Rachel Rafaelian v. Perfecto Iron Works, Inc. ( 2013 )

Supreme Court
No. 2012-163-Appeal.
(PM 11-5464)
Rachel Rafaelian :
v. :
Perfecto Iron Works, Inc., et al. :
NOTICE: This opinion is subject to formal revision before
publication in the Rhode Island Reporter. Readers are requested to
notify the Opinion Analyst, Supreme Court of Rhode Island,
250 Benefit Street, Providence, Rhode Island 02903, at Telephone
222-3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.
Supreme Court
No. 2012-163-Appeal.
(PM 11-5464)
Rachel Rafaelian :
v. :
Perfecto Iron Works, Inc., et al. :
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
OPINION
Justice Goldberg, for the Court. This case came before the Supreme Court on April 9,
2013, pursuant to an order directing the parties to appear and show cause why the issues raised in
this appeal should not summarily be decided. The petitioner, Rachel Rafaelian (Rafaelian or
petitioner), appeals from an order of the Superior Court granting the respondent‟s, Perfecto Iron
Works, Inc. (Perfecto or respondent), motion to vacate a default judgment and final decree.
Rafaelian argues that the trial justice ignored both Rule 81(a)(2) of the Superior Court Rules of
Civil Procedure and G.L. 1956 § 44-9-24, which precludes the Superior Court from vacating a
final decree foreclosing the right of redemption after a tax sale. In response, Perfecto argues that
the trial justice did not err in vacating the decree, which Perfecto asserts was entered
erroneously; Perfecto claims that the decree is void because Perfecto timely answered the
petition seeking to foreclose its right of redemption.
The trial justice, having found that a timely answer had been filed, held that the decree
erroneously was entered and granted Perfecto‟s motion to vacate. After hearing the arguments of
counsel and carefully examining the memoranda filed by the parties, we are of the opinion that
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cause has not been shown; we proceed to decide the appeal at this time. For the reasons set forth
below, we affirm the judgment of the Superior Court.
Facts and Travel
On September 22, 2011, Rafaelian filed, in the Superior Court, a petition to foreclose the
right of redemption arising from a tax sale of property located at 1107 Westminster Street,
Providence, Rhode Island, and designated by the tax assessor as lot 50, plat 32 (the property).
That petition indicated that Rafaelian had obtained tax title to the property on June 25, 2010, at a
sale conducted by the Providence Water Supply Board for nonpayment of user fees. The
propriety of the sale has not been challenged. The petition also stated that “more than one year
from the date of said sale has elapsed and no redemption has been made; the proceedings
aforesaid have been conducted according to law[.]” Furthermore, the petition indicated that the
named respondents—Perfecto, the Rhode Island Division of Taxation, and the Internal Revenue
Service—held an interest in the property, and that each of these respondents was provided notice
of the petition via certified mail.1
It is undisputed that Perfecto filed an answer on October 14, 2011, and that this filing was
noted on the court‟s docket sheet. Apparently, neither Rafaelian nor her attorney received a copy
of the answer. On October 18, 2011, believing that no responsive pleading had been filed,
Rafaelian filed a motion for entry of default and final decree. By affidavit of her attorney,
Rafaelian alleged that respondents had failed to plead or otherwise defend as to petitioner‟s
petition. The default motion was set for hearing on October 28, 2011; however, it is not clear
whether any of the respondent parties were provided notice of this hearing. Ultimately, on
October 28, 2011, a final decree was entered declaring “[t]hat all rights of redemption [in and to
1
The record reflects that neither the Rhode Island Division of Taxation nor the Internal Revenue
Service entered appearances at any stage of these proceedings.
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the property] are forever foreclosed and barred” and vesting “[t]he legal and equitable title to the
property * * * in [Rafaelian].”
On November 3, 2011, Perfecto filed a motion to vacate the default and the final decree.
On November 14, 2011, Rafaelian objected to Perfecto‟s motion. At the hearing on the motion
to vacate, Perfecto argued that both the default and the final decree were void. Perfecto
established that its answer was filed on October 14, 2011, that it did not receive notice of the
hearing on Rafaelian‟s motion for default, and that the relief it sought did not turn on whether a
decree foreclosing the right of redemption could be vacated pursuant to the Superior Court Rules
of Civil Procedure. Perfecto argued that because the name and address of petitioner‟s attorney
were not set forth in the motion seeking foreclosure, the answer was mailed to Rafaelian at the
address listed on her petition.2 Further, Perfecto stated that, after the petition was filed, there had
been some communication with Rafaelian‟s counsel about the redemption costs but that Perfecto
was not aware of the impending hearing on Rafaelian‟s motion for entry of default.
