Justia.com Opinion Summary: Because Property Owner failed to pay real estate taxes on his property, the Town held a tax sale of Property Owner's property. Buyer purchased the property after Property Owner defaulted on the action. The superior court subsequently granted Buyer's petition to foreclose Property Owner's right of redemption to the property. Subsequently, a judgment was entered declaring the prior tax sale void and vesting the property back to Property Owner. Property Owner then executed a warranty deed conveying the property to his Sister. Concurrently, a stipulation was entered as an order of the superior court vesting title in the property to Buyer. Thereafter, Property Owner and Sister filed the instant action, seeking a declaratory judgment invalidating the stipulation order. The superior court determined that Buyer was the proper record title holder of the property. The Supreme Court affirmed, holding that a superior court judgment cannot "re-vest" title to property back to a prior owner once that owner has been defaulted in a petition to foreclose his right of redemption and a final decree has been entered.
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Supreme Court
No. 2010-145-Appeal.
(WC 05-367)
William J. Medeiros et al.
:
v.
:
Bankers Trust Company et al.
:
Present: Suttell, C.J., Goldberg, Flaherty, and Indeglia, JJ.
OPINION
Justice Indeglia, for the Court. This appeal obliges us to once again wade into the
sometimes murky waters of Rhode Island’s tax-sale statute, and more specifically, its redemption
foreclosure process. The issue presented is whether a Superior Court judgment can “re-vest”
title to property back to a prior owner after that owner has been defaulted in a petition to
foreclose his right of redemption.
This case came before the Supreme Court on December 1, 2011, pursuant to an order
directing the parties to appear and show cause why the issues raised in this appeal should not be
summarily decided. After hearing the arguments of counsel and reviewing the memoranda
submitted on behalf of the parties, we are satisfied that cause has not been shown. Accordingly,
we shall decide the appeal at this time without further briefing or argument. For the reasons set
forth in this opinion, we affirm the judgment of the Superior Court.
I
Facts and Travel
It is necessary to begin by recounting the tangled facts and extensive proceedings that
ultimately led to the present action before this Court. On May 17, 1996, the plaintiff William J.
Medeiros (Medeiros) became the owner of a certain parcel of real estate at 360-362 Devil’s Foot
-1-
Road in the Town of North Kingstown (the property). That same day, Medeiros executed a
mortgage to the property to secure a note in the amount of $68,750. The original mortgagee then
assigned the mortgage to Bankers Trust Company (Bankers). Medeiros made monthly mortgage
payments through Bankers’s service company, Select Portfolio Servicing, Inc. (Select), until he
experienced financial difficulties. At around the same time, Medeiros also failed to pay the
necessary real estate taxes to the Town of North Kingstown (the town).
The Tax Lien Case
On June 4, 1999, the town held a tax sale of the property. Prior to the tax sale, the town
provided notice pursuant to G.L. 1956 §§ 44-9-10 and 44-9-11 1 to Medeiros and Fleet Bank. 2
Bankers, however, as mortgagee, did not receive notice of the tax sale. Fiduciary Trust Services
(Fiduciary) purchased the property at the tax sale and received a tax deed executed by the town
on June 16, 1999.
On June 26, 2000, Fiduciary filed a petition to foreclose Medeiros’s right of redemption
to the property in the Superior Court for Washington County (the tax lien case). The record
indicates that Medeiros was properly notified of the petition pursuant to § 44-9-27, 3 but that he
failed to file an answer. On July 28, 2000, a final decree was entered in the tax lien case,
foreclosing and barring all rights of redemption, including those that Medeiros had in the
property.
1
These statutes govern the notice required to be provided to taxpayers and other parties in
interest prior to a real estate tax sale.
2
The record leaves us uncertain as to why Fleet Bank—an institution with no apparent interest in
the property—was provided notice of the tax sale.
3
This statute governs the requisite notice to be provided to interested parties upon the filing of a
foreclosure petition.
-2-
The Notice Case
Thereafter, on October 10, 2000, Bankers filed a complaint against Medeiros, Fiduciary,
and the town, 4 seeking to invalidate the tax sale and the redemption foreclosure (the notice case).
