Post Tax Sale Notice Alone Satisfies Due Process Rights?
With the increasing number of tax sales and tax sales confirmed by judgment being declared absolute nullities by Courts across the State of Louisiana, tax sale investors have been deterred from investing in tax sales and title attorneys and title insurers will either not insure tax sale titles confirmed by judgment or insure the title only on a case by case basis. In an effort to provide stability to tax sales, the Louisiana Legislature passed Acts 2008, No. 819 § 1, effective on January 1, 2009, (“Act 819”) which overhauled the laws regulating tax sales and made post tax sale notice the key notice in tax sales. The constitutionality of Act 819 has been questioned by a number of attorneys and commentators while at the same time, leaving investors and their attorneys eager for the Louisiana Courts to determine the enforceability of the substantive 2009 revisions.
On May 4, 2016, the Louisiana Court of Appeal for the Second Circuit issued a landmark decision interpreting the substantive 2009 revisions to the statutes regulating tax sales which significantly altered Louisiana jurisprudence. In Turney, the Second Circuit unanimously held (3-0) that the 2009 revisions were enforceable and upheld the validity of a tax sale where the former owner was not provided pretax sale notice and where Regions Bank, a mortgagee of record (and a named defendant in the case), was not provided pretax sale notice. See Adair Asset Management LLC v. Turney, No. 50,574-CA (La. App. 2nd Cir. 5/4/2016); 195 So.3d 501, 509-13. Turney, the former owner, was provided post-tax sale notice under Louisiana Revised Statute § 47:2156 at least six months prior to expiration of the redemption period. Thus, the Court held a redemption nullity was inapplicable and the tax sale was valid and enforceable. The Court repeatedly emphasized that “Post-sale notice is now the important notice for due process in tax sales and redemption.” In addressing the constitutionality of the substantive 2009 revisions and Mennonite, the Court explained that only “tax sale title” is transferred at the tax sale in contrast to ownership under pre-2009 tax sale laws and ownership is not divested until a proper post tax sale notice is issued. Thus, the post tax sale notices are the triggering events which significantly affect the property interest. Id.
The Court also recognized that lack of pretax sale notice no longer renders a tax sale an absolute nullity and application of absolute nullities to tax sales has been abandoned. A tax sale can only be null under one of the three exclusive relative nullity causes provided in the Act 819. The Court also noted that due process is met as long as a person is “duly notified” under the statute. The Court explained:
Under the New Act, subsection 2122(4) clearly provides that due process notification can occur in one of several methods: ‘under La. R.S. 47:2156, 2157, 2206, 2236, or 2275, or with service of a petition and citation in accordance with R.S. 47:2266.’ The redemption notice under section 2156 is just one of the ways to achieve due process notification of the requisites parties.
See Turney at 510 (emphasis added). Importantly, service of a petition and citation was recognized as a valid means of post tax sale notice which satisfies the parties’ due process rights even though post tax sale notice is not issued within the redemption period. Id.
Under Turney, tax sale purchasers have the ability to preserve their tax sale title by issuing proper post tax sale notice even where the tax collector has failed to notify all required parties prior to the sale. The Turney decision is a step forward in providing stability to tax sales and in making tax sale investing more attractive to investors. It also starts the process of providing comfort to title attorneys and title insurers to insure post 2009 tax sale titles confirmed by judgment. The Louisiana Supreme Court denied an Application for Writ of Certiorari and/or Review on November 7, 2016.
Wesley M. Plaisance is a Partner in the New Orleans office of Breazeale, Sachse & Wilson LLP (www.bswllp.com) where he heads the Tax Sale and Quiet Title Litigation group and practices other commercial litigation with a focus on real estate related litigation. Wesley M. Plaisance regularly handles tax sale litigation matters across Louisiana including without limitation in the City of New Orleans (Orleans Parish), East Baton Rouge Parish, St. Tammany Parish (including Covington, Mandeville and Slidell), Jefferson Parish, Lafayette Parish, Livingston Parish, Plaquemines Parish and Lafourche Parish. Mr. Plaisance represents tax sale purchasers in suits to confirm tax sale title(s) and ownership with and/or without cancellation of mortgages and other encumbrances and in partition proceedings commenced after a tax sale purchaser confirms only a fractional ownership interest.
Mr. Plaisance has also represented and represents tax debtors, landowners, mortgage holders including banks and other interested parties in actions to annul and/or nullify tax sales. Mr. Plaisance additionally handles complex commercial litigation matters arising out of large investment funds created to purchase tax sale certificates and/or tax deeds in Louisiana, Georgia, Indiana and Florida.