Jlo, Llc. v. Kent Kalley, Aaron D. Kalley, Industrial Centre Federal Credit Union, Town of Yorktown, Muncie Sanitary District

Pursuant to Ind. Appellate Rule 65(D), this
Memorandum Decision shall not be
Nov 12 2014, 10:03 am
regarded as precedent or cited before any
court except for the purpose of establishing
the defense of res judicata, collateral
estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE
AARON D. KALLEY:
JON L. ORLOSKY
Muncie, Indiana ERIC C. WELCH
E. PHILLIP GREGG, JR.
Welch & Company, LLC
Muncie, Indiana
IN THE
COURT OF APPEALS OF INDIANA
JLO, LLC, )
)
Appellant, )
)
vs. ) No. 18A02-1404-MI-226
)
KENT KALLEY, AARON D. KALLEY, )
INDUSTRIAL CENTRE FEDERAL CREDIT )
UNION, TOWN OF YORKTOWN, MUNCIE )
SANITARY DISTRICT, DELAWARE )
COUNTY TREASURER, and INDIANA )
DEPARTMENT OF REVENUE, )
)
Appellees. )
APPEAL FROM THE DELAWARE CIRCUIT COURT
The Honorable Thomas A. Cannon, Jr., Judge
Cause No. 18C05-1208-MI-236
November 12, 2014
MEMORANDUM DECISION - NOT FOR PUBLICATION
CRONE, Judge
Case Summary
JLO, LLC (“JLO”) appeals the trial court’s order denying JLO’s petition for tax deed
regarding certain real property located on Cornbread Road in Yorktown (“the Property”).
JLO claims that the trial court abused its discretion. Finding no abuse of discretion, we
affirm.
Facts and Procedural History
The record indicates that on September 20, 2013, JLO filed a “Verified Petition For
Order Directing the Auditor of Delaware County, Indiana to Issue a Tax Deed” regarding the
Property. Appellant’s App. at 39-40. On October 4, 2013, the owner of the Property, Aaron
D. Kalley, filed an objection to the petition. Following a hearing, the trial court entered its
findings of fact and conclusions thereon denying JLO’s petition. Specifically, the trial court
found in relevant part:
1. On or about October 26, 2011, Kent Kalley and Sheila Kalley conveyed
[the Property] by virtue of a Quitclaim Deed to Kent Kalley and Aaron
D. Kalley as join tenants with rights of survivorship. The Deed was
recorded with the Delaware County Recorder as Instrument Number
2012R01453. The property was conveyed as part of Kent Kalley’s
estate plan.
2. Aaron D. Kalley did not reside in [the Property].
3. On [o]r about March 10, 2013, Kent Kalley, Aaron D. Kalley’s father
died and Aaron D. Kalley became the fee simple owner of the real
property by operation of law.
4. Aaron D. Kalley was born on December 27, 1992 and was twenty (20)
years old at the time of his father’s death.
5. At the time of Kent Kalley’s death, Kent Kalley was delinquent in the
payment of property taxes and the property was sold at a tax sale which
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was conducted on September 12, 2012. The Tax Sale Certificate was
issued for the sum of $1,576.43 which was paid by Bidder Number 36,
Jon Orlosky.
6. That shortly thereafter, Jon Orlosky assigned the Tax Sale Certificate to
JLO, LLC.
7. At the time and date of the tax sale, the records of the Delaware County
Auditor indicated that the property was owned by Kent Kalley and
Aaron D. Kalley.
8. At the time and date of the tax sale, the records of the Delaware County
Auditor further indicated that the address of record for Kent Kalley and
Aaron D. Kalley was [the address of the Property].
9. That Aaron Kalley stipulated through his Counsel that all notices that
were required to be given to the Kalleys and others with a substantial
interest of public record pursuant to Ind. Code Sections 6-1.1-25-4.5
and 4.6 were properly given.
10. That Aaron Kalley further stipulated that proper notices were sent out
by certified mail and First Class mail and that none of the notices that
were sent out by First Class mail to [the address of the Property]
were returned to JLO, LLC.
11. That submissions by both parties indicate a return receipt of the Ind.
Code [Section 6-1.1-25-4.5] notice dated October 30, 2013 and signed
by Aaron Kalley.
12. Aaron Kalley denied that the signature on the return receipt was in fact
his signature.
13. Evidence also indicated that while the certified mail notice sent to
Aaron Kalley at [the address of the Property] pursuant to Ind. Code
Section 6-1.1-25-4.6 was returned as “unclaimed,” the notice sent by
First Class mail was never returned to JLO, LLC.
14. That on March 12, 2013, one of the parties with a substantial interest of
public record who was notified of the tax sale, [Industrial Centre
Federal Credit Union], contacted the Delaware County Treasurer’s
office and indicated that they would be redeeming the property.
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15. Aaron D. Kalley was made aware that taxes were due and payable on
[the Property] by a representative of Industrial Federal Credit Union,
but was not aware that the property had been sold in the tax sale.