On November 24, 2000, Bankers filed an amended complaint, alleging that the tax sale of the
property was void because the town failed to give it notice. As part of its requested relief,
Bankers petitioned the Superior Court to order Fiduciary to issue a redemption deed in favor of
Medeiros. Because Medeiros believed that his rights were adequately protected by Bankers, he
did not respond or enter his appearance in the notice case, despite being named as a defendant.
On December 17, 2001, the matter was presented before a justice of the Superior Court for
Washington County, wherein “the [c]ourt granted summary judgment for Bankers Trust, and
default judgments against Medeiros, Stephen Goldman, and Fiduciary Trust entered.”
On January 15, 2002, a judgment was entered against Medeiros and Fiduciary in the
notice case (the January 2002 judgment), declaring the prior tax sale void, vacating the final
decree entered in the tax lien case, and “vest[ing the property] back into William Medeiros[,]
subject to the mortgage to Bankers * * *.” Medeiros received a copy of the January 2002
judgment; one was also recorded in the land evidence records of the town on March 14, 2002.
Fiduciary Moves to Vacate
On June 21, 2002, Fiduciary filed a motion to vacate the January 2002 judgment,
asserting that it was not properly served with the complaint filed against it in the notice case,
and, that it did not receive notice of Bankers’s motions for default judgment and summary
judgment. Medeiros here contends that he never received notice of this motion to vacate.
4
The complaint also named Stephen J. Goldman as a defendant based on his status as a “lienor.”
The record reflects that he never answered nor appeared and was defaulted. Thus, for the
purposes of this appeal, his status as a defendant in the notice case plays no role.
-3-
Nevertheless, in an order entered on September 6, 2002, the Superior Court vacated the default
judgment and summary judgment against only Fiduciary. 5 No copy of this order was sent to
Medeiros, nor was the order recorded in the land evidence records of the town.
At some point in 2004, unaware of any potential cloud on the property, Medeiros entered
into negotiations with Select (Bankers’s service company) in an attempt to settle the amount
owed based on the mortgage note. In a letter dated April 29, 2005, Select indicated to Medeiros
that to effectively discharge the mortgage, a payoff amount of $69,893.53 was required on or
before May 6, 2005. Medeiros’s sister, Margaret E. Cambra (Cambra), 6 agreed to provide the
necessary funds to satisfy the outstanding mortgage, as well as $5,106.47 to satisfy all
outstanding real estate taxes in exchange for title to the property. On May 2, 2005, Cambra
wired the $69,893.53 to Select in satisfaction of the mortgage and also paid to the town the
delinquent taxes. Thereafter, without knowledge of the order vacating the default judgment and
summary judgment against Fiduciary in the notice case, Medeiros executed a warranty deed
conveying the property to Cambra on May 31, 2005.
The Stipulation Order in the Notice Case
Concurrently, on May 31, 2005, and prior to the recordation of the property transfer from
Medeiros to Cambra in the land evidence records, a stipulation between Bankers, Fiduciary, and
the town was entered as an order of the Superior Court (stipulation order) in the notice case and
was recorded that day in the land evidence records of the town. The stipulation order vacated the
December 17, 2001 summary judgment in favor of Bankers, and vested title to the property in
Fiduciary dating to December 17, 2001, and no longer subject to the mortgage held by Bankers.
5
Finding that Fiduciary was not properly served in the notice case and did not receive adequate
notice, the lower court granted the motion to vacate.
6
Cambra is also a plaintiff in this appeal.
-4-
Furthermore, the stipulation order dismissed with prejudice all claims, counterclaims, and crossclaims of the parties. 7
Medeiros did not receive any notice of the stipulation or subsequent order. Instead,
Medeiros first learned of the stipulation order on June 3, 2005, when a final title search of the
property was performed prior to the recording of the deed from Medeiros to Cambra. Despite
the existence of the recorded stipulation order, plaintiffs went ahead and recorded the warranty
deed to the property.
The Instant Action
In an attempt to clear the title to the property, Medeiros and Cambra filed the instant
action in the Superior Court for Washington County on June 17, 2005, seeking a declaratory
judgment invalidating the May 31, 2005 stipulation order. 8 The complaint also requested that all
clouds on the property be removed and that Cambra be adjudged the fee simple owner of the
property by virtue of the warranty deed from Medeiros. The matter was tried on October 14,
2008, and November 18, 2008, before a justice of the Superior Court, sitting without a jury.
