ABAR ASSOCIATES v. Luna

• Decision Date: 08 March 2005
• Docket Number: No. 2002-391-Appeal.,2002-391-Appeal.
• Citation: 870 A.2d 990
• Parties: ABAR ASSOCIATES, a RIGP v. Emilio LUNA, Jr., et al.
• Court: Rhode Island Supreme Court

870 A.2d 990

ABAR ASSOCIATES, a RIGP v. Emilio LUNA, Jr., et al.

No. 2002-391-Appeal.

Supreme Court of Rhode Island.

March 8, 2005.

Patrick T. Conley, Esq., East Providence, for Plaintiff.

Lauren E. Jones, Esq., Providence, for Defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

SUTTELL, Justice.

This appeal requires us to revisit the right of redemption foreclosure process under Rhode Island's tax sale statute. It is a familiar journey, and one which we have made with increasing frequency of late.

The plaintiff, ABAR Associates, appeals from a Superior Court order that vacated a final decree forever foreclosing and barring all rights of redemption and that allowed First Union National Bank (First Union) to redeem a parcel of real estate that ABAR had purchased at a tax auction sale.

We have addressed various aspects of Rhode Island's tax sale statute on many occasions. First Union, however, raises a novel, and rather elementary, question that previously has eluded examination — when is a tax sale a "sale" for purposes of computing the one-year period that must elapse before a petition to foreclose may be filed under G.L.1956 § 44-9-25? Is it, as plaintiff argues, on the date of the tax sale auction? Or is it, as the hearing justice ruled, when the city tax collector executed and delivered the deed? Or is it, as defendant asserts, on the date the deed is recorded, thus completing the "sale?"¹

Before addressing the merits of this issue, however, we must consider a procedural obstacle standing in First Union's road to redemption that plaintiff asserts cannot be traversed. May the holder of an unrecorded interest in the property, who is clearly not entitled to receive notice of either the tax sale or the petition to foreclose, intervene after a final decree has been entered foreclosing all rights of redemption? Our review of our previous pronouncements in this area causes us to answer this question in the negative. Because we are of the opinion that it was an error of law to permit First Union to intervene after the foreclosure judgment was entered, we need not address the question of whether plaintiff filed its petition to foreclose before the statutory one-year period had expired. We vacate the order of the Superior Court, therefore, and reinstate the final decree of September 11, 2001.

Facts and Travel²

The facts in this case are largely uncontested. In July 1998, Emilio and Giselda Luna purchased real property at 90 Wilson Street in Providence, Rhode Island. Ameriquest Mortgage Company granted the Lunas a $72,800 loan, secured by a first mortgage on the property. This mortgage was recorded in the Providence land evidence records on August 3, 1998. Shortly after granting the mortgage loan, Ameriquest "bundled" it with approximately $20 million in other loans, which it then sold on the secondary market. The Luna loan was thus assigned to Empire Mortgage X, Inc. Less than one year later, in May 1999, Empire Mortgage X reassigned the mortgage deed and loan documents to First Union. First Union, however, did not record this assignment in the land evidence records until over two and a half years later, on January 7, 2002, by which time much had transpired with respect to the subject property.

Because of a delinquency in the payment of real estate taxes, the City of Providence sold the property at a tax sale auction on May 18, 2000. ABAR submitted the highest bid, $2,082.50. On July 7, 2000, the city conveyed a tax collector's deed to ABAR, which plaintiff caused to be recorded on July 14, 2000.

On May 21, 2001, just over one year after the tax sale auction, plaintiff filed a petition to foreclose all rights of redemption. The court appointed a title examiner to determine all persons having an interest in the property. By report dated June 10, 2001, the title examiner identified the following interested parties: Emilio Luna, Jr., and Giselda Luna; Ameriquest Mortgage Co.; and Norwest Financial RI, Inc., the assignee of a previous (perhaps undischarged) mortgage. On June 14, 2001, plaintiff filed an amended petition to foreclose, listing the above parties as defendants, all of whom were duly served citations by certified mail. As none of said parties pled or otherwise defended, default was entered. A final decree forever foreclosing and barring all rights of redemption was entered on that fateful day of September 11, 2001.³

At some point thereafter, First Union found out about the foreclosure. It recorded its mortgage interest on January 7, 2002, and on January 9, 2002, filed a motion to file an answer and redeem property. First Union asserted that ABAR had filed its petition to foreclose prematurely, in violation of § 44-9-25, and, therefore, contested the validity of its tax title. Hearings were held on First Union's motion on January 23 and January 30, 2002.

