Wednesday, July 30, 2014

Court of Appeals Finds Motion to Set Aside Tax Deeds Not Filed in Reasonable Time

Excerpts of the Court of Appeals' Decision follow:

Rushmore filed its motion asking the trial court to set aside the order directing issuance of tax deeds and tax sale pursuant to Trial Rule 60(B)(6). Motions filed pursuant to this subsection must be filed within a “reasonable time.” T.R. 60(B). The determination of what constitutes a reasonable time varies with the circumstances of each case. Levin v. Levin, 645 N.E.2d 601, 604 (1994). Relevant to the question of timeliness is the basis for the moving party’s delay and prejudice to the party opposing the motion. Id. 6
Here, Rushmore claims that its motion was filed within a reasonable time. In particular, the record demonstrates that Rushmore filed its Trial Rule 60(B) motion on September 9, 2013, over 18 months after Oberleas received the tax deeds to the parcels of Property. Rushmore claims that its motion was filed within a reasonable time because: 1) Rushmore filed its motion within three months of acquiring an interest in the Property, which Rushmore claims is not unreasonable given the difficulty a mortgagee may have connecting a tax sale notice with an erroneous property address to a particular mortgage loan; and 2) This delay did not result in prejudice because Oberleas will still retain a lien against the Property parcels in the event that the deeds are invalidated.

We find these arguments, particularly the former, unavailing and agree with Oberleas that the delay is unreasonable. While we do not condone the errors made by Oberleas and caution that exactitude is important when recording and notifying others of property interests, Rushmore’s challenge simply comes too late.

One of the factors we consider when assessing whether or not a motion was filed within a reasonable time is the basis for the moving party’s delay. Here, Rushmore was not a party in interest during the time of the tax sale or even when the deeds were issued. In fact, Rushmore did not acquire an interest in the Property until 16 months after the deeds had been issued to Oberleas. When a mortgagee takes an assignment of a mortgage, he acquires the status of the mortgage at that time. Further, the mortgagee is charged with constructive notice of all the facts that a proper examination of the record would show. Keybank Nat’l Ass’n v. NBD Bank, 699 N.E.2d 322, 327 (Ind. Ct. App. 7 1998). The record clearly shows the Oberleas’s tax deeds were recorded in the Auditor’s Office on February 16, 2012 under an accurate lot number and property description. Appellant’s App. 91-97. Therefore, Rushmore had constructive notice of Oberleas’s tax deeds and thus was not a bona fide purchaser, despite an error in the common address. See Union State Bank v. Williams, 169 Ind. App. 345, 350, 348 N.E.2d 683, 687 (1976). Had Rushmore checked the record prior to acquiring the mortgage from Bank of America, it would have been aware that Oberleas was issued tax deeds for four of the five parcels on the Property.

Additionally, it is apparent that Oberleas suffered prejudice as a result of the delay. More specifically, for approximately 18 months, Oberleas believed he was the rightful owner of the parcels and acted accordingly. He has paid taxes and “mowed, cleared underbrush and weeds, and provided general care to the [p]arcels.” Appellant’s App. 123.

Finally, this Court recognizes a general public policy interest in having finality and closure to such transactions. As this Court previously explained, “[i]n ruling on a T.R. 60(B) motion, the trial court must balance the alleged injustice suffered by the party moving for relief against the interests of the winning party and societal interest in the finality of litigation.” Hoosier Health Sys., Inc. v. St. Francis Hosp. & Health Ctrs.,796 N.E.2d 383, 388 (Ind. Ct. App. 2003). Although Rushmore may not have had actual notice of Oberleas’s deeds to the Property parcels, it is charged with constructive notice; therefore, we do not believe Rushmore suffers grave injustice if Oberleas retains ownership of the Property because Rushmore had the opportunity to avoid the problem much earlier. See Union State Bank, 169 Ind. App. at 350, 348 N.E.2d at 687. In short, because of society’s interest in the finality of litigation, we cannot indefinitely allow banks to shift any potential issues associated with a mortgage to subsequent mortgagees if it operates to the detriment of the tax sale purchaser as it does in this case. Therefore, we conclude that Rushmore’s motion was not filed within a reasonable period of time.

Moving onto Rushmore’s other claims, it also argues that the property descriptions in the 4.5 and 4.6 notices Oberleas sent to the record owners, Thomas and Hayes, were not in substantial compliance with Indiana Code sections 6-1.1-25-4.5 and -4.6 because they omitted a digit in the common address and failed to provide a full legal description per the statute. Appellant’s Br. 7. Further, Rushmore argues that the notices were sent to Thomas and Hayes at an address in Muncie, rather than the proper address on record with the Auditor’s Office, meaning that the mailing itself was not in compliance with the statute. Id. at 11. However, we need not address the sufficiency of the 4.5 and 4.6 notices because, even if they possess merit, the issue of reasonable timing discussed above is dispositive. The sufficiency challenge simply comes too late.

Based on these facts, we cannot say that the trial court abused its discretion in denying Rushmore’s motion to set aside the issuance of the tax deeds and tax sale. Accordingly, we affirm the judgment of the trial court.