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In re Petition of Wiper Corp. for Tax Deed

Court of Appeals of Indiana

August 16, 2017

In re Petition of Wiper Corporation for Tax Deed,
v.
Patricia E. Godwin, Barbara S. Sanders, Joseph Kaufman, James Zwickel, Thad Fischer, Trent Fischer, and Trina Fischer Boden, Appellees-Respondents/Cross-Appellants Wiper Corporation, Appellant-Petitioner/Cross-Appellee,

         Appeal from the Warrick Circuit Court The Honorable Greg A. Granger, Judge Trial Court Cause No. 87C01-1008-MI-572

          ATTORNEY FOR APPELLANT Leanna Weissmann Lawrenceburg, Indiana

          ATTORNEYS FOR APPELLEES Chad D. Wuertz Wuertz Law Office, LLC Indianapolis, Indiana

          CRONE, JUDGE.

         Case Summary

         [¶1] Attorneys, like gamblers, should "know when to hold 'em [and] know when to fold 'em."[1] Instead of walking away from litigation that was essentially over, attorneys representing the owners of property that was sold for nonpayment of taxes racked up thousands of dollars in fees and costs trying to keep the buyer of the property, Wiper Corporation ("Wiper"), from receiving a refund for its tax sale purchase, which had been invalidated by county officials on unspecified grounds. The refund issue is governed by statute and is not within the property owners' control. After a hearing, the trial court issued an order denying Wiper a refund and applying the purchase money to the property owners' delinquent tax obligations. Wiper contends that the trial court had no legal authority to do so. We agree and therefore reverse and remand on this issue.

         [¶2] The trial court also ordered Wiper to pay the property owners' attorney's fees and costs dating back to November 2011, when Wiper petitioned for a tax deed to their property, based on a finding that Wiper deceived the court and failed to comply with statutory notice requirements and the property owners' discovery requests. Wiper contends that the trial court erred in doing so. We agree with the trial court's decision to award fees and costs based on Wiper's misconduct but hold that the award should be limited to fees and costs incurred before February 25, 2013, when Wiper essentially folded 'em by conceding the invalidity of its tax sale purchase. Therefore, we also reverse and remand on this issue.

         [¶3] On cross-appeal, the property owners contend that the trial court erred in failing to impose sanctions against Wiper's attorney and in deeming certain issues moot in a prior order. We find these issues waived and therefore affirm in relevant part.

         Facts and Procedural History

         [¶4] In March 2007, Fifth Third Bank, as trustee of the May S. Zwickel Trust, conveyed property in Warrick County ("the Property") to Patricia Godwin, Barbara Sanders, Linda Kaufman, James Zwickel, Thad Fischer, Trent Fischer, and Trina Fischer Boden (collectively "the Owners") by trustee's deed.[2] The deed lists the Owners' mailing address as James's address in Tennessee ("the Tennessee Address") and indicates that tax statements should be sent to that address. Owners' Ex. 8. The deed was recorded in the Warrick County recorder's office in April 2007. Id.

         [¶5] According to James, the house he "grew up in" was on the Property. Tr. At 91. He was responsible for paying taxes on the Property for several years after the deed was issued, and then Patricia "was supposed to pay them for several years." Id. at 94. James moved from the Tennessee address in late 2009 or early 2010, and Patricia was supposed to have the Warrick County auditor's records updated to reflect her Colorado address but did not do so because "she had a lot going on in her life." Id. at 100. In any event, the Owners did not pay the 2008 and 2009 taxes on the Property.

         [¶6] "If an owner of real estate fails to pay the property taxes, the property may be sold in order to satisfy the tax obligation." In re 2007 Tax Sale in Lake Cty., 926 N.E.2d 524, 527 (Ind.Ct.App. 2010). "The tax sale process is purely a statutory creation and requires material compliance with each step of the governing statutes …." Id. "The tax sale process involves the issuance of three notices to the property owner. The first required notice is the county auditor's notice of tax sale …." Id. "The second required notice is the notice of the right of redemption, which the person who purchases the property at a tax sale sends to the owner of the property." Id. at 528. And the third required notice is the notice of filing a petition for tax deed, which the purchaser sends to the property owner. Id.

