Dupont v. Reuter, 1 CA-CV 07-0299 (Ariz. App. 9/11/2008)

• Decision Date: 11 September 2008
• Docket Number: 1 CA-CV 07-0299.
• Parties: BRUCE DUPONT aka BRUCE BENNETT, a single man; BRAD BARDING, a single man, Plaintiffs/Appellants, v. FRANCIS WOODWARD REUTER, a widow, Defendant/Appellee.
• Court: Arizona Court of Appeals

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BRUCE DUPONT aka BRUCE BENNETT, a single man; BRAD BARDING, a single man, Plaintiffs/Appellants, v. FRANCIS WOODWARD REUTER, a widow, Defendant/Appellee.

1 CA-CV 07-0299.

Court of Appeals of Arizona, Division One, Department B

Filed September 11, 2008

Appeal from the Superior Court in Coconino County, Cause No. CV2004-0713, The Honorable Dan R. Slayton, Judge, REVERSED

Law Office of Pernell W. McGuire, PLLC, Flagstaff, By Pernell W. McGuire, Attorneys for Plaintiffs/Appellants.

Mooney, Wright & Moore, PLLC, Mesa, By Paul J. Mooney, Jim L. Wright, Paul Moore, Attorneys for Defendant/Appellee.

OPINION

JOHNSEN, Judge.

¶1 Arizona Revised Statutes ("A.R.S.") section 42-18202(A) requires that before a tax lienholder may sue to foreclose the property owner's right to redeem the lien, the lienholder must send the property owner by certified mail a notice of intent to foreclose. In this case, the lienholder sent the notice but did so by regular mail. Later, after the property owner failed to respond to service of a complaint, the lienholder obtained a default judgment. The superior court vacated the judgment on the ground that the lienholder's failure to strictly comply with section 42-18202(A) deprived the court of jurisdiction. We conclude the court did not lack jurisdiction over the foreclosure complaint and reverse the order vacating the judgment.

FACTS AND PROCEDURAL BACKGROUND

¶2 According to the complaint, Bruce Dupont (also known as Bruce Bennett) and Brad Barding (together, "Dupont") hold a certificate of purchase of a tax lien on an abandoned school property in Williams. The lien represents some $240,000 in taxes owing for 1989 and 13 years thereafter.¹

¶3 Pursuant to A.R.S. §§ 42-18201 et seq., more than three years after purchasing the tax lien, Dupont sought to foreclose the owner's right to redeem the property. On November 10, 2004, his lawyer mailed by first-class mail two copies of the required Notice of Intent to Foreclose to the addresses of record of Francis Woodward Reuter, the owner of the property. Neither of the notices was returned as undeliverable. On December 15, 2004, Dupont filed a foreclosure complaint, which was served on Reuter on January 31, 2005, by hand-delivery to an authorized person at her residence in California. Service also was effected by publication. After Reuter failed to respond to the complaint, Dupont filed a Notice of Application for Entry of Default and an Application for Entry of Default on March 16, 2005. Default was entered that same day. Although the Notice of Application for Entry of Default was served on Reuter by mail, the record contains no evidence that she responded. On May 9, 2005, Dupont moved for entry of default judgment, which was entered on May 12, 2005. The record shows that after Dupont commenced a separate forcible detainer action, Reuter agreed to a stipulated judgment. The parties' stipulation, however, expressly provided that it did not constitute a waiver of Reuter's "right to pursue post-judgment remedies in any other case or action."

¶4 On November 10, 2005, a full year after Dupont's Notice of Intent to Foreclose was mailed to her, Reuter filed a "Motion to Vacate Default Judgment Pursuant to Rule 60(c), A.R.C.P." Reuter argued the default judgment was void because the superior court lacked jurisdiction. Jurisdiction was lacking, she asserted, because the foreclosure complaint failed to allege that Dupont had served the Notice of Intent to Foreclose by certified mail, as required by A.R.S. § 42-18202(A).² The superior court granted Reuter's motion to vacate. Dupont moved for reconsideration, and while that motion was pending, Reuter moved to dismiss the complaint for lack of jurisdiction. The court denied Dupont's motion for reconsideration and a later motion for new trial. It granted Reuter's motion to dismiss and ordered the Coconino County Treasurer to rescind, withdraw and cancel the treasurer's deed issued pursuant to the default judgment. Dupont's timely appeal followed.

DISCUSSION

A. Standard of Review.

¶5 This court will not reverse a decision to vacate a default judgment absent a clear abuse of discretion. Daou v. Harris, 139 Ariz. 353, 359, 678 P.2d 934, 940 (1984). Whenever doubt exists as to the merits of a default judgment, it should be set aside. Sloan v. Florida-Vanderbilt Dev. Corp., 22 Ariz. App. 572, 574, 529 P.2d 726, 728 (1974) (setting aside a default judgment under Rule 60(c)(6)). Likewise, we will not disturb a denial of a motion for new trial absent a manifest abuse of discretion, Larsen v. Decker, 196 Ariz. 239, 244, ¶ 27, 995 P.2d 281, 286 (App. 2000), and we apply the abuse of discretion standard to a ruling on a motion to dismiss, Appels-Meehan v. Appels, 167 Ariz. 182, 183, 805 P.2d 415, 416 (App. 1991) (citation omitted).

