New York Law Review

Tag: Tax Foreclosure

  • Orange County Commissioner of Finance v. Helseth, 17 N.Y.3d 620 (2011): Notice Required Only for Governmental Taking, Not Subsequent Options

    Orange County Commissioner of Finance v. Helseth, 17 N.Y.3d 620 (2011)

    Due process requires notice reasonably calculated to apprise parties of an opportunity to be heard regarding a governmental taking of property, but does not mandate notice for subsequent, discretionary options offered after a lawful foreclosure.

    Summary

    The Helseths failed to pay property taxes, leading to a foreclosure action by Orange County. The County provided notice of the foreclosure but the Helseths did not respond, and the County obtained title. The County then offered the Helseths an opportunity to repurchase the property, but notice of this option was returned as undeliverable. The Helseths argued they were entitled to better notice of the repurchase option. The New York Court of Appeals held that due process only requires notice of the initial governmental taking (the foreclosure), not of subsequent, discretionary options like the repurchase opportunity, reversing the lower court’s ruling in favor of Orange County.

    Facts

    The Helseths owned a property in Orange County. They moved and attempted to update their address with the County for tax purposes, but the County’s records still reflected their old address. They failed to pay property taxes, leading to the County initiating foreclosure proceedings. The County sent notice of the foreclosure action to the old address via certified mail, which was returned as unclaimed. The Helseths did not respond to the foreclosure action, and the County obtained a default judgment and title to the property. After obtaining title, the County sent another notice to the old address, informing the Helseths of an opportunity to repurchase the property. This notice was also returned as undeliverable. The Helseths learned of the foreclosure and scheduled auction through their real estate broker.

    Procedural History

    The Helseths moved to stay the sale of the property after learning about the foreclosure. The Supreme Court denied a temporary restraining order and ruled that the initial foreclosure notice was adequate but the notice for the repurchase option was not. The Appellate Division affirmed, holding that the County failed to provide adequate notice of the repurchase opportunity. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether the County was required to provide the Helseths with constitutionally adequate notice of the opportunity to repurchase their property after the County had already obtained title through a tax foreclosure proceeding, when the initial foreclosure notice was deemed adequate.

    Holding

    No, because constitutional due process only mandates notice of the governmental taking that impairs the rights of interested parties (i.e., the foreclosure action), and does not extend to subsequent, discretionary remedies offered after the property was lawfully foreclosed.

    Court’s Reasoning

    The Court of Appeals reasoned that due process requires notice that is “reasonably calculated, under all the circumstances, to apprise” parties of the opportunity to be heard regarding a governmental action that affects their rights (citing Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950)). The court emphasized that all that was constitutionally required of the County was reasonable notice of the foreclosure action. The repurchase option was a discretionary remedy offered after the property was lawfully foreclosed and conveyed to the County. Therefore, it did not establish or extend a property right entitled to due process protection. The Court distinguished Jones v. Flowers, 547 U.S. 220 (2006), noting that in Jones, the tax sale itself was the governmental taking, whereas here, the foreclosure was the taking, and the repurchase option was a separate, optional measure. The court quoted Sheehan v. County of Suffolk, 67 N.Y.2d 52, 59 (1986) stating “Once taxpayers are provided with notice and an opportunity to be heard on the adjudicative facts concerning the valuation of properties subject to tax, as was done here, they have received all the process that is due”. The court also cited Weigner v. City of New York, 852 F.2d 646 (2d Cir. 1988), stating that “due process only requires notice of the pendency of the action and an opportunity to respond. The City . . . was not required to send additional notices as each step in the foreclosure proceeding was completed or when each of the available remedies was about to lapse”.

  • Harner v. County of Tioga, 5 N.Y.3d 136 (2005): Sufficiency of Notice in Tax Foreclosure Proceedings

    5 N.Y.3d 136 (2005)

    Due process in tax foreclosure proceedings is satisfied when the county mails notices by certified mail (returned unclaimed) and ordinary first-class mail (not returned) to the address on the tax roll, even if the certified mail is unclaimed, without requiring the county to search public records for an alternative address.

