HBI, L.L.C. v. Barnette

• Citation: 941 N.W.2d 158,305 Neb. 457
• Decision Date: 10 April 2020
• Docket Number: No. S-19-147.,S-19-147.
• Parties: HBI, L.L.C., Appellee, v. Walter D. BARNETTE, Appellant.
• Court: Supreme Court of Nebraska

305 Neb. 457

941 N.W.2d 158

HBI, L.L.C., Appellee,

v.Walter D. BARNETTE, Appellant.

No. S-19-147.

Supreme Court of Nebraska.

Filed April 10, 2020

I. INTRODUCTION

This is an appeal from an action to quiet title after issuance of a tax deed. Appellant, Walter D. Barnette, argues that a notice of application for a treasurer’s deed was defective and that the statutory scheme relating to notice requirements for obtaining a tax deed is unconstitutional on due process grounds. We affirm.

II. BACKGROUND

On March 5, 2013, Pontian Land Holdings LLC (Pontian) purchased a certificate of tax sale for real property after Barnette failed to pay real estate taxes on the property. The property was located at "Lot 2, Swaney’s Addition Replat I, an Addition to the City of Bellevue, as surveyed, platted and recorded, Sarpy County, Nebraska." After waiting the statutorily required 3 years, Pontian initially filed a judicial foreclosure action on the property, but later dismissed the action and filed an application for a treasurer’s tax deed.

As required by Neb. Rev. Stat. § 77-1831 (Reissue 2009), Pontian sent notice of its intent to apply for a treasurer’s deed for the property by certified mail, return receipt requested, to the address where the property tax statement was mailed. This address was Barnette’s residence, which was located in Pottawattamie County, Iowa. The notice listed Pontian as the purchaser of the real property, but erroneously stated that Guardian Tax Partners Inc. (Guardian) would apply for the treasurer’s tax deed. The notice also listed Guardian as the sender of the certified mail. Although Barnette resided at the address where the notice was sent, the notice was returned as "unclaimed." Handwriting on the certified mail receipt indicates the post office had made three attempts to deliver the notice prior to returning it as unclaimed. Pontian subsequently published notice in a Sarpy County newspaper for 3 consecutive weeks.

On August 29, 2016, the Sarpy County treasurer issued a treasurer’s tax deed in Pontian’s name. Pontian filed a complaint, seeking to quiet title on the property. Barnette filed a counterclaim to quiet title in his name. Pontian later transferred the property to HBI, L.L.C., and HBI was substituted as plaintiff in the case. On October 31, 2017, Barnette filed a motion for summary judgment that was later withdrawn. On January 30, 2018, HBI filed a motion for summary judgment. On February 14, Barnette filed a second motion for summary judgment. Both motions were denied by the district court as being premature.

On October 12, 2018, HBI filed a second motion for summary judgment. On October 22, Barnette filed a third motion for summary judgment. Barnette later amended his counterclaim with leave from the district court. The counterclaim alleged Pontian’s notice was defective and challenged the constitutionality of the notice requirements set forth in Neb. Rev. Stat. §§ 77-1832 to 77-1835 (Reissue 2009) on due process grounds. Specifically, Barnette argued that because Pontian knew Barnette lived in Pottawattamie County, Iowa, notice by publication in Sarpy County violated his right to due process.

On January 15, 2019, the district court granted HBI’s amended second motion for summary judgment and denied Barnette’s third motion for summary judgment. The district court quieted title in favor of HBI after finding that Barnette was given sufficient notice in compliance with Nebraska law and that the notice did not violate the due process requirements of the U.S. Constitution or the Nebraska Constitution.

Barnette now appeals the district court’s order granting summary judgment in favor of HBI and denying Barnette’s third motion for summary judgment.

III. ASSIGNMENTS OF ERROR

Barnette assigns that the district court erred in (1) not finding that Pontian’s original election of foreclosure barred the tax deed process, (2) finding the notice provided complied with Nebraska statutes, (3) not finding the Nebraska tax sale statutory scheme violated the U.S. Constitution and the Nebraska Constitution, (4) finding Barnette’s due process rights under the U.S. Constitution and the Nebraska Constitution were not violated, and (5) not quieting title to Barnette.

IV. STANDARD OF REVIEW

The constitutionality of statutes and statutory interpretation present questions of law.¹

V. ANALYSIS

1. ORIGINAL ELECTION OF JUDICIAL FORECLOSURE

In his first assignment of error, Barnette argues Pontian’s claim for a tax deed was barred by its original election to proceed to judicial foreclosure.

