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Sale of delinquent tax deed voided due to treasurer error

By Michael Howell

In a recent Opinion and Order, District Court Judge James Haynes has declared void a tax deed acquired by Zinvest, LLC, because the Ravalli County Treasurer failed to file an affidavit of publication for the Notice of Sale of Delinquent Tax Lien for the years 2008 to 2011 with the County Clerk and Recorder’s Office as required by law.

In this case the couple, Michael and Angela Hudgins, failed to pay property taxes for the tax years 2008 to 2011 on their Hamilton property in Hughes Addition. In April of 2012 Zinvest notified the Hudginses that if the taxes were not paid in full in two weeks an Assignment of Tax Sale Certificate would be purchased by Zinvest from Ravalli County. In June, the company paid the delinquent taxes for the tax years 2008 to 2012 in the amount of $4,057.90 as well as a $75 assignment fee and the Treasurer issued an Assignment Sale Certificate for the property. The Hudginses were served with a Notice that a Tax Deed May be Issued and the company filed a “Proof of Notice” with the Ravalli County Clerk and Recorder. The redemption period expired and a Tax Deed was issued to Zinvest by the Treasurer in September 2012.

The issue was in court early the next month as Zinvest moved to Quiet Title to the property.

In his brief on behalf of the Hudginses, Hamilton attorney William Nelson argued that the tax deed statutes were not followed by the Ravalli County Treasurer when she failed to file any affidavits of publication for two of the tax years (2008 and 2009) and for filing two others (2010 and 2011) late, after it was brought to their attention in 2013. Because of this failure, argued Nelson, Ravalli County lacked the jurisdiction to issue the tax deed to Zinvest.

Zinvest, a Billings based company formed in 2012, was represented by Scott Green and Michael McGuinness of Patten, Peterman, Bekkedahl & Green, PLLC out of Billings. The company argued that the Hudginses were not harmed and did not lack due process in the proceedings. They argued that the public notices were in fact published and all legally required notifications were given to the Hudginses. They had the opportunity to address the back taxes and did not.

“The Hudginses cannot claim harm from an error that had no actual effect on their right to notice or opportunity to redeem,” states McGuiness in his brief.

Judge Haynes sided with the Hudginses in his summary judgment issued November 19, 2013. He notes immediately that both sides agree that in Isern v. Summerfield the Montana Supreme Court reaffirmed “that tax deed statutes must be strictly followed.” He goes on to note that in Hudson v. McDonald (1987) the court stated “let the tax deed applicant be aware of [the tax deed statutes], and let him adhere to the letter thereof, particularly as to the description of the property, the content of the affidavits and notices, and the need for the determination of occupancy,” and in Tax Lien Services v. Hall, “Even typographical errors in a document may be sufficient grounds to set aside a resulting tax deed.”

Haynes said the decision “boils down to whether the Hudginses’ inability to articulate harm, due process harm or otherwise, is trumped by Zinvest’s inability to demonstrate strict compliance with the tax deed statutes, albeit due to errors and omissions made by the Ravalli County Treasurer.” He says that the Hudginses’ position must prevail.

“If the Court accepts Zinvest’s invitation here to overlook the errors and omissions of the Ravalli County Treasurer, the result would be that the ‘strict compliance’ mandated by Isern only applies to the tax deed purchaser, and could only apply to county officials such as the treasurer if due process infringements are specifically articulated and individually demonstrated. Such a result would neutralize the Legislature’s enactment of [the law], as well as relieve the county treasurers of performing their statutory duty. This result the Court cannot condone, given Montana’s ‘strict compliance’ rule. Unfortunate as the result may seem… Montana places the burden on the purchaser of the tax deed to ensure both their own compliance as well as the responsible public agency’s compliance with the tax deed statutes,” wrote Haynes.

“The strict compliance policy adopted by the Montana Supreme Court places the full compliance responsibility on the purchaser of the tax deed. This responsibility includes ensuring that the responsible government official—here the Ravalli County Treasurer—has properly complied with the Montana laws regarding tax liens and tax deed. This responsibility was not met. Thus, the tax deed issued to Zinvest must be declared void,” wrote Haynes.

The time period in question, 2008 to 2011, includes tenures served by JoAnne Johnson, Mary Hudson-Smith and Marie Keeton. The longstanding omission was not corrected in this case until June 24, 2013 by Keeton, when she delivered around eight affidavits of publication to be recorded at the Clerk and Recorder’s Office.
According to Clerk and Recorder Regina Plettenberg, the affidavits ranged from 2010 through 2012, but were all recorded on the same date, June 24, 2013. Plettenberg estimated that from January 1, 2009 through December 31, 2012, eleven tax deeds were recorded in her office. She said that very few of the hundreds of Assignments issued each year over delinquent taxes go all the way to a deed transfer.

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