Bill's Printing, Inc. v. Carder

• Decision Date: 29 April 2004
• Docket Number: No. 03-779.,03-779.
• Parties: BILL'S PRINTING, INC., and First Security Bank v. George F. CARDER III and Sharon L. Carder.
• Court: Arkansas Supreme Court

Page 803

161 S.W.3d 803

357 Ark. 242

BILL'S PRINTING, INC., and First Security Bank v. George F. CARDER III and Sharon L. Carder.

No. 03-779.

Supreme Court of Arkansas.

April 29, 2004.

R. Bryan Tilley, Heber Springs; and Barrett & Deacon, P.A., by: D.P. Marshall Jr. and Leigh M. Chiles, Jonesboro, for appellants.

John Patterson, P.A., Searcy,; and Terry J. Lynn, Heber Springs, for appellees.

ANNABELLE CLINTON IMBER, Justice.

Appellants Bill's Printing, Inc., and First Security Bank, bring this appeal from a circuit court's order quieting title in certain real property in favor of Appellees George F. Carder III and Sharon L. Carder (the Carders). The appellants contend that the circuit court erred in setting aside a cancellation deed issued by the State Land Commissioner and in finding that the Commissioner acted contrary to law in unilaterally cancelling the deed issued to the appellees. Alternatively, they assert on appeal that the circuit court erred in finding that Bill's Printing was not a bona fide purchaser. We hold that Bill's Printing is a bona fide purchaser and therefore reverse the order of the circuit court.

In 1993, Mary Scholes conveyed land, including Lot Fifteen in Heber Springs, Cleburne County, to her children Patrick and Laura Scholes. Patrick Scholes testified that that deed contained a statement that tax statements should be sent to "Pat Scholes, 1876 Cowden, Memphis, Tennessee 38104." In January 1994, Patrick Scholes moved to 3113 Hayley Cove in Germantown, Tennessee without notifying the Cleburne County tax collector of his new address.

On June 30, 1997, the Cleburne County tax collector certified Lot Fifteen, which was listed as owned by C. Patrick and Laura L. Scholes, 1876 Cowden Ave., Memphis, TN 38104, as forfeited to the state for nonpayment of taxes. The list stated that the Scholeses had been delinquent in payment of their real property taxes since 1994. On August 21, 1997, the Land Commissioner sent the Scholeses a notice by certified mail to the Cowden Avenue address in Memphis explaining that Lot Fifteen was certified to the state for delinquent taxes and that they must pay taxes, penalties, interests, and costs due or the land would be sold at a public sale on August 26, 1999. On September 3, 1997, the U.S. Postal Service returned the notice to the Land Commissioner marked undeliverable.¹

On August 26, 1999, the Land Commissioner held a tax-delinquent land sale and sold Lot Fifteen to the Carders for $4,957.86. Mr. Carder testified that they paid real estate taxes on the land for the years 2000 and 2001.

In August 1999, a Cleburne County resident told Patrick Scholes that Lot Fifteen was offered for a tax sale. Scholes testified that he immediately called the Land Commissioner's office and requested a petition to redeem. On August 31, 1999, five days after the land was sold, the Land Commissioner's office sent a petition to redeem to Scholes. It included information that the sale date was "Subject to sale" and that the taxes for 1994-1997 with interest, penalties, costs, and fees totaled $302.39. The petition also listed the telephone and fax numbers by which to contact the Land Commissioner's office with any questions. The petition, in bold capital letters, directed the Scholeses to see the "other side for instructions." The instructions on the reverse side read that petitions to redeem:

are valid for 90 days from the date printed. If 90 days has expired, an updated Petition to Redeem must be requested. Please be aware of the sale date of the property. To avoid the sale of the property, the past due amount must be paid in full. Possession of a valid Petition to Redeem does not postpone the sale date. In the event the property is sold, the record owner has 30 days to redeem the property. If not redeemed within 30 days, the sale is final and the property cannot be redeemed.

The Scholeses did not file a petition to redeem Lot Fifteen within thirty days of the tax sale. Accordingly, on September 29, 1999, the Land Commissioner issued a limited-warranty deed to the Carders for Lot Fifteen as a result of the August 26, 1999 sale. That deed was recorded in Cleburne County on October 7, 1999. On October 13, 1999, Patrick Scholes mailed the petition to redeem and a check in the amount of $302.39 to the Land Commissioner's office.

On October 21, 1999, Peggy Barnes, Chief Deputy of the Land Commissioner's office, wrote Patrick Scholes and said that she was returning his check, because Lot Fifteen was "sold on September 29, 1999," and that a limited-warranty deed had been filed for record in Cleburne County.

