McCann v. Scaduto , 510 N.Y.S.2d 149 ( 1986 )

OPINION OF THE COURT

Per Curiam.

The primary issue presented by this appeal, upon reargument, is whether the provisions of the Nassau County Administrative Code (hereinafter NCAC) dealing with the enforcement of collection of real estate taxes are unconstitutional on the basis that the NCAC does not require that actual notice of sale of the tax lien upon the owner’s property be served upon the property owner. The NCAC does, however, require that the property owner be served with actual notice, by certified mail, return receipt requested, of his right to redeem the outstanding tax lien prior to the expiration of the redemption period, after which time the lienholder is entitled to acquire absolute title to the subject premises. We conclude that the statutory scheme is constitutional and, accordingly, upon re-argument, adhere to this court’s prior holding which affirmed the dismissal of the petition (see, McCann v Scaduto, 118 AD2d 690).

I

Prior to a discussion of the facts of the case at bar, a review of the particular provisions of the NCAC applicable herein is warranted.¹ NCAC § 5-37.0 (a) requires the County Treasurer each year to compile a list of properties for which taxes have not been paid in the previous year. These outstanding taxes are designated as a "tax lien” against each of the respective properties (NCAC § 5-24.0 [4]) and the County Treasurer is then required to set a date in February of the following year for the sale of said liens (NCAC §§ 5-37.0, 5-39.0 [a]). The list, along with notice that the tax liens will be sold unless the outstanding charges are paid by that date, is required to be published three times in a newspaper of general circulation (NCAC § 5-37.0 [a], [c]). The tax liens for which payment has not been made by the date specified in the published notice are then sold at a public auction to the bidders who offer to accept the lowest rate of interest on the outstanding balance of the tax lien (NCAC § 5-39.0 [a], [former b]; § 5-40.0). The code provisions in question did not provide for actual notice of the sale of the tax lien upon the property owner.

A two-year redemption period begins to run once the tax lien is sold, during which time the property owner may satisfy the tax lien by making payment to the County Treasurer of the outstanding taxes, interest, penalty, and expenses regarding the lien (NCAC §§ 5-48.0, 5-50.0). Commencing no later than 21 months after the tax lien sale, the purchaser of a tax lien is required to serve a three-month notice to redeem by certified mail, return receipt requested, upon the record owner or owners, mortgagee or mortgagees, prior lienholder or lien-holders, and other specified parties (NCAC § 5-51.0).

Under the provision in question, the notice essentially informed the recipient that title to the property would be conveyed to the lienholder unless the lien is redeemed by the end of the redemption period (NCAC § 5-51.0 [former b] [4]). If the property owner failed to redeem the tax lien within the specified three-month time period, the lienholder could either commence a formal real property foreclosure proceeding to obtain title or, in the alternative, apply to the County Treasurer to obtain a deed of conveyance to the property (NCAC § 5-51.0 [former b]). If the lienholder chose the latter alternative, the County Treasurer, upon receipt of the three-month notice to redeem together with proof of service, issued a deed of conveyance to the lienholder (NCAC § 5-51.0 [e]; § 5-53.0). The deed of conveyance vested absolute title in fee to the lienholder and constituted presumptive evidence that all of the proceedings leading up to the conveyance (i.e., the sale of the tax lien and service of the notice to redeem) were validly performed (NCAC §§ 5-53.0, 5-54.0 [b]).

II

The facts of this proceeding are essentially undisputed. The petitioner Helene McCann (Mrs. McCann) was the owner of real property located at 22 Clayton Avenue, Floral Park, in the County of Nassau during the period from June 1953 to June 1984. During the latter term of her period of ownership of the premises, Mrs. McCann had developed a history of failing to timely pay the taxes assessed against her property. For example, in 1973 Mrs. McCann failed to make payment of her real estate taxes and, as a result, in February 1975 a tax lien on her premises was sold to one Sadie Schwartz. That tax lien was ultimately redeemed by Mrs. McCann in June 1975. Similarly, in June 1976 and again in February 1979, tax liens upon Mrs. McCann’s property were sold to the respondent Shirley Stone. Both of these liens were also eventually redeemed by Mrs. McCann.

Finally, in 1981, Mrs. McCann again defaulted in the payment of school taxes assessed against her property for the fiscal year 1980-1981. Pursuant to the statutory scheme set forth in NCAC § 5-37.0, respondent Scaduto caused to be published a notice of a tax lien sale on Mrs. McCann’s property in Newsday for the requisite three-week period.² Thereafter, on February 16, 1982, the tax lien on Mrs. McCann’s property was sold to the respondent Stone and a certificate of sale of the tax lien was issued.

