Kim v. Jordan Realty

• Decision Date: 27 March 2020
• Docket Number: C.A. No. 19-83WES
• Parties: CHU H. KIM, Plaintiff, v. JORDAN REALTY, et al., Defendants.
• Court: U.S. District Court — District of Rhode Island

CHU H. KIM, Plaintiff, v. JORDAN REALTY, et al., Defendants.

C.A. No. 19-83WES

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

March 27, 2020

REPORT AND RECOMMENDATION

PATRICIA A. SULLIVAN, United States Magistrate Judge.

Brought pursuant to 42 U.S.C. § 1983 (Count II), as well as pursuant to state law, including R.I. Gen. Laws §§ 44-9-1, et seq. (Count I), and common law negligence (Count III), this case challenges the constitutional and statutory sufficiency of notices sent by Defendant Pawtucket Water Supply Board ("PWSB") in advance of the 2016 tax sale of property located at 46 Amey Street, Pawtucket, Rhode Island ("46 Amey Street").¹ Based on the alleged inadequacy of the 2016 tax sale notices and on a challenge to the constitutionality of the procedure for subsequently raising inadequate notice as a defense set forth in R.I. Gen. Laws § 44-9-11(c),² the complaint asks this Court to vacate the 2018 Rhode Island Superior Court final decree of foreclosure of all rights of redemption and to declare the tax deed for 46 Amey Streetvoid ab initio. It also alleges that, after the tax sale, rent has been collected for the use of 46 Amey Street, giving rise to a state law claim based on larceny (obtaining of property by false pretenses) pursuant to R.I. Gen. Laws § 11-41-4 (Count IV).

Now pending before the Court are dueling dispositive motions. Defendant Jordan Realty ("Jordan Realty"), the buyer at the tax sale, has filed a motion to dismiss (ECF No. 7) based on Fed. R. Civ. P. 12(b)(1) and 12(b)(6),³ while Plaintiff Chu H. Kim ("Kim"), the taxpayer and former owner of 46 Amey Street, has moved for summary judgment (ECF No. 11) on all four Counts of his complaint. Both motions are referred to me for report and recommendation. 28 U.S.C. § 636(b)(1)(B). For the reasons that follow, I find that Kim's § 1983 claim, grounded in his right to procedural due process, is without merit and that both the undisputed facts and the well-pled facts in the complaint establish that Kim is estopped from challenging the tax sale or Jordan Realty's ownership of 46 Amey Street. Therefore, I recommend that Kim's motion for summary judgment be denied and that Jordan Realty's motion to dismiss be granted.

I. INTRODUCTION

The operative facts laid out in the complaint (ECF No. 1, "Compl.") may be briefly summarized. Until November 9, 2016, title to 46 Amey Street was vested in Plaintiff Kim. Compl. ¶ 1. After bills issued by PWSB for water usage at 46 Amey Street became overdue and remained unpaid, PWSB published and posted a notice of tax sale in various locations and mailed it to Kim at various addresses, including by certified mail to Kim at 46 Amey Street itself, as well as to Kim's mailing address of record in the offices of PWSB pursuant to R.I. Gen.Laws § 44-9-9 through 11.⁴ However, PWSB did not mail or deliver the notice to Kim's residence in East Providence, which Kim alleges PWSB "knew, or reasonably should have known" was his mailing address. Compl. ¶ 21. Kim claims that, because it did not, there was "confusion and delay of receipt by the appropriate party."⁵ Id. ¶¶ 23-24. As a result, he asserts that the 2016 tax sale notice was legally insufficient and not in accordance with minimum constitutional requirements. On November 9, 2016, 46 Amey Street was sold at public auction to Defendant Jordan Realty. Id. ¶¶ 2, 5-9.

Just over a year later, pursuant to R.I. Gen. Laws § 44-9-25, Jordan Realty filed a petition to foreclose Kim's right of redemption in the Superior Court. Jordan Realty v. Kim, Case No. PM-2017-5447 ("Jordan Realty v. Kim"). Under the Rhode Island statutory scheme for tax sales, this proceeding in the Superior Court provides the taxpayer with a full-blown opportunity to raise any "notice defense" he might have arising from any inadequacy - whether or not of constitutional dimension - tainting the pre-tax sale notice. R.I. Gen. Laws § 44-9-11(c). However, for any party who was entitled to notice of the tax sale and who got "actual notice of the pendency of the petition to foreclose," it is also the last chance - the defense of inadequate pre-tax sale notice must be raised in this proceeding in the Superior Court or the taxpayer is "estopped from alleging lack of notice in any action to vacate a final decree." Id. (emphasis supplied).

