January 16, 2018

Colorado Court of Appeals: County Treasurer Must Exercise Due Diligence When Notice Returned Undelivered

The Colorado Court of Appeals issued its opinion in Wells Fargo Bank Financial Colorado, Inc. v. Olivas on Thursday, December 14, 2017.

TaxationSale of Tax LiensTax DeedNoticeDiligent Inquiry.

Buyers signed a deed of trust with Wells Fargo Financial Colorado, Inc. (WFFC) to secure a mortgage and an open-end deed of trust to Wells Fargo Financial Bank (WFFB) to secure a line of credit. Beginning in 2008, buyers failed to pay both the monthly mortgage installments to WFFC and the property taxes on their house. WFFC did not pay the taxes after September 2009, and Housman paid the 2009 taxes on October 20, 2010, when the Treasurer, Olivas, sold a tax lien on the house by public auction. Housman also paid taxes on the property for tax years 2010, 2011, and 2012. In 2013, Housman applied for a tax deed. In early January 2014, the Treasurer took steps pursuant to C.R.S. § 39-11-128 to notify all parties with an interest in the property of an impending issuance of a tax deed and a right to redeem. The notice to WFFC was returned as undeliverable as addressed. The notice to WFFB was not returned to the Treasurer. Believing that he had provided the required notice because one Wells Fargo entity had received the notice, the Treasurer issued Housman a tax deed on May 28, 2014. Housman sold the property to Moran a few weeks later, and Housman continued to hold a deed of trust on the property. In May 2015, WFFC filed a complaint for declaratory relief seeking to void the tax deed to Housman, the special warranty deed from Housman to Moran, and the deed of trust held by Housman. WFFC moved for summary judgment, and Housman and Moran cross-moved for summary judgment asserting, among other things, that WFFC’s complaint should be barred by laches. The district court granted summary judgment for defendants, concluding that Housman’s tax deed was valid.

On appeal, WFFC contended that the district court erred in granting summary judgment to defendants. A reasonably diligent treasurer should know that secured parties on different deeds of trust that secure different loan amounts, with different names and addresses, may not be so closely affiliated that notice to one may be assumed to effect notice to the other. The Treasurer failed, as a matter of law, to perform his statutory duty to exercise reasonable diligence in seeking an alternative address for WFFC. When notice is defective because it was given without the diligent inquiry required by law, the tax deed is voidable.

The judgment was reversed and the case was remanded for further proceedings on the affirmative defense of laches. If the court concludes that laches does not bar WFFC’s claims, it shall address the request for declaratory relief. If recovery of the land conveyed by the tax deed is effected by this suit, the court shall consider whether C.R.S. § 39-12-101 applies.

Summary provided courtesy of Colorado Lawyer.

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