16. Aaron D. Kalley asked his mother to take a check to the Delaware
County Treasurer’s Office and pay all outstanding tax liabilities.
17. On May 10, 2013, Sheila Kalley, Aaron’s mother approached the
Delaware County Treasurer and requested the amount needed to bring
the property taxes current. The Treasurer advised that the total amount
due at the time was $1,474.83. Sheila Kalley tendered a check in the
amount of $1,474.83. Sheila Kalley again asked if the check “took care
of everything” and she was assured that the property taxes were current.
18. At no time was Sheila Kalley advised to speak with the Auditor about
redeeming the property from the tax sale.
19. Sheila Kalley and Aaron Kalley believed that the property taxes were
paid and current.
20. On or about September 23, 2013, Sheila Kalley received a call from
Industrial Centre Federal Credit Union advising that Aaron’s property
had been sold in a tax sale.
21. On September 23, 2013, Aaron Kalley was advised by his mother that
the property had been sold at tax sale.
Id. at 25-27.
Based upon these findings of fact, the trial court concluded that although JLO had
fully complied with the statutory requirements for giving notice under the Indiana tax sale
statutes, denial of the petition for tax deed was appropriate under the circumstances.
Specifically, the trial court concluded in relevant part:
The use of the Court’s equitable discretion is appropriate in the current matter
as it would be unjust to issue a tax deed under the circumstances w[h]ere the
Respondent was an unsophisticated 20 year old man, grieving the death of his
father, where attempts were made to pay all outstanding property taxes prior to
the redemption date, where the payment was premised upon information
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provided by the Delaware County Treasurer that there were no additional taxes
due and owing and where the Respondent did not have actual knowledge of
the tax sale.
Id. at 28. Accordingly, the trial court denied JLO’s petition and allowed Kalley an extension
of thirty days to redeem the Property.1 This appeal ensued.
Discussion and Decision
In denying JLO’s petition, the trial court entered findings of fact and conclusions
thereon sua sponte. We apply a two-tier standard of review to sua sponte findings and
conclusions: whether the evidence supports the findings, and whether the findings support
the judgment. Trust No. 6011, Lake Cnty. Trust Co., v. Heil’s Haven Condo. Homeowners
Ass’n, 967 N.E.2d 6, 14 (Ind. Ct. App. 2012), trans. denied. We may not set aside the
findings or judgment unless they are clearly erroneous. Ind. Trial Rule 52(A); Menard, Inc.
v. Dage-MTI, Inc., 726 N.E.2d 1206, 1210 (Ind. 2000). Findings and conclusions are clearly
erroneous when the record contains no facts or inferences supporting them. Trust No. 6011,
967 N.E.2d at 14. A judgment is clearly erroneous when a review of the record leaves us
with a firm conviction that a mistake has been made. Id. “We consider only the evidence
favorable to the judgment and all reasonable inferences flowing therefrom, and we will
neither reweigh the evidence nor assess witness credibility.” Id. (citation omitted). Although
we accord substantial deference to findings of fact, we do not so defer to the trial court’s
conclusions of law. In re Des.B., 2 N.E.3d 828, 836 (Ind. Ct. App. 2014).
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The court further ordered that in the event that Kalley failed to redeem the Property within thirty days
from the date of the order, and upon the filing of an “Affidavit of Default,” the trial court shall issue an order
directing the Delaware County Auditor to issue a tax deed identifying JLO as the fee simple owner of the
Property. Appellant’s App. at 29.
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JLO first asserts that the trial court’s finding that Kalley did not have actual
knowledge during the redemption period that the Property had been sold in a tax sale is
unsupported by the evidence. Specifically, JLO argues that Kalley admitted that he had
actual knowledge of the sale prior to the expiration of the redemption period because his
objection to JLO’s petition for tax deed included the statement “that in May of 2013, the
Respondent, Aaron D. Kalley, was advised by a third party that the property was sold at tax
sale in 2012.” Appellant’s App. at 79. JLO refers to Kalley’s objection to the petition as a
“pleading” and maintains that Kalley and the trial court should be bound by this “admission
in a pleading.” Appellant’s Br. at 4-5. JLO’s argument is unavailing.
JLO directs us to the broad language of Indiana Trial Rule 8(D), which provides:
“Averments in a pleading to which a responsive pleading is required … are admitted when
not denied in the responsive pleading.” However, Indiana Trial Rule 7(A) contains a specific
and exhaustive list of the “pleadings,” 2 and we have clarified often that “[n]either a motion
nor a party’s response to a motion is considered a pleading.” Richards-Wilcox, Inc. v.
