June 23, 2018

Colorado Court of Appeals: Single Notice Addressed to Married Homeowners Deemed Constitutionally Adequate

The Colorado Court of Appeals issued its opinion in Cordell v. Klingsheim on Thursday, May 31, 2018.

Tax Sale—Adequate Notice—Treasurer’s Deed—Due Process—Reinstatement Order.

The Cordells owned a tract of land in La Plata County. After they failed to pay taxes for several years, Heller purchased a tax lien for the property and assigned it to Klingsheim, who later requested a deed from the La Plata County Treasurer. Before issuing the deed, the Treasurer sent the Cordells a copy of the notice of application for a treasurer’s deed by certified mail. The notice was mailed to the Cordells in one envelope, using a New Mexico address listed for the Cordells in the county tax records. A return receipt was received indicating the notice had been received by Mr. Cordell’s mother. The Cordells did not redeem, and the Treasurer issued a treasurer’s deed to Klingsheim.

Sometime later the Cordells learned of the notice and filed suit seeking a declaratory judgment that they were the owners of the property and the treasurer’s deed was void. The trial court ruled that the Treasurer had not made a “diligent inquiry” in attempting to notify the Cordells that their land might be sold to satisfy the tax lien and voided the deed. The alternative basis for the decision was that the deed was void because no “separate notice” was mailed to Ms. Cordell. The Court of Appeals previously affirmed the voiding order but did not address the “separate notice” argument. On certiorari review, the Colorado Supreme Court concluded that the Treasurer fulfilled the diligent inquiry duty and the Treasurer’s transmission of the notice by certified mail satisfied due process, and the Court reversed and remanded the case. On remand to the Court of Appeals, the Cordells requested the division to consider the separate notice argument. The division declined to do so, and a mandate was issued reversing the voiding order and remanding the case to the trial court. On remand, the trial court issued a reinstatement order without substantive analysis of its own.

On appeal of the reinstatement order, the Cordells argued that the trial court was not required to reinstate the treasurer’s deed on remand because the Supreme Court’s holding reached only one of the two grounds on which the trial court rested the voiding order. Neither the Supreme Court nor the trial court reached the separate notice issue. Because the issue was not resolved, the Court of Appeals considered whether the trial court’s failure to consider the issue warrants reversal. Here, the Cordells were married and both were receiving mail at the same address. The Court concluded that notice mailed to both record owners in a single piece of mail is constitutionally adequate. Thus, the reinstatement of the treasurer’s deed on remand was proper.

The reinstatement order was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Treasurer’s Diligent Inquiry Does Not Require Actual Delivery of Notice

The Colorado Supreme Court issued its opinion in Klingsheim v. Cordell on Monday, April 4, 2016.

Tax Liens—Tax Sales—Diligent Inquiry.

This case principally required the Supreme Court to determine the scope of a county treasurer’s duty of diligent inquiry, pursuant to CRS § 39-11-128(1), in attempting to notify a taxpayer that his or her land may be sold to satisfy a tax lien. Construing CRS § 39-11-128(1)(a), the Court concluded that a county treasurer has an initial duty to serve notice of a pending tax sale on every person in actual possession or occupancy of the property at issue, as well as on the person in whose name the property was taxed or specially assessed, if upon diligent inquiry such persons can be found in the county or if their residences outside the county are known. In addition, the Court held that a treasurer owes a duty of further diligent inquiry after an initial notice has been sent only when the facts known to the treasurer show that the taxpayer could not have received the notice of the pending tax sale. Applying this standard here, the Court concluded that the county treasurer satisfied its duty of diligent inquiry. In addition, the Court concluded that the notice that the county treasurer provided in this case satisfied due process requirements. Accordingly, the Court reversed the judgment of the court of appeals and remanded the case for further proceedings consistent with this opinion.

Summary and full case available here, courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Insufficient Notice of Tax Lien Renders Tax Deed Voidable

The Colorado Court of Appeals issued its opinion in Sandstrom v. Solen on Thursday, February 25, 2016.

Validity of a Tax Deed—Void or Voidable—Redemption Rights of Tenants in Common—Summary Judgment—Duty of Diligent Inquiry.

Bradford appealed the summary judgment concluding that the Arapahoe County Treasurer (Treasurer) properly invalidated a tax deed in his favor. Bradford also appealed the grant of summary judgment quieting title to the subject property in favor of Solen and Ibbotson.

The subject parcel was assessed as a 50% undivided interest in mineral rights beneath surface property owned by Bradford. That undivided interest was conveyed as two undivided interests to Solon and his sister Ibbotson. Because of an error on the part of the assessor, the Treasurer had billed the parcel by mailing tax bills to Solon only. The taxes went unpaid for tax years 2004 through 2007. In 2005, Bradford purchased the 2004 tax lien.

On August 30, 2008, Bradford applied for a tax deed for the parcel. Before a deed is issued to a purchaser, CRS § 39-11-128(1)(a) requires the treasurer to serve a notice of the purchase of a tax lien on all persons having an interest or title of record in or to the property if “upon diligent inquiry” the residence of such persons can be determined. Here, the Treasurer sent notice to Solen of the application for tax deed but did not obtain title work for the parcel or check the county clerk and recorder’s records. On February 26, 2009, the Treasurer issued a tax deed transferring the entire undivided one-half interest in the mineral estate to Bradford.