In response, Rafaelian argued that the Superior Court Rules of Civil Procedure do not
provide a procedural vehicle to vacate the default and the final decree foreclosing the right of
redemption and that, therefore, Perfecto‟s motion “is completely defective and not allowed.”
According to Rafaelian, Perfecto was notified by letter, sent by facsimile, “that this matter is set
down for foreclosure on October the 28th, 2011.” Counsel averred that this facsimile
communication was sent before the hearing date and in response to Perfecto‟s verbal request for
redemption costs. In an ensuing exchange between Rafaelian and the trial justice, the question
arose as to who bears the responsibility of searching the court file to see if an answer had been
filed before the court enters a default. The trial justice declared that it was not the court‟s
2
Apparently, this address was counsel‟s office; but, because the answer was addressed to
Rafaelian, rather than counsel, he did not receive it.
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obligation to determine that there was no answer in the file before entering a default. Counsel
also argued that, although he had not received a copy of Perfecto‟s answer, it was a common
practice for delinquent respondents to request redemption costs and then elect not to answer the
petition, thus allowing the default to enter.
The trial justice concluded that the default erroneously was entered in this case because
Perfecto‟s answer was timely filed. The trial justice based her decision on Perfecto‟s
“meritorious defense” and the general policy of the courts to favor redemptions. The trial justice
stated that she arrived at her conclusion by employing the principles of equity and by relying on
“the Zeus case,”3 and not the Superior Court Rules of Civil Procedure.4
An order was entered on November 15, 2011, granting Perfecto‟s motion and vacating
the entry of default and the final decree. The order enjoined petitioner “from alienating,
transferring, encumbering, concealing, selling, or otherwise disposing of” the property until
further order of the court. The petitioner‟s timely notice of appeal from the November 15, 2011
order was filed on November 28, 2011. Before this Court, the parties raise arguments that are
identical to those posited to the trial justice.
Discussion
We begin our analysis by noting that “[a] tax sale foreclosure proceeding „is a unique
procedure created by statute for a limited purpose[:] to provide a forum for the exercise of the
3
The trial justice likely was referring to Zeus Realty Co. v. Jaral Realty, Inc., 653 A.2d 70, 70
(R.I. 1995), where a plaintiff in an unsuccessful appeal sought to overturn a Superior Court order
vacating an entry of default based upon the finding “that the plaintiff‟s notice to the defendants
was premature since it was sent prior to the setting of a return day and prior to the presentation of
a title examiner‟s report to the Superior Court.” On appeal, Rafaelian argues that Zeus is
inapplicable to her case. Because we uphold the trial justice‟s decision vacating the default, we
need not reach this issue.
4
The parties then informed the trial justice that, after the default entered, the property in question
was transferred from Rafaelian to an LLC. The trial justice directed the entry of a restraining
order enjoining further transfer of the property.
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right to redeem the subject land.‟” ABAR Associates v. Luna, 870 A.2d 990, 994 (R.I. 2005)
(quoting Pratt v. Woolley, 117 R.I. 154, 157, 365 A.2d 424, 426 (1976)). “Because it is a
statutory proceeding and not an ordinary civil action, the jurisdiction of the Superior Court is
sharply circumscribed.” Id. (citing Pratt, 117 R.I. at 157, 365 A.2d at 426); see also Finnegan v.
Bing, 772 A.2d 1070, 1072 (R.I. 2001). Importantly, “[t]ax sale foreclosure proceedings are also
specifically exempted from the operation of the Rules of Civil Procedure by Rule 81(a)(2)
* * *.”5 Abar Associates, 870 A.2d at 944. Also, as the travel of this case indicates, foreclosure
proceedings move at lightning speed.
Rafaelian argues to this Court that Perfecto‟s motion to vacate was filed in contravention
of § 44-9-24, which provides, in pertinent part, that “no decree [foreclosing the right of
redemption] shall be vacated except in a separate action instituted within one year following
entry of the decree and in no event for any reason, later than one year following the entry of
decree[,]” and only on very limited grounds.6 Clearly, with respect to any validly entered decree,
5
Specifically, Rule 81(a)(2) of the Superior Court Rules of Civil Procedure provides, in
pertinent part, that “[t]hese rules do not apply to the following proceedings: * * * Petitions for
foreclosure of redemption of interests in land sold for nonpayment of taxes * * *.”
