This statute provides for notice by certified mail to delinquent property taxpayers that someone has paid the taxes on their real estate and that they must redeem their property by paying the taxes, or lose it. If the certified mail notice is unclaimed, the person giving the notice (who is the purchaser of a tax certificate at a sale of delinquent property), that person must take additional steps to notify the delinquent taxpayer that a collector’s deed will be issued to the person who purchased the tax certificate.
The Missouri Supreme Court based its opinion on the due process standard established by the United States Constitution as recently articulated by the U. S. Supreme Court in Jones v. Flowers (2006).
Section 140.405 is a part of a series of statutes that create a procedure for transferring title to real estate that has been sold by county collectors because of unpaid taxes. Persons buy property (actually they buy tax certificates) at sales held by county collectors each August. These buyers are essentially making secured loans to county governments and other units supported by property taxes, such as schools, ambulance districts and fire protection districts. The buyer of a tax certificate has the right to apply for a collector’s deed, following section 140.405’s procedure, if the delinquent property owner does not redeem the property after notice that the tax certificate holder intends to obtain a collector’s deed.
A key provision of the statutes requires that the party who has purchased the property at tax sale send notice by certified mail to the owner of the property, as shown by the county records, to tell the owner of the owner’s right to redeem the property (pay the taxes, penalties, interest and costs) within 90 days or forever lose the property. At the end of the 90-day period, if redemption doesn’t happen, the party who paid the taxes at the tax sale gets a collector’s deed. If the property is redeemed, the buyer gets reimbursed.
In Jones, the U. S. Supreme Court stated that when certified mail is unclaimed, the state (Arkansas in that case) must do more to give notice to the delinquent property owner. A couple of years ago, the Missouri Court of Appeals had followed Jones in a case regarding the process for obtaining title to apparently abandoned mobile homes.
Many Missouri real estate lawyers then wondered whether the legislature or the Missouri Supreme Court would try to bring Missouri’s statutes on tax collectors’ deeds and possibly foreclosures under the same constitutional standard. Now the Missouri Supreme Court has spoken on collectors’ deeds.
The facts on which the new opinion was decided are simple. Hardy didn’t pay taxes for 1999, 2000 and 2001 on a parcel of property that she didn’t occupy. Schlereth purchased the property at the annual August tax sale, paying $9,500 in delinquent taxes, interest and costs of the sale. Following section 140.405, Schlereth sent notice to Hardy by certified mail. The notice indicated that Hardy had a 90-day time period in which she could redeem by paying the taxes, penalties, interest and costs; otherwise she would lose all rights to the property.
Continuing the statutory procedure, Schlereth applied for and obtained a collector’s deed. Then he filed a quiet title suit, which is necessary to cure any defects in the tax collection procedures, generally enabling the owner to get title insurance and to use the property to secure a loan. Sometimes the court rules for the delinquent taxpayer.
Hardy admitted that she received two notices from the postal service, but did not claim the certified mail. If she had signed the postal receipt, would the court have ruled the same way?
The trial court ruled for Schlereth, who had followed the statutory procedure, and Hardy asked the court to amend the judgment and grant a new trial. The court, apparently noticing the strength of Hardy’s argument that the statutory procedure was unconstitutional under new federal law, granted Hardy’s motion for a new trial and sustained Hardy’s motion for summary judgment. Schlereth appealed directly to the Missouri Supreme Court.
The Missouri Supreme Court made a seemingly ironic observation: if Schlereth had sent the notice by regular mail, he might have won. Under a Missouri court of appeals decision, regular mail is presumed to be received if properly addressed. And the court also noted that “the effect [of this opinion] may be to encourage parties to evade certified-mail notices.”
The Missouri Supreme Court pointed out that “it is up to the legislature to determine what notice should be sent when the certified mail notice is returned unclaimed.”
We’re well into the legislative session now, and the deadline for introduction of bills has passed. We can’t expect any fixes soon, and legislative tinkering under pressure can result in imperfect fixes.
How may one seeking a collector’s deed send notice now that section 140.405 is void? The court suggests use of a process server, which is a far more expensive option, generally at least $40 per attempt, and often many parties (lien holders and co-owners) are entitled to service.
The underlying principle here is that the taking of the delinquent taxpayer’s property is done by the state, so strict due process is required. In Arkansas, the county official actually is obligated to send the notice. In Missouri, the statutes require that the notice be sent by the person who bought the property at tax sale, who is really filling a role in a state tax procedure.
Foreclosure attorneys contend that non-judicial foreclosure is different. Their argument is that the right to foreclose after notice by certified mail, though provided by statute, is also a matter of contract. The borrower’s signature to the power-of-sale deed of trust indicates the borrower’s consent to notice by certified mail. While I’ve heard this argument, I haven’t seen any strong legal authority for it or against it.