Kelber L.L.C. v. WVT LLC, et al
Filing
31
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT: It is ORDERED that Plaintiff's 23 Motion for Partial Summary Judgment is hereby GRANTED, and Defendants' 25 Motion for Summary Judgment is hereby DENIED. It is further ORDERED that the parties are to submit an accounting of the amounts owed no later than 10/31/16. Signed by District Judge Irene M. Keeley on 9/30/16. (cnd)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
KELBER, LLC,
Plaintiff,
v.
//
CIVIL ACTION NO. 1:15CV80
(Judge Keeley)
WVT, LLC, OAK HALL,
Defendants.
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
Pending for consideration is the motion for partial summary
judgment
(dkt.
no.
23)
filed
by
the
plaintiff,
Kelber,
LLC
(“Kelber”). Also pending is the motion for summary judgment (dkt.
no. 25) filed by the defendants, WVT, LLC (“WVT”) and Oak Hall
(“Hall”) (collectively “defendants”). For the reasons that follow,
the Court GRANTS Kelber’s motion and DENIES the defendants’ motion.
I. BACKGROUND
In August 2011, Kelber purchased a rental property located at
796 Willey Street in Morgantown from Sunhersh, LLC (“Sunhersh”),
for
$384,000.
Kelber,
a
Maryland
limited
liability
company,
obtained a mortgage with United Bank, which recorded the deed of
trust in the Monongalia County Clerk’s office in September 2011.
Kelber then contracted with a management company to oversee and
maintain the property, which was occupied by several residential
tenants.
When the first installment of the 2012 property taxes became
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
due in September 2012, the Monongalia County Sheriff sent the bill
to Sunhersh instead of to Kelber. Sunhersh, however, never paid the
taxes because it no longer owned the property; nor did it forward
the bill to Kelber. Consequently, Kelber never received and paid
the bill, and it became delinquent on the rental property’s taxes.
In November 2013, the Sheriff sold the property at a tax lien
sale, where WVT purchased it.1 West Virginia Code § 11A-3-19
requires a tax lien purchaser such as WVT to prepare a list of all
persons or entities entitled to redeem the property by paying all
monies owed. In particular, the statute requires the purchaser to
prepare its list “after October 31 of the year following the
sheriff’s sale, and on or before December 31 of the same year.” W.
Va. Code § 11A-3-19.
Rather than wait for the statutory time period, however, WVT
prepared and submitted its list to the State Auditor (“Auditor”)
immediately after purchasing the property at the tax foreclosure
sale.2
WVT requested that notice be sent to the names on the list
1
Defendant, Oak Hall, is the lone member of WVT, LLC.
2
This is roughly one year prior to the opening of the
statutory window in which to submit such a list. It is unclear what
impact, if any, this would have had on the facts of this case, and,
as it does not impact the Court’s ruling here, thus, it need not be
discussed further.
2
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
not
only
by
certified
mail,
return
receipt
requested,
but
simultaneously by regular mail to those listed, by mail to the West
Virginia
Secretary
of
State’s
office
(“Secretary”),
and
by
publication in the appropriate local newspaper (dkt. no. 25-3 at
4). WVT’s list included the former owner of the property, Sunhersh,
as well as United Bank, which was listed as a mortgage holder on
the property.3 Kelber also was listed, but at an address in Severna
Park, Maryland, where it was no longer located; at the time the
list was created, Kelber had in fact relocated to a different,
unknown address. WVT’s mailings to the Severna Park address were
returned as “Not Known, Unable to Forward,” “Not Deliverable,” and
“Unclaimed.” As a result, Kelber never received notice of the sale,
and never had an opportunity to redeem the property by paying the
delinquent taxes.
Sometime
after
April
1,
2015,
in
accordance
with
state
statute, the Auditor delivered a quitclaim deed to WVT. WVT
immediately recorded the deed, and the County Clerk filed it in the
3
Apparently, neither Sunhersh nor its managing member, Michael
Castle, ever forwarded the redemption notices to Kelber because
Sunhersh had sold the property to Kelber three years prior and was
not responsible for the delinquent taxes (dkt. no. 24-2 at 3).
Similarly, because Kelber had paid and satisfied the mortgage prior
to United Bank’s receipt of the redemption notice, the bank never
forwarded it to Kelber (dkt. no. 24-4 at 2-3).
3
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
record book on April 7, 2015. Two days later, April 9, 2015, WVT’s
agent, Hall, knocked on the door of the Willey Street property and
asked a tenant for Kelber’s phone number. After obtaining the
number, Hall called Kelber to advise it that WVT now owned the
property and would be collecting revenues from the tenants from
that point on. Apparently, Hall also contacted Kelber’s property
manager on the same day. The property manager then began holding
revenues from the property in escrow, and also retained outside
counsel.
After being contacted by WVT, Kelber offered to pay the
redemption amount pursuant to the state code, but WVT refused (dkt.
nos. 24-4 at 4, 24-6 at 2). WVT then offered to return the property
to Kelber for either $100,000 or “50 cents on the dollar” (dkt.
nos. 24-4 at 4, 24-6 at 2). In addition, WVT posted a notice on the
door of the property advising the tenants that they needed to “make
contact with [WVT] so we can arrange to rent you the property.
Should you fail to make contact with [WVT], [WVT] will be forced to
take steps to evict you. Should you choose not to deal with [WVT]
steps will be taken to evict you.”
On April 27, 2015, Kelber filed a complaint in the Circuit
Court of Monongalia County, asserting that the returned mailings
4
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
triggered additional duties on the part of WVT to attempt to
ascertain Kelber’s new address. Kelber also contended that WVT was
required to send notice to the 796 Willey Street address of the
subject property. As well, Kelber’s complaint sought a preliminary
injunction to set aside the tax-sale deed on the basis that WVT had
failed to comply with W. Va. Code § 11A-3-22(d) by not using “due
diligence” to locate and contact Kelber during the redemption
period. It also asserted that, in its efforts to notify Kelber of
the tax sale, WVT had performed a state function, and, by its
failure
to
provide
due
process,
had
violated
Kelber’s
constitutional rights. Finally, the complaint claimed that, by
contacting its property manager and tenants, WVT had tortiously
interfered with its contracts with those individuals.