As required by NCAC § 5-51.0, on December 17, 1983, the respondent Stone sent a notice to redeem to Mrs. McCann, via certified mail, return receipt requested, informing her of the tax lien upon her property and stating that if Mrs. McCann did not redeem the tax lien on or before March 20, 1984, the respondent Stone would take a deed of conveyance to the subject premises. Mrs. McCann concedes that she received the notice to redeem on December 17, 1983. Despite her receipt of said notice, Mrs. McCann did not redeem the outstanding tax lien within the three-month period provided for in the notice. As a result, on June 20, 1984, the respondent Stone requested from the respondent Scaduto a deed of conveyance to Mrs. McCann’s property. A deed was issued on June 26, 1984.

Mrs. McCann claims that she first became aware that she no longer owned the subject premises when she sent a check to the respondent Scaduto for payment of the 1983-1984 school taxes assessed against her property. The check was returned to Mrs. McCann with a letter from the respondent Scaduto informing her that the respondent Stone held title to the premises by reason of Mrs. McCann’s failure to redeem the tax lien.

Mrs. McCann, together with her daughter, Teresa Rose McCann, and the petitioner William Lewis, an occupant of a portion of Mrs. McCann’s property, instituted a proceeding pursuant to CPLR article 78 in January 1985 seeking, inter alia, (1) to vacate the deed of conveyance issued to the respondent Stone for the subject premises; and (2) to permit Mrs. McCann to redeem the lien upon the premises which had been purchased by the respondent Stone. Special Term found that the deed of conveyance held by the respondent Stone to the subject premises was valid and accordingly dismissed the petition. The petitioners appealed Special Term’s judgment and this court affirmed (see, McCann v Scaduto, 118 AD2d 690, supra). The petitioner Helene E. McCann, represented by new counsel, moves, inter alia, for reargument of the appeal, and upon reargument, seeks to challenge the constitutionality of the applicable provision of the NCAC insofar as they deal with the enforcement and collection of real estate taxes.

Ill

Mrs. McCann takes the position that the provisions in question are unconstitutional on the basis that they fail to provide that a property owner receive actual notice of the sale of a tax lien levied on his property. We disagree. As the Court of Appeals recently stated, "there is no constitutional requirement that the owner receive personal notice of [a] tax sale * * * (Botens v Aronauer, 32 NY2d 243, app dsmd 414 US 1059; see, also, Ballard v Hunter, 204 US 241, 254-255; Lily Dale Assembly v County of Chautauqua [72 AD2d 950, affd 52 NY2d 943, cert denied 454 US 823]). Notification by publication is adequate” (Congregation Yetev Lev D’Satmar v County of Sullivan, 59 NY2d 418, 422).

The petitioner Helene E. McCann, however, relies heavily upon the recent United States Supreme Court case of Mennonite Bd. of Missions v Adams (462 US 791). In Mennonite, the court held that the Indiana tax statute which did not provide for actual notice to a mortgagee of a tax sale of a mortgaged premises, violated the due process rights of the mortgagee. Under the Indiana statute, as it then existed, only the record owner of the subject premises was provided with actual notice of the tax sale. The mortgagee was merely accorded notice by publication. The Mennonite court recognized, at the outset, that a mortgagee had a legally protected property interest that is significantly affected by a tax sale. The court then reaffirmed the principles set forth in Mullane v Central Hanover Trust Co. (339 US 306) in holding that where a property interest is at stake, a party must be afforded that degree of notice reasonably calculated under all the circumstances, to apprise interested parties of the pendency of the action. The Mennonite court concluded that as to the mortgagee, neither publication, posting nor mailed notice to the owner was sufficient since the mortgagee’s identity in that case was reasonably ascertainable by a review of the property records. Thus, since the mortgagee in Mennonite had received no actual notice whatsoever of the tax sale until after the period to redeem had passed, the court ruled that the mortgagee’s due process rights under the 14th Amendment were violated.

Applying the aforesaid principles to the case at bar, and keeping in mind the presumption of constitutionality which applies to legislative enactments (see, Matter of Brown-Forman Distillers Corp. v State Liq. Auth., 64 NY2d 479, 485; Montgomery v Daniels, 38 NY2d 41, 54-56), we find no constitutional infirmity with the particular provisions of the NCAC challenged herein. Several key distinctions exist between the Nassau County tax scheme in question and the Indiana statute found to be unconstitutional in Mennonite Bd. of Missions v Adams (462 US 791, supra). Under the Indiana statute, the mortgagee’s property interest was immediately affected at the time the tax sale occurred since title to the mortgaged premises passed to the purchaser at the sale, subject to defeasement only if the former owner redeemed the property by paying his taxes. Thus, the mortgagee’s property interest was jeopardized at the time the tax sale took place. Under the Nassau County tax scheme, however, the tax lien sale does not adversely affect the property owner’s interest in his property. The only practical effect of the tax lien sale is to change the entity to which the unpaid taxes are owed. The tax lien purchaser does not obtain title to the premises on the date of the sale but merely acquires a tax lien and does not become entitled to exercise any possessory interest in the premises until the end of the statutory two-year redemption period.

