Lilly v. Duke

• Decision Date: 29 November 1988
• Docket Number: No. 17960,17960
• Citation: 180 W.Va. 228,376 S.E.2d 122
• Court: West Virginia Supreme Court
• Parties: Owen A. LILLY and Peggy J. Lilly, and C. Glen Lilly and Sara Lilly, his Wife v. Gay H. DUKE.

Page 122

376 S.E.2d 122

180 W.Va. 228

Owen A. LILLY and Peggy J. Lilly, and C. Glen Lilly and Sara

Lilly, his Wife v. Gay H. DUKE.

No. 17960.

Supreme Court of Appeals of

West Virginia.

Nov. 29, 1988.

Syllabus by the Court

1. There are certain constitutional due process requirements for notice of a tax sale of real property. Where a party having an interest in the property can reasonably be identified from public records or otherwise, due process requires that such party be provided notice by mail or other means as certain to ensure actual notice.

2. W.Va.Code, 11A-3-2 (1967), was, prior to its amendments in 1983 and 1985, constitutionally invalid insofar as it permitted the sale of real property without personal notice to affected owners and others having an interest in the property.

3. The holding of Syllabus Point 9 of Pearson v. Dodd, 159 W.Va. 254, 221 S.E.2d 171 (1975), appeal dismissed, 429 U.S. 396, 97 S.Ct. 581, 50 L.Ed.2d 574 (1977), is overruled insofar as it precludes a landowner or other party having an interest in real property from bringing suit to set aside the sale of the property based on a constitutionally defective notice at the sheriff's sale for delinquent taxes.

Walton S. Shepherd, III, Sissonville, for appellants.

Oliver D. Kessell, Ripley, for appellee.

MILLER, Justice:

We consider today what notice is constitutionally required prior to the sheriff's sale of real property for delinquent taxes pursuant to W.Va.Code, 11A-3-1, et seq. (1967). Admittedly, the issue presented here is limited, since the statute was amended in 1983 and 1985 to provide for notice by certified mail to comply with Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983). ¹

On July 12, 1978, the plaintiffs conveyed to Cecil J. Taylor, III, and Faye V. Taylor, his wife, a 23.681 acre tract of land situate in Jackson County. On the same day, the Taylors executed a deed of trust thereon to secure the payment of a promissory note in the principal sum of $12,000. Monthly installments on the note of $223.97 were to be remitted to the Bank of Sissonville. The deed of trust, as recorded, identified the plaintiffs as beneficiaries and Walton S. Shepherd, III, of Kanawha County as trustee.

For the year 1980, the tract was assessed and entered in the land books of Jackson County in the name of the Taylors. No real property taxes were paid by the Taylors in that year and the tract became delinquent. As required by W.Va.Code, 11A-2-13 (1967), ² the county sheriff posted and published in the local newspaper a notice of the tax delinquency. A second notice, published pursuant to W.Va.Code, 11A-3-2 (1967), ³ announced that the tract would be offered for sale at public auction on October 19, 1981. There were no bids received at the auction, and the sheriff purchased the tract for the State. ⁴

The tract was unredeemed, and on September 12, 1983, the deputy commissioner of forfeited and delinquent lands filed a suit to authorize its sale for the benefit of the school fund. ⁵ The defendant, Gay H. Duke, purchased the tract for the sum of $50 at an auction held on December 9, 1983. A tax deed was executed and delivered to the defendant by the deputy commissioner on December 28, 1983.

This suit to set aside the tax deed was filed by the plaintiffs on August 2, 1984, in the Circuit Court of Jackson County in reliance on Mennonite Bd. of Missions v. Adams, supra. By order dated October 28, 1986, the court entered summary judgment for the defendant. Mennonite was found not to control because there were insufficient facts developed as to the notice of the sale by the deputy commissioner.

The issue that we confront today is whether a property owner or a mortgagee may be deprived of his property interest without adequate notice prior to the sale of property at a sheriff's sale for failure to pay taxes. ⁶

We spoke to this issue in advance of Mennonite in Don S. Co., Inc. v. Roach, 168 W.Va. 605, 285 S.E.2d 491 (1981), and concluded that there was a due process right to notice prior to a sheriff's sale, as evidenced by this language in Syllabus Point 1:

"A landowner whose property is to be sold for delinquent taxes under Chapter 11A, article 3 of the West Virginia Code, as amended, is an interested party, by virtue of the statutory entitlement to redeem delinquent property contained in article 3, who must be afforded the protection of the due process guarantees contained in the West Virginia and United States Constitutions."