¶6 We review issues of law, however, de novo. Bentley v. Building Our Future, 217 Ariz. 265, 270, ¶ 11, 172 P.3d 860, 865 (App. 2007). A court abuses its discretion if it commits a legal error. City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz. 172, 190, ¶ 64, 181 P.3d 219, 237 (App. 2008).

B. Tax Lien Foreclosures.

¶7 The law requires the county treasurer to mail notice on or before September 1 of each year to the owner of each property on which delinquent taxes are owed. A.R.S. § 42-18103 (2006).³ On or before December 31, the treasurer must prepare a list of all properties on which taxes for prior tax years are delinquent and a notice that a tax lien is to be sold on each such property. A.R.S. § 42-18106 (2006). That notice of intent to sell is mailed to the last known address of each affected property owner and also is published and posted. A.R.S. §§ 42-18108, -18109 (2006). At the sale, which is held in February, one may purchase a tax lien by paying the entire amount of delinquent taxes owed on the property, plus interest and penalties. A.R.S. § 42-18114 (2006). If more than one prospective purchaser bids on the lien, it is sold to the one who "offers to accept the lowest rate of interest on the amount so paid to redeem the property from the sale." Id. ¶8 Pursuant to A.R.S. § 42-18201 (2006), one who has purchased a tax lien may bring an action to foreclose the property owner's right to redeem at any time beginning three years after the sale of the lien. Section 42-18202 (2006) describes the content and manner of the notice of intent to foreclose that the lienholder must serve before filing suit. At the time of the entry of default judgment in this case, that section provided:

A. At least thirty days before filing an action to foreclose the right to redeem under this article, . . . the purchaser shall send notice of intent to file the foreclosure action by certified mail to:

1. The property owner of record according to the records of the county recorder . . .

B. The notice shall include:

1. The property owner's name.

2. The real property tax parcel identification number.

3. The legal description of the real property.

4. The certificate of purchase number.

5. The proposed date of filing the action.

¶9 Relevant to the issue before us is A.R.S. § 42-18101 (2006), which provides:

A. The county treasurer shall secure the payment of unpaid delinquent taxes by using the provisions of this article and articles 4, 5 and 6 of this chapter to sell the tax liens provided for in § 42-17154 and to foreclose the right to redeem.

B. An insubstantial failure to comply with these provisions does not affect the validity of: . . .

3. The sale of a tax lien or the foreclosure of the right to redeem by which tax collection is enforced.

A footnote to this statute explains that the references in subpart A are to sections 42-18151 et seq. (redemption of tax liens) and, significantly for our purposes, 42-18201 et seq. (judicial foreclosure of right of redemption).

¶10 By amendment effective August 12, 2005, after the events at issue here, the legislature added the following subpart to section 42-18202:

C. If the purchaser fails to send the notice required by this section, the purchaser is considered to have substantially failed to comply with this section. A court shall not enter any action to foreclose the right to redeem under this article until the purchaser sends the notice required by this section.

¶11 The holder of the lien may file an action to foreclose the lien no sooner than 30 days but no longer than 180 days after service of the notice of intent to foreclose. A.R.S. § 42-18202(A). The Rules of Civil Procedure control such a proceeding. A.R.S. § 42-18203(A) (2006). The owner of the property may redeem the tax lien at any time before judgment is entered. A.R.S. § 42-18206 (2006).

C. The Superior Court Had Jurisdiction Over the Foreclosure Complaint.

¶12 The basis of the superior court's conclusion that it lacked jurisdiction over the foreclosure complaint was its finding that, pursuant to A.R.S. § 42-18202, one seeking to foreclose a tax lien has a mandatory duty to serve the notice of intent to foreclose by certified mail. Because Dupont's foreclosure complaint did not and could not allege he had served his notice of intent to foreclose by certified mail, the court held jurisdiction was absent. For the following reasons, we disagree that the requirement to serve the notice of intent to foreclose by certified mail is jurisdictional and reverse the court's orders and judgment on that ground.⁴

¶13 Statutory duties relating to tax liens may be either mandatory (and therefore jurisdictional) or directory. See Kincannon v. Irwin, 64 Ariz. 307, 310, 169 P.2d 861, 863 (1946) (treasurer's duty to give notice of tax lien sale held to be mandatory); see also Dep't of Revenue v. S. Union Gas Co., 119 Ariz. 512, 514, 582 P.2d 158, 160 (1978) ("A provision is mandatory when failure to follow it renders the proceeding to which it relates illegal and void; it is directory when the failure to follow it does not invalidate the proceedings." (quoting Pleasant Hills Borough v....