WVT removed the case, with Kelber’s motion for preliminary
injunction pending, to this Court on May 14, 2015. Given the state
of the pleadings on removal, the Court denied Kelber’s motion for
preliminary injunctive relief on May 20, 2015 (dkt. no. 14).
Thereafter, on October 2, 2015, Kelber moved for partial
summary judgment, seeking to set aside the tax-sale deed and to
obtain a declaration that it holds indefeasible title to the
subject property, free and clear from any claims or interest of WVT
5
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
(dkt. no. 23 at 1). WVT followed with its own motion for summary
judgment, seeking to dismiss the entire case with prejudice. Both
motions are ripe for disposition. As explained below, the Court
GRANTS Kelber’s motion for partial summary judgment and DENIES the
defendants’ motion for summary judgment.
II. LEGAL STANDARD
Summary
documents,
judgment
is
appropriate
electronically
declarations,
where
the
stored
.
stipulations
information,
,
.
.
admissions,
“depositions,
affidavits
or
interrogatory
answers, or other materials” establish that “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed R. Civ. P. 56(a), (c)(1)(A).
When ruling on a motion for summary judgment, the Court reviews all
the evidence “in the light most favorable” to the nonmoving party.
Providence Square Assocs., L.L.C. v. G.D.F., Inc., 211 F.3d 846,
850 (4th Cir. 2000). The Court must avoid weighing the evidence or
determining
its
truth
and
limit
its
inquiry
solely
to
a
determination of whether genuine issues of triable fact exist.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
The moving party bears the initial burden of informing the
Court
of
the
basis
for
the
motion
6
and
of
establishing
the
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
nonexistence of genuine issues of fact.
Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). Once the moving party has made the
necessary showing, the non-moving party “must set forth specific
facts showing that there is a genuine issue for trial.”
Anderson,
477 U.S. at 256 (internal quotation marks and citation omitted).
The “mere existence of a scintilla of evidence” favoring the nonmoving party will not prevent the entry of summary judgment; the
evidence
must
be
such
that
a
rational
trier
reasonably find for the nonmoving party.
of
fact
could
Id. at 248–52.
III. APPLICABLE LAW
Under West Virginia law, a property owner who is delinquent in
paying property taxes exposes that property to public sale. See W.
Va. Code § 11A-3-1. et seq. Prior to any sale, however, the county
sheriff is required to publish a list of the county’s delinquent
lands and send a notice of delinquency by certified mail to the
responsible taxpayers listed in the county land books. § 11A-3-2.
The delinquent property owner may redeem at any point prior to the
sale by tendering to the sheriff all of the taxes due, together
with
any
interest
and
fees
accrued.
§§
11A-3-4,
11A-2-18.
Unredeemed properties are thereafter subject to the sheriff’s
public sale of tax liens against them. § 11A-3-5.
7
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
If the highest bidder at the public sale pays all of the taxes
due, and any interest and fees accrued, the “sheriff shall certify
the real estate to the State Auditor for disposition.” § 11A-3-8.
The Auditor then provides notice to the purchaser outlining the
requirements he or she must satisfy in order to secure a deed to
the property. See § 11A-3-14. One of those requirements is that,
“[a]t any time after October 31 of the year following the sheriff’s
sale, and on or before December 31 of the same year,” the purchaser
must “[p]repare a list of those to be served with notice to redeem
and request the State Auditor to prepare and serve the notice.” §
11A-3-19(a).
When serving the notice to redeem, the Auditor is required to
provide the form notice provided in § 11A-3-21 to non-resident
recipients by certified mail. § 11A-3-22. Furthermore, “[i]f the
address of any person entitled to notice . . . is unknown to the
purchaser and cannot be discovered by due diligence on the part of
the purchaser, the notice shall be served by publication.” Id.
(emphasis added). Finally, “[i]f the real estate described in the
notice is not redeemed within the time specified therein, . . . the
deputy commissioner shall, upon the request of the purchaser, make
and deliver to the person entitled thereto a quitclaim deed for
8
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
such real estate.” § 11A-3-59.
Pursuant to § 11A-4-4(a), those entitled to notice to redeem,
but who were not properly served with the requisite notice, may
bring a civil action to set aside a tax deed within three years of
its delivery to the grantee. However,
[n]o title acquired pursuant to this article shall be set
aside in the absence of a showing by clear and convincing
evidence that the person who originally acquired such
title failed to exercise reasonably diligent efforts to
provide notice of his intention to acquire such title to
the complaining party or his predecessors in title.
§ 11A-4-4(b) (emphasis added). Importantly, in suits seeking to set
aside a tax sale deed, it is the tax sale grantee who bears the
burden of proving full compliance with the statutory and due
process notice requirements. See Rebuild America, Inc. v. Davis,
726 S.E.2d 396, 404 (W. Va. 2012); Mason v. Smith, 760 S.E.2d 487,
494 (W. Va. 2014) (citing Rebuild America).
To
be
clear,
actual
notice
is
not
required
before
the
government may deprive a person of their property. See Jones v
Flowers, 547 U.S. 220, 226 (2006). Rather, the government must
provide “notice reasonably calculated, under all the circumstances,
to apprise interested parties of the pendency of the action and
afford them an opportunity to present their objections.” Id.
(quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306,
9
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
313 (1950)). The Supreme Court of Appeals of West Virginia has
further defined these requirements as follows:
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.
Mason v. Smith, 760 S.E.2d 487, 488 (W. Va. 2014) (quoting
Syl.
pt. 1, Lilly v. Duke, 376 S.E.2d 122 (W. Va. 1988)).
The notifying party must utilize methods or means that anyone
honestly seeking to actually effectuate the notice would reasonably
employ. See Jones, 547 U.S. at 229 (quoting Mullane, 339 U.S. at
315 (“[W]hen notice is a person’s due ... [t]he means employed must
be such as one desirous of actually informing the absentee might
reasonably adopt to accomplish it.”)).
