SOUTHWESTERN COMMERCIAL CAPITAL v. CORNETT PACKING

• Citation: 997 P.2d 849,2000 OK 19
• Decision Date: 14 March 2000
• Docket Number: No. 93,013.,93,013.
• Parties: SOUTHWESTERN COMMERCIAL CAPITAL, INC., a Texas corporation, Plaintiff-Appellee, v. CORNETT PACKING COMPANY, an Oklahoma corporation, Jack W. Cornett, Joan Cornett, Defendants, Joe B. Barnes, County Treasurer of Oklahoma County, Oklahoma; and the Board of County Commissioners of Oklahoma County, Oklahoma, Defendants-Appellants.
• Court: Supreme Court of Oklahoma

997 P.2d 849

2000 OK 19

SOUTHWESTERN COMMERCIAL CAPITAL, INC., a Texas corporation, Plaintiff-Appellee, v. CORNETT PACKING COMPANY, an Oklahoma corporation, Jack W. Cornett, Joan Cornett, Defendants, Joe B. Barnes, County Treasurer of Oklahoma County, Oklahoma; and the Board of County Commissioners of Oklahoma County, Oklahoma, Defendants-Appellants.

No. 93,013.

Supreme Court of Oklahoma.

March 14, 2000.

Gretchen Crawford, Assistant District Attorney, Oklahoma City, for Defendants-Appellants.

Steven P. Metheny, Metheny, Mitchell, Davis & Klein, Oklahoma City, for Plaintiff-Appellee.

WATT, J.,

FACTS AND PROCEDURAL BACKGROUND

¶ 1 The facts giving rise to this appeal are not in dispute. In 1987, defendants, Cornett Packing Company and others, gave a mortgage on certain real property in Oklahoma County to plaintiff, Southwestern Commercial Capital, Inc., which Southwestern then assigned to the Small Business Administration. The Small Business Administration later reassigned the mortgage to Southwestern. The term "mortgagee" is used throughout this opinion to describe whichever mortgagee held the mortgage at the time being discussed.

¶ 2 Cornett failed to pay the ad valorem taxes on the real estate for the years 1989 through 1992 in the amount of $12,511.09 and also failed to pay personal property taxes on its business for those years in the amount of $33,740.02. While both the unpaid real estate taxes and personal property taxes were liens on the mortgaged property, the personal property tax lien was expressly junior and inferior to the Southwestern-Small Business Administration mortgage lien under 68 O.S. 1991 § 3102.¹ Section 3102 provides that personal property tax liens "are superior to all other liens, conveyances or encumbrances filed subsequent thereto, on real or personal property." [Emphasis added.] Title 68 O.S. 1991 § 3101 contains the identical provision.

¶ 3 Section 3102 also provides,

. . . From and after the entry of the tax upon the tax lien docket, any person claiming any interest in any land or personal property can sue the county treasurer and board of county commissioners in the district court to determine the validity or priority of the lien.

The statute, however, does not state when such a suit must be brought.

¶ 4 The Oklahoma County Treasurer took steps to sell the property at a tax sale, in accordance with 68 O.S.1991 § 3105, which provides:

The county treasurer shall in all cases where taxes are a lien upon real property and are unpaid on April 1 of any year proceed, as hereinafter provided, to advertise and sell such real estate for such taxes, special assessments and costs, and shall not be bound before so doing to proceed to collect by sale all personal taxes on personal property which are by this Code made a lien on realty, but shall include such personal tax with that due on the realty, and shall sell the realty for all of said taxes and special assessments

There were no other bidders at the tax sale and the treasurer bought the property in the name of the county for the amount of the unpaid taxes as authorized by 68 O.S.1991 § 3108, which provides:

The county treasurer is hereby authorized at all tax sales made under the laws of this state, in case there are no other purchasers offering the amount due, to purchase all of any real estate offered at the sale for the amount of taxes, penalty, interest and costs due and unpaid thereon, in the name of the county in which the sale takes place, the county acquiring all the rights both legal and equitable that any other purchaser could acquire by reason of the purchase. . . .

¶ 5 The county treasurer was required by 68 O.S.1991 § 3106 to give notice of the tax sale to the record owner of the property by certified mail. Section 3106 provides:

In addition to said published notice, the county treasurer shall give notice by certified mail by mailing to the owner of said real property, as shown by the last tax rolls in his office, a notice of said sale . . .

Section 3106, however, does not require that notice of tax sales be mailed to mortgagees and the county treasurer did not mail notice of the tax sale to the mortgagee.