    Summary

    Donald Harner challenged a tax foreclosure by Tioga County, arguing insufficient notice. The County had mailed notices to Harner at an address on the tax roll via certified and first-class mail. The certified mail was returned as “unclaimed,” but the first-class mail was not. Harner claimed he never received the notices and that the address on the tax roll was incorrect. The Court of Appeals held that the County’s actions satisfied due process, as the first-class mailing not being returned suggested Harner was avoiding notice, and Harner, as the record owner, had a responsibility to update his address.

    Facts

    Harner owned property in Tioga County, which he conveyed to the Winnies via a land contract in 1990, obligating them to pay property taxes. In 1994, the tax rolls were changed to reflect Harner’s address as care of the Winnies at the property address. The County mailed tax bills and foreclosure notices to this address. In 2002, the County initiated foreclosure proceedings for unpaid taxes, sending notices by certified and first-class mail to the address on the tax roll. The certified mail was returned marked “unclaimed,” but the first-class mail was not returned.

    Procedural History

    Harner filed a CPLR Article 78 proceeding to set aside the tax deed. The Supreme Court dismissed the petition, finding the County satisfied notice requirements. The Appellate Division reversed, holding the notice inadequate because the unclaimed certified mail required the County to search public records. The Court of Appeals granted leave and reversed the Appellate Division, dismissing Harner’s petition.

    Issue(s)

    Whether the County provided constitutionally adequate notice of the tax foreclosure proceeding when it mailed notices by certified mail, which were returned “unclaimed,” and by ordinary first-class mail, which was not returned, to the address listed on the tax roll.

    Holding

    Yes, because under the circumstances, the County’s actions were reasonably calculated to apprise Harner of the foreclosure proceedings, satisfying due process requirements, and Harner had a duty to ensure his address on the tax roll was accurate.

    Court’s Reasoning

    The Court reasoned that due process requires notice reasonably calculated to apprise interested parties of pending actions. The Court distinguished this case from situations where mail is returned as undeliverable, stating that “unclaimed” suggests the addressee is avoiding notice. The Court noted that only the certified mail was returned, implying Harner was aware of the proceedings but chose not to claim the mail. The Court also emphasized that Harner was the record owner and responsible for updating his address with the County. His failure to do so did not render the County’s procedures unconstitutional. The Court cited Kennedy v. Mossafa, noting that while a reasonable search of public records may be required when notice is undeliverable, the circumstances here, with first class mail reaching the address, were different. The Court stated, “As record owner, Harner bore the responsibility of updating his address to protect his ownership interests. His failure to fulfill this duty does not render the County’s procedures constitutionally infirm as it attempted personal notice through both certified and first class mailings, fully complying with RPTL 1125 (1) (a), and published and posted public notices as also required by statute (RPTL 1124).” Therefore, the County’s actions, in compliance with the Real Property Tax Law (RPTL), were sufficient to satisfy due process.

  • Kennedy v. Mossafa, 100 N.Y.2d 1 (2003): Due Diligence Required for Tax Foreclosure Notice

    100 N.Y.2d 1 (2003)

    When a notice of tax foreclosure is returned as undeliverable, due process requires the enforcing officer to conduct a reasonable search of public records to ascertain the owner’s correct address, but the extent of that search is defined by reasonableness and the owner’s own actions.

    Summary

    Kennedy sued Mossafa to quiet title after purchasing Mossafa’s property at a tax foreclosure sale due to unpaid 1996 taxes. The County sent a foreclosure notice to the address on the tax roll, but it was returned as undeliverable. The County did not conduct further investigation. Mossafa claimed she had notified the Town of a change of address. The Court of Appeals held that while sending notice to the tax roll address is insufficient when it’s returned undeliverable, the County’s search was reasonable under the circumstances because Mossafa provided no evidence that a further search would have revealed her correct address, and her actions contributed to the confusion.

    Facts

    Mossafa purchased property in 1983, listing her address as Blaisdell Road. She paid property taxes at this address until 1996. In 1991, she moved to Lester Drive and allegedly notified the Town of her new address. She paid the 1997 and 1998 tax bills using checks with her Lester Drive address. The 1996 taxes went unpaid, and in October 1997, the County filed a foreclosure petition and mailed a notice to the Blaisdell Road address. The notice was returned as undeliverable. The tax bill for 1998 included a notice on the back stating previous taxes were due and failure to pay could result in loss of property; she paid it but made no inquiry. The County sold the property to Kennedy in June 1998 after obtaining a default judgment.