There
is
a
core
question
presented
in
this
case:
What
constitutes reasonable due diligence by someone actually desirous
of providing notice when the address of the party to be noticed is
unknown? Over the last several decades, opinions on this issue have
evolved, gradually establishing more due process protections for
the delinquent property owner. In West Virginia, the Supreme Court
of Appeals has consistently expanded the minimum efforts required
to meet the reasonable due diligence threshold. See Mingo Cty.
10
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
Redevelopment Auth. v. Green, 534 S.E.2d 40, 45 (W. Va. 2000)
(describing evolution of minimum notice requirements).
As an example of this evolution, the 1967 version of the tax
sale statute, W. Va. Code § 11A-2-13 (1967), merely required that
a list of delinquent properties be posted on the county courthouse
door and published as a legal advertisement in the newspaper. See
Lilly, 1376 S.E.2d at 125 n. 2, n. 3. In Lilly, West Virginia’s
highest court invalidated that version of the statute4 because it
allowed for the sale of delinquent properties without “personal
notice to affected owners and others having an interest in the
property.”5 Id. at 125. Lilly articulated the minimum standard for
4
In 1983 and 1985, during the pendency of Lilly, West Virginia
amended W. Va. Code § 11A-3-2 to require personal notice to the
property interest holder. See Lilly, 376 S.E.2d at 125.
5
The Court relied heavily on, and fully complied with, the
opinion of the Supreme Court of the United States in Mennonite Bd.
of Missions v. Adams, 462 U.S. 791 (1983). Mennonite 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.”
Lilly, 376 S.E.2d at 124 (quoting Mennonite, 462 U.S. at 798).
11
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
notice to a property interest holder of a pending tax sale as
follows:
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.
Id. at Syl. pt. 1.
Notably,
“West
Virginia’s
statutory
notice
requirements
parallel the requirements of the United States Constitution.”
Plemons v. Gale, 396 F.3d 569, 572 (4th Cir. 2005) (“Plemons II”).
Accordingly, the Court will draw on both bodies of law to resolve
the issues in this case. See Button v. Chumney, 2014 WL 2931901, at
*6 (N.D.W. Va. June 27, 2014).
IV. DISCUSSION
No material facts are in dispute.6 The parties agree that
Kelber was a party to be noticed and that its address of record was
6
WVT argues in its opposition to Kelber’s motion for summary
judgment that there are genuine issues of material fact in dispute,
and then proceeds to list the issues. But this list contains mere
disagreements with Kelber’s legal arguments, and assertions of
WVT’s own legal conclusions. There are no claims that some fact,
such as the actions by either party, or the results of those
actions, did not occur in the way claimed by the opposing party.
Indeed, WVT’s own motion for summary judgment notes that Kelber
“has failed to establish any genuine issue of material fact for a
jury to decide” (dkt. no. 25-3 at 1). Notably, nor has WVT.
12
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MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
no longer valid. Further, the actions taken by WVT in its attempt
to comply with the statutory notice requirements, as well as the
results of those efforts, are undisputed. The sole question is
whether WVT was reasonably diligent in fulfilling its statutory and
constitutional due process duty to provide Kelber with adequate
notice of its right to redeem. The Court concludes that it was not.
Challenges to tax sales of private property can generally be
divided into two distinct areas of inquiry: (1) whether the state,
or, as in this case, a private party that has been statutorily
assigned the duty to provide notice to redeem,7 has reasonably
identified all parties with an interest in the subject property; or
(2) whether the government, or its statutorily substituted party,
has satisfied the due process requirement of providing adequate
notice to all of those identified parties. Here, there is no
question Kelber was a record party of interest properly identified
on the list WVT prepared for the Auditor. Consequently, the Court
7
See Plemons v. Gale, 298 F.Supp.2d 380, 388 (S.D.W.Va. Jan.
13, 2004) (“Plemons I”), vacated 396 F.3d 569, 570 (4th Cir. 2005),
remanded to 382 F.Supp.2d 826 (S.D.W.Va. July 27, 2005) (“Plemons
III”) (“Under West Virginia law, the tax lien purchaser has the
duty to give notice . . . .”); see also Huggins v. Prof’l Land
Res., Inc., 2013 WL 431770 (N.D.W.Va. Jan. 25, 2013) (noting that
the statutory scheme “assigns to a private party the State’s
Fourteenth Amendment obligation to notify property owners of their
right to redeem their property interest”).
13
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
need only determine whether WVT fully complied with the due process
requirement to provide adequate notice to Kelber.
The
Supreme
Court
of
Appeals
of
West
Virginia
recently
addressed similar facts in Mason v. Smith, 760 S.E.2d 487 (W. Va.
2014). There, the tax sale purchaser did not attempt personal
service on the record owners of a delinquent property “in the
manner provided for commencing a civil action,” nor did they
attempt notice by publication. Id. at 493. Instead, the purchaser
opted to send notice by certified mail to the record owners, and
also to a bank that held a mortgage on the property. Id. at 489-90.
The certified mail receipts showed that, while the bank received
notice, the notices to the three record owners were returned as
undelivered. Id. at 490. Importantly, the returned notices were not
marked “refused,” but rather “return to sender—not deliverable as
addressed—unable to forward” or “return to sender—unclaimed—unable
to forward.” Id.
Mason
held
that
certified
mail
returned
and
marked
as
“undeliverable as addressed,” or “unclaimed,” did not provide
adequate notice to the property owner of its right to redeem. Id.
at 494. It noted that, after the unsuccessful initial mailing, the
tax sale purchaser had failed to take any additional steps to
14
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
effectuate service on the owners, despite the fact that the three
property owners’ “correct addresses were reasonably ascertainable
and
could
have
been
confirmed
through
the
exercise
of
due
diligence.” Id. at 494.
Importantly, prior to Mason, in Jones v. Flowers, the Supreme
Court
of
the
United
States
held
that
when
mail
is
returned
unclaimed, the due process requirement of adequate notice has not
been satisfied. 547 U.S. 220, 225 (2005). In Jones, the Arkansas
Commissioner of Lands sent notice by certified mail to a land owner
informing him of his tax delinquency and his right to redeem.
