Dow v. State

• Decision Date: 01 April 1976
• Docket Number: M,No. 6,6
• Citation: 396 Mich. 192,240 N.W.2d 450
• Parties: Carl DOW et al., Plaintiffs-Appellants, v. STATE of Michigan, Defendant-Appellee.
• Court: Michigan Supreme Court

Page 450

240 N.W.2d 450

396 Mich. 192

Carl DOW et al., Plaintiffs-Appellants, v. STATE of Michigan, Defendant-Appellee.

No. 6, March Term 1974.

Supreme Court of Michigan.

April 1, 1976.

Vander Veen, Freihofer & Cook by George E. Pawlowski, Grand, Rapids, for plaintiffs-appellants.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Jerome Maslowski, Russell E. Prins, Asst. Attys. Gen., Environmental Protection and Natural Resources Div., Lansing, for defendant-appellee.

Michigan Ass'n for Consumer Protection, Michigan Legal Services Ass'n, George L. Corsetti, Michigan Legal Services Assistance Program, Detroit, Mich., Michael J. Barnhart, Center for Urban Law and Housing University of Detroit Law School, Detroit, Mich., amicus Curiae.

LEVIN, Justice.

Marie Parker Smith, Titleholder to a parcel of real property improved with a family residence, and Carl and Rose Dow, land contract purchasers of Smith, Commenced this action to quiet title against the State of Michigan which had acquired title to the property at a tax sale for nonpayment of 1965 city taxes in the amount of $35.82.

Plaintiffs claim the tax sale was defective because the state failed to give them adequate notice of the tax foreclosure proceedings.

The issue is whether the Due Process Clause, barring the state from depriving any person of property without due process of law, ¹ precludes foreclosure of the state's statutory lien for unpaid property taxes absent notice, other than newspaper publication, to owners of significant interests in the property.

The circuit court, finding that the statutory requirements concerning tax sales had been complied with, rejected plaintiffs' constitutional challenges and entered a summary judgment dismissing the complaint. The Court of Appeals affirmed.

We hold that the Due Process Clause requires that an owner of a significant interest in property be given proper notice and an opportunity for a hearing at which he or she may contest the state's claim that it may take the property for nonpayment of taxes and that newspaper publication is not constitutionally adequate notice of such right.

We reverse and remand to the trial court for entry of a judgment quieting title in Smith, subject to the land contract purchaser's interest of the Dows.

I

Proceedings to foreclose a tax lien are commenced by petition filed with the circuit court for the county in which the delinquent tax lands are situated. ² Notice of the hearing on the petition ³ is required to be published in a regularly established newspaper in the county. ⁴ Publication is declared to be 'equivalent to a personal service of notice on all persons who are interested in the lands specified in such petition.' ⁵

Notice of the tax sale is to be mailed to the last known post office address of the person 'according to the records of (the state treasurer's) office,' against whom the delinquent taxes are assessed. However, 'failure to receive or serve such notice shall not invalidate the proceedings taken under the state treasurer's petition and decree of the circuit court, in foreclosure and sale of the lands for taxes.' ⁶

Not later than 120 days before expiration of the right to redeem from a tax sale, registered return receipt notice of such right is to be mailed to each person to whom is assessed land bid in to the state at the tax sale and still held as a state bid. A defect in or failure to receive or serve the notice does not invalidate the proceedings. ⁷

Private tax sale purchasers, but not the state, are required to give notice by registered mail to all persons 'having any estate in such lands or any interest therein, either in fee, for life or for years, or any mortgagee * * * the holder of any lien * * * or any person in the actual possession of the lands at the time of such tax purchase'. ⁸

After the expiration of six months from the time a deed is made to the state no action may be commenced to set it aside. ⁹

Neither Smith nor the Dows were in possession. The property was occupied by a tenant of the Dows.

Title to the property is now in the State of Michigan.

It is agreed that Smith and the Dows were without actual knowledge of the tax sale or the circuit court hearing regarding the 1965 taxes and that the records of neither the Kent County Clerk's nor Treasurer's Office show proof of service by mailing of notices of the tax sale or of the circuit court hearing or of the right of redemption.