For 46 Amey Street, Jordan Realty served the notice of the petition for foreclosure by certified mail as required by R.I. Gen. Laws § 44-9-27, and by personal service (served by a constable on Kim's spouse, a "person of suitable age") at his East Providence residence pursuant to R.I. Super. Ct. R. 4(e)(1).⁶ Compl. ¶ 13. Despite being a party who had "receive[d] actual notice of the pendency of the petition to foreclose," R.I. Gen. Laws § 44-9-11(c), Kim opted not to answer the petition, not to appear in the Superior Court proceeding, not to attend the Superior Court hearing and not to argue to the Superior Court that PWSB's notice of the tax sale was inadequate. See Compl. ¶ 29. Following the Superior Court hearing (held on February 21, 2018), on February 28, 2018, the Superior Court issued its final decree forever foreclosing and barring Kim's right of redemption with respect to 46 Amey Street. Compl. ¶ 30 & Exs. 6, 7.

For a taxpayer who did not receive "actual notice of the pendency of the petition to foreclose," the Rhode Island statutory scheme allows one more chance to raise a due process deprivation arising from a tax sale. Specifically, § 44-9-24 permits such a taxpayer to bring a "separate action" to vacate the Superior Court final decree within one year⁷ following its entry. R.I. Gen. Laws § 44-9-24. However, the § 44-9-24 grounds are limited, as relevant here, to the "inadequacy of notice of the petition amounting to a denial of due process." Id. Despite having received "actual notice," Kim has invoked § 44-9-24; on February 21, 2019, almost one year after the entry of the Superior Court's final decree, Kim filed his complaint in this Court.

Counts I and II of Kim's complaint allege that the tax sale of 46 Amey Street to Jordan Realty is void and Jordan Realty's deed is a nullity because PWSB failed to provide Kim withconstitutionally or legally sufficient notice of the 2016 tax sale. In connection with these notice-based claims, Kim challenges the constitutionality of R.I. Gen Laws § 44-9-11(c), which provides that, for him as a person with actual notice, the Superior Court petition proceeding was his last opportunity to raise the notice defense. He argues that R.I. Gen Laws § 44-9-11(c) is "nothing more than a contrivance and an artifice . . . deliberately designed to make an 'end run' around, and circumvent the impropriety of, an underlying tax sale by a municipal authority in which notice is void ab initio." ECF No. 9 at 12. Therefore, Kim contends, § 44-9-11(c) is unconstitutional, both facially and as applied in the circumstances of this case. Count III is based on state law negligence by PWSB only. The viability of Count III has not been challenged by the pending motions. Count IV accuses Jordan Realty of larceny because it collected rent in connection with the use of 46 Amey Street in reliance on the tax sale deed.

Not mentioned in Kim's complaint and complicating Kim's standing to assert these arguments are the allegations in the complaint filed by the Intervenor, Henry George. ECF No. 25. George claims that he had been residing at 46 Amey Street with Kim's permission and that, beginning in August 2016 (approximately three months before the tax sale), Kim defrauded him by agreeing to sell 46 Amey Street and accepting payments totaling $97,000 made through August 2018, while failing to disclose that 46 Amey Street was about to be and then had been sold at a tax sale. Id. ¶¶ 4-8, 12. George has sued Kim for fraud in the Superior Court. George v. Kim, PC-2019-8297 (filed Aug. 8, 2019). Because Kim seeks to have Jordan Realty's title to 46 Amey Street voided, George filed a complaint-in-intervention here to preserve his claim to a superior right of ownership. Kim has failed to answer George's complaint-in-intervention, which was filed on January 28, 2020; as of this writing, he is in default. George has not joined Kim's claims against either PWSB or Jordan Realty; he has not argued that any of the noticessent to Kim in connection with the tax sale of 46 Amey Street are constitutionally or statutorily inadequate. Rather, he alleges that Kim was supposed to pay all municipal assessments until the sale to him was consummated and that Kim "failed to take the necessary action to maintain said property as a result of the tax sale." ECF No. 25 ¶¶ 10, 13.

Without waiting for discovery, Kim and Jordan Realty have both filed dispositive motions.

First, Jordan Realty responded to the complaint with a motion to dismiss all claims (Counts I and IV) against it. ECF No. 7.⁸ Invoking Fed. R. Civ. P. 12(b)(6), it argues that Kim's challenge to the 2016 pre-tax sale notice fails because, as a party with "actual notice" who chose to fail to answer or appear, he is estopped and forever foreclosed and barred from raising any notice defense, include lack of due process, by the Superior Court's 2018 final decree in the proceeding on the petition to foreclose Alternatively, invoking Fed. R. Civ. P. 12(b)(1), Jordan Realty contends that this Court lacks jurisdiction because the case runs afoul of the Tax Injunction Act, 28 U.S.C. § 1341 ("TIA"). It also asks the Court to abstain based on Younger v. Harris, 401 U.S. 37 (1971).

Kim opposes Jordan Realty's motion, arguing that PWSB's notice of the 2016 tax sale was not made in a manner reasonably likely to inform affected persons and that Jordan Realty's notice of the 2018 petition is flawed because it was not ordered by the Superior Court as required by R.I. Gen Laws § 44-9-27; but see ECF No. 12-1 at 1 (Justice Keough orders that Jordan Realty be allowed to make personal service). Despite his receipt of actual notice in 2018...