Id. at 223. The mailings were returned, marked “unclaimed.” Id. at
223-24. Just prior to the tax lien sale, the Commissioner published
a legal notice of the sale in the newspaper. Id. at 224. After
selling the property to the highest bidder, the Commissioner again
mailed notice to the delinquent property owner, informing him that,
unless he redeemed by paying the past due taxes and fees, the
property would be transferred to the lien holder. Id. at 224.
Based on these facts, the Supreme Court recognized that,
although its precedent allowed for certified mail to satisfy the
due process requirement, it had never addressed directly “whether
due process entails further responsibility when the government
15
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MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
becomes aware prior to the taking that its attempt at notice has
failed.” Id. at 227. Noting that a majority of the federal circuit
courts of appeals and state supreme courts that had addressed the
issue had “decided that when the government learns its attempt at
notice has failed, due process requires the government to do
something more before real property may be sold in a tax sale,” id.
at 227-28 (collecting cases), the Court observed:
We do not think that a person who actually desired to
inform a real property owner of an impending tax sale of
a house he owns would do nothing when a certified letter
sent to the owner is returned unclaimed. If the
Commissioner prepared a stack of letters to mail to
delinquent taxpayers, handed them to the postman, and
then watched as the departing postman accidentally
dropped the letters down a storm drain, one would
certainly expect the Commissioner’s office to prepare a
new stack of letters and send them again. No one
“desirous of actually informing” the owners would simply
shrug his shoulders as the letters disappeared and say “I
tried.” Failure to follow up would be unreasonable,
despite the fact that the letters were reasonably
calculated to reach their intended recipients when
delivered to the postman.
Id. at 229. Accordingly, “when mailed notice of a tax sale is
returned unclaimed, the State must take additional reasonable steps
to attempt to provide notice to the property owner before selling
his property, if it is practicable to do so.” Id. at 225.
In the case at bar, it is undisputed that the notices sent to
Kelber by certified mail were returned as undeliverable. There is
16
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MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
also no dispute that, at the time WVT directed the Auditor to send
notice to Kelber by certified mail, it also directed the Auditor
to provide notice by regular mail, by publication in the local
newspaper,
and
by
undisputed
that,
service
once
the
on
the
Secretary.
certified
mailing
Finally,
was
it
is
returned
as
undeliverable, WVT took no further steps to notify Kelber. In
actuality, WVT not only failed to take further steps after the
unsuccessful delivery, it also demonstrated no desire whatsoever to
ascertain the results of its notification efforts. Essentially, it
closed its eyes and hoped for the best.
Nevertheless, WVT contends that it fully complied with the
requirements of due process, arguing that, regardless of the failed
delivery of the certified mailings, it had no duty to take any
further steps. The Court now turns to these contentions.
A.
WVT’s Lack of Actual Knowledge that the Certified Mail was
Returned as Undeliverable Does not Obviate its Obligation to
Take Further Action
Because it had no knowledge that its certified mailings were
returned to the Auditor as undeliverable, WVT argues that it had no
obligation to take any additional steps. In support, it relies on
the holdings in Jones and Plemons, claiming those decisions excused
it from any obligation to take further steps towards providing
17
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
notice, barring its actual awareness of the unsuccessful initial
attempt. See Jones, 547 U.S. at 227 (“[W]hen the government learns
its attempt at notice has failed . . . .”8) (emphasis added);
Plemons II, 396 F.3d at 573 (“When a party required to give notice
knows that a mailed notice has, for some reason, failed . . . .”).
According to WVT, this language indicates that the duty to take
additional steps is only triggered by actual knowledge of the
failed notice attempt.
The issue of actual knowledge was not specifically addressed
by the courts in either Jones or Plemons. In both of those cases,
the notifying party conceded its awareness of the failed notice
attempt. Nevertheless, to WVT’s point, the Court finds that it
would be antithetical to the clearly established duty to provide
adequate notice if the state or other responsible party could evade
that
duty
simply
by
sending
a
certified
mailing
and
avoid,
8
To be clear, the quoted language from Jones comes from the
Court’s discussion of what other courts have decided, while its
conclusion does not explicitly demand knowledge:
We hold that when mailed notice of a tax sale is returned
unclaimed, the State must take additional reasonable
steps to attempt to provide notice to the property owner
before selling his property, if it is practicable to do
so.
Jones, 547 U.S. at 225.
18
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
purposefully or otherwise, learning of its outcome. The very
essence of requiring the “return receipt requested” option with
certified
mail
indicates
that
the
sending
party
desires
confirmation of its receipt. A sender cannot know of a prompt
return of undeliverable mail if allowed to turn a blind eye.
Moreover, allowing a party to exercise willful blindness to the
outcome of the certified mailing would ignore the reasoning of
courts that have required a party on notice of a failed attempt to
take additional steps.9
This Court declines WVT’s invitation to validate the practice
of turning a blind eye to the outcome of notice by certified mail.
It is untenable to hold that the duty to provide notice does not
include a duty to determine whether a certified mailing was
successful. That is after all the very purpose of requiring a
return receipt. Such a holding would be particularly detrimental in
a case such as this, where the state will receive the returned
undeliverable mail, thus allowing the notifying party to shield
itself
through
purposeful
ignorance
9
from
having
to
take
any
See Plemons II, 396 F.3d at 575-76 (collecting cases holding
that additional steps are required once the notice is returned as
undeliverable).
19
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
additional reasonable steps to provide notice.10
In Plemons III, Judge Goodwin recognized the inherent conflict
of interest present in a system that places the duty to provide
notice on the very party that stands to profit most if the notice
is unsuccessful. See 382 F.Supp.2d 826, 830 (S.D.W.Va. July 27,
2005). “This conflict of interest makes it imperative that courts
strictly scrutinize the efforts of a tax lien purchaser to ensure
that they are ‘such as one desirous of actually informing the
absentee’ might reasonably adopt.” Id. (quoting Mullane, 339 U.S.
at 315).
It can hardly be considered a reasonably diligent effort when,
as here, a party charged with providing notice fails to inquire as
to the results of the certified mailing. Whether a party knows, or
should reasonably know, that its notice efforts have initially
failed is an appropriate inquiry in a case such as this one.