Rose Dow received notice of the period for exercise of the right to redeem but did not disclose this information to Carl Dow or Smith until after termination of the redemption period. Carl Dow and Smith were without notice of the redemption period. ¹⁰

Notice of the sale was published in the Sentinel-Leader, published weekly in the City of Sparta (population 3,094) with a circulation of 2,100. Sparta is 10 miles from Grand Rapids. Smith is a resident of grand Rapids (population 411,000) and the Dows are residents of the City of Wyoming (population 56,560). ¹¹

II

Michigan's provision for notice by publication in tax foreclosure proceedings was sustained against a due process challenge by the United States Supreme Court in Longyear v. Toolan, 209 U.S. 414, 28 S.Ct. 506, 52 L.Ed. 859 (1908).

Forty-three years later, in Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), the Supreme Court declared unconstitutional a section of the New York Banking Law which permitted service by newspaper publication to the beneficiaries of a common trust fund whose addresses were known or readily ascertainable. In Schroeder v. City of New York, 371 U.S. 208, 83 S.Ct. 279, 9 L.Ed.2d 255 (1962), and Walker v. City of Hutchinson, 352 U.S. 112, 77 S.Ct. 200, 1 L.Ed.2d 178 (1956), the Court struck down notice by publication in land condemnation proceedings. ¹² In Covey v. Town of Somers, 351 U.S. 141, 76 S.Ct. 724, 100 L.Ed. 1021 (1956), notice by publication of a tax sale was held insufficient where the land owner, known to be mentally incompetent, was without a guardian and unable to understand the nature of the proceedings. ¹³

While the dictates of Mullane have been applied by the Court in cases where the property owner had no reason to expect that a judicial proceeding might be commenced against his property, property tax assessments are a definite annual event of which all competent ¹⁴ land owners are cognizant.

In sustaining in Longyear notice by publication, the United States Supreme Court espoused the so-called 'caretaker theory.' ¹⁵'The owner of property whose taxes, duly assessed, have remained unpaid for more than one year, must be held to the knowledge that proceedings for sale are liable to be begun as soon as practicable after the 1st day of June, and that the law contemplates that they will be ended before December 1, when the sales will be made by the county treasurer. The proceedings are inscribed on the public records and otherwise made notorious. If he exercises due vigilance, he cannot fail to learn of their pendency, and that full opportunity to defend is afforded to him. This satisfies the demands of due process of law, and the judgment is affirmed.' Longyear v. Toolan, supra, 209 U.S. p. 418, 28 S.Ct. p. 508. (Emphasis supplied.)

In Golden v. Auditor General, 373 Mich. 664, 131 N.W.2d 55 (1964), this Court, distinguishing Mullane, Schroeder and Walker as cases where the plaintiffs had no reason to anticipate that action would be taken against their property, rejected a claim that a tax deed should be set aside because the statute does not require personal service or notice by mail.

III

After Golden was decided, the United States Supreme Court expanded the protection of consumers against state action under the Due Process Clause. In Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), Wisconsin's procedure for prejudgment garnishment of wages without notice was held violative of the Due Process Clause. Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), struck down two state statutes permitting replevin upon Ex parte application to a court clerk without prior notice. In Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974), the Court cut back, upholding Louisiana's sequestration statute which permits issuance of a writ to enforce a vendor's lien without a prior hearing. However, in North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975), the Court struck down Georgia's statutes which provide for prejudgment garnishment of a bank account on a writ issued by a court clerk without notice or hearing.

While Fuentes, Mitchell and North Georgia may differ regarding the quantum of process to be accorded, it is clear that the Due Process Clause applies to a creditor's effort to enforce its lien through judicial proceedings or other state action against a defaulting debtor. In commenting on Fuentes, the Court in North Georgia Finishing observed:

'Although the length or severity of a deprivation of use or possession would be another factor to weigh in determining the appropriate form of hearing, it was not deemed to be determinative of the Right to a hearing of some sort. Because the official seizures had been carried out without notice and without opportunity for a hearing or other safeguard against mistaken repossession they were held to be in violation of the Fourteenth Amendment.' North Georgia Finishing, Inc. v. Di-Chem, Inc., supra, p. 606, 95 S.Ct. p. 722. (Emphasis supplied).

While North Georgia Finishing concerns a commercial transaction ¹⁶ 'involving parties of equal bargaining power,' and Sniadach, Fuentes and Mitchell concern creditors who sought to collect relatively small amounts from individual consumers, the Court declined to make a distinction on that account:

'We are no more inclined now than we have been in the past to distinguish among different kinds...