    Procedural History

    Kennedy sued Mossafa to quiet title. The Supreme Court granted summary judgment to Kennedy, dismissing Mossafa’s third-party complaint against the County. The Appellate Division affirmed. The Court of Appeals then affirmed the Appellate Division’s decision.

    Issue(s)

    Whether the procedures used by a county to foreclose on a property following a tax delinquency satisfied constitutional due process when the owner never actually received notice of the proceeding, even though the county mailed the notice to the address on the tax roll and the notice was returned as undeliverable.

    Holding

    No, because the County satisfied its due process obligations by attempting to send notice to the address on the tax roll, and, after that notice was returned as undeliverable, a reasonable search of public records would not have revealed a different address. The attempted personal notice, coupled with posting and publication, satisfied due process under the circumstances.

    Court’s Reasoning

    The Court acknowledged that due process requires “notice reasonably calculated, under all the circumstances, to apprise” interested parties of a foreclosure action (citing Mullane v. Central Hanover Bank & Trust Co.). When a notice is returned as undeliverable, the enforcing officer should conduct a reasonable search of public records for an alternative address. However, the public record does not consist solely of the tax roll. RPTL 1125 specifically refers to the records of the surrogate’s office and contemplates that the enforcing officer may charge for any reasonable search of the public record. A reasonable search, however, does not necessarily require searching the Internet, voting records, etc. Here, Mossafa presented no evidence that a search of public records would have revealed her correct address. While towns are required to keep a record that payment was made, they are not required to retain copies of checks or the envelopes they came in. Also relevant was that, as required by RPTL 1125 (2) (a), at least for 1998, a tax bill put appellant on notice that taxes were due, and that the failure to pay them would result in the loss of the property. The Court balanced Mossafa’s interests against the State’s interest in collecting delinquent taxes and considered Mossafa’s conduct in not updating her address. “Ownership carries responsibilities.” The court concluded that, under these circumstances, Mossafa’s current address was not reasonably ascertainable, and the attempted notice, coupled with posting and publication, satisfied due process.

  • 172 East 122 Street Tenants Assn. v. Schwarz, 73 N.Y.2d 342 (1989): Authority of Dissolved Corporation to Reclaim Property

    172 East 122 Street Tenants Assn. v. Schwarz, 73 N.Y.2d 342 (1989)

    A corporation dissolved for failure to pay franchise taxes can still apply to reclaim property formerly owned by it that was acquired by the city in a tax foreclosure proceeding, as this constitutes winding up its affairs by collecting assets.

    Summary

    This case addresses whether a corporation, dissolved for failing to pay franchise taxes, can apply to reclaim property foreclosed upon by New York City. The Court of Appeals held that it can. PRF Realty was dissolved and the City foreclosed on its properties. PRF applied for release of the properties under an Administrative Code provision, which the City conditionally approved. Tenant associations sought to void the transfer. The Court of Appeals reversed the lower court’s decision, finding that reclaiming foreclosed property is part of winding up the corporation’s affairs, which is permitted under the Business Corporation Law.

    Facts

    PRF Realty (PRF) owned two adjacent buildings in New York City but abandoned them. The City initiated in rem tax foreclosure proceedings. Before the foreclosure judgment, PRF was dissolved by the Secretary of State for failure to pay corporate franchise taxes. After the City foreclosed, PRF applied for release of the City’s interest in the properties under the Administrative Code. The Corporation Counsel conditionally approved the application, pending payment of tax deficiencies. PRF then conveyed the properties via quitclaim deed to 420-172 East Associates (East Associates). East Associates’ payment to PRF included a check payable to the City for the tax deficiencies.

    Procedural History

    The tenants associations sought to purchase the buildings under the Tenant Interim Lease Program. The City’s approval of PRF’s release application prevented this. The tenant associations then initiated an Article 78 proceeding to vacate the release and void the transfer to East Associates. The Supreme Court granted the petition, voiding the transfer. The Appellate Division affirmed, relying on prior precedent. The Court of Appeals reversed and dismissed the petition.