Utilizing that benchmark, the Court has no difficulty in concluding
10
In fact, the State had instituted an online system by which
purchasers could track the status of the certified mail, and it
expected that the purchasers would do such. See Dkt. No. 24-8 at
11-18. WVT admits that it often utilizes the system to track
roughly 300 properties, but for some unknown reason, it allegedly
failed to check the mailings for the Kelber property. See Dkt. No.
24 at 28-29 (citing preliminary injunction hearing testimony of
Senior Deputy State Auditor).
20
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
that, at a minimum, WVT had a duty to inquire as to the results of
the certified
mailing, and therefore should have reasonably known
of the unsuccessful delivery.
B.
WVT Failed to Take Sufficient Additional Steps Once the
Certified Mail was Returned as Undeliverable
WVT next argues that it had already undertaken all additional
steps required when, at the time of the certified mailing, it
preemptively directed the Auditor to send notice by regular mail,
by service on the Secretary, and by publication in the local
newspaper. Kelber contends that such “concurrent initial efforts do
not equate to additional or follow-up efforts,” as required once
notice has been returned as undeliverable (dkt. no. 30 at 5).
Essentially, Kelber argues that
a multi-step process is involved;
that is, once the party tasked with notice knows that the mailing
has been unsuccessful, it then must take additional steps to
ascertain a correct address. Only after the initial effort fails,
as well as all subsequent reasonable efforts to discover a correct
address, should the party then resort to the less likely methods of
regular mail, service through the Secretary, or publication in the
newspaper.
The holdings in Plemons II, Jones, and Mason underscore that
standard methods of attempting notice do not suffice when the
21
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
sender is on notice that the certified mail has been returned as
undeliverable. In such an instance, these additional attempts at
notice may only suffice when they are utilized after the initial
effort has failed. Only then, armed with any information garnered
from
the
failed
attempt,
can
the
notifying
party
reasonably
calculate whether those methods might provide adequate notice of
the pending tax lien sale. See Plemons II, 396 F.3d at 575, where
the court observed:
[A]dopting the rule that prompt return of mailed notice
triggers a duty to make reasonable follow-up efforts
would seem to best comport with the instruction in
Mullane that due process requires efforts “reasonably
calculated” to actually “apprise interested parties” of
the possible deprivation; that is, notice consistent with
that of “one desirous of actually informing the
absentee,” rather than efforts that are but a “mere
gesture.”
(quoting Mullane, 339 U.S. at 314-15).
Similarly,
in
Jones,
the
Supreme
Court
held
that
“the
government’s knowledge that notice pursuant to the normal procedure
was ineffective triggered an obligation on the government’s part to
take additional steps to effect notice.” 547 U.S. at 230. It is
logical that further obligations would be triggered only subsequent
to
knowledge
of
the
failed
certified
mailing.
Without
such
knowledge, the notifying party cannot properly evaluate whether
22
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
regular
mail,
notice
to
the
Secretary,
or
publication
are
reasonably calculated to provide notice under the circumstances. In
other words, those methods cannot be characterized as further
efforts if they are exhausted beforehand, without knowledge that
the record address may be invalid.
It makes sense that any such additional efforts would be steps
at resolving the undeliverability issue, not just further attempts
directed at what then is most likely known to be an invalid
address. Knowledge that a certified mailing has been returned as
undeliverable puts the sender on notice that it is highly probable
that the recipient no longer resides at that address. See Plemons
II, 396 F.3d at 575 (“The return of the certified notice marked
‘unclaimed’ should have been a red flag for some further action.”).
Armed with that knowledge, the sender can presume that a regular
mailing likely, although not absolutely, will face the same fate.
Moreover, it is reasonable for the sender to question whether
the incorrect address in the county records is the same address on
file with the Secretary, or even whether the property owner has
registered with the Secretary at all. Certainly, a reasonable
additional step would be to contact the Secretary by telephone or
website to ascertain whether there is an address on file and, if
23
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
so, whether it matches the county record address.
Finally, WVT argues that publication of the notice in the
newspaper ultimately satisfied its due process obligation. This
argument
fails,
however,
in
the
face
of
WVT’s
constructive
knowledge that the certified mailing was returned as undeliverable,
and its failure to undertake any additional efforts to ascertain
the property owner’s valid address.
Notice by publication is a “last ditch” attempt, to be
utilized when all else fails:
If the address of a person entitled to notice, whether a
resident or nonresident of this state, is unknown to the
purchaser and cannot be discovered by due diligence on
the part of the purchaser, the notice shall be served by
publication as a Class III-0 legal advertisement . . .
and the publication area for the publication shall be the
county in which the real estate is located. If service by
publication is necessary, publication shall be commenced
. . . .
§ 11A-3-22 (emphasis added). The statute is clear. Only after duly
diligent efforts to discover a valid address have failed shall the
party tasked with notice be allowed to satisfy due process by
publication. Indeed, pursuant to Jones, service by publication is
akin to a “hail mary”: “Several decades ago, this Court observed
that
‘[c]hance
alone’
brings
a
person’s
attention
to
‘an
advertisement in small type inserted in the back pages of a
24
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
newspaper,’ and that notice by publication is adequate only where
‘it is not reasonably possible or practicable to give more adequate
warning.’” Jones, 547 U.S. at 237 (quoting Mullane, 339 U.S. at
315, 317); see also Mennonite, 462 U.S. at 799 (“Neither notice by
publication and posting, nor mailed notice to the property owner,
are
means
‘such
as
one
desirous
of
actually
informing
the
[mortgagee] might reasonably adopt to accomplish it.’”). This
observation is even more appropriate when the property owner is
known to live out of state.
Accordingly, the Court concludes that due process required WVT
to exercise due diligence in its duty to provide notice, including
taking further reasonable steps to ascertain Kelber’s current
address once the certified mailing was returned as undeliverable.
This it failed to do. Therefore, based on its failure to undertake
any additional efforts, its publication of the notice does not
satisfy the due process requirements established in Plemons II,
Jones, and Mason.
C.
