Stopping Short of Justice: Hamilton and Notice Requirements for the Redemption Period of Tax Sales

• Author: Jessica Gladney
• Pages: 263-298

Jessica Gladney. I would like to thank Professors Paul R. Baier, Ronald J. Scalise Jr., and John M. Devlin for their guidance throughout the writing process. I am also grateful to my friends and family, in particular my father, Ronald C. Gladney, for encouraging me to pursue a legal career and supporting me wholeheartedly in all of my endeavors.

Page 263

I Introduction

An elderly man loses his entire home. It has been in his family for generations and is worth more than $100,000. The property is sold in a tax sale because the mortgage company inadvertently failed to pay less than thirty dollars in property taxes. While such a scenario naturally stirs the emotions, tax sales by state entities for often highly insignificant sums of money are not uncommon in the United States. In Hamilton v. Royal International Petroleum Corp.,¹ the Louisiana Supreme Court had to determine whether the procedures that deprived Mr. Hamilton of his family home were legally sound under both due process and state statutory constraints. The court determined that notice of the redemption period is not required by the Due Process Clause, and the state statutory provision providing for notice of redemption does not include the remedy of nullification if the notice requirement is not satisfied.

Part II of this article discusses the background of the Hamilton v. Royal International Petroleum Corp. opinion. Part III follows with a description of the Louisiana Supreme Court's reasoning, which is divided into separate evaluations for due process and the judicial interpretation of the statutory requirement for notice of the redemption period. Part IV expands upon the due process issue by providing a historical analysis of due process as applied to tax sales and evaluating due process specifically as applied to the facts in Hamilton.

Part V analyzes the court's interpretation of the statutory notice requirement for the redemption period as a state law entitlement. Part V begins with an historical analysis of the role of the judiciary in a civil law system, followed by a critique of the traditional view of the judiciary. The article proceeds to evaluate the court's analysis regarding its inability to impose a penalty where the statute does not expressly provide one, followed by an examination of judicial use of equity to fill gaps in legislation and prevent injustice.

Page 264

After a full evaluation of the court's reasoning to support its decision, this article demonstrates that the due process determination was faulty, and the court's conclusion with respect to the imposition of penalties was certainly flawed. Contrary to the court's suggestion that it was unable to impose a penalty for the tax collector's failure to provide statutorily required notice during the redemption period, the court could have imposed a penalty without violating civil law traditions.

II Background

Michael D. Hamilton of Baton Rouge, Louisiana, lived in a home that he inherited from his father.² The mortgage company failed to pay $27.09 in property taxes for 1994, and in April 1995, notice of the delinquency was sent to him by certified mail.³ Mr. Hamilton signed the return receipt, which indicated that he received the notice.⁴ The notice advised Mr. Hamilton that he owed $27.09 to the city of Baton Rouge for 1994 property taxes, and if the delinquency was not rectified within twenty days from the date of the notice, property sufficient to satisfy the delinquency would be seized and sold at a tax sale.⁵ The tax deficiency remained unpaid and the property was sold on June 12, 1995, to Royal International Petroleum Corp. (hereinafter RIPCO) for $71.68.⁶ The tax deed in RIPCO's name was recorded on June 30, 1995.⁷

Page 265

Louisiana Constitution article VII, section 25(B)(1) provides for a three-year redemption period during which Mr. Hamilton could have redeemed the property.⁸ During Mr. Hamilton's three- year redemption period, the Louisiana Legislature amended Louisiana Revised Statutes section 47:2180, which covers additional procedural requirements such as requirements for notice for the tax sale and redemption period process.⁹ Prior to the amendment, the tax collector was not statutorily required to send notice to the taxpayer during the redemption period.¹⁰ Act 984, enacted during the 1997 legislative session with an effective date of August 15, 1997, imposed additional notice requirements.¹¹ The pertinent section of the amendment created a statutory requirement for notice during the redemption period:

On the second day of January of each year, or as soon thereafter as possible, in each year following the year in which the original notice of delinquency is made pursuant to Subparagraph (a) herein, the tax collector shall address to each taxpayer who has not paid all the taxes which have been assessed to him on immovable property a written notice in the manner provided herein. The notice shall specify the property upon which the taxes are delinquent, the amount of taxes due, and the manner in which the property may be redeemed. The notice shall be made each year until the property is no longer redeemable as provided in Article VII, Section 25(B) of the Constitution of

Page 266 Louisiana. The cost of mailing the notice shall be considered cost for purposes of redemption.¹²

Mr. Hamilton's redemption period was to terminate on June 30, 1998. Although the amendment to Louisiana Revised Statutes section 47:2180 did not apply retroactively to the two prior years of Mr. Hamilton's redemption period, the statute as amended did apply to the third year. Despite the statutory requirement, the tax collector failed to provide Mr. Hamilton with notice in the third year, and the redemption period expired on June 30, 1998.¹³

The tax title obtained by RIPCO at the tax sale is not considered merchantable because of defenses that the tax debtor can raise.¹⁴ The tax title can be quieted and thereby made merchantable by prescription of five years as granted by article VII, section 25 of the Louisiana Constitution. The tax title can also be quieted by bringing an action to confirm the tax title against the former owner or his successors as outlined in Louisiana Revised Statutes section 47:2228.¹⁵

Mr. Hamilton filed suit to challenge the validity of the tax sale based on the failure of the tax collector to provide notice of the redemption period.¹⁶ The Nineteenth Judicial District Court for the Parish of East Baton Rouge rendered judgment in favor of RIPCO and the Louisiana First Circuit Court of Appeal reversed.¹⁷ The Page 267 Louisiana Supreme Court held that the failure of the tax collector to provide notice during the post sale redemption period did not violate due process, so the tax sale could not be annulled on constitutional grounds.¹⁸ Furthermore, the court determined that since the legislature did not provide a penalty for the tax collector's statutory failure to provide redemption period notice, the judicial system could not impose a penalty in place of the legislature.¹⁹

III The Louisiana Supreme Court's Reasoning

A Due Process

The Louisiana Supreme Court acknowledged that notice of delinquency prior to the tax sale is required by due process and failure to provide such notice would have required the tax sale to be annulled.²⁰ However, the court recognized that the due process requirement of notice prior to the tax sale did not necessarily extend to post-sale notice of redemption.²¹ In the court's analysis of the due process claim for notice during the redemption period, Justice Knoll emphasized the importance of notice and an opportunity to be heard prior to the deprivation of a property interest.²²

The court concluded that notice and opportunity to be heard were provided to Mr. Hamilton prior to the tax sale, and Mr. Hamilton was properly divested of his property at the tax sale.²³

Page 268

Determining that due process does not require post-sale notice of the redemption period, the court concluded that the sale could not be annulled on the due process challenge.²⁴ To reinforce its conclusion on the issue of due process, the court noted that the state legislature also did not require a penalty if the tax collector failed to provide notice during the redemption period.²⁵

B Judicial Imposition of Penalty for Statutory Violation

In the analysis of the statutory requirement for notice during the redemption period, the Louisiana Supreme Court began with the standard rules of statutory interpretation, acknowledging that the starting point of interpretation is the statute itself. The statute must be applied as written when the language is clear and unambiguous and does not lead to an absurd result.²⁶ In analyzing the construction of Louisiana Revised Statutes section 47:2180, the court recognized that the term "shall"generally denotes a mandatory duty.²⁷ However, the statute did not explicitly provide a penalty if the redemption notice was not provided...