    Issue(s)

    1. Whether a corporation dissolved by proclamation for failure to pay franchise taxes is “eligible” to seek release of its formerly owned property pursuant to section 11-424 of the Administrative Code.
    2. Whether the Corporation Counsel was required to review PRF’s release application to ensure that granting the relief requested would not violate other statutory mandates.

    Holding

    1. Yes, because Business Corporation Law § 1006(b) allows a dissolved corporation to pursue remedies related to property it owned before dissolution, and Administrative Code § 11-424 grants such a remedy.
    2. No, because the Corporation Counsel’s interpretation of “eligibility” under the statute and his approval of the application were neither arbitrary nor irrational merely because the application was not checked against the provisions of the Business Corporation Law pertaining to dissolved corporations.

    Court’s Reasoning

    The Court reasoned that the Administrative Code provision allows a former owner to recover foreclosed property by filing a release application. Business Corporation Law § 1006(b) states that dissolution does not affect any remedy available to the corporation for rights existing before dissolution. The Court emphasized that “[t]he dissolution of a corporation shall not affect any remedy available to or against such corporation * * * for any right or claim existing * * * before such dissolution.” Thus, PRF’s ability to reclaim its property does not depend on whether the property is currently a corporate asset, but on whether a remedy exists allowing PRF to recapture a property right it possessed prior to dissolution. Administrative Code § 11-424 provides that remedy. The court deferred to the Corporation Counsel’s interpretation of “eligibility” under the Administrative Code. “[I]nterpretation of a statute by the agency charged with its enforcement is, as a general matter, given great weight and judicial deference so long as the interpretation is neither irrational, unreasonable nor inconsistent with the governing statute”.

  • Matter of ISCA Enterprises v. City of New York, 77 N.Y.2d 861 (1991): Waiver of Due Process Claim by Failure to Redeem Property

    Matter of ISCA Enterprises v. City of New York, 77 N.Y.2d 861 (1991)

    A property owner who fails to redeem property after being granted the opportunity to do so by the city waives the right to complain about a deprivation of due process in the tax foreclosure proceedings.

    Summary

    ISCA Enterprises, the property owner, challenged a default judgment in a tax foreclosure action, claiming the city’s administrative code denied due process by not providing actual notice prior to foreclosure. After learning of the judgment, ISCA requested relief from the City, which was granted on the condition that ISCA pay the outstanding taxes, interest, and penalties within a specified timeframe. ISCA failed to make these payments for nearly two years. The New York Court of Appeals held that ISCA, having failed to avail itself of the opportunity to redeem the property, could not later claim a deprivation of due process. The Court affirmed the Appellate Division order without reaching the constitutional issue.

    Facts

    ISCA Enterprises owned property in New York City.
    The City initiated an in rem tax foreclosure action against the property due to unpaid taxes.
    A default judgment was entered against ISCA in the foreclosure action.
    ISCA claimed the City’s Administrative Code (sections D17-16.0, D17-17.0) was unconstitutional because it did not mandate actual notice to property owners before tax foreclosure.
    After the judgment, ISCA requested relief from the City, seeking to set aside the judgment and redeem the property.
    The City agreed to release its interest in the property if ISCA paid the taxes, interest, and penalties within a given timeframe.
    ISCA did not make the required payments or redeem the property for nearly two years.

    Procedural History

    The trial court entered a default judgment against ISCA in the tax foreclosure action.
    ISCA appealed, arguing the City’s Administrative Code violated due process.
    The Appellate Division’s order was appealed to the New York Court of Appeals.
    The Court of Appeals affirmed the Appellate Division’s order, effectively upholding the foreclosure, without addressing the constitutional question.

    Issue(s)

    Whether a property owner who is granted the opportunity to redeem property after a tax foreclosure judgment, but fails to do so, can later challenge the foreclosure proceedings on due process grounds.

    Holding

    Yes, because having failed to avail himself of the right to redeem granted upon his request, appellant cannot now be heard to complain of a deprivation of due process in the forfeiture of the property.