WVT Could Have Undertaken Reasonably Diligent Efforts at
Notification that were not Extraordinary
WVT asserts that it was reasonably diligent when it searched
the public records prior to sending notice by certified mail, and
that, in any case, Kelber’s current address could not have been
25
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
ascertained from them (dkt. no. 25-3 at 17). Moreover, it claims
that,
by
contemporaneously
providing
notice
by
regular
mail,
service on the Secretary, and publication in the newspaper, it
undertook all the efforts required by due process. According to
WVT, this was more notice than had been provided to either of the
property owners in Jones or Plemons (dkt. no. 25-3 at 18-19).
Finally, WVT relies on Plemons II for the proposition that a party
“need not undertake extraordinary efforts to discover . . .
whereabouts . . . not in the public record.” 396 F.3d at 574.
This, however, is only a partial reading of the court’s
holding in Plemons II. The entirety of the passage quoted by WVT
reads:
Although a party required to provide notice need not
“undertake extraordinary efforts to discover . . .
whereabouts . . . not in the public record,” it must use
“reasonably diligent efforts” to discover addresses that
are reasonably ascertainable.
Plemons II, 396 F.3d at 574 (quoting Mennonite, 462 U.S. at 798 n.
4. Thus, efforts clearly are not extraordinary simply because they
are beyond a search of the public record. Rather, once a party is
on notice that the recipient’s address is no longer valid, it must
undertake a reasonably diligent effort to acquire a valid address,
if ascertainable, so long as that effort is not extraordinary. See
26
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
Plemons II, 396 F.3d at 575-76 (collecting cases indicating that,
once
a
mailing
is
returned
as
undeliverable,
the
sender
is
obligated to make an effort to ascertain the correct address11). A
review, or re-review, of all available public records is not the
end of the reasonableness inquiry, but rather “the very least” of
what may be required. Id. at 577.
Courts
have
been
reticent
to
define
the
contours
of
“extraordinary efforts.” Nevertheless, “‘all the circumstances’ of
a case, including its ‘practicalities and peculiarities,’ must be
considered
in
determining
the
constitutional
sufficiency
of
notice.” Id. at 574 (quoting Mullane, 339 U.S. at 314). In Plemons
I, the district court suggested several ways in which Plemons’s
correct address might have been reasonably ascertained, including
consulting the phonebook, inquiring of the tenants at the subject
property, and contacting the mortgagee bank. See 298 F. Supp. 2d
380, 389 (S.D.W. Va. Jan. 13, 2004). On review, the Fourth Circuit
11
“As all of these cases recognize, initial reasonable efforts
to mail notice to one threatened with loss of property will
normally satisfy the requirements of due process. However, when
prompt return of an initial mailing makes clear that the original
effort at notice has failed, the party charged with notice must
make reasonable efforts to learn the correct address before
constructive notice will be deemed sufficient.” Plemons II, 396
F.3d at 576.
27
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
held that such efforts were not compelled in that particular case.
Plemons II, 396 F.3d at 577. Although recognizing that checking the
phonebook might be reasonable in some cases, it concluded that such
an effort would have been futile because the telephone number and
address listed for Plemons were no longer valid. Id. The circuit
court also dismissed the idea that contacting the tenants would
have been reasonable because mailings addressed to the occupant had
already been returned as undeliverable. Id. Further, it noted that
a property owner and mortgagee are not in privity and “under normal
circumstances, one cannot be expected to communicate notice of an
impending tax sale to the other.” Id. (citing Mennonite, 462 U.S.
at 799). Despite these conclusions, it is clear from the Fourth
Circuit’s opinion that, in an appropriate case, such methods could
be considered reasonably diligent efforts.
Notably, in Plemons II the Fourth Circuit remanded the case to
the district court expressly for the purpose of determining “what
efforts, if any, [the purchaser] made to search public documents,
or whether Plemons’ proper address would have been ascertainable
from
such
a
search.”
Id.
at
578.
On
remand,
Judge
Goodwin
determined that, although the purchaser had failed to make any
further efforts to locate Plemons, a subsequent search of the
28
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
public records would not have revealed her correct address. He
therefore concluded that the deed should not be set aside. Plemons
III, 382 F.Supp.2d at 828.
Judge Goodwin nevertheless expressed puzzlement with the
inquiries requested by the Fourth Circuit. Questioning how a reexamination of the same public records as originally searched could
possibly satisfy due process, he noted that such a futile reexamination would be the kind of “mere gesture” disapproved in
Mullane. Id. at 829 (“As the Supreme Court noted in Mullane, ‘when
notice is a person’s due, process which is a mere gesture is not
due process.’” (quoting Mullane, 339 U.S. at 315)). Anticipating
the outcome in Jones, he posited that the “only relevant inquiry is
to ask what process would be undertaken by a reasonable person
under the specific circumstances of the case.” Id.
In Jones, the Supreme Court confronted the question of what
constituted
reasonable
diligence
when
a
mailing
is
promptly
returned as undeliverable. See 547 U.S. 220. After certified mail
to Jones was returned as undeliverable, the State of Arkansas took
no further action; two years later, after sending a second round of
certified
mail
to
the
invalid
address
and
publishing
an
advertisement in the newspaper, it sold the property at public
29
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
auction. In the view of the Supreme Court, “[d]eciding to take no
further action is not what someone ‘desirous of actually informing’
[the property owner] would do; such a person would take further
reasonable steps if any were available.” Id. at 230.
Jones argued that the state should have searched for his
address in the “phonebook and other government records such as
income tax rolls.” Id. at 235-36. Although the Supreme Court
declined to mandate such an open-ended search of all records, id.
at 236, it did note several other reasonable steps that Arkansas
could have undertaken, including posting notice on the front door
of the residence, or addressing otherwise undeliverable mail to
“occupant.”12 Id. at 235. Indeed, it reasoned that an open-ended
search
of
government
records
“imposes
burdens
on
the
State
significantly greater than the several relatively easy options
outlined above,” including simply posting notice on the front door.
Id.
12
The parties go to great lengths to argue whether mailing to
the physical address could have been accomplished because of a
technically incorrect address, i.e., 796 Willey Street rather than
796A or 796B Willey Street. Whether such an effort would have been
successful or futile is of no import to the outcome here, however,
as WVT never even attempted to send mail to “occupant,” an effort
that might have informed them of the mailing address discrepancy
and allowed them to correct for it.