On November 18, 1999, Patrick Scholes contacted the Land Commissioner's office, spoke with Carol Lincoln, an attorney with that office, and faxed a memo to Ms. Lincoln summarizing their conversation. In that memo, Scholes stated that he believed that he had ninety days to file his petition to redeem and that Ms. Lincoln stated that the sale date on the petition should have read "August 26, 1999," instead of "Subject to sale." Also on November 18, Ms. Lincoln sent a memo to the Land Commissioner, recommending that he "cancel the sale" to the Carders and "allow the redemption," because "it is the policy of the office to write the sale information on the petition and highlight the information particularly the date the petition must be returned," which was not done.

On November 23, 1999, pursuant to Patrick Scholes' request, the Land Commissioner's office sent a second petition to redeem to Patrick and Laura Scholes for Lot Fifteen. The petition again stated that the sale date was "Subject to sale." The Land Commissioner's officer received the Scholes' completed petition to redeem for Lot Fifteen on December 6, 1999, which was 102 days after the tax sale. On December 8, 1999, the Land Commissioner issued a deed cancelling the Carders' limited-warranty deed for Lot Fifteen. The cancellation deed was recorded on December 30, 1999. On December 9, 1999, the Land Commissioner issued a redemption deed for Lot Fifteen to Patrick and Laura Scholes. The Scholeses' redemption deed was duly recorded on December 14, 1999. Sometime in 2000, John Braswell, owner of Bill's Printing, Inc., testified that he was driving by Lot Fifteen in Heber Springs, noticed a "For Sale" sign, and called Patrick Scholes, who was listed on the sign with his telephone number. On October 7, 2000, the Scholeses issued a warranty deed for Lot Fifteen to Bill's Printing, Inc., for $42,000. John Braswell testified that he had a title company examine the title to Lot 15. Mr. Braswell testified that he has been mowing the lot since the purchase and paid taxes on it in the Spring of 2002, after receiving notice from Cleburne County that his taxes were due.

On December 21, 2000, George and Sharon Carder sued Bill's Printing, Inc., Patrick and Laura Scholes, and the State Land Commissioner. The Carders later added First Security Bank, which carried the mortgage on Lot Fifteen, as a party. The suit sought to cancel the cancellation deed issued by the Land Commissioner and to quiet title to Lot Fifteen in the Carders. On June 24, 2002, a bench trial was conducted by the circuit court.² Patrick Scholes testified that he was not told that the property was sold when he contacted the Land Commissioner's office in August 1999 to request a petition to redeem. He also testified that no one knew that the Carders had any claim to Lot Fifteen when he closed the land sale to Bill's Printing, Inc., in October 2000.

Steve Hollowell, Executive Assistant to the Land Commissioner, testified at the bench trial that he believed the Land Commissioner had the authority to cancel a deed that he issued or to set aside a sale. He further stated that the Land Commissioner's office has written policies consisting of a looseleaf folder with examples of petitions to redeem, disclaimers, redemption deeds, and land patents but that there was no written policy instructing employees about what to do when a petition to redeem is issued after a tax sale but before the thirty-day redemption period has expired. Specifically, he testified that there was no written policy instructing employees to write the date of the actual sale on the petition to redeem, thus alerting the taxpayer that he or she has thirty days to redeem. He did testify that it was an unwritten standard operating procedure in the office to advise persons of those dates when a petition to redeem was mailed out, but mistakes could still be made as illustrated by the Scholeses' case.

On July 9, 2002, the circuit court issued its decree. The court found that the Cleburne County Tax Collector properly certified Lot Fifteen as delinquent on June 30, 1997; that the Land Commissioner properly notified the Scholeses by certified mail at their last known address; that the public sale of Lot Fifteen occurred on August 26, 1999; that the sale complied with Arkansas law, and no error was found to justify cancelling the limited-warranty deed granted to the Carders; that title to the property was vested in the Carders before the Land Commissioner issued the redemption deed; that the State held no interest in Lot Fifteen to convey to the Scholeses; that the Land Commissioner acted contrary to law in unilaterally cancelling the limited-warranty deed granted to the Carders; that the deed of cancellation is hereby cancelled; that the Land Commissioner never conveyed any title to the Scholeses after the recording of the deed of cancellation; that Patrick and Laura Scholes owned no interest when they conveyed Lot Fifteen by warranty deed to Bill's Printing, Inc.; that the Carders showed by a preponderance of the evidence that Bill's Printing, Inc., had notice of such facts and circumstances that would lead to knowledge of the Carders' claim to the property; and that title to Lot Fifteen is quieted and confirmed in the Carders, and the claims of the Scholeses, the Land Commissioner, Bill's...