Additionally, under the NCAC provisions in issue, before the owner’s property interest was divested, he was provided with a three-month notice via certified mail, return receipt requested, of the obligation to redeem within three months. Thus, unlike the Indiana statute which created a danger that a mortgagee would be forever divested of his property interest without ever learning of an impending foreclosure on his security interest (see, Matter of Foreclosure of Tax Liens by County of Erie [Manufacturers & Traders Trust Co.], 103 AD2d 636), the NCAC provided the property owner with notice and a three-month period to redeem the tax lien prior to the divestiture of any property interest. Significantly, the statute provided that the failure of the tax lien purchaser to comply with the statutory notice requirements of NCAC § 5-51.0, would prevent the issuance of a deed of conveyance to the lienholder (NCAC § 5-51.0 [e]; § 5-53.0). Clearly then, the provisions of the NCAC challenged herein, comply with the dictates set forth in Mennonite Bd. of Missions v Adams (supra; see also, Sheehan v County of Suffolk, 67 NY2d 52, 59, cert denied sub nom. MacKechnie v County of Sullivan, — US —, 106 S Ct 3299).

We also reject the claim that due process requires that a property owner be afforded a hearing before the divestiture of his property title to enforce the collection of real estate taxes. The courts have consistently held that due process is not offended by summary statutory remedies for the collection of property taxes provided that the property owner is given the appropriate notices of said proceedings (see, Sheehan v County of Suffolk, supra; Congregation Yetev Lev D’Satmar v County of Sullivan, 59 NY2d 418, supra; Botens v Aronauer, 32 NY2d 243).

In conclusion, we emphasize that Mrs. McCann concedes having received the three-month notice to redeem the outstanding tax lien held by respondent Stone; however, she took no action to timely redeem said lien. As noted previously, Mrs. McCann had come close to losing title to the subject premises on at least three prior occasions but in those instances acted in a timely fashion to satisfy the tax liens prior to the expiration of the redemption period. No such action was taken with respect to the lien involved herein. Thus, while Mrs. McCann’s plight is a sympathetic one, it is well settled that a property owner is chargeable with knowledge that taxes will be levied against the property regularly and that a default may result in forfeiture of the land (see, Sheehan v County of Suffolk, supra, at p 58). Moreover, Mrs. McCann was accorded her due process rights prior to divestiture of title. Accordingly, the petition seeking, inter alia, vacatur of the deed of conveyance held by the respondent Stone to the subject premises was properly dismissed.

We have reviewed Mrs. McCann’s remaining contentions and find them to be without merit.

Accordingly, reargument should be granted and, upon re-argument, the original result should be adhered to.

1 . We take judicial notice of the fact that while this appeal was pending, the Nassau County Administrative Code has been amended insofar as it deals with the enforcement of the collection of real estate taxes (see, Local Laws, 1986, No. 13 of County of Nassau). We do not pass judgment on the constitutionality of these new provisions.

2 . In opposition to the petition in this case, the respondents offered evidence indicating that notice of the tax lien sale was also mailed to Mrs. McCann. Mrs. McCann denied having received that notice. Since the NCAC is not silent as to the notice of a tax lien sale to be given to a property owner (NCAC § 5-37.0), Real Property Tax Law § 1002 (4) which requires mailed notice to the property owner of the sale, does not apply (see, Real Property Tax Law § 2006; Matter of Stevens Med. Arts Bldg. v City of Mount Vernon, 72 AD2d 177). As a result, the respondents may not rely upon the presumption that public officials perform their statutory duty, to establish that notice of the tax lien sale was sent to Mrs. McCann (see, Matter of Driscoll v Troy Hous. Auth., 6 NY2d 513). To the extent that our recent decision in Matter of Socci v Stone (120 AD2d 531) holds to the contrary, it is overruled.

In the absence of a presumption of regularity, the record contains insufficient evidence to establish that Mrs. McCann received notice, other than by publication, of the tax lien sale. In the absence of such evidence, we reach the merits of the constitutionality of the NCAC regarding its notice provisions.