30
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
In dismissing Arkansas’s complaints that such efforts were
overly burdensome, the Court noted that the state’s current statute
mandated that, in the absence of proof that the property owner has
received notice by certified mail, the state was required to
provide actual notice through personal service. Id. at 236 (citing
Ark. Stat. § 26-37-301(e)). Similarly, in West Virginia, civil
lawsuits
may
be
initiated
by
actual
notice
through
personal
service. Concomitantly, posting notice on the property, knocking on
the
front
door,
or
addressing
mail
to
“occupant”
cannot
be
considered overly burdensome when the method of service mandated by
West Virginia law to initiate all civil lawsuits is personal
service. See W. Va. R. Civ. P. 4.
Considering the current state of the law in West Virginia, it
is notable that, in Mason, the Supreme Court of Appeals of West
Virginia set aside a tax deed after certified mail sent to the
property owner was returned as undeliverable, where the purchaser
had made no further efforts at notification. See 760 S.E.2d 487,
494 (W.Va. 2014). The court noted that, although the record
addresses for the property owners were no longer valid, their
“correct addresses were reasonably ascertainable and could have
been confirmed through the exercise of due diligence.” Id. at 494.
31
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
Ultimately, the court found that the purchaser had “failed to take
a single additional step to attempt to notify the [property
owner].” Id. at 494.
WVT purports to find support for its contention that it was
not required to mail notice to the subject property address in this
Court’s decision in Button, where notice to the record owner, Ms.
Mills,
was
returned
as
undeliverable.
See
2014
WL
2931901
(N.D.W.Va. 2014). Notably, although it may have been possible for
the tax lien purchaser to have reasonably ascertained Mills’s
current address from a search of the county records, any mailing to
that address ultimately would have been futile because she had
died.
Id.
Accordingly,
this
Court
held
that,
under
the
circumstances, all due process requirements had been met. Seizing
on this holding, WVT asserts that it also was not required to mail
notice to the subject property address of record, 796 Willey
Street, because mailing there would have been futile.13
13
WVT provided an affidavit of Troy Rickles, Officer in Charge
of the Morgantown Post Office. Dkt. No. 25-1. Mr. Rickles swore
that 796 Willey Street it not a valid mailing address and any mail
sent there would have been returned as undeliverable. Id. at 1. The
correct mailing addresses were 796 Willey Street Apartment A and
796 Willey Street Apartment B. Id. According to Mr. Rickles, any
mail addressed to Kelber LLC at either of those addresses would
also have been returned as undeliverable, however, because it is
not listed as the occupant of those residences. Id. at 2.
32
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
Button, however, is factually distinguishable from the case at
bar in several important respects. First, it dealt with the
question of providing notice to Button’s predecessor in interest,
Ms. Mills. Button had acquired the property interest through Ms.
Mill’s will, but she never recorded it with the county. Having
never been an owner of record, neither Button (nor her address)
could have been ascertained from a reasonable search of the county
records. Perhaps of greater relevance to the issue here, however,
is the fact that Button dealt with mineral rights that were subject
to a tax lien sale, and the property under which those minerals
were situated was unimproved, uninhabited land. Id. Posting notice
on the minerals, or knocking on the front door of a residence on
the property above them, were not options available to the tax lien
purchaser.
Nevertheless, Button recognized that “[w]hether a tax lien
purchaser performs his or her duties in a reasonably diligent
manner, however, can be examined only ‘under all the circumstances’
of a given case.” Id. at *6 (citing Mullane, 339 U.S. at 314). The
circumstances in the instant case are distinguishable from those in
Button. Once it should reasonably have known that the certified
mail was returned as undeliverable, and that, more likely than not,
33
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
the address it had used for Kelber was no longer valid, WVT made no
further effort to ascertain Kelber’s current address. While there
is no dispute that a re-examination of the county records would
have been futile in this regard, WVT did have a multitude of nonextraordinary means available to it to attempt to ascertain that
address. A party actually desirous of notifying Kelber could have
called the bank that formerly held the mortgage on the property and
simply asked whether it had a contact phone number or address for
Kelber.14 As WVT was aware that Kelber was a Maryland LLC, it also
could have visited the Maryland Secretary of State’s website in
pursuit of a current address. Neither of these efforts would have
required
even
leaving
the
office,
and
certainly
were
not
extraordinary.
Perhaps the simplest, most efficient, and most direct way of
providing notice to Kelber, however, would have been to do exactly
what WVT did once it had acquired the deed to the property — go to
the property and knock on the door (or post notice). See Jones, 547
U.S. at 236-37 (noting that “rather than taking relatively easy
14
While it is true that the bank may not have given such
information to WVT, one cannot know because no one asked. Moreover,
the bank may have forwarded the request to Kelber as a service to
its former customer, but again, we cannot know this because it was
not attempted.
34
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
additional steps to effect notice, [including posting at the
property,] the State undertook the burden and expense of purchasing
a
newspaper
advertisement,
conducting
an
auction,
and
then
negotiating a private sale of the property”). WVT was well aware
that the property at issue was a rental property with multiple
tenants, and, potentially, a property manager, and it should have
reasonably
surmised
that
it
could
ascertain
Kelber’s
contact
information simply by visiting the property. See Plemons II, 396
F.3d at 573 (“Only a method that is reasonable, taking into account
‘the
practicalities
and
peculiarities
of
the
case,’
will
be
adequate.” (quoting Mullane, 339 U.S. at 314-15)). Posting at the
property would also have been reasonable and no more burdensome
than the personal service outlined as one method of satisfying the
statute.
Such efforts are not extraordinary. In fact, they are so
ordinary that almost immediately after it received the deed WVT was
able to speak directly with the property manager and Kelber itself
when it wanted to collect the rents and make an offer for 50 cents
on the dollar. WVT also posted notice two days after recording the
deed, when it sought to inform the tenants that it would now be
collecting the rents.
