Roberts v. Robert

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IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE TIM ROBERTS, ) 1 CA-CV 06-0530 ) Intervenor/Defendant/ ) DEPARTMENT B Appellant, ) ) O P I N I O N v. ) ) PAUL ROBERT and YOLANDA ROBERT, ) Trustees of the Samani Trust, ) Dated 3-31-1997, ) FILED 5-31-07 ) Plaintiffs/Appellees. ) __________________________________) Appeal from the Superior Court in Mohave County Cause Nos. CV2004-0786 CV2004-0788 The Honorable James E. Chavez, Judge REVERSED AND REMANDED WITH INSTRUCTIONS Baumann Kelly Doyle Paytas & Bernstein, PA By Gary T. Doyle Attorneys for Intervenor/Defendant/Appellant Phoenix Bruno Brooks & Goldberg, PC By Robert H. Brooks Attorneys for Plaintiffs/Appellees Kingman N O R R I S, Presiding Judge ¶1 The Robert, Plantiffs/Appellees, trustees of the Samani Paul Trust Robert dated and March Yolanda 31, 1997 ( lienholders ), purchased two Arizona real property tax liens. The lienholders subsequently sued the owner of record, Phyllis V. Johnson, the Mohave County Treasurer, various fictitious parties, and the unknown heirs of any of them if they be deceased to foreclose their right to redeem the tax liens. After attempting personal service on Johnson, the lienholders discovered Johnson had died. A son of Johnson, identified in the record as person in charge of the defendant s estate, was served on Johnson s behalf and subsequently entered into an arrangement with the lienholders whereby they would obtain a default judgment without any assessment of fees or costs against Johnson or the son. The lienholders then obtained a default judgment barring Johnson or any person claiming title under her from asserting any right, title or interest in and to the property subject to the tax liens. ¶2 A year later, Appellant, Tim Roberts, appeared, claimed to be a son and heir of Johnson, and argued that as an heir, he had a right to redeem the tax liens. Moving for a new trial and asking the superior court to set aside the default judgment, he argued the default judgment was void insofar as it purported to foreclose his right to redeem. The superior court disagreed, denied his motions, and assessed sanctions. ¶3 The fundamental issue presented in this appeal is whether a decedent s heir has a right to redeem a tax lien on the decedent s real property. Because we hold an heir has such a right, we also hold that to foreclose the heir s right to 2 redeem, the tax lien purchaser must make the heir a defendant to a tax lien foreclosure action and obtain a judgment foreclosing the heir s right to redeem. FACTS AND PROCEDURAL HISTORY ¶4 The facts as revealed in the record are undisputed. Johnson owned two parcels of real property in Mohave County, Arizona. In August 2004, the lienholders sued Johnson, the Mohave County Treasurer, various fictitious parties such as John and Jane Does, and the unknown heirs of any of them if they be deceased to foreclose their right to redeem two tax liens on the property Treasurer. which Under the state lienholders had law, levied a tax purchased on constitutes a lien on the assessed property. Statutes (A.R.S.) § 42-17153(A) (Supp. 2006)1. of delinquent authorized to investments. taxes sell on tax real property, liens, which real from the property Arizona Revised To secure payment county treasurers are are interest bearing A.R.S. § 42-18101 (Supp. 2006). The purchaser of a tax lien receives a certificate of purchase, also known as a tax lien certificate. ¶5 Real A.R.S. § 42-18118 (Supp. 2006). property tax liens may be redeemed by the property owner, the owner s agent, assignee, or attorney, or by 1 We refer to the current version of this and other statutes because, for purposes of the issues addressed in this opinion, they are the same as the statutes in effect at the time of the events giving rise to this appeal. 3 any person who has a legal or equitable claim in the property, including the holder of a tax lien certificate of a different date. A.R.S. § 42-18151 (Supp. 2006). A tax lien is redeemed when a person authorized by A.R.S. § 42-18151 pays the county treasurer the delinquent statutory fees. taxes, accrued interest, A.R.S. § 42-18153 (Supp. 2006). and other If a tax lien certificate is not redeemed within three years of the date of purchase, the purchaser may bring an action in the superior court to foreclose the right to redeem. (Supp. 2006). lienholders § 42-18201 That is what happened here. ¶6 A.R.S. The parties their and the lawyer unknown filed attempted heirs with the by to serve the publication. court an fictitious Accordingly, affidavit supporting service by publication under Arizona Rules of Civil Procedure 4.2(f) and (g). Rule 4.2(f) allows for service by publication on a person if that person s present address is unknown but whose last known address was outside Arizona; Rule 4.2(g) allows for service by publication when, in any action involving title to real property, joinder of the unknown heirs of a deceased person is necessary for a complete determination of the action. ¶7 The lienholders also attempted to personally Johnson at her last known, out-of-state, address. 4 serve But because Johnson had died - - the record does not reveal when - - the process server retained by the lienholders served Johnson s son, John Roberts, identified in the process server s affidavit of service and in the record as person in charge of defendant s estate. 