In a written decision issued on December 28, 2009, the Superior Court determined that as
a result of the stipulation order, Fiduciary and its assigns were the proper record title holders of
the property.
In reaching this decision, the trial justice found that the stipulation order
adequately adjudicated the issue of whether Bankers received notice of the tax sale in the notice
7
Also on May 31, 2005, Fiduciary executed and recorded a quitclaim deed conveying the
property to Brownell Realty. Brownell Realty later contracted to sell the property to one Daniel
Konuch.
8
The complaint comprised several counts including a count for unjust enrichment against the
town in regard to the $5,106.47 Cambra paid for outstanding taxes on the property and a count
for mutual mistake against Select and Bankers concerning the $69,893.53 Cambra paid in
satisfying the mortgage. Select subsequently returned that amount to Cambra on its own accord.
The December 28, 2009 decision by the lower court in this matter required that the town return
the tax payment to Cambra. The additional counts are not relevant to this appeal.
-5-
case. Therefore, the trial justice found that Medeiros was barred from challenging the stipulation
order based on Bankers’s lack of notice because “any claims regarding Bankers Trust’s lack of
notice [was] precluded by the doctrine of res judicata.” Additionally, she found that Medeiros
failed to protect his interest in the property—and his right to receive notice of the stipulation—by
defaulting in both the tax lien case and the notice case. Because of his “willful failure to answer,
or appear, in two separate proceedings,” the trial justice therefore found no violation of
Medeiros’s due process rights.
Final judgment entered on January 20, 2010. Medeiros filed a timely notice of appeal on
February 2, 2010. On appeal, Medeiros asserts that this Court’s analysis should begin with the
Superior Court’s January 2002 judgment in the notice case, in which the lower court declared the
tax sale void, vacated the final decree entered in the tax lien case, and vested the property back
into Medeiros subject to Bankers’s mortgage. Medeiros argues that the Superior Court decision
on December 28, 2009, in the instant action should be reversed because he received no notice of
Fiduciary’s motion to vacate the January 2002 judgment, the order granting that motion, or the
2005 stipulation order, in violation of his due process rights.
Furthermore, in regard to his prior default in the notice case, Medeiros contends that the
stipulation order was a “new or additional claim[] for relief” in the notice case. Thus, in his
view, Rule 5(a) of the Superior Court Rules of Civil Procedure also entitled him to receive notice
of (1) Fiduciary’s motion to vacate the January 2002 judgment in the notice case, (2) the court’s
order granting that motion, and (3) the subsequent stipulation order. 9
9
Rule 5(a) of the Superior Court Rules of Civil Procedure reads in pertinent part:
“No service need be made on parties in default for failure to appear
except that motions for assessment of damages and pleadings
asserting new or additional claims for relief against them shall be
-6-
In response, Fiduciary argues that because Medeiros defaulted in the tax lien case, the
issue presented in the notice case initiated by Bankers was limited to Fiduciary’s and Bankers’s
interests only. To support this position, Fiduciary points to the language of the Superior Court’s
order of September 6, 2002, that vacated the default judgment and summary judgment, which
stated that “[t]he default judgment and summary judgement [sic] are vacated as to Fiduciary
Trust Services only.” Therefore, Fiduciary avers that the prior “re-vestment” of the property
back to Medeiros (subject to Bankers’s mortgage) by virtue of Bankers’s successful motion for
summary judgment was “erroneously entered” by the Superior Court. Consequently, Fiduciary
asserts that this “wrongful granting of title back to * * * Medeiros” failed to create a new claim
and re-attach Medeiros’s due process right to notice. Rather, Fiduciary argues, Medeiros’s due
process rights were satisfied when Medeiros was given notice of the proceeding to foreclose on
his right of redemption after the tax sale.
As to Medeiros’s Rule 5(a) argument, Fiduciary contends that because Medeiros
defaulted in the tax lien case, the subsequent proceedings (and the stipulation order) only sought
to clarify the status between Bankers and Fiduciary rather than raise any new claims against
Medeiros. Accordingly, Fiduciary contends that Rule 5(a) did not entitle Medeiros to notice of
the stipulation order.