In 2013, an oil and gas lessee of Ibbotson’s notified the Treasurer that she claimed ownership of the parcel. On August 26, 2013, the Treasurer issued and recorded a declaration of invalid treasurer’s deed that purportedly invalidated Bradford’s tax deed. In December 2013, the Treasurer filed this action seeking a declaratory judgment that the declaration of invalid treasurer’s deed was a valid document, thereby canceling title in Bradford. The Treasurer’s complaint admitted that she had failed to conduct diligent inquiry prior to issuing the tax deed. Bradford counterclaimed against the Treasurer and cross-claimed against Solen and Ibbotson for a decree quieting title in the parcel. The district court entered summary judgment in favor of the Treasurer, Solen, and Ibbotsen.

On appeal, Bradford argued the district court erred in finding that the tax deed issued to her was invalid and void. The Court of Appeals concluded that the tax deed was voidable for failure to provide Ibbotson with notice. Because the statutory requirements of CRS § 29-11-128(1) were not met, the district court properly voided the tax deed.

Bradford also argued that it was error to conclude that as tenants in common, Ibbotson and Solen were entitled to quiet title in the parcel and that because Solen received notice of the requested tax deed, he was estopped from challenging her title under the tax deed. The Court disagreed, noting that a tenancy in common is a form of ownership in which each cotenant owns a separate fractional share of undivided property. The parcel was assessed as a single parcel, and Solen and Ibbotson each owned an undivided interest in the entire parcel. The tax deed purported to convey the entire parcel, and therefore either cotenant had the right to notice and to redeem the entire parcel. It is irrelevant whether Solen is estopped because Ibbotson was willing and ready to redeem if she had received notice.

Bradford also contested Solen’s standing, but the Court found that Solen had standing.

The Court affirmed the order.

Summary and full case available here, courtesy of The Colorado Lawyer.

Tenth Circuit: Credit Reporting Agency Need Not Resolve Legal Disputes Regarding Underlying Debt

The Tenth Circuit Court of Appeals issued its opinion in Wright v. Experian Information Solutions, Inc. on Tuesday, November 10, 2015.

Gary A. Wright is the manager, attorney, and registered agent for Attorneys Title Insurance Agency of Aspen LLC (ATA). In May 27, 2009, the IRS filed a notice of federal tax lien (NFTL) with the Pitkin County Recorder against Mr. Wright in his personal capacity for unpaid employment taxes from 2004. However, Mr. Wright had paid the taxes via a check to the IRS dated May 8, 2009. The Pitkin recorder listed the tax lien on its indexing website as against Mr. Wright in his personal capacity, and it was picked up by credit reporting agencies (CRAs) Experian and TransUnion, who received the information from LexisNexis, their contractor.

Mr. Wright discovered the lien on his personal credit report in 2011 and disputed it to Experian and TransUnion, asserting the IRS had withdrawn the lien because it had been paid in full and the NFTL inaccurately stated the lien was against him personally when it should have been listed as against ATA only. He included with his letters a copy of the NFTL, a copy of his letter to the IRS requesting withdrawal of the lien, and the IRS’s release of the lien. In response, the CRAs checked with LexisNexis and marked the lien released because it had been paid in full. The CRAs did not remove the lien from their credit reports because the IRS reported it as released instead of withdrawn. Mr. Wright requested reinvestigation, attaching the same documentation as before. Experian did not perform a second investigation. TransUnion requested documentation, and when LexisNexis reported the same result previously reached, TransUnion sent a summary of the investigation to Mr. Wright.

Mr. Wright sued the CRAs in federal district court, asserting negligent and willful violations of the federal Fair Credit Reporting Act (FCRA) and Colorado’s counterpart, the Colorado Consumer Credit Reporting Act (CCCRA). He asserted claims against the CRAs for failing to follow reasonable procedures to ensure maximum possible accuracy in preparing the credit report. He also asserted a claim for failure to reasonably reinvestigate his claim. The district court granted summary judgment to the CRAs, finding it was reasonable for them to interpret the NFTL as applying to Mr. Wright personally and that the IRS can issue a tax lien against a business entity and its member. Mr. Wright appealed.

The Tenth Circuit first evaluated Mr. Wright’s argument that the CRAs failed to use reasonable procedures in originally reporting the tax lien. The Tenth Circuit evaluated the legal requirements of the FCRA and CCCRA and found no error in the district court’s grant of summary judgment. The Tenth Circuit noted that, to prevail, a plaintiff must show that the CRA failed to follow reasonable procedures to ensure the accuracy of its reports, the report in question was inaccurate, the plaintiff suffered injury, and the CRAs caused the injury. The Tenth Circuit found that Mr. Wright failed to prove the first element because he could not prove the CRAs failed to follow reasonable procedures. The Tenth Circuit noted that to require the CRAs to employ tax professionals to evaluate every tax lien reported by a county recorder or court clerk is unduly burdensome. The Tenth Circuit affirmed the district court’s summary judgment grant to the CRAs.

Next, the Tenth Circuit considered whether the CRAs used reasonable procedures in reevaluating Mr. Wright’s dispute. The Tenth Circuit again found no error, rationalizing that Mr. Wright again failed to show that the CRAs failed to follow reasonable procedures in their reinvestigation. The Tenth Circuit noted that a reasonable reinvestigation does not require a CRA to resolve a legal dispute about the validity of the underlying debt. Judge Bacharach dissented with this portion of the opinion; he believes that the district court employed an incorrect procedure for evaluating the reasonableness of the CRAs investigation and noted that any ambiguity should have been resolved in the consumer’s favor.

The Tenth Circuit affirmed the district court’s grant of summary judgment to the CRAs. Judge Bacharach dissented only with the portion of the opinion concerning reinvestigation.