Jordan v. Jensen

• Decision Date: 10 January 2017
• Docket Number: No. 20150257,No. 20150647,20150257,20150647
• Citation: 2017 UT 1
• Parties: JAMES HARVEY JORDAN, TRUSTEE OF THE JAMES H. JORDAN REVOCABLE TRUST, Appellees, v. EDDIE R. JENSEN and LY-THI JENSEN, Appellants.
• Court: Utah Supreme Court

2017 UT 1

JAMES HARVEY JORDAN, TRUSTEE OF THE

JAMES H. JORDAN REVOCABLE TRUST¹, Appellees, v. EDDIE R. JENSEN and LY-THI JENSEN, Appellants.

No. 20150257

No. 20150647

SUPREME COURT OF THE STATE OF UTAH

January 10, 2017

This opinion is subject to revision before final publication in the Pacific Reporter

On Direct Appeal

Eighth District, Vernal Dep't

The Honorable Samuel P. Chiara

No. 130800084

Attorneys:

Clark B. Allred, Vernal, A. Erin Bradley, Salt Lake City, for appellees James Harvey Jordan Trustee, Martha Jordan Boright, and Laura Ward

A. John Davis III, Christopher R. Hogle, Mark L. Burghardt, Salt Lake City, for appellee Axia Energy, LLC

Rick L. Knuth, Brady L. Rassmussen, Salt Lake City, for appellees Stonegate Resources, LLC, and Wasatch Oil & Gas, LLC

Daniel A. Jensen, Terry E. Welch, Matthew E. Jensen, Salt Lake City, for appellants Eddie R. Jensen and Ly-Thi Jensen

G. Wesley Quinton, Farmington, for amici Utah Petroleum Association and Utah Mining AssociationSean D. Reyes, Att'y Gen., Laron J. Lind, Ass't Att'y Gen., Salt Lake City, for amicus Utah State Tax Commission

CHIEF JUSTICE DURRANT authored the opinion of the Court, in which ASSOCIATE CHIEF JUSTICE LEE, JUSTICE HIMONAS, JUDGE MCKELVIE, and JUDGE GARDNER joined.

Having recused themselves, JUSTICE DURHAM and JUSTICE PEARCE did not participate herein; THIRD DISTRICT COURT JUDGES RICHARD D. MCKELVIE and JAMES D. GARDNER sat.

CHIEF JUSTICE DURRANT, opinion of the Court:

Introduction

¶ 1 Here, we consider whether Utah Code section 78B-2-206 bars a challenge to a tax title based on a tax sale effected without notice to an interested party. On May 25, 2000, Uintah County conducted a tax sale, yet failed to provide the record mineral interest owners notice of the sale. Now, over a decade later, the purchaser of the tax title and the individuals who were the record owners of the mineral interest prior to the tax sale dispute for the first time who rightfully owns the mineral reserve. The purchasers of tax title raise Utah Code section 78B-2-206 as a defense. That statute precludes a party from challenging the validity of a tax title that was conveyed at a tax sale more than four years prior to suit. The record mineral interest owners argue that in failing to provide notice of the tax sale—a factual point the purchaser of the tax title concedes—the county violated their due process rights and that, therefore, the statute of limitations does not bar their suit.

¶ 2 We agree with the record mineral interest owners. Because Utah Code section 78B-2-206 was triggered by the county's tax sale—which it conducted in violation of the Due Process Clause of the Fourteenth Amendment—we cannot apply that limitations statute to bar the record mineral interest owners' suit. And because in Utah a failure to provide notice to an interested party of a tax sale also serves as a jurisdictional defect, we conclude that the county failed to obtain jurisdiction over the mineral interest at issue, thereby preventing that property interest from passing at the tax sale.

Background

¶ 3 The facts of this case are complex, and focus primarily on various conveyances related to the property at issue. The appellees in this matter include the Jordans and Axia. The Jordans obtained the property in question from certain predecessors and retainedownership of the mineral interest before conveying the surface estate to a subsequent owner. Believing they still owned the mineral interest, the Jordans signed leases with various parties to develop this mineral interest. One of these leases was eventually assigned to Axia, which is also an appellee in this matter. After the Jordans conveyed the surface estate, the subsequent owner failed to pay taxes and Uintah County purported to sell the property at a tax sale for unpaid taxes. The Jensens, the appellants, eventually purchased the tax title sold by Uintah County at that tax sale. These facts are discussed in greater detail below.

¶ 4 On October 25, 1954, Olivia Jordan, Marie Robertson, and Caroline Kelley (the Jordans' predecessors in interest) acquired surface and mineral rights to roughly forty acres of property (Property) in Uintah County, Utah, by a warranty deed.² Forty years later, on February 3, 1995, Olivia Jordan, Marie Robertson, and Caroline Kelley conveyed the surface interests of the Property to Jonathan Anthony Andrews by a warranty deed, expressly and intentionally reserving the Property's oil, gas, and mineral rights.