In sum, Medeiros takes the following position—that the January 2002 judgment “revesting” the property back to him and Bankers nullified the tax sale and the foreclosure of the
right of redemption, and effectively reverted Medeiros and Bankers to their former positions
prior to the tax sale, as mortgagor and mortgagee of the property, respectively. Following this
served upon them in the manner provided for service of summons
in Rule 4.”
-7-
position to its logical end, Medeiros concludes that based on this “re-vesting,” he was entitled to
notice prior to the stipulation order being entered.
Unfortunately for Medeiros, however, our
longstanding authority in this area does not comport with this line of reasoning. Hence, we hold
that the January 2002 judgment did not “re-vest” the property back to Medeiros and that he was
not entitled to subsequent notice.
II
Standard of Review
“This Court views deferentially the factual findings of a trial justice sitting in a nonjury
case.” Grady v. Narragansett Electric Co., 962 A.2d 34, 41 (R.I. 2009) (quoting Manchester v.
Pereira, 926 A.2d 1005, 1011 (R.I. 2007)). We therefore “will not disturb the findings of a trial
justice sitting without a jury unless such findings are clearly erroneous or unless the trial justice
misconceived or overlooked material evidence or unless the decision fails to do substantial
justice between the parties.” Id. (quoting Macera v. Cerra, 789 A.2d 890, 892-93 (R.I. 2002)).
“[I]f, on review, the record indicates that competent evidence supports the trial justice’s findings,
we shall not substitute our view of the evidence for his [or hers] even though a contrary
conclusion could have been reached.” Nardone v. Ritacco, 936 A.2d 200, 204 (R.I. 2007)
(quoting Imperial Casualty and Indemnity Co. v. Bellini, 888 A.2d 957, 961 (R.I. 2005)).
“In contrast to our deferential [standard regarding] factual findings made by a trial
justice,” Grady, 962 A.2d at 41 (citing Manchester, 926 A.2d at 1011), when “the issue is a pure
question of law,” we review using a de novo standard. Ashley v. Kehew, 992 A.2d 983, 987
(R.I. 2010) (citing Ondis v. City of Woonsocket ex rel. Treasurer Touzin, 934 A.2d 799, 802
(R.I. 2007)).
-8-
III
Discussion
This Court’s analysis begins with Medeiros’s default in the tax lien case. As previously
mentioned, a year after the property was sold by the town at the June 1999 tax sale, 10 Medeiros
properly received notice of Fiduciary’s petition to foreclose his right of redemption in Superior
Court. As was suitably noted in the trial justice’s written decision, “Medeiros failed to answer or
appear to assert any claim to an interest in the property[,]” thus leading to the default judgment
entered against him. This failure to answer the petition to foreclose his right of redemption is
fatal to his current appeal.
A
Controlling Statutes
We are mindful that “[a] tax sale foreclosure proceeding ‘is a unique procedure created
by statute for a limited purpose; to provide a forum for the exercise of the right to redeem the
subject land.’” ABAR Associates v. Luna, 870 A.2d 990, 994 (R.I. 2005) (quoting Pratt v.
Woolley, 117 R.I. 154, 157, 365 A.2d 424, 426 (1976)).
In the past, this Court has
acknowledged that because of a property owner’s disproportionate loss, “[l]egislatures and courts
have acted to ameliorate the severity of tax forfeitures.” Id. (quoting Albertson v. Leca, 447
A.2d 383, 388 (R.I. 1982)). “We also have recognized, however, that the Rhode Island tax
statute ‘strikes a fair balance between the interests of the government and private property
rights—the state may move quickly to obtain by sale the taxes due, but the owner has ample
10
As required by G.L. 1956 § 44-9-25, which reads in pertinent part:
“(a) After one year from a sale of land for taxes, * * *
whoever then holds the acquired title may bring a petition in the
[S]uperior [C]ourt for the foreclosure of all rights of redemption
under the title.”
-9-
opportunity to redeem his real estate.’” Id. (quoting Albertson, 447 A.2d at 388). Furthermore,
we reiterate that “one of the goals of the tax sale statute is to ‘afford a measure of stability to tax
titles.’” Id. (quoting Picerne v. Sylvestre, 122 R.I. 85, 89, 404 A.2d 476, 478 (1979)). It is
through this lens that we must view the present case.