2 A few days later, John Roberts telephoned the lawyer representing the lienholders, explained that before Johnson s death the two of them had decided the property was not worth anything, had no intention of paying the taxes, and were going to let them go. The lienholders lawyer advised John Roberts that as long as the matter went by default, the lienholders would not attempt to obtain a judgment for attorney s fees or costs against the defendants, although they would no longer have an interest in the property. After voluntarily dismissing the fictitious parties - but not the unknown heirs - and obtaining defaults against the Treasurer and Johnson, the obtained a default judgment on December 1, 2004. lienholders The judgment quieted title to the property in the lienholders and barred the defendants and all who do or may claim title under them from 2 The record contains no other details regarding John Roberts status vis-Ã -vis Johnson s estate, or, for that matter, whether Johnson died testate or intestate and whether Johnson s estate had been or was being administrated. 5 asserting any right, title, claim or interests whatsoever in and to the property.3 ¶8 On December 2, 2005, Tim Roberts filed an application for new trial under Arizona Rule of Civil Procedure 59(j); after the lienholders responded, Roberts moved to intervene, and to set aside the judgment as being void under Arizona Rule of Civil Procedure 60(c). Claiming to be a son and heir of Johnson,4 Roberts that asserted when Johnson died, he obtained an ownership interest in the property by operation of law; this interest gave him the right to redeem the tax liens; and the default judgment was void as to him because he had not been personally served or served by publication. Although the superior court granted Roberts request to intervene, it denied his other motions. attorneys fees It also granted the lienholders request for as sanctions under Arizona Rule of Civil Procedure 11. ¶9 Roberts timely appealed. We have jurisdiction pursuant to A.R.S. § 12-120.21(A)(1)(2003). 3 The judgment stated the unknown heirs as well as the fictitious parties had been dismissed. However, the lienholders notice of dismissal only dismissed the fictitious parties; it did not dismiss the unknown heirs. 4 In an affidavit, Roberts asserted he was Johnson s son and heir. The lienholders did not provide the superior court with any evidence contradicting Roberts assertion. 6 DISCUSSION ¶10 court, On appeal, Roberts asserts, as he did in the superior that as a son and heir of Johnson, he obtained an interest in the property by operation of law that entitled him to redeem the tax liens. ¶11 We agree. Section 42-181515 identifies who may redeem a tax lien. It states that a tax lien may be redeemed by 1. 2. 3. ¶12 The owner. The owner s agent, assignee or attorney. Any person who has a legal or equitable claim in the property, including a certificate of purchase of a different date. Although, as the lienholders point out, A.R.S. § 42- 18151 does not specifically state that an heir may redeem a tax lien, by operation of law an heir succeeds to the ownership interest of the decedent in real property. In Arizona, title to a decedent s real property devolves directly to his or her heirs and devisees, and this is true whether the estate has been or is being administered. Section 14-3101(A) (Supp. 2006) states: Upon the death of a person, his separate property and his share of community property devolves to the persons to whom the property 5 Whether this statute allows an heir to redeem a tax lien presents an issue of law, which we review de novo. Sun Valley Fin. Servs. of Phoenix, L.L.C. v. Guzman, 212 Ariz. 495, 499, ¶ 17, 134 P.3d 400, 404 (App. 2006). 7 is devised by his last will, or to those indicated as substitutes for them in cases involving lapse, renunciation or other circumstances affecting the devolution of testate estates, or in the absence of testamentary disposition to his heirs, or to those indicated as substitutes for them in cases involving renunciation or other circumstances affecting the devolution of intestate estates.6 Accord, A.R.S. administration, § 14-3901 the heirs (Supp. and 2006)( In devisees are the absence entitled to of the estate in accordance with the terms of a probated will or the laws of intestate succession. ).7 ¶13 Arizona principle. courts have consistently recognized this See, e.g., Stephens v. Comstock-Dexter Mines, 54 Ariz. 519, 522, 97 P.2d 202, 203 (1939)(real estate of deceased person upon death changes in ownership by operation of law and becomes vested in heirs subject to payment of debts of the estate, expense of administration, and allowance to family); In re McDonnell s Estate, 65 Ariz. 248, 252, 179 P.2d 238, 241 (1947)(on death, title to real property immediately vests in 6 This statute contains several terms of art that are defined in A.R.S. § 14-1201 (Supp. 2006). These defined terms include devise ( when used as a verb, means to dispose of real or personal property by will ) and heirs ( persons . . . who are entitled under the statutes of intestate succession to the property of a decedent ). A.R.S. § 14-1201(12) and (23). 