¶ 5 Between 1995 and 1999, Uintah County assessed annual taxes against the Property. No other taxes were assessed against the Property during that time. The tax notice for the 1995 property taxes—the year the Jordans' predecessors in interest conveyed the surface interests to Mr. Andrews—was mailed to Olivia Jordan c/o Jonathan Anthony Andrews, though she never received that notice. Thereafter, Uintah County sent all tax notices to Mr. Andrews. In 1997, Olivia Jordan conveyed by warranty deed her remaining interest in the oil and gas mineral reserve to James Harvey Jordan, Martha Jordan Boright, and Mary Edna Jordan (the Jordans). After the February 1995 severance of the mineral rights, Mr. Andrews, the new surface owner, failed to pay the property taxes for 1995,³ 1998, and 1999, leaving $167.19 in unpaid property taxes.

¶ 6 Utah law provides for the annual sale of real property in May or June "following the lapse of four years from the date the property tax became delinquent."⁴ Before selling real property for unpaid taxes, a county must provide notice of the tax sale, "sent by certified and first class mail to the last-known recorded owner . . . and all other interests of record, as of the preceding March 15, at their last-known address."⁵ Once the county conveys tax title to the purchaser at the tax sale, any action to challenge the validity of the tax title must be brought within "four years from the date of the sale."⁶ If an action is brought more than four years from the date of the tax sale, it is barred by Utah Code section 78B-2-206.

¶ 7 On May 25, 2000, Uintah County seized the Property for unpaid taxes and sold it to Quality Remediation Services (QRS) at a tax sale for $6,000.00. The district court found that "[n]o notice was ever given to the Jordans," who are owners of record, "of the [tax] assessment of 1995, the failure to pay the taxes, or the tax sale." The tax title conveyed by the county to QRS contains no reservations or exceptions, failing to recognize the Jordans' severed mineral interest. On December 13, 2000, QRS conveyed the Property to the Jensens by a warranty deed for $5,500.00. As with the tax title conveyed to QRS, the deed from QRS to the Jensens contains no reservation or exceptions. In a 2001 Real Property Transfer Survey Standard Land Questionnaire, the Jensens noted that the purchase from QRS did not include the severed mineral interest.

¶ 8 In early 2003, the Jordans purportedly leased the mineral interest rights in the Property to Landco Energy, Inc. (Landco). In May 2011, the Jordans leased the Property's mineral rights to Stonegate Resources, LLC (Stonegate). Three months later, on August 1, 2011, Stonegate assigned its lease to Axia, reserving an overriding royalty interest. Sometime thereafter, Stonegate conveyed a portion of its royalty interest to Wasatch Oil & Gas, LLC (Wasatch).

¶ 9 On November 7, 2011, Axia entered a Surface Use Agreement and Grant of Easement (Surface Use Agreement) with the Jensens. The following year, Axia secured two title opinions from two different attorneys to ensure that the Jordans owned the leased mineral interest. Both attorneys raised concerns "as to whether the mineral estate . . . passed under the Tax Deed," thereby makingownership uncertain. After Axia received these title opinions casting doubt on the Jordans' ownership, on March 29, 2013, the Jordans' counsel sent a letter to the Jensens asking them to sign a mineral rights quitclaim deed and explaining that if the Jensens were unwilling to sign the deed, the Jordans would be compelled to file a quiet title action. In response, the Jensens claimed ownership over the mineral estate for the first time.

¶ 10 The Jordans filed a complaint to quiet title on July 5, 2013. Among other things, the complaint alleges that no notice was given to the Jordans or their predecessors of the 1995 taxes, subsequent delinquency, or the May 2000 tax sale as required by due process. The Jensens filed their answer and counterclaim on August 9, 2013, seeking a declaratory judgment to quiet title to the mineral interest and alleging that the Jordans' action was barred by Utah Code section 78B-2-206. Eventually, the Jensens amended their counterclaim, adding a third-party complaint against Axia, which had leased the oil, gas, and mineral rights from the Jordans. For purposes of this appeal, we refer to the Jordans and Axia collectively as the Appellees.

¶ 11 After concluding discovery, the parties filed motions for summary judgment. The district court granted the Appellees' motions for summary judgment,⁷ concluding that it could not apply section 206 because of Uintah County's due process violation and that the failure to provide notice to the Jordans prevented their property interest—the mineral reserve—from passing at the tax sale. The Jensens appealed the district court's judgment, and we retained jurisdiction to decide the issue.

Standard of Review

¶ 12 We address one issue on appeal: whether the district court correctly determined that the failure to provide constitutionally adequate notice to the Jordans of the May 2000 tax sale renders Utah Code section 78B-2-206⁸ inapplicable, thereby allowing the Appelleesto have the 2000 tax title declared void to the extent it purports to transfer the Jordans' mineral estate.⁹ This issue requires us to interpret the Fourteenth Amendment to the United States Constitution and Utah Code section 78B-2-206. The correct interpretation of those authorities is a legal issue we review...