    Court’s Reasoning

    The Court of Appeals avoided addressing the constitutional question of whether the City’s Administrative Code provided sufficient notice in tax foreclosure proceedings. Instead, the Court based its decision on the principle of waiver. The Court reasoned that ISCA, by requesting and receiving the opportunity to redeem the property by paying the outstanding taxes, interest, and penalties, and then failing to act on that opportunity for nearly two years, had effectively waived its right to challenge the foreclosure on due process grounds. The Court cited Selzer v. Baker, 295 NY 145, 149, reinforcing the principle that a party cannot accept a benefit (the chance to redeem) and then later challenge the process by which that benefit was offered. The court stated, “Having failed to avail himself of the right to redeem granted upon his request, appellant cannot now be heard to complain of a deprivation of due process in the forfeiture of the property.” The decision highlights the importance of timely action and the potential consequences of failing to pursue available remedies. This case serves as a reminder that courts may decline to address constitutional issues if a case can be resolved on narrower, non-constitutional grounds, such as waiver.

  • NYSA-Westchester Assoc. v. City of New York, 43 N.Y.2d 257 (1977): Upholding City’s Power to Amend Tax Foreclosure Laws

    NYSA-Westchester Assoc. v. City of New York, 43 N.Y.2d 257 (1977)

    A city’s local law amending tax foreclosure procedures is constitutional, even if it differs from state law, provided the state law is optional and the local law doesn’t contradict the state’s overall scheme.

    Summary

    This case addresses the constitutionality of New York City’s Local Law No. 45 of 1976, which reduced the time before in rem tax foreclosure proceedings from three years to one. The petitioners argued this law was inconsistent with state law and thus unconstitutional. The Court of Appeals upheld the local law, finding that the state’s in rem tax foreclosure procedure was optional, allowing the city to enact its own procedure as long as it did not contradict state law. The court emphasized that lack of uniformity does not equate to inconsistency.

    Facts

    The City of New York enacted Local Law No. 45, shortening the waiting period for in rem tax foreclosure proceedings to one year. Previously, the city’s Administrative Code, Title D, established a tax foreclosure procedure, initially enacted by the State Legislature and amended several times. The state’s Stagg Act (later Real Property Tax Law) provided an optional in rem foreclosure procedure for tax districts. New York City had its own specific procedures under Title D of its Administrative Code. Petitioners challenged Local Law No. 45, arguing it was inconsistent with state law.

    Procedural History

    The Supreme Court, New York County, granted the city’s motion for summary judgment, upholding the constitutionality of Local Law No. 45. The petitioners appealed directly to the New York Court of Appeals under CPLR 5601(b)(2), arguing that a local law should be considered a state statutory provision for the purposes of that section.

    Issue(s)

    Whether New York City’s Local Law No. 45 of 1976, reducing the waiting period for in rem tax foreclosure proceedings, is unconstitutional because it is inconsistent with a “general law” of the state, namely Title 3 of Article 11 of the Real Property Tax Law (the successor to the Stagg Act)?

    Holding

    No, because the state’s in rem tax foreclosure procedure is optional, not mandatory, and the city’s local law does not contradict the overall design and pattern of the state statute.

    Court’s Reasoning

    The Court of Appeals held that the taxing power in New York State is vested in the Legislature, which can delegate this power to cities. While the Constitution grants local governments the power to adopt local laws, this power is restricted regarding the levy, collection, and administration of local taxes. The court reasoned that even assuming the Real Property Tax Law is a “general law,” Local Law No. 45 is not inconsistent with it. The state law is optional, allowing local tax districts to choose whether to use it. Nothing prevents the establishment of local in rem foreclosure procedures through special acts. The court emphasized the difference between lack of uniformity and inconsistency, stating, “Petitioners appear to have been diverted by the false assumption that lack of uniformity (i.e., the failure of the procedural details of the city’s title D precisely to parallel those of the optional State statute) is the same as inconsistency or contradiction. It is not.” The court upheld the local law, finding that it did not deny petitioners equal protection of the laws. The court stated that the State procedure is optional, rather than mandatory, i.e., local tax districts may elect to take advantage of its provisions but are not required to do so. Nothing in the statute forecloses the establishment of local in rem foreclosure procedures by the adoption of special acts.