C. Jordan Myers, Learning to Live With Jones v. Flowers: a "new Wrinkle" for an Old Standard

• Publication year: 2007

COMMENT

LEARNING TO LIVE WITH JONES v. FLOWERS: A "NEW WRINKLE" FOR AN OLD STANDARD

INTRODUCTION

First-class mail versus certified mail. Posting notice versus publishing notice. These may seem like inconsequential choices at first, but in the end they may make the difference between keeping your house and losing your house. At least they did to Gary Jones. The Supreme Court was faced with determining the consequences of these decisions in Jones v. Flowers.¹What began as a simple misunderstanding with Jones's mortgage company regarding his responsibility to pay property taxes soon turned into a tax foreclosure sale.²

When the Arkansas Tax Commissioner's tax sale notice sent by certified mail was returned as unclaimed, the Supreme Court had to decide whether Jones was unconstitutionally deprived of his property.³

One fundamental concept of due process in the United States is that when the government attempts to take a property interest, it must give notice.⁴This notion is grounded in the Fourteenth Amendment, which includes the provision that a state shall not "deprive any person of life, liberty, or property, without due process of law."⁵

This phrase has consistently caused great consternation among judges, attorneys, and law students, even in the seemingly narrow context of real estate foreclosures. In the seminal case regarding notice, Mullane v. Central Hanover Bank & Trust Co., the Supreme Court noted the difficulty of interpreting the Due Process Clause: "Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice."⁶Mullane also provided the standard used for the past fifty years: notice must be "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."⁷

Courts' applications of a flexible "reasonableness" standard in different contexts makes the jurisprudence surrounding notice difficult to describe succinctly, especially when the context is the enforcement of property taxes.⁸

Adding to the confusion is the fact that no two states employ the same tax foreclosure procedures. Across the country, there are over 150 enforcement procedures for collecting property taxes, with differences even evident from county to county.⁹Determining what type of notice is due, to whom it is owed, and when in the enforcement of a property tax delinquency it must be sent can create heartburn for all parties involved.

In Jones v. Flowers, the Court faced a "new wrinkle," which required a determination of whether additional steps are necessary when notice is sent to a delinquent property taxpayer but returned as unclaimed.¹⁰Before Flowers, various state courts and lower federal courts addressed the issue but failed to reach a consensus.¹¹Many courts found that the government should take additional steps to notify the homeowner of the foreclosure once the government learns that the initial notice was returned as unclaimed.¹²Other courts, however, determined that governments satisfy due process by sending the notice by certified mail and that no further steps must be taken, even if the notice is returned as unclaimed.¹³

This inconsistency was addressed by the Court in Flowers, where it held that when notice of a tax foreclosure sale is sent by certified mail and returned, a state must take additional reasonable steps to provide notice to the property owner, if practicable.¹⁴This Comment analyzes the conclusions and distinctions made in Flowers, identifies unresolved questions, and assesses the impact that Flowers may have on future court rulings and legislative decisions. Flowers emanates from a line of notice cases where courts have employed a fluid standard to protect due process rights. This type of flexible standard, while sometimes difficult to grasp, is particularly suited to a context such as property tax foreclosures, which has varied procedures across jurisdictions.

Part I of this Comment explains the basic context of property taxes and foreclosure procedures, considers the cases that have shaped notice requirements, and identifies the pre-Flowers split among federal and state courts as to the necessity of taking additional reasonable steps after notice is returned as unclaimed. Part II presents the facts leading up to Flowers and analyzes the Court's opinion. Part III considers the test employed by the Supreme Court, why it is appropriate, and how its flexible standard can be adapted to other fact patterns. Part IV considers the impact of Flowers on future legislative modifications and suggests guidelines for states to employ in their notice requirements.

I. TAXES, FORECLOSURES & NOTICE BEFORE FLOWERS

It is helpful to understand the underlying context that creates the necessity for notice because the sufficiency of notice depends on the specific facts.¹⁵In Flowers, the subject matter faced by the Court-property taxes and their enforcement-was one that has long caused trouble and confusion.¹⁶The following sections will consider not only property taxes and relevant enforcement procedures, but also influential notice cases and the split of state and federal courts that the Flowers Court confronted.

A. Property Taxes

Property taxes are a means for local governments to fund entities such as public schools, police departments, and sanitation services.¹⁷Property values serve as the basis for calculating property taxes, although states differ in their calculation methods.¹⁸

Property taxes in the United States can be traced back to colonial times.¹⁹

Although there has been significant debate about the utility and fairness of property taxation,²⁰municipalities continue to use it as a means of raising revenue largely because of this historical pedigree.²¹

Prior to the American colonial period, private third-parties who bought the right to collect past-due taxes collected the majority of delinquent property taxes.²²This collection method played a more limited role in America, with local government officials beginning to handle more collections in the nineteenth century.²³Today, the historical pedigree of selling the right to collect on delinquent property taxes is evident as private individuals in some jurisdictions may purchase the government's tax lien on delinquent property through a private sale.²⁴The property tax lien carries the government's power and is the first and senior lien against the delinquent property.²⁵A modern innovation in this context includes the packaging of delinquent tax liens and placing them on the market as securities.²⁶

Today, there are seemingly endless forms of property tax enforcement procedures across state and local jurisdictions.²⁷Other than providing a lien and some enforcement thereof, jurisdictions differ in regards to the specific enforcement mechanisms, the amount of judicial involvement, and other aspects of tax lien procedures.²⁸Most jurisdictions satisfy property tax deficiencies either through sale of the lien or sale of the property itself.²⁹That process includes a requirement of judicial involvement in nearly half of the jurisdictions.³⁰Some jurisdictions do not utilize a public auction; rather, they recognize "strict foreclosure."³¹Strict foreclosure involves setting a final deadline for payment of taxes, after which nonpayment results in the transfer of the property to the government.³²

Other variables include whether the jurisdiction recognizes a statutory right of redemption and how long that right exists.³³A statutory right of redemption, which arises after a foreclosure sale, allows the taxpayer to redeem his property by paying the foreclosure sale price.³⁴The numerous variables involved in the foreclosure process only add to the difficulty of creating and applying a framework for analyzing adequate notice procedures.

B. Notice Jurisprudence

The government must satisfy state and federal due process requirements for all forms of property tax enforcement.³⁵The basis for this requirement is that state action, such as the enforcement of tax delinquencies, invokes the protections of the Fourteenth Amendment.³⁶Courts have interpreted the Fourteenth Amendment to at least require notice and an opportunity to present objections before an individual can be deprived of his or her property.³⁷

Courts have had difficulty defining exactly what steps are necessary to satisfy the notice requirement.³⁸Constitutional due process requirements have consistently evolved over the years.³⁹Flowers was influenced, in particular, by three pivotal Supreme Court decisions-Mullane v. Central Hanover Bank

& Trust Co.,⁴⁰Mennonite Board of Missions v. Adams,⁴¹and Dusenbery v. United States⁴²-that comprise a portion of the framework for notice jurisprudence in this context.

In Mullane, the Court was faced with an issue regarding the constitutionality of notice procedures provided to beneficiaries of a common trust fund.⁴³The Court had to determine whether notice by publication in a local newspaper was constitutionally sufficient.⁴⁴When giving notice, the factual vagaries of each case require courts to engage in an individualized analysis, balancing the interests of the state with the individual interests sought to be protected.⁴⁵Most importantly, the Court set forth the test that has been employed by courts since: "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is 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."⁴⁶

The Court employed this "reasonableness" test to determine whether the actions to provide notice satisfied due process.⁴⁷For those beneficiaries whose names and addresses were ascertainable through due diligence, notice by publication...