Three specific statutory provisions pertaining to tax sales are paramount in this appeal.
Section 44-9-24 provides in relevant part:
“The title conveyed by a tax collector’s deed shall be
absolute after foreclosure of the right of redemption by decree of
the [S]uperior [C]ourt * * *. * * * Furthermore, the action to
vacate shall only be instituted for inadequacy of notice of the
petition amounting to a denial of due process or for the invalidity
of the tax sale because the taxes for which the property was sold
had been paid or were not due and owing because the property was
exempt from the payment of such taxes.” (Emphasis added.)
Section 44-9-30 provides that once a default has been entered, as it was in the case at bar, “a
decree shall be entered which shall forever bar all rights of redemption.” (Emphasis added.)
Moreover, § 44-9-31 provides in pertinent part:
“If a person claiming an interest desires to raise any
question concerning the validity of a tax title, the person shall do
so by answer filed in the proceeding on or before the return day, or
within that further time as may on motion be allowed by the court,
or else be forever barred from contesting or raising the question in
any other proceeding. He or she shall also file specifications
setting forth the matters upon which he or she relies to defeat the
title; and unless the specifications are filed, all questions of the
validity or invalidity of the title, whether in the form of the deed or
proceedings relating to the sale, shall be deemed to have been
waived.” (Emphases added.)
In this case, the record indicates that after Medeiros was properly noticed of the tax sale
and of the hearing to foreclose his right of redemption, he failed to file an answer or to assert any
claim of interest in the property. Therefore, once Medeiros defaulted and a final decree entered
against him on July 28, 2000, the tax deed was absolute as to Fiduciary, and Medeiros was
- 10 -
forever barred from any subsequent claim. All questions by Medeiros concerning the validity of
the title were deemed waived—including the right to notice of both Fiduciary’s September 2002
motion to vacate and the May 31, 2005 stipulation order.
B
Prior Precedent
On multiple occasions, this Court has held that “upon notice of a petition for foreclosure
of the right of redemption, the failure by one who owns an interest in real estate to file an answer
or specifications on or before the return day forever bars that party from later contesting the
validity of the tax title.” ABAR Associates, 870 A.2d at 995 (quoting Kildeer Realty v. Brewster
Realty Corp., 826 A.2d 961, 967 (R.I. 2003)).
In Kildeer Realty, 826 A.2d at 963, a parcel of real estate was sold at a tax sale. The
defendant property owner, Brewster Realty, was not properly notified of the impending tax sale.
Id. A year after the tax sale, the purchaser of the real estate, Kildeer Realty, filed a petition in
Superior Court to foreclose all rights of redemption to the property. Id. Brewster Realty did
receive notice of the petition, but failed to appear or object. Id. A final decree was entered,
foreclosing all rights of redemption to the real estate. Id. Subsequently, Brewster Realty filed a
motion to vacate the judgment, asserting the original tax sale was void for want of notice and that
it was deprived of its property without due process. Id.
This Court in Kildeer Realty, 826 A.2d at 966, held that despite Brewster Realty not
receiving notice of the impending tax sale, § 44-9-31 explicitly barred the defendant from
contesting the validity of the tax title in any future proceeding because it was defaulted in the
redemption foreclosure action. We reasoned that once a default was entered according to § 44-930, “a decree shall be entered which shall forever bar all rights of redemption[,]” and “any
- 11 -
subsequent claims by Brewster Realty were forever barred.” Kildeer Realty, 826 A.2d at 966;
see also ABAR Associates, 870 A.2d at 996-97 (holding that it was improper to allow a party
with a property interest to intervene after a final decree had been entered foreclosing all rights of
redemption, despite that party not receiving any notice of the prior tax sale); Norwest Mortgage,
Inc. v. Masse, 799 A.2d 259, 263 (R.I. 2002) (holding that a creditor’s noncompliance with § 449-31 prohibited the creditor from setting aside a tax sale, despite the fact that the tax sale
occurred in violation of the automatic stay provisions of the bankruptcy code); Picerne v.
