Cont'l Res. v. Fair

• Decision Date: 18 March 2022
• Docket Number: S-21-074.
• Citation: 311 Neb. 184,971 N.W.2d 313
• Parties: CONTINENTAL RESOURCES, appellee, v. Kevin L. FAIR, defendant and third-party plaintiff, appellant, and Heather Hauschild, Scotts Bluff County Treasurer, and Doug Peterson, Attorney General for the State of Nebraska, in their official capacities, and the County of Scotts Bluff, third-party defendants, appellees.
• Court: Nebraska Supreme Court

311 Neb. 184

971 N.W.2d 313

CONTINENTAL RESOURCES, appellee,

v. Kevin L. FAIR, defendant and third-party plaintiff, appellant,andHeather Hauschild, Scotts Bluff County Treasurer, and Doug Peterson, Attorney General for the State of Nebraska, in their official capacities, and the County of Scotts Bluff, third-party defendants, appellees.

No. S-21-074.

Supreme Court of Nebraska.

Filed March 18, 2022

Michael W. Meister, Jennifer Gaughan, and Mark T. Bestul, of Legal Aid of Nebraska, for appellant.

Gregory C. Scaglione and Casandra M. Langstaff, of Koley Jessen, P.C., L.L.O., for appellee Continental Resources.

Douglas J. Peterson, Attorney General, and James A. Campbell, Solicitor General, for appellee Attorney General.

Heavican, C.J., Cassel, Stacy, Funke, Papik, and Freudenberg, JJ., and Thompson, District Judge.

Papik, J.

If an owner of real property in Nebraska fails to pay property taxes, a statute allows the county in which the property is located to sell a tax certificate for the property to a private party. If, after a period of time, the owner of the real property fails to pay the taxes owed and the tax certificate purchaser complies with certain requirements, the tax certificate purchaser can obtain a deed to the property, free of any encumbrances. This appeal presents a multipronged challenge to the constitutionality of the statutes that authorize this process. The appellant contends that the statutes, both facially and as applied to him, violate the state and federal Takings Clauses; the state and federal Due Process Clauses; the federal Excessive Fines Clause; article I, § 25, of the Nebraska Constitution ; and article III, § 18, of the Nebraska Constitution. We hold that these claims of unconstitutionality lack merit and, thus, affirm.

BACKGROUND

Nebraska Tax Sale Statutory Process.

Before reviewing the facts of this particular case, we believe it beneficial to provide an overview of Nebraska's tax certificate sale process. Because tax certificate sale proceedings are governed by the law in effect at the time the tax sale certificate is sold, see HBI, L.L.C. v. Barnette , 305 Neb. 457, 941 N.W.2d 158 (2020), we cite the statutes that were in effect in March 2015, when the tax certificate for the property at issue in this case was sold.

The tax sale process has been a part of Nebraska law since at least 1879. See 1879 Neb. Laws, §§ 1-184, pp. 276-349. In that year, the Legislature passed an act "[t]o provide a system of revenue" for the growing state. 1879 Neb. Laws, p. 276. Located within the revenue act of 1879 was a method of recouping unpaid property taxes—a tax sale process which allowed investors to purchase tax certificates on tax-delinquent properties, then to request a tax deed from the county treasurer after a certain amount of time had passed if the property owner had not redeemed the property. See, §§ 109-111, pp. 320-21; § 119, pp. 324-25; § 126, p. 327.

The process operates in largely the same manner today as it did in 1879. See Neb. Rev. Stat. § 77-1801 et seq. (Reissue 2018). Each county has an automatic lien on property within its boundaries for the property taxes that are due to the government.

Neb. Rev. Stat. § 77-1901 (Reissue 2018). The county has the authority to sell its lien to a private party via a tax certificate when the taxes on the property become delinquent. See § 77-1818.

To facilitate the sale of the lien, the county treasurer creates a list of all the properties in the county that have delinquent property taxes. See § 77-1802. The list must then be published in a local newspaper once a week for 3 consecutive weeks. See § 77-1804. The tax certificate is then offered for sale. See § 77-1807(2)(b), (e), and (f). A statute sets the cost of the certificate as "the amount of taxes, interest, and cost thereon." § 77-1808.

If a county sells a tax certificate on a property, the property owner is not without recourse. The statute provides the owner the right to redeem the property by paying the county treasurer the amount listed in the tax certificate plus all other taxes paid by the tax certificate purchaser, any interest, and other fees. See § 77-1824. Interest accrues at 14 percent per year. Neb. Rev. Stat. § 45-104.01 (Reissue 2021).