¶ 6 In June 1993, the county treasurer, under 68 O.S.1991 § 3125, gave notice of his intention to resell the property to which he had earlier acquired title under the tax resale procedures. Section 3125 provides:

The county treasurer shall in all cases where taxes are a lien upon real property and are unpaid on April 1 of any year proceed, as hereinafter provided, to advertise and sell such real estate for such taxes, special assessments and costs, and shall not be bound before so doing to proceed to collect by sale all personal taxes on personal property which are by this Code made a lien on realty, but shall include such personal tax with that due on the realty, and shall sell the realty for all of said taxes and special assessments.

Notice of the resale was given both to the record owner and the mortgagee as required by 68 O.S.1991 § 3127:

The county treasurer shall, at least thirty (30) days prior to such resale of real estate, give notice by certified mail, by mailing to the owner of said real estate, as shown by the last tax rolls in his office, and to all mortgagees of record of said real estate a notice stating the time and place of said resale and showing the legal description of the real property to be sold. . . .

¶ 7 Following its receipt of notice of the 1993 resale, the mortgagee attempted to redeem the property by paying only the real estate taxes due, but not the personal property taxes, because the land records showed that its lien was superior to the county treasurer's personal property tax lien. It is undisputed that the treasurer's personal property tax lien was junior and inferior to the Southwestern-Small Business Administration mortgage and that the county treasurer had not given notice by mail to the mortgagee of the original tax sale. Nevertheless, the county treasurer refused to allow the mortgagee to redeem the property unless the mortgagee paid the personal property taxes, too. Further, the treasurer refused to accept payment in full if the mortgagee tried to pay "under protest." The mortgagee acquiesced and paid the taxes in accordance with the treasurers demands, as failing to do so would have extinguished its mortgage lien on the property.

¶ 8 On June 30 1993 the mortgagee sued Cornett and others to foreclosure its mortgage. In its suit mortgagee included a cause of action against the county treasurer and county commissioners for a refund of the $33,740.02 it had paid the treasurer for the lien for personal taxes on the property. The treasurer relied on 68 O.S.1991 § 3113 to justify its insistence that the mortgagee pay all the taxes for which the property was sold, including the personal property taxes. Section 3113 provides:

. . . any person having a legal or equitable interest [in the property] may redeem the same from the lien resulting from the tax sale at any time before the execution of a deed of conveyance therefor by the county treasurer . . . by paying the county treasurer the sum for which the property was sold. . . ."

¶ 9 The mortgagee's claim against the Cornetts and the defendants, other than the treasurer and the county commissioners, was reduced to judgment in 1993 and the property was sold at foreclosure sale for an amount less than the Cornetts owed the mortgagee. The 1993 judgment reserved for later determination the mortgagee's claim against the treasurer and county commissioners. None of the issues involving the Cornetts are before us here.

¶ 10 In 1998 the mortgagee moved for summary judgment against the county treasurer and county commissioners on the ground that the undisputed facts showed mortgagee to be entitled to a judgment for a refund of the $33,740.02 it had paid the treasurer for the lien for personal taxes on the property. The trial court granted the mortgagee's motion for summary judgment on April 9, 1999. The county treasurer and county commissioners appealed from the trial court's order granting summary judgment against them under the accelerated procedure provided for in Rule 1.36, Supreme Court rules. The Court of Civil Appeals, Division I reversed the trial court, holding that the county treasurer could require the mortgagee to pay the personal property tax as a precondition to redeeming the property because mortgagee had failed to sue to establish the superiority of its lien under 68 O.S. 1991 § 3102.

ISSUE

¶ 11 May a county treasurer lawfully deprive a mortgagee of the superiority of its mortgage lien by requiring the mortgagee to satisfy a personal property lien against the mortgaged property that is inferior to the mortgagee's lien in order to avoid extinguishment of the mortgage lien? We answer no.

DISCUSSION

¶ 12 The county treasurer presents several arguments in support of his view that he was entitled to require the mortgagee to satisfy the personal property tax lien as well as the real estate tax lien and that the mortgagee is not entitled to reimbursement of the amount paid: (1) Title 68 O.S.1991 § 3113 required the county treasurer to collect all taxes, including personal property taxes, before allowing the mortgagee to redeem the property; (2) the mortgagee's failure to establish the superiority of its lien through suit under 68 O.S.1991 § 3102 prior to the original tax sale deprived mortgagee of the superiority of its lien; (3) mortgagee's having received mailed notice of the pending resale prevented the termination of mortgagee's superior lien rights from being a due process violation; (4) mortgagee was guilty of laches for allowing its claim against the county treasure to remain on the docket for five years without action; and (5) Mortgagee was entitled to no relief against the treasurer because mortgagee failed to comply with the Governmental Tort Claims Act. For the reasons discussed below, we reject the county...