We did not define in Roach the type of notice constitutionally required. Almost two years after Roach, the United States Supreme Court decided Mennonite, a case that involved a due process challenge to Indiana's tax sale statute by a mortgagee. Under Indiana's statutory procedure, notice of a tax sale was provided to all parties by publication and posting. The landowner was also provided notice by certified mail, but a mortgagee was provided no additional notice. When the property was sold, the purchaser received a certificate of sale. This certificate constituted a priority lien on the property. If the tract was not timely redeemed, a deed was prepared and delivered to the purchaser giving him fee simple title, free and clear of all liens and encumbrances.

The United States Supreme Court initially found that a mortgagee possessed a substantial property interest which was significantly affected by the sale. This was because a tax sale immediately provided to the purchaser a priority lien which took precedence over the mortgagee's lien. Furthermore, if the property was unredeemed by the landowner or other interested party, the mortgagee's interest was entirely extinguished.

The Court next proceeded to determine the sufficiency of notice by posting and publication. Relying principally on Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), it held that constructive notice to a mortgagee violated due process where the mortgagee could reasonably be identified from public records.

"When the mortgagee is identified in a mortgage that is publicly recorded, constructive notice by publication must be supplemented by notice mailed to the mortgagee's last known available address, or by personal service. But unless the mortgagee is not reasonably identifiable, constructive notice alone does not satisfy the mandate of Mullane." 462 U.S. at 798, 103 S.Ct. at 2711, 77 L.Ed.2d at 187. (Footnote omitted).

At a minimum, Mennonite stated, due process requires "[n]otice by mail or other means as certain to ensure actual notice" to the interested party. 462 U.S. at 800, 103 S.Ct. at 2712, 77 L.Ed.2d at 188. ⁷ Since the notice provided to the mortgagee was constitutionally insufficient, the tax sale was deemed to be ineffective.

More recently, on authority of Mullane and Mennonite, the Supreme Court invalidated an Oklahoma probate statute that provided for constructive notice to certain estate creditors. Tulsa Prof. Collection Serv. v. Pope, 485 U.S. 478, 108 S.Ct. 1340, 99 L.Ed.2d 565 (1988). The Oklahoma statute barred all contract claims against an estate if they were not filed within two months of a published notice. The Court in Pope dealt with a rather modest property interest--a cause of action. Furthermore, the statute in question was termed a "nonclaim" statute in that it automatically barred claims not filed against the estate within the prescribed time.

The argument was made in Pope that a "nonclaim" statute was analogous to a statute of limitations. Under settled law a statute of limitations involves no state action and, therefore, is not subject to attack on due process grounds. See Texaco, Inc. v. Short, 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738 (1982); Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1978). The Court rejected this argument by pointing to the ongoing nature of the state's involvement in the probate procedure, and concluded:

"Where the legal proceedings themselves trigger the time bar, even if those proceedings do not necessarily resolve the claim on its merits, the time bar lacks the self-executing feature that Short indicated was necessary to remove any due process problem. Rather, in such circumstances, due process is directly implicated and actual notice generally is required." 485 U.S. at 487, 108 S.Ct. at 1346, 99 L.Ed.2d at 577. (Citations omitted).

Two conclusions may be drawn from Mennonite and Pope. First, as with the mortgagee in Mennonite, the beneficiary of a deed of trust enjoys a protectible interest in the property subject to the trust. We have recognized the substantial property interests involved in a deed of trust--the trustee holding legal title for the beneficiary and the grantor holding an equitable title. Rollyson v. Bourn, 85 W.Va. 15, 100 S.E. 682 (1919).

Second, these cases prescribe certain constitutional due process requirements for notice of a tax sale of real property. Where a party having an interest in the property can reasonably be identified from public records or otherwise, due process requires that such party be provided notice by mail or other means as certain to ensure actual notice, as set out in Mennonite:

"Notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable." 462 U.S. at 800, 103 S.Ct. at 2712, 77 L.Ed.2d at 188. (Emphasis in original).

Thus, we conclude that W.Va.Code, 11A-3-2 (1967), was, prior to its amendments in 1983 and 1985, constitutionally invalid insofar as it permitted the sale of real property without personal notice to affected owners and others having an interest in the property.

In the present case, we believe the plaintiffs' name and address were reasonably ascertainable....