The Legislature’s recent amendments to tax sale statutes notwithstanding, the proceedings at issue in this case are governed by the law in effect on December 31, 2009.² Under Neb. Rev. Stat. § 77-1801 (Reissue 2009), properties with delinquent real estate taxes on or before the first Monday of March may be sold at a tax sale. The tax sale purchaser acquires a lien on the property, which is represented by a tax certificate.³ A property owner may redeem a property after a tax certificate has been issued with payment of the amount noted on the tax certificate, other taxes subsequently paid, and interest.⁴ If, after 3 years, the property has not been redeemed, there are two methods by which the holder of a tax certificate may acquire a deed to the property: the tax deed method and judicial foreclosure.⁵ A tax deed acts to convey the property and may be issued by the county treasurer after proper notice is provided.⁶ Judicial foreclosure requires the holder of a tax certificate to foreclose on the lien for taxes in the district court of the county where the property is located.⁷

Barnette relies on language in Neun v. Ewing⁸ to support his argument that Pontian’s application for a tax deed was barred by its initial filing of a foreclosure action. In Neun , property owners attempted to redeem their property after a foreclosure action had been filed using the procedure set forth in § 77-1824, authorizing redemption from a tax sale prior to the issuance of a tax deed. This court held that once judicial foreclosure has begun, only the separate redemption procedure established by Neb. Rev. Stat. § 77-1917 (Reissue 2009) is available.⁹ Recognizing that the two procedures for converting a tax sale certificate into a deed are not interchangeable, the court concluded that

once the holder has elected to proceed under chapter 77, article 19, the provisions of such article govern the rights of the parties in relation to the tax sale certificate. In other words, after the election to proceed by judicial foreclosure has been made, both the holder and the property owner are bound by that election.¹⁰

In arriving at its holding, the court articulated: " ‘Although the overall objective of both procedures is the recovery of unpaid taxes on real property, these [procedures] "are two separate and distinct methods for the handling of delinquent real estate taxes" ’ which are ‘neither comparable nor fungible.’ "¹¹

Barnette argues that this language precluded Pontian from applying for a tax deed because it initially filed a foreclosure action. Neun is distinguishable. The issue in Neun was the manner of redemption permitted once the holder of a tax sale certificate had elected to proceed with judicial forfeiture. Moreover, Barnette’s interpretation of Neun is inconsistent with a plaintiff’s statutory right to voluntary dismissal. Under Neb. Rev. Stat. §§ 25-601 and 25-602 (Reissue 2016), a plaintiff has the right to dismiss an action without prejudice any time before final submission of the case, so long as no counterclaim or setoff has been filed by an opposing party.

Here, Pontian’s foreclosure action was dismissed prior to a summons being issued, and no complaint was served on Barnette in that action. Thus, Pontian had a statutory right to voluntarily dismiss its initial filing without prejudice. We hold that Pontian’s election to initially file and dismiss the judicial foreclosure action did not preclude his application for a tax deed. In addition, we clarify that the language used to distinguish between the two methods of converting a tax certificate into a deed in Neun did not abrogate the tax certificate holder’s right to voluntary dismissal under §§ 25-601 and 25-602. In this case, Pontian had a right to voluntary dismissal under §§ 25-601 and 25-602 because no counterclaim or setoff had been filed.¹²

2. NOTICE UNDER § 77-1831

(a) Publication in Sarpy County

In his second assignment of error, Barnette first argues that publication in Sarpy County was insufficient notice because Pontian knew Barnette lived in Pottawattamie County, Iowa.

A tax sale purchaser is not entitled to a tax deed unless he or she provides sufficient notice to the property owner at least 3 months prior to the application for the tax deed.¹³ A tax deed is presumptive evidence that notice has been served or published as statutorily required.¹⁴

Although the Legislature has since amended § 77-1832, the version of the statute governing the proceedings at issue here provided, in relevant part, that "[s]ervice of the notice provided by section 77-1831 shall be made by certified mail, return receipt requested, upon the person in whose name the title to the real property appears of record to the address where the property tax statement was mailed ...." If the titled owner could not be found upon diligent inquiry, § 77-1834 permitted the purchaser or his or her assignee to publish the notice "in some newspaper published in the county and having a general circulation in the county or, if no newspaper is printed in the county, then in a newspaper published in this state nearest to the county in which the real property is situated."

In Wisner v. Vandelay Investments ,¹⁵ this court addressed whether the applicable language in §§ 77-1832 and 77-1834 permitted the holder of a tax certificate to serve a property owner by publication after being unable to serve her by certified mail when the holder had...