HOW MUCH DILIGENCE IS NECESSARY?
A recent decision of the Wisconsin Court of Appeals raises this question: How far does a county (or a tax purchaser) need to look to locate a party whose interest in property will be extinguished by a tax deed? In Juneau County v. Associated Bank, N.A., 2012AP1304 (January 31, 2013), the court held that the county was not required to “look beyond the record in the Office of the Register of Deeds” to find the address of a bank that held a mortgage on the property. The court held that the county had complied with Wisconsin statutes establishing notice requirements for tax lien foreclosures. The county listed the bank as having an “unknown address” because the bank’s address could not be found in recorded documents and relied on notice published in a newspaper. Default judgments of foreclosure were entered. The bank moved to vacate the judgments claiming that the county did not comply with Wisconsin notice requirements. The Circuit Court held that the county had satisfied the statutory requirements, and the Appeals Court agreed.
It appears that the case was argued solely on Wisconsin law. The United States Supreme Court, however, has held repeatedly that the Due Process clause of the Fourteenth Amendment to the United States Constitution requires that the county (or a tax purchaser) make a diligent inquiry to located interested parties and serve them with notice before they are deprived of their interest in property. In Jones v. Flowers, 126 S.Ct. 1708 (2006), the state tax commissioner sent certified mail to the property owner at the property address stating that his property would be lost if the taxes were not redeemed. The letter was returned unclaimed because the property owner had moved. The Supreme Court held 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.” When certified mail was returned unclaimed, the state was required to do something more to give notice to the owner.
If the bank in the Wisconsin case had argued based on Due Process rather than Wisconsin law, the result may have been different.
Taxing bodies and tax purchasers should be forewarned: Due Process requires a diligent effort to serve notice on interested parties. Satisfying state statutory requirements may not be enough.