By order entered on February 4, 2002, the Superior Court ruled that plaintiff's petition to foreclose was prematurely filed because the sale "was not completed until [the] deed was conveyed by the Tax Collector of the City of Providence on or about July 7th." Therefore, he found that July 7, 2000, was the operative date for the purposes of determining when the one-year period specified in § 44-9-25⁴ began, after which foreclosure proceedings could be initiated.

Finding that both the original and amended petitions to foreclose had been filed before one year had elapsed from the date the city signed and delivered the tax collector's deed, the Superior Court vacated the final decree that had been entered in the foreclosure proceeding of September 11, 2001, and it allowed First Union to "redeem the [t]ax [c]ollector's [d]eed from ABAR" for the original sum of $2,082.50, plus court costs, attorneys' fees and statutory interest. The order also specified that First Union's motion "to file an answer and redeem the property shall be treated as a motion to intervene." The plaintiff filed a timely notice of appeal to the Supreme Court on February 15, 2003.⁵

ABAR argues on appeal that the Superior Court committed error by ruling that its petition to foreclose was filed prematurely. It contends that the statutory one-year time period "from a sale of land for taxes" until "a petition * * * for the foreclosure of all rights of redemption" may be filed begins on the date of the tax sale auction, not from the date the tax deed was issued or recorded. Thus, it contends, the decree on September 11, 2001, was rendered in strict accordance with the statutory procedures applicable to tax foreclosure sales. Consequently, it asserts, all rights of redemption were forever foreclosed.

In addition, plaintiff argues that First Union should not have been allowed to intervene and redeem for three reasons. First, plaintiff asserts that there cannot be any intervention and redemption after a final judgment has been entered foreclosing the rights of redemption. Second, it maintains that First Union should not have been allowed to intervene because it was not the holder of an interest of record while the foreclosure proceeding was pending, and, therefore, was not entitled to notice of the proceeding and does not have standing to intervene. Related to this argument, plaintiff argues that the doctrine of laches prevents First Union from challenging the foreclosure proceeding at this time because it failed to record its interest in the Lunas' property. Finally, plaintiff argues that the Superior Court order allowing First Union to intervene was erroneous because tax foreclosure proceedings can be challenged only in a separate action in equity.

In response, First Union argues that this Court interprets the tax statute liberally in favor of redemption and that the Superior Court justice was correct to vacate the foreclosure judgment and allow it to redeem. First Union further argues that because of the penal nature of the tax sale statute, its provisions must be strictly obeyed. The core of First Union's argument is its contention that the tax sale became valid only on July 14, 2000, when ABAR recorded the tax collector's deed it had received from the city. Consequently, First Union maintains, plaintiff's amended foreclosure petition of June 14, 2001, was prematurely filed and, therefore, the foreclosure judgment of September 11, 2001, was invalid and correctly set aside by the Superior Court. First Union further argues that because there was no valid final judgment foreclosing the rights of redemption and because it has an interest in the property, it had standing under § 44-9-29 to file an answer and offer to redeem the property.

In addition, First Union counters ABAR's argument that it should have filed a separate action in Superior Court by asserting that the version of § 44-9-24 in effect at the time this case was decided did not require a separate action to be filed and that there is conflicting case law weighing in favor of its position that no separate action was needed.

Likewise, First Union attacks ABAR's argument that the doctrine of laches prevents it from asserting its rights because plaintiff is unable to show that it has suffered any prejudicial harm. Consequently, it argues, this Court should uphold the hearing justice's decision to vacate the judgment.

Discussion

A tax sale foreclosure proceeding "is a unique procedure created by statute for a limited purpose; to provide a forum for the exercise of the right to redeem the subject land." Pratt v. Woolley, 117 R.I. 154, 157, 365 A.2d 424, 426 (1976). Because it is a statutory proceeding and not an ordinary civil action, the jurisdiction of the Superior Court is sharply circumscribed. See id.; see also Finnegan v. Bing, 772 A.2d 1070, 1072 (R.I.2001)

. Tax sale foreclosure proceedings are also specifically exempted from the operation of the Rules of Civil Procedure by Rule 81(a)(2) of the Superior Court Rules of Civil Procedure.⁶

Although the statute does not...