Ind. Land Trust Co. v. XL Inv. Props., LLC

• Decision Date: 30 July 2019
• Docket Number: Court of Appeals Case No. 18A-MI-2150
• Citation: 130 N.E.3d 630
• Parties: INDIANA LAND TRUST COMPANY, f/k/a Lake County Trust Company TR #4340, Appellant-Movant, v. XL INVESTMENT PROPERTIES, LLC, and LaPorte County Auditor, Appellees-Respondents
• Court: Indiana Appellate Court

130 N.E.3d 630

INDIANA LAND TRUST COMPANY, f/k/a Lake County Trust Company TR #4340, Appellant-Movant,

v.XL INVESTMENT PROPERTIES, LLC, and LaPorte County Auditor, Appellees-Respondents

Court of Appeals Case No. 18A-MI-2150

Court of Appeals of Indiana.

FILED July 30, 2019

Attorneys for Appellant: Greg A. Bouwer, Jeff Carroll, Koransky Bouwer & Poracky, P.C., Dyer, Indiana

Attorney for Appellee XL Investment Properties, LLC: Matthew J. Hagenow, Newby, Lewis, Kaminski & Jones, LLP, LaPorte, Indiana

Attorney for Appellee LaPorte County Auditor: J. Alex Bruggenschmidt, Buchanan & Bruggenschmidt, P.C., Zionsville, Indiana

Baker, Judge.

[1] Indiana Land Trust Company, f/k/a Lake County Trust Company TR #4340 (Trust 4340), appeals the judgment of the trial court denying its motion to set aside a tax deed and quiet title judgment issued to XL Investment Properties, LLC (XL Investment). Trust 4340 argues that the trial court erroneously determined that the motion to set aside was untimely filed and the tax sale notice process employed by the LaPorte County Auditor (the Auditor) was statutorily and constitutionally insufficient. Finding that the motion to set aside was not untimely and that the notice process was constitutionally insufficient, we reverse and remand for further proceedings.

Facts¹

[2] Peter Dellaportas is a decades-long real estate developer who owns many investment properties. At some point in the past, Dellaportas purchased a 140-acre property, which used to be a municipal airport, in Michigan City. The property has since been subdivided into multiple parcels, some of which have been developed for commercial use.

[3] Dellaportas's company, located in Chicago, is called Midwest Investment. In June 1993, Dellaportas put one of the undeveloped parcels, totaling approximately thirty acres (the Property) into a trust, Trust 4340, with either himself or Midwest Investment as the beneficiary. Lake County Trust Company (the Trust Company) was the entity that helped him process and finalize the trust.

[4] The deed directed that property tax bills for the Property should be sent to Midwest Investment at 415 North LaSalle Street, Suite 700, in Chicago. In 1994, Midwest Investment relocated to Suite 200 in the same building and remained there for approximately ten² years. In 2014, Midwest Investment moved to 432 North Clark Street, Suite 304, in Chicago. Midwest Investment did not update the Auditor with its changes of address.

[5] Midwest Investment paid the property taxes on the Property from 1993 through 2008 but failed to pay any property taxes from 2009 through 2015. In 2015, LaPorte County (the County) determined that the Property's outstanding tax liability totaled $230,017.26.

[6] The County held a tax sale in 2015 (the Tax Sale); the certified Tax Sale list included the Property. The County engaged SRI, Inc. (SRI), a local government contractor, to assist with various aspects of the tax sale process, including the mailing of thousands of tax notices. The Work Plan Agreement entered into between the County and SRI stated that the parties (including SRI, the Auditor, and the Treasurer) would "individually or collectively perform or cause to be performed by employees of their organization the actions defined herein which are required to execute the County Tax Sale in compliance with Ind. Code 6-1.1-24 and Ind. Code 6-1.1-25." Tr. Ex. 21. The Work Plan Agreement also stated that "the Auditor agrees to search its internal records for a better address for the owner(s) of properties for which the certified mail notices are returned and provide the results of said searches to SRI ...." Id.

[7] In 2015, the General Assembly amended Indiana Code section 6-1.1-24-4. Following that amendment, the Auditor believed it no longer had an obligation to search for a better address if certified mail notices were returned as undeliverable.

[8] On July 31, 2015, SRI prepared the notice of the tax sale of the Property and sent it by certified mail (the Certified Mail Notice) to Trust 4340 at Suite 700 on North LaSalle Drive. The Certified Mail Notice did not contain a street address or common description of the Property. The Certified Mail Notice was returned, stamped "Return to Sender, Not Deliverable as Addressed, Unable to Forward," and bore a handwritten note stating "refused." Tr. Ex. 24. The notice was also mailed to the same address on the same date by regular, first-class mail (the First Class Notice). The First Class Notice was not returned.