         [¶7] In July 2010, the Warrick County auditor sent a notice of tax sale to the Owners via certified mail to the Tennessee Address. The certified mail receipt was signed by a person with no interest in the Property. On August 30, 2010, the auditor and the treasurer filed a joint application for judgment and order of sale for numerous properties with delinquent taxes, including the Property. The next day, the trial court entered a judgment and order of sale.

         [¶8] On September 16, 2010, the treasurer sold the Property to Vinod Gupta at the tax sale for $6800, which included the delinquent 2008 and 2009 property taxes plus penalties, interest, and costs. The auditor issued Vinod a tax sale certificate, which Vinod assigned to Wiper. Vinod is Wiper's president. Vinod's son Vivek acted as Wiper's attorney during the tax sale proceedings.

         [¶9] The Owners had one year after the tax sale to redeem the Property. Ind. Code § 6-1.1-25-4. At that time, Indiana Code Section 6-1.1-25-4.5(c) provided that a purchaser of a tax sale certificate was entitled to a tax deed to the property only if the redemption period had expired, the property had not been redeemed within the statutory period, and, not later than ninety days after the date of sale, the purchaser gave notice of the sale to "the owner of record at the time of the sale …." Subsection (d) of the statute provided that the purchaser "shall give the notice by sending a copy of the notice by certified mail to … the owner of record at the time of the [sale of the property] at the last address of the owner for the property, as indicated in the records of the county auditor[.]" And subsection (h) provided that the notice "is considered sufficient if the notice is mailed to the address required under subsection (d)." In March 2011, Wiper sent two envelopes ("the March Envelopes") containing multiple notices of the tax sale via certified mail to the Tennessee Address. Both envelopes were returned as not deliverable as addressed/unable to forward.

         [¶10] In May 2011, Linda's husband Joseph[3] went to the treasurer's office at the request of Linda and Patricia, his sister-in-law, who asked him to inquire if any taxes were due on the Property, pay the taxes, and update the county's records for the Property to reflect Patricia's address in Colorado ("the Colorado Address"). Joseph paid the spring 2011 property taxes and gave the treasurer's office the Colorado Address. For reasons unknown, the treasurer's office did not inform Joseph about the pending tax sale proceeding. In June 2011, the auditor's office updated the Owners' address in its records.

         [¶11] The one-year redemption period for the Property expired in September 2011.At that time, Indiana Code Section 6-1.1-25-4.6(a) stated that not later than six months after the expiration of the redemption period, the tax sale purchaser may file a verified petition

asking the court to direct the county auditor to issue a tax deed if the real property is not redeemed from the sale. Notice of the filing of this petition shall be given to the same parties and in the same manner as provided in section 4.5 of this chapter …. The notice required by this section is considered sufficient if the notice is sent to the address required by section 4.5(d) of this chapter. Any person owning or having an interest in the tract or real property may file a written objection to the petition with the court not later than thirty (30) days after the date the petition was filed. If a written objection is timely filed, the court shall conduct a hearing on the objection.

Subsection (b) of the statute provided that not later than sixty-one days after the petition is filed,

the court shall enter an order directing the county auditor … to issue to the petitioner a tax deed if the court finds that the following conditions exist:
(1) The time of redemption has expired.
(2) The tract or real property has not been redeemed ….
(3) [A]ll taxes and special assessments, penalties, and costs have been paid.
(4) The notices required by this section and section 4.5 of this chapter have been given.
(5) The petitioner has complied with all the provisions of law entitling the petitioner to a deed.

Ind. Code § 6-1.1-25-4.6(b).

         [¶12] In November 2011, Wiper sent two envelopes ("the November Envelopes") containing notices of its intent to file a verified petition for a tax deed to the Property to the Tennessee Address via certified mail. Both envelopes were returned as not deliverable as addressed/unable to forward. On November 14, Wiper filed a verified petition for a tax deed to the Property stating that it had given the notices required by statute and "complied with all the provisions of law entitling the purchaser to a deed." Appellant's App. at 79.