35
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
In light of the circumstances, it is beyond debate that WVT
could have taken additional steps “reasonably calculated, under all
the circumstances, to apprise [Kelber] of the pendency of the
action and afford them an opportunity to present their objections.”
Jones, 547 U.S. at 226 (internal quotation omitted). While it may
be inappropriate for a court to prescribe exactly what steps must
be used in any given case, the additional steps available to WVT
here
clearly
were
not
extraordinary.
Rather,
they
provided
reasonable methods of notification that someone actually desirous
of notifying Kelber might have employed under the circumstances.
WVT, however, merely sat back and waited for the redemption period
to expire.
D.
Kelber’s Own Failure to Pay its Taxes and Update its Address
with the State Does Not Excuse the Due Process Requirement for
Adequate Notice
WVT avers that Kelber failed to pay its property taxes, failed
to keep its address current with the County Clerk or Sheriff, and
failed to keep its address updated with the Auditor. It contends
that these facts constitute a lack of “reasonable diligence,” thus
making Kelber “solely responsible” for the tax sale transfer. These
arguments are unavailing.
In Jones, the Supreme Court specifically addressed whether a
36
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
property owner who had received a tax bill and then failed to pay
the taxes owed was on inquiry-notice that the property was subject
to a tax sale. It held that “the common knowledge that property may
become subject to government taking when taxes are not paid does
not excuse the government from complying with its constitutional
obligation of notice before taking private property.” 547 U.S. at
231-32 (citing Mennonite, 462 U.S. at 800).
Jones also summarily dispatched the argument that the failure
of property owners to update their addresses, even in the face of
a statutory requirement to do so, relieved the state of its
constitutional obligation to provide adequate notice. Id. at 232.
While acknowledging that a statute requiring a property owner to
update its address did support the contention that mailing a
certified letter to the record address was a reasonably calculated
method of reaching the property owner, the Court concluded that a
property owner’s failure to update its record address did not
excuse the obligation of the State to take additional steps once
notice is promptly returned as unclaimed or undeliverable. Id. at
232.
E.
WVT’s Mailing of Notice to the West Virginia Secretary of
State’s Office was not Adequate Notice to Kelber
WVT’s final argument is that Kelber was statutorily required
37
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
to register with the West Virginia Secretary of State’s office to
acquire a business certificate. By Kelber’s failure to do so, WVT
contends that, pursuant to W. Va. Code § 31D-15-1501(e), Kelber is
presumed to have appointed the Secretary as its attorney-in-fact.
Kelber counters that it is not subject to that portion of the Code,
which applies to West Virginia corporations, because it is a
limited liability company (“LLC”) licensed in Maryland. Kelber,
however, is subject to the Uniform Limited Liability Company Act
(“LLC Act”), codified at W. Va. Code § 31B-10-101, et seq.
That
statute contains a substantially similar provision appointing the
Secretary as attorney-in-fact for unregistered foreign LLCs. See W.
VA. Code § 31B-10-1008.
The Court need not resolve this dispute, inasmuch as both of
these
statutes
must
yield
to
constitutional
due
process
requirements. Merely sending notice to the Secretary, even if
considered Kelber’s de facto agent, does not comport with the due
process requirements under the circumstances of this case. The
holding in Jones clearly dispelled any notion that one’s failure to
comply with laws requiring payment of property tax, or failure to
update one’s address as statutorily required, somehow abrogated the
State’s obligation to provide adequate notice. See 547 U.S. at
38
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
231-32. Similarly, a statute automatically appointing the Secretary
as attorney-in-fact for an unregistered LLC in no way mitigates the
State’s obligation to provide a property owner with adequate notice
of its right to redeem.15
This view is in keeping with the legislative intent of West
Virginia’s
statutory
scheme
governing
tax
lien
sales,
which
recognizes “the rights of owners of real property to adequate
notice and an opportunity for redemption before they are divested
of their interests in real property for failure to pay taxes” W.
Va. Code § 11A-3-1. It also aligns with the clear trend of the
majority of courts mandating that reasonable efforts be undertaken
to provide actual notice to the property owner. See Mingo Cty., 534
S.E.2d at 45; see also Dkt. No. 16 at 100 (“I believe that . . .
the West Virginia Supreme Court is moving in th[e] direction [of
actual notice]. I believe [Jones] has already put the Federal
Courts there.” (testimony of West Virginia University College of
Law,
Dean
Emeritus,
John
W.
Fisher,
II,
during
preliminary
injunction hearing on May 20, 2015)).
15
Indeed, one might argue that, if a tax lien purchaser knows
that a foreign LLC has not registered, he may choose only to mail
notice to the Secretary, with full knowledge of the futility of
reaching the owner, and simply rely on the Secretary’s statutory
appointment as agent to conclude that notice has been perfected.
39
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
V. CONCLUSION
For the reasons discussed, the Court concludes that WVT failed
to provide Kelber with adequate notice of its right to redeem the
subject property. Consequently, it GRANTS Kelber’s motion for
partial summary judgment and DENIES WVT’s motion for summary
judgment.
The Court is cognizant that, pursuant to W. Va. Code § 11A-31, et seq., before the deed may be set aside, Kelber is required to
present to WVT the full redemption amount, together with any
additional taxes paid by WVT and any other statutorily mandated
costs. Moreover, Kelber is entitled to any rents collected since
the deed was recorded, less any expenses paid by WVT. Accordingly,
the Court ORDERS the parties each to submit an accounting of the
amounts owed no later than Monday, October 31, 2016, following
which it will schedule a hearing to address setting aside the tax
sale deed and Kelber’s requested declaration that it is vested with
indefeasible title to the subject property, free and clear from all
claims and interest of WVT.
It is so ORDERED.
40
KELBER, LLC. V. WVT, LLC, ET AL.
1:15CV80
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF’S
MOTION FOR PARTIAL SUMMARY JUDGMENT [DKT. NO. 23] AND
DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DKT. NO. 25]
The Court directs the Clerk to transmit copies of this
Memorandum Opinion and Order to counsel of record.
DATED: September 30, 2016.
/s/ Irene M. Keeley
IRENE M. KEELEY
UNITED STATES DISTRICT JUDGE
41
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