7 A.R.S. § 14-3101 and § 14-3901 are virtually identical to § 3-101 and § 3-901, respectively, of the Uniform Probate Code. Unif. Probate Code § 3-101, -901 (1998). The comment to § 3-901 confirms that title to a decedent s property passes to his heirs and devisees at death. 8 heirs who may then convey their interest subject to ordinary processes of administration and rights of creditors); Hallas v. Evans, 69 Ariz. 14, 18, 207 P.2d 985, 987 (1949)(on death of husband, widow as only heir became immediately vested with title to husband s land); In re Foreman s Estate, 99 Ariz. 147, 14950, 407 P.2d 102, 103-04, (1965)(real property of deceased person changes in ownership upon his or her death by operation of law and becomes vested in heirs).8 ¶14 Therefore, when Phyllis Johnson died, title to her real property devolved directly to her devisees or heirs by operation of law. Under A.R.S. § 42-18151, Roberts, either as an owner or a person having a legal claim in the property, became entitled to redeem the tax liens. ¶15 This, then, brings us to Roberts second argument on appeal: that because the lienholders failed to join him as a defendant in their foreclosure action, the foreclosure judgment did not foreclose his right to redeem. Again, we agree with Roberts. ¶16 As explained above, if a tax lien certificate is not redeemed within three years of 8 the date of purchase, the In In re Estate of Johnson, 168 Ariz. 108, 110, 811 P.2d 360, 362 (App. 1991), we explained that although A.R.S. § 14-3101 provides that property is transferred to the devisees upon the decedent s death, the statute does not govern the time of vesting of a devise in an heir who is required by the [decedent s] will to survive distribution of the estate. 9 purchaser may bring an action in the superior court in the county in which the real property is located to foreclose the right to redeem. A.R.S. § 42-18201(A) (Supp. 2006). Thus, if the holder of a tax lien certificate wants to foreclose the redemption right of an owner or a person who has a legal or equitable interest in the property, the holder must join those parties in the foreclosure action. If the certificate holder fails to join such a party but obtains a judgment foreclosing the right to redeem held by other defendants, that judgment will not foreclose the redemption right of the missing party. ¶17 Section 42-18204 (Supp. 2006) recognizes this point. Under that statute, if in an action to foreclose the right to redeem, the court finds that the sale of the tax lien is valid and that the tax lien has not been redeemed, the court shall enter judgment redeem. [f]oreclosing the right of the defendant A.R.S. § 42-18204(A)(1)(emphasis added). to The statute goes on to state that after judgment has been entered, the parties whose rights to redeem the tax lien are thereby foreclosed have no further legal or equitable right, title or interest in the property subject to the right of appeal and stay of execution as in other 18204(B)(emphasis added). civil actions. A.R.S. § 42- This statutory wording makes clear that only those parties who are joined in the action may have their rights to redeem foreclosed. 10 The language of this statute is consistent with case law that generally recognizes that a person who is not a party to an action is not bound by the result. Daystar Investments, L.L.C. v. Maricopa County Treasurer, 207 Ariz. 569, 573, ¶ 15, 88 P.3d 1181, 1185 (App. 2004). Therefore, the lienholders needed to join Roberts as a defendant in their foreclosure action and obtain a judgment against him to foreclose his right to redeem. ¶18 Requiring the holder of a tax lien certificate to join a decedent s heir will not, as the lienholders argue, impose an impossible burden on tax lien holders that of attempting to locate a deceased property owner s heirs. First, this burden is an obligation that is fundamental to our system of laws. [A]ny procedure which deprives an interest must satisfy due process. individual of a property Mervyn s, Inc. v. Superior Court, 144 Ariz. 297, 300, 697 P.2d 690, 693 (1985); see also Mullane v. Cent. Hanover (1950)(fundamental Fourteenth Bank requisite Amendment is Trust of right Co., due to 339 U.S. be heard; 314 protected process 306, by this right has little reality or worth unless one is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest. ). ¶19 Second, impossible. this obligation does not require the [W]hen notice is a person s due, process which is 11 a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it. Mullane, 339 U.S. at 315. A diligent search and inquiry for heirs is all that is required, similar to the type of diligence required to justify and effect service of process by publication. Thus, depending on the circumstances, a tax lien holder may need to examine public records or court records, or may need to ask relatives, friends, or neighbors of a decedent property owner about the existence of heirs. Cf. Preston v. Denkins, 94 Ariz. 214, 222-23, 382 P.2d 686, 691-92 (1963)(court lacked jurisdiction to enter default judgment following service by publication based on alleged lack of knowledge of defendants residences when simple inquiry would have revealed information); Master Fin., Inc. v. Woodburn, 208 Ariz. 70, 73, ¶ 15, 90 P.3d 1236, 1239 (App. 2004)(service by publication satisfies due-process minimum notice requirements if it is the