6
In its entirety, G.L. 1956 § 44-9-24 provides:
“The title conveyed by a tax collector‟s deed shall be absolute after
foreclosure of the right of redemption by decree of the superior court as provided
in this chapter. Notwithstanding the rules of civil procedure or the provisions of
chapter 21 of title 9, no decree shall be vacated except in a separate action
instituted within one year following entry of the decree and in no event for any
reason, later than one year following the entry of decree. Furthermore, the action
to vacate shall only be instituted for inadequacy of notice of the petition
amounting to a denial of due process or for the invalidity of the tax sale because
the taxes for which the property was sold had been paid or were not due and
owing because the property was exempt from the payment of such taxes. The
superior court shall have exclusive jurisdiction of the foreclosure of all rights of
redemption from titles conveyed by a tax collector‟s deed, and the foreclosure
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§ 44-9-24 is controlling; “[t]he right to institute an independent action under § 44-9-24 is
triggered by the entry of a foreclosure decree * * *.” Sycamore Properties, LLC v. Tabriz
Realty, LLC, 870 A.2d 424, 427 n.7 (R.I. 2005).7 Critically, an action pursuant to § 44-9-24 lies
only
“for inadequacy of notice of the petition amounting to a denial of
due process or for the invalidity of the tax sale because the taxes
for which the property was sold had been paid or were not due and
owing because the property was exempt from the payment of such
taxes.”
None of these circumstances is present in this case. We are confronted, however, with a
situation in which the decree of the Superior Court was entered in error. The decree is therefore
voidable and its erroneous entry falls outside the safeguards of § 44-9-24.
In this case, the default decree was entered based on the representation to the court that
Perfecto had not filed an answer to the petition. In fact, Perfecto had answered the petition and
had done so in a timely manner. Accordingly, because the court mistakenly ordered the entry of
default—as evidenced by the filing of the answer, which filing plainly appears in the electronic
docket sheet—the trial justice properly vacated the decree. Because the judgment in this case
proceedings shall follow the course of equity in a proceeding provided for in
§§ 44-9-25―44-9-33.”
7
In Sycamore Properties, LLC v. Tabriz Realty, LLC, 870 A.2d 424, 426 (R.I. 2005), we
determined that “§ 44-9-24 operates as a „safety valve‟ for taxpayers who have lost their right of
redemption because of an invalid tax sale * * *.” We therefore held that, because of the
inadequate notice of the initial tax sale, the property owner was not barred from challenging the
final decree. Id. at 428. We are mindful that the post-Sycamore amendment may have
“narrowed the notice-based „safety valve‟ of § 44-9-24,” Mortgage Electronic Registration
Systems, Inc. v. DePina, 63 A.3d 871, 878 (R.I. 2013) (discussing the amendment to § 44-9-24,
which amendment changed the phrase “inadequacy of notice amounting to a denial of due
process”—the operative and critical phrase for purposes of DePina—to read “inadequacy of
notice of the petition amounting to a denial of due process”), but the fact remains that “[t]he right
to institute an independent action under § 44-9-24 is triggered by the entry of a foreclosure
decree * * *.” Sycamore Properties, 870 A.2d at 427 n.7.
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was not a valid judgment, it necessarily and properly was vacated. We need extend our analysis
no further.
In the circumstances of this case, we are satisfied that the trial justice did not err in
granting Perfecto‟s motion to vacate the final decree.
Conclusion
For the foregoing reasons, the judgment of the Superior Court is affirmed. The record
shall be remanded to the Superior Court.
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RHODE ISLAND SUPREME COURT CLERK’S OFFICE
Clerk’s Office Order/Opinion Cover Sheet
TITLE OF CASE: Rachel Rafaelian v. Perfecto Iron Works, Inc., et al.
CASE NO: No. 2012-163-Appeal.
(PM 11-5464)
COURT: Supreme Court
DATE OPINION FILED: June 18, 2013
JUSTICES: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
WRITTEN BY: Associate Justice Maureen McKenna Goldberg
SOURCE OF APPEAL: Providence County Superior Court
JUDGE FROM LOWER COURT:
Associate Justice Sarah Taft-Carter
ATTORNEYS ON APPEAL:
For Plaintiff: Patrick T. Conley, Esq.
For Defendant: J. David Freel, Esq.