So, what happens if the property owner does not redeem the property? The tax certificate holder can eventually apply for a tax deed, but must first wait at least 3 years after purchasing the tax certificate. See § 77-1837(1). Before applying for the tax deed, the tax certificate holder must provide a period of notice to the property owner of its intention to do so. See § 77-1831. If a tax deed is issued to the tax certificate purchaser, title to the property passes free and clear of any encumbrances. See SID No. 424 v. Tristar Mgmt. , 288 Neb. 425, 850 N.W.2d 745 (2014).

With this statutory background established, we turn to the facts and procedural history of this case.

Factual and Procedural History.

Kevin L. Fair and Terry A. Fair, a married couple, owned real property in Scotts Bluff County, Nebraska. The Fairs lived in a house on the property and owned the property free of any encumbrances.

In 2014, the Fairs failed to pay the property taxes they owed. In compliance with §§ 77-1801 and 77-1804, in February 2015, the county treasurer published a list of tax-delinquent properties in an area newspaper. The list included the legal descriptions of many properties, one of which was the Fairs’ home. The list was published three times: February 5, 12, and 19.

The county treasurer sold a tax certificate for the property's unpaid taxes to Continental on March 11, 2015, for $588.21. Continental then paid the subsequent property taxes as if it were the owner of the property. Once Continental began paying the property's taxes, the County did not send any further communications or tax bills to the Fairs. Nor did the Fairs attempt to make any payments to the county treasurer for the delinquent property taxes.

Three years later, on April 13, 2018, Continental served the Fairs a "Notice of Expiration of Right of Redemption." The notice informed the Fairs that they had 3 months from the date the notice was served to redeem the property and that redemption would cost $5,268—the total value of the unpaid taxes, fees, and interest. The notice also indicated that if the property was not redeemed, Continental would apply for a tax deed and the right of redemption would expire.

The Fairs did not make any payment to the county treasurer after receiving the notice from Continental. True to its word, in July 2018, Continental applied for a tax deed. The county treasurer issued the tax deed to Continental. At the time the tax deed was issued, the county assessed the value of the property at $59,759.

Continental thereafter filed a quiet title action against the Fairs. The Fairs eventually filed an amended answer, counterclaim, and third-party complaint, which added Scotts Bluff County and the county treasurer in her official capacity as third-party defendants. Relevant to this appeal, the Fairs alleged that the tax certificate sale process violated their constitutional rights in a number of respects. Because the Fairs sought to have statutes declared unconstitutional, the Nebraska Attorney General exercised his right "to be heard" regarding the Fairs’ constitutional claims. See Neb. Rev. Stat. § 25-21,159 (Reissue 2016).

In response to a motion filed by Continental, the district court granted summary judgment against the Fairs and quieted title to the property in Continental's favor. The district court found that the tax certificate sale statutes were not unconstitutional in the manner alleged.

Terry Fair died while the lawsuit was pending in the district court. Kevin Fair (hereinafter Fair) filed a timely appeal.

On the same day he filed his opening brief, Fair filed a notice pursuant to Neb. Ct. R. App. § 2-109(E) (rev. 2014) that his appeal challenged the constitutionality of Nebraska statutes. We moved the case to our docket. The Attorney General filed a brief on appeal defending the constitutionality of the challenged statutes.

ASSIGNMENTS OF ERROR

Fair assigns that the district court erred in granting Continental's summary judgment motion to quiet title because the tax sale process set forth in § 77-1801 et seq. violates (1) the Takings Clauses of the U.S. and Nebraska Constitutions; (2) the Due Process Clauses of the U.S. and Nebraska Constitutions; (3) the Excessive Fines Clause of the U.S. Constitution; (4) article I, § 25, of the Nebraska Constitution ; and (5) article III, § 18, of the Nebraska Constitution.

STANDARD OF REVIEW

Although this case comes to us as an appeal from an order granting summary judgment, the parties do not disagree about any of the relevant facts. The sole issues on appeal are Fair's standing to assert his various constitutional challenges and the merits of those constitutional challenges.

Standing is a jurisdictional component of a party's case because only a party who has standing may invoke the jurisdiction of a court. Adair Holdings v. Johnson , 304 Neb. 720, 936 N.W.2d 517 (2020). The question of jurisdiction is a question of law, upon which an appellate court reaches a conclusion independent of the trial court. Id.

The constitutionality of a statute also presents a question of law upon which appellate courts have an obligation to reach an independent conclusion irrespective of the decision of the court below. See State v. Boche , 294 Neb. 912, 885 N.W.2d 523 (2016).

ANALYSIS

Standing.

Before we can address the merits of Fair's constitutional challenges, we are confronted with a challenge to his standing. Because standing is a jurisdictional issue, we address it first. See Egan v. County of Lancaster , 308 Neb. 48, 952 N.W.2d 664 (2020).

The Attorney General contends that because Fair failed to comply with § 77-1844, he lacks standing to assert certain constitutional challenges. Section 77-1844 provides that "[n]o person shall be permitted to...