         [¶13] Later that month, Patricia independently found out about the tax sale proceeding. On November 21, the Owners filed an objection to Wiper's petition and a motion for relief from the trial court's judgment and order of sale. The objection alleged that "deficiencies in the tax sale, redemption and tax sale notice process exist herein which preclude the entry of a tax deed in relation to the Property." Id. at 86. On December 14, the Owners filed a supporting brief in which they alleged that the auditor's notice and the auditor and the treasurer's petition regarding the tax sale were deficient in various respects, as was the tax sale order and Wiper's notice of tax sale under Indiana Code Section 6-1.1-25-4.5. Most important for purposes of this appeal, the Owners also alleged that Wiper failed to provide proper notice of the filing of the petition for tax deed under Indiana Code Section 6-1.1-25-4.6 because, by the time that notice was sent, the Owners' address had been updated in the county's records to the Colorado Address. In February 2012, the trial court set a hearing on the Owners' objection for June 13.

         [¶14] In the meantime, around January 19, 2012, the Owners served their first set of discovery requests on Wiper, with a response due on February 18. In a March 22 letter to Vivek, the Owners' counsel Andrew Ozete stated that no response had been received and that unless Wiper withdrew its petition for tax deed with prejudice by March 29, Ozete would begin preparing a motion for summary judgment that would "seek to have all costs and attorneys' fees incurred by [the Owners] awarded to them as a judgment against [Wiper] since it is clear to [Ozete] now that at no time ever did [Wiper] have a meritorious basis to maintain this action." Id. at 314. On or about March 23, Wiper submitted responses to the Owners' discovery requests. In response to an interrogatory, Wiper stated that it had reviewed the treasurer's files regarding the Property in September 2011; thus, Wiper either knew or should have known of the Colorado Address before it sent notice of its intent to file a petition for tax deed in November 2011. Also, Wiper did not comply with the Owners' request to produce any documents related to the requirements of Indiana Code Sections 6-1.1-25-4.5 and -4.6, i.e., the March Envelopes and the November Envelopes and the certified mail receipts. On April 2, the Owners served a second set of discovery requests on Wiper, specifically asking it to produce those documents.

         [¶15] On April 27, the treasurer and the auditor filed a report stating that they deemed the tax sale to be invalid. No reason for the invalidation was given.[4]The report also stated that a letter had been sent to Wiper via certified mail that read as follows: "Pursuant to IC 6-1.1-25-10, [the auditor and the treasurer] have found the sale of the below listed tax sale certificates to be invalid. Please return your tax sale certificate(s) to the [auditor's] office. Your statutory refund will be processed upon receipt of your tax sale certificates." Id. at 221. Copies of the report were served on Vivek and Ozete.

         [¶16] On May 4, the Owners filed a motion to compel Wiper's compliance with discovery, a motion for attorney's fees and costs, a request for a finding that Wiper failed to comply with notice requirements, and a request for an order determining that Wiper was entitled to a refund of only seventy-five percent of the tax sale surplus and was prohibited from participating in the next tax sale pursuant to Indiana Code Section 6-1.1-25-4.6. At that time, the statute provided in relevant part that if a petition for tax deed is timely filed and the court refuses to enter an order directing the county auditor to execute and deliver the tax deed because of the petitioner's failure to fulfill the notice requirement under subsection (a) of the statute,

the court shall order the return of the amount, if any, by which the purchase price exceeds the minimum bid on the property … minus a penalty of twenty-five percent (25%) of that excess. The petitioner is prohibited from participating in any manner in the next succeeding tax sale in the county under IC 6-1.1-24. The county auditor shall deposit penalties paid under this subsection in the county general fund.

Ind. Code § 6-1.1-25-4.6(d). The statute also provided that, notwithstanding subsection (d), "the court shall not order the return of the purchase price or any part of the purchase price if: (1) the purchaser … has failed to provide notice or has provided insufficient notice as required by section 4.5 of this chapter; and (2) the sale is otherwise valid." Ind. Code § 6-1.1-25-4.6(f).