Sylvestre, 113 R.I. 598, 602, 324 A.2d 617, 619 (1974) (recognizing the all-encompassing terms
of “forever barred” and “in any other proceeding” in § 44-9-31), overruled on other grounds, 122
R.I. 85, 404 A.2d 476 (1979). Thus, in the instant case, because Medeiros defaulted in the tax
lien case, he is precluded from intervening in any subsequent claim to the property.
Accordingly, we agree with the trial justice’s decision that because of the preceding
authority, the January 2002 judgment failed to “re-vest” Medeiros with the property. The trial
justice properly noted that because Medeiros “failed to answer or appear to assert any claim” in
the tax lien case, “[t]he default judgment entered against Medeiros in [that] case terminated any
interest he might have in the property.” The trial justice was correct in finding that “[s]imply
because the [January 2002 judgment] was sent to Medeiros as a courtesy” and erroneously “revested” title in Medeiros, the judgment was in error and “d[id] not change his status as [a] party
in default.” As a result, this Court considers the January 2002 judgment to be null and void.
Furthermore, because the default against Medeiros in the tax lien case could not have been
removed or set aside, Medeiros is unable to avail himself of the notice exception found in Rule
- 12 -
5(a). 11 Concerning Medeiros’s due process argument, we also agree with the trial justice’s
finding that “Medeiros’[s] rights to due process were satisfied * * * when he was [given notice],
and elected not to protect any interest he might have in the property.” 12
As a policy matter, to allow a property to “re-vest” in a defaulted party after the final
decree has been entered would result in “the purpose of achieving stabilization of tax titles
[being] completely frustrated.” ABAR Associates, 870 A.2d at 996. To so hold would only
invite an unnecessary cascade of legal proceedings following a redemption foreclosure—as this
case illustrates.
IV
Conclusion
For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.
The record of the case shall be remanded to the Superior Court.
Justice Robinson did not participate.
11
It is worthwhile to note that Medeiros defaulted a second time in the notice case. However,
because § 44-9-31 specifically applies to parties contesting a tax title, we limit our analysis and
holding in this case to Medeiros’s default in the tax lien case.
12
We distinguish this case from the facts in Sycamore Properties, LLC v. Tabriz Realty, LLC,
870 A.2d 424 (R.I. 2005), in which this Court held in favor of an aggrieved party that had been
divested of property after a tax sale and its right to redeem was foreclosed. In Sycamore, 870
A.2d at 428, we held that a property owner, after defaulting in the proceeding to foreclose its
right of redemption, was nonetheless wrongly denied its due process rights because the notice
given to the property owner of the pending tax sale was improper. By contrast, in the instant
case, Medeiros was given adequate notice of both the tax sale and the petition to foreclose his
right of redemption. See also Jones v. Flowers, 547 U.S. 220, 225 (2006) (holding that when
“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 [the] property”).
- 13 -
Supreme Court
No. 2010-145-Appeal.
(WC 05-367)
William J. Medeiros et al.
:
v.
:
Bankers Trust Company et al.
:
NOTICE: This opinion is subject to formal revision before
publication in the Rhode Island Reporter. Readers are requested to
notify the Opinion Analyst, Supreme Court of Rhode Island,
250 Benefit Street, Providence, Rhode Island 02903, at Telephone
222-3258 of any typographical or other formal errors in order that
corrections may be made before the opinion is published.
RHODE ISLAND SUPREME COURT CLERK’S OFFICE
Clerk’s Office Order/Opinion Cover Sheet
TITLE OF CASE:
William J. Medeiros et al v. Bankers Trust Company et al.
CASE NO:
No. 2010-145-Appeal.
(WC 05-367)
COURT:
Supreme Court
DATE OPINION FILED: March 13, 2012
JUSTICES:
Suttell, C.J., Goldberg, Flaherty, and Indeglia, JJ.
WRITTEN BY:
Associate Justice Gilbert V. Indeglia
SOURCE OF APPEAL:
Washington County Superior Court
JUDGE FROM LOWER COURT:
Associate Justice O. Rogeriee Thompson
ATTORNEYS ON APPEAL:
For Plaintiff:
Erica M. O’Connell, Esq.
For Defendant: Peter P. D’Amico, Esq.
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