[9] SRI generated a "returned mail to search" list for all entities that were sent notices of the Tax Sale; the list included Trust 4340. In August 2015, SRI performed an additional search for addresses of those entities, but evidently was unable to find the current address for Trust 4340 and/or Midwest Investment.

[10] On August 7, 2015, the address for tax notices for Trust 4340 and the adjacent parcel was changed in the LaPorte County system used by the Auditor and assessor. Beginning on that date, the system listed the correct, current address on North Clark Street.

[11] The Auditor did not undertake any effort to find current addresses for property owners whose certified mail was returned as undeliverable. Although SRI posted to its website if first class or certified mail was returned, no one from the Auditor's office ever checked that website to determine if mail had been returned. There was never a point in the process when the Auditor looked for returned mail or took any action related to it. Indeed, employees of the Auditor readily admitted they took no action:

• "Q: Did you search your internal records for this parcel, to your knowledge? A: I just answered that. We did not because the first-class mail was not returned. Shall I say it slower?" Tr. Vol. II p. 71.

• "Q: You didn't have to do anything[?] A: No. Q: So you didn't make any type of determination on whether or not to search for another address? A: No, we did not. We didn't search for anything. Q: So you could [not] have cared less if the notices were returned[?] A:

That's right." Appellant's App. Vol. III p. 59.

The Auditor published notice of the Tax Sale in the local newspaper three times before the Tax Sale.

[12] Dellaportas and Midwest Investment remained unaware of the Tax Sale. In October 2015, the Tax Sale took place, but the Property did not sell. Therefore, the County placed it for sale at a Live Certificate Sale in February 2016. The County published notice of the Live Certificate Sale. XL Investment purchased the Property for $155,000. XL Investment filed a petition for a tax deed for the Property. The trial court entered an order issuing the deed on August 30, 2016. The deed was signed on September 30 and recorded on October 4, 2016. At some point, XL Investment filed a quiet title action, which finally resulted in notice to Trust 4340 on December 9, 2016.

[13] On March 9, 2017, Trust 4340 moved to set aside the judgment and tax deed. A bench trial took place on April 13, 2018, and on August 9, 2018, the trial court denied Trust 4340's motion. In pertinent part, the trial court found as follows:

44. [The Notice] was sent by first class mail and certified mail to the owner of record at the last address of record. The first class mailing was not returned, leaving the Auditor under no obligation to take additional steps to notify the property owner.

* * *

46. Per statute, the owner of the Property was to notify the County of a change in address and did not.

* * *

48. The Court finds that although the Tax Sale notice did not include the property address or other description of the property, the Auditor and SRI still substantially complied with Indiana Code § 6-1.1-24-4 by providing the pin number and legal description and could not provide any address or other description because the property was vacant.

* * *

77. Due process does not require that a property owner receive actual notice before the government may take his property. Rather, we have stated 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." Jones v. Flowers , 547 U.S. 220, 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006).

78. When mailed notice of a tax sale is returned unclaimed, the State must take additional reasonable steps to attempt to provide notice to the property owner before selling his property, if it is practicable to do so. Id.

79. ... In the present case, the Auditor sent two mailings, one via first class mail and one via certified mail. Although the certified mail was returned, the first class mailing was not returned.

80. The Court in Jones held that when a mailing is returned unclaimed, additional steps must be taken to provide notice. Id. The County in the present case took that additional step when they sent two mailings through two different methods. They also went a step further and published notice of the pending Tax Sale three times in the local paper.

* * *

84. Therefore, the County's efforts to notice the Trust prior to the tax sale were reasonably calculated to appraise [sic] Trust 4340 of the tax sale proceedings against the property and it was reasonably certain that the first class mailing informed those affected because it was never returned.

* * *

90. The Court finds that the Trust did not file its petition for relief within a reasonable amount of time for the following reasons:

1. The Trust did not pay real estate taxes on the Property for eight (8) years.

2. The Trust acquired the property in 1993. Despite multiple moves over several years, the Auditor was never provided with an updated address by the Trust.

* * *

4. Peter Dellaportas testified to be an experienced real estate developer who knew or should have known that real estate taxes are due each year and the subsequent consequences for not paying them.

Appealed Order p. 8-16. Trust 4340 now appeals.

Discussion and...