         [¶17] On May 17, Wiper filed a report stating that it had received the letter from the auditor and the treasurer and that Wiper had requested a reason for their invalidation of the tax sale but had not yet received a response; Wiper opined that "the certificate was arbitrarily invalidated." Appellant's App. at 364. On May 21, the Owners filed a motion to vacate the hearing on their objection to the tax sale and a motion to set a hearing on their motion to compel. Also on that date, Wiper filed an opposition to the Owners' May 4 motion in which it asserted that the Owners' pleadings were "moot" based on the invalidation of the tax sale and that it had provided copies of the certified mail receipts, which it had not. Id. at 371.

         [¶18] On May 24, the trial court vacated the June 13 hearing and reset it for July 12. On June 18, Wiper filed an opposition to the Owners' motion to set a hearing on their motion to compel and a motion to dismiss the cause pertaining to the tax sale certificate "in its entirety, " asserting that the Owners' "pleadings are moot based on the invalidation" of the tax sale. Id. at 380. On June 21, the Owners filed a response that reads in relevant part as follows:

1. Wiper alleges that the controversy at issue in the case has been settled or disposed of; however, that is not true in this case. Pursuant to I.C. 6-1.1-25-4.6, an issue or controversy exists as to how much, if any, of a refund of the amounts paid at Tax Sale Wiper is entitled to.
2. Pursuant to that same statute, an issue exists as to whether or not Wiper should be allowed to participate in the next tax sale in this County.
….
7. In this case, as was discussed in [the Owners'] Motion to Compel, Wiper's Verified Petition appears to have been filed containing statements that were apparently either not within the personal knowledge of the Affiant or deliberately false.
8. It also appears, as is described in the Motion to Compel, that Wiper made misrepresentations to the Court in its prior Extension Motion.
9. Given that Wiper and/or its principals are participants in Tax Sales with some regularity in multiple jurisdictions throughout the State of Indiana, including Warrick County, Indiana, it is critical that Wiper, like a bad mortgage servicer, be called to task and held to account for filing a false Affidavit in this case and to be deterred from future attempts to do so.
10. Finally, although Wiper in the Wiper Objection and Motion to Dismiss now concedes the County's authority to invalidate the tax sale as to the relevant certificate, (and thus the issue of whether a tax deed may issue is clearly now by admission of Wiper answered in the negative), this change of position from Wiper's Report to Court sent on or about May 14, 2012 does not resolve the issue of the amount of refund, if any, due Wiper or resolve [the Owners'] request for sanctions.

Id. at 391-92 (citations omitted).

         [¶19] On June 25, the trial court vacated the July 12 hearing on its own motion and ordered each party to submit "in writing its position on whether this cause is ended by the sale being declared invalid. If a party believes the matter should not be ended, the party shall explain what issues it believes remains to be decided by the Court." Id. at 395. On October 20, after receiving responses from Wiper, the Owners, and the county, the court issued an order ("the Hearing Order") that reads in pertinent part,

The Court, being duly advised, and based upon the pleadings of record issues the following findings as follows in relation to each of the following issues:
1. Issue One: What amount, if any, of refund is Wiper entitled to in relation to this matter?
2. Issue Two: Should Wiper and Vinod Gupta be barred from participating in the next tax sale in this County?
It is Ordered, Adjudged and Decreed that the Hearing Issues are the only issues remaining before the Court. All other issues previously raised, other than as may be necessary in relation to the enforcement of the terms of this Order, are moot and shall not be addressed further by any party.

Id. at 426. The court set a hearing on the issues for January 14, 2013. Neither Wiper nor the Owners sought reconsideration of or an interlocutory appeal from the Hearing Order. On November 15, Wiper filed a designation of evidence and witness list. Attached to the designation was an affidavit from Vinod stating that he had sent the tax sale notices.

         [¶20] On January 7, 2013, the parties agreed to continue the hearing to March 6. On February 7, Wiper filed a motion to determine and order refund and a motion to quash a subpoena requiring it to appear for a ...


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