Cummins, 700 N.E.2d 496, 499 (Ind. Ct. App. 1998). Moreover, as noted by the trial court,
Kalley’s objection was not a verified document, was signed only by Kalley’s counsel, and
simply provided information as “a starting point from where discovery takes place.” Tr. at
54. Contrary to JLO’s assertions, Kalley’s objection to the petition for tax deed is not a
pleading, and any statement contained therein regarding the date that Kalley received actual
2
Indiana Trial Rule 7(A) provides that the pleadings shall consist of: (1) a complaint and an answer;
(2) a reply to a denominated counterclaim; (3) an answer to a cross-claim; (4) a third-party complaint, if a
person not an original party is summoned under the provisions of Rule 14; and (5) a third-party answer.
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knowledge of the sale was not evidence before the trial court. During the hearing held on
this matter, Kalley and his mother each testified that Kalley did not have actual knowledge
that the Property was sold in a tax sale until September 23, 2013, after the redemption period
expired. Thus, the record contains facts and inferences supporting the challenged finding and
JLO has demonstrated no error.
JLO maintains that the trial court erred in denying its petition for tax deed because
Kalley did not redeem the Property within the one-year redemption period, despite JLO’s full
compliance with the statutory notice provisions.3 We find our decision in M Jewell, LLC v.
Powell, 954 N.E.2d 1053 (Ind. Ct. App. 2011), on point and instructive. In Powell, the facts
indicated that the tax sale purchaser fully complied with statutory notice provisions, the
property owner had actual knowledge that his property had been sold in a tax sale, and the
property owner was aware of his redemption rights. Id. at 1054. However, when the
property owner tried to redeem the property and settle his tax obligations, he was told by an
employee of the Grant County Treasurer’s Office, incorrectly, that he did not owe any past
due taxes, interest, or penalties. Id. On a second occasion visiting the Treasurer’s Office, the
property owner was told, again incorrectly, that he could not redeem the property. Id. At no
time was the owner directed to the Grant County Auditor’s Office, the place he should have
gone in the first place to redeem the property. Id. The redemption period expired three days
after the property owner’s second visit to the Treasurer’s Office. Id. The tax sale purchaser
3
See Ind. Code § 6-1.1-25-4.
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subsequently filed a petition with the trial court to obtain a tax deed for the property, and the
owner objected. Id.Based upon these facts, the trial court in Powell exercised its equitable power to deny
the petition for tax deed and to provide the owner an additional thirty days in which to
redeem his property. Id. at 1055. Specifically, the trial court explained that the property
owner came before the court with clean hands and that it would be unjust, in light of the
owner’s repeated good faith efforts to redeem his property, to award his home to the tax sale
purchaser for a meager price. Id. Therefore, despite the tax sale purchaser’s compliance
with statutory notice provisions and the property owner’s actual knowledge of the tax sale,
the trial court determined that no adequate remedy at law existed and that exercise of its
equitable power was necessary under the circumstances. Id. Recognizing that “[e]quity has
power, where necessary, to pierce rigid statutory rules to prevent injustice,” we affirmed the
trial court’s decision on appeal. Id. at 1056 (quoting Swami, Inc. v. Lee, 841 N.E.2d 1173,
1178 (Ind. Ct. App. 2006), trans. denied.).
As in Powell, the trial court here concluded that no adequate remedy at law existed
and that exercise of the court’s equitable discretion was necessary under the circumstances.
The facts favorable to the judgment and the reasonable inferences to be drawn therefrom
support the trial court’s finding that, despite JLO’s compliance with statutory notice
provisions, Kalley, an unsophisticated twenty-year-old who was grieving the death of his
father, was wholly unaware that the Property had been sold in a tax sale. However, because
he did learn that a tax delinquency existed on the Property, he sent his mother to the
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Delaware County Treasurer’s Office with a blank check to pay any amount necessary. After
paying $1474.83, the amount instructed by the Treasurer’s Office, Kalley’s mother was
assured by representatives at that office that “everything was taken care of.” Tr. at 42-43. At
no time was she informed that the Property had been sold in a tax sale or that steps for
redemption could or needed to be taken and that she should proceed to the Auditor’s Office
for further inquiry. These facts support the trial court’s determination that Kalley’s failure to
timely redeem the Property was based at least in part upon information, or lack thereof, given
to his mother by the Treasurer’s Office. Similar to the property owner in Powell, there is
ample evidence in the record of Kalley’s affirmative and good faith efforts to protect his
ownership in the Property prior to the expiration of the redemption period.
It is well settled that a “trial court has full discretion to fashion equitable remedies that
are complete and fair to all parties involved.” Tajuddin v. Sandhu Petroleum Corp. No. 3,
921 N.E.2d 891, 895 (Ind. Ct. App. 2010) (quoting Swami, 841 N.E.2d at 1178). The record
supports the trial court’s conclusion that, despite JLO’s compliance with the statutory notice
provisions, it would be unjust to order issuance of a tax deed and award the Property to JLO
for the meager price of $1576.43 under the circumstances presented. We will not second-
guess the trial court’s decision to exercise its equitable power in this manner. Accordingly,
we affirm the judgment of the trial court.
Affirmed.
RILEY, J., and MATHIAS, J., concur.
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