditor is
irrelevant to the Auditor’s exercise of constitutional duties. See Farmers Mut. Ins. Co., 992 N.E.2d at 758-59
(noting that the Jones Court “rejected any suggestion that a landowner’s failure to comply with a statutory
obligation to keep his address updated forfeited his right to constitutionally sufficient notice” and holding
that “a landowner’s failure to provide the auditor’s office with a correct mailing address [cannot] excuse[] the
auditor’s failure to carry out his duties”).
7
We need not address Trust 4340’s other arguments. But we note that we have significant concerns about
the substantive content of the notice. Specifically, the notice provided neither a street address—which is not
surprising, given that the land was undeveloped and had no address—or a common description of the
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[27] The judgment of the trial court is reversed and remanded for further
proceedings.
May, J., and Tavitas, J., concur.
Property. We question whether this notice complied with Indiana Code section 6-1.1-24-4(b)(2), which
requires that a tax sale notice must contain either a street address or a common description of the property.
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