best means of notice under the circumstances and it is reasonably calculated to apprise the interested parties of the pendency of the action. ); Cooper v. Commonwealth Title of Arizona, 15 Ariz. App. 560, 564, 489 P.2d 1262, 1266 (1971)(lienholder s affidavit supporting service by publication failed to state facts showing diligent search and inquiry had been made to ascertain residence or whereabouts of defendants; affidavit did not disclose whether telephone listings, county 12 voting lists, county assessor s records, utility companies, neighbors, or city directory had been checked). ¶20 The very facts of this case undercut the lienholders impossibility argument. The lienholders lawyer spoke to John Roberts - - another Johnson heir - - and it would not have been burdensome to ask John Roberts whether there were other heirs. The record contains no evidence that this question was ever asked. ¶21 Further, when, as here, the tax lien certificate holder has reason to believe the property owner has died leaving heirs, and, after exercising appropriate due diligence, has been unable to locate those heirs, the unknown heirs can be made parties and served with process by publication. Arizona Rules of Civil Procedure 4.1(o) and 4.2(g)9 specifically allow for such service. The language of the two rules is virtually identical. The principal difference between the two rules is that Rule 4.1(o) is a 9 subsection of the rule that governs service Rule 4.2(g) states: When in an action for the foreclosure of a mortgage on real property or in any action involving title to real property, it is necessary for a complete determination of the action that the unknown heirs of a deceased person be made parties, they may be sued as the unknown heirs of the decedent, and service of a summons may be made on them by publication in the county where the action is pending . . . . 13 of process in Arizona, while Rule 4.2(g) is a subsection of the rule that Service by governs service publication of under process either outside rule will of Arizona. satisfy both. McAuliffe and Wahl, 2 Ariz. Prac., Civil Trial Practice § 12.19 (2d ed. 2001). ¶22 4.1(o) To justify service by publication under either Rule or 4.2(g), the tax lien certificate holder will be required to explain to the court the circumstances warranting service by publication. holder to explain identify and to This allows the tax lien certificate court heirs locate the and what to efforts satisfy were the made to due-process requirements discussed above. ¶23 Whether service by publication is constitutionally sufficient will turn of the facts of the particular case. We do not attempt to set forth a rule that will fit each circumstance. See Mullane, 339 U.S. at 317 ( This Court has not hesitated to approve of reasonably warning. resort possible to or publication practicable . . to . where give it more is not adequate Thus it has been recognized that, in the case of persons missing or unknown, employment of an indirect and even a probably futile means of notification is all that the situation permits and creates no constitutional bar to a final decree 14 foreclosing their rights. ); see also Walker v. Dallas, 146 Ariz. 440, 443-44, 706 P.2d 1207, 1210-11 (1985)(same). ¶24 In this case, the lienholders named Johnson s unknown heirs in the caption of their complaint, published the summons and the other information required by either rule once a week for four successive weeks in a Mohave County newspaper, and submitted an affidavit to the court referencing Rule 4.2(g). Yet, the lienholders advised the superior court they had not served Roberts by publication and affirmatively argued he had never been served at all because he was not a party to the action. The lienholders took this position because they believed Roberts had no right, title, or interest in the real property. But, as we have explained, he did. Although on appeal - and contrary to their position in the superior court regarding service on Roberts - the lienholders suggest they properly served Roberts as an unknown heir by publication, the record contains no evidence of what steps, if any, the lienholders took to identify and locate Johnson s heirs before attempting service by publication. Therefore, we reverse the superior court s judgment denying Roberts application for new trial and assessing motion Rule 11 to set aside foreclosure On sanctions. the remand, the judgment court reconsider those motions consistent with this opinion. 15 and shall ¶25 costs. Roberts has requested an award of attorneys fees and Roberts has not, however, identified any basis for an award of fees. We therefore deny his request for fees but grant his request for costs on appeal, contingent on his compliance with Arizona Rule of Civil Appellate Procedure 21. CONCLUSION ¶26 The superior application for foreclosure judgment, reversed. We a new remand court s trial and judgment motion and assessing Rule this matter the to denying to 11 set Roberts aside sanctions, superior court the is for further proceedings consistent with this opinion. ___________________________________ PATRICIA K. NORRIS, Presiding Judge CONCURRING: ___________________________________ DANIEL A. BARKER, Judge ___________________________________ JON W. THOMPSON, Judge 16

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