Opinion
NO. 2017–CA–0646
05-09-2018
R & N URSULINE FAMILY LIMITED PARTNERSHIP v. PAS A VENDRE, LLC, as Successor in Interest To Matthew B. Moreland, and Norman S. Foster, in His Capacity as Ex–Officio Tax Collector for the City of New Orleans
Scott J. Sonnier, ATTORNEY AT LAW, 650 Poydras Street, Suite 1400, New Orleans, LA 70130, COUNSEL FOR PLAINTIFF/APPELLANT Thomas M. Beh, ELKINS, PLC, 201 St. Charles Avenue, Suite 4400, New Orleans, LA 70170, COUNSEL FOR DEFENDANT/APPELLEE
Scott J. Sonnier, ATTORNEY AT LAW, 650 Poydras Street, Suite 1400, New Orleans, LA 70130, COUNSEL FOR PLAINTIFF/APPELLANT
Thomas M. Beh, ELKINS, PLC, 201 St. Charles Avenue, Suite 4400, New Orleans, LA 70170, COUNSEL FOR DEFENDANT/APPELLEE
(Court composed of Judge Roland L. Belsome, Judge Sandra Cabrina Jenkins, Judge Regina Bartholomew–Woods )
JUDGE SANDRA CABRINA JENKINS In this action to annul a tax sale, R & N Ursuline Family Limited Partnership ("R & N") appeals the trial court's April 10, 2017 judgment granting an exception of res judicata filed by appellee, Pas A Vendre, LLC ("Pas A Vendre"). For the reasons that follow, we vacate the judgment and remand for further proceedings.
PROCEDURAL AND FACTUAL BACKGROUND
The Property and the Tax Sale
R & N was the owner of property located at 1041–43 Dauphine Street in New Orleans ("Property"). In November 2002, the New Orleans Department of Health adjudicated the Property as "blighted," and in May 2004, the City of New Orleans ("City") recorded a health lien against the Property in the Orleans Parish mortgage records. For tax years 2004 and 2005, R & N failed to pay the ad valorem property taxes assessed on the Property. Consequently, on November 28, 2007, the City held a tax sale of the Property ("Tax Sale"), and the Property was sold to Matthew B. Moreland. On December 17, 2007, the City issued a Tax Sale Deed conveying the Property to Mr. Moreland. The Tax Sale Deed was recorded in the conveyance office of Orleans Parish.
R & N's 2008 Lawsuit
On or about February 28, 2008, R & N filed a "Suit for Redemption, Temporary Restraining Order, Preliminary Injunction and Permanent Injunction" ("2008 Lawsuit") naming Mr. Moreland as the defendant. In the 2008 Lawsuit, R & N sought a judgment declaring the Property redeemed, and asked for a preliminary injunction prohibiting Mr. Moreland from occupying the Property.
Four years later, in September 2012, Mr. Moreland filed a Motion for Summary Judgment in the 2008 Lawsuit, seeking a ruling from the court that R & N had no right to redeem the Property under La. R.S. 13:2575(C) because the City had declared the Property blighted. Mr. Moreland also sought a judgment confirming full title and ownership of the Property in his favor. Mr. Moreland served the motion and order upon R & N by certified mail and regular mail. R & N did not file an opposition to the Motion for Summary Judgment.
On November 6, 2012, the trial court rendered a judgment ("2012 Judgment"): (1) granting Mr. Moreland's Motion for Summary Judgment and; (2) decreeing that "the property forming the subject matter of this suit is not redeemable by virtue of LSA–R.S. 13:2575(C) and thus full title and ownership in the property which Defendant purchased in a tax sale is hereby confirmed and title quieted in favor of Defendant, Matthew Moreland." On November 15, 2012, the minute clerk mailed the Notice of Signing of Judgment to R & N. R & N did not appeal the 2012 Judgment.
On May 19, 2016, Mr. Moreland and Pas A Vendre entered into an "Act of Transfer and Contribution to Capital" ("Act of Transfer") in which Mr. Moreland transferred his entire interest in the Property to Pas A Vendre. The Act of Transfer was recorded in the public records for Orleans Parish on or about May 19, 2016.
R & N's 2016 Lawsuit
On October 18, 2016, nine years after the Tax Sale, R & N filed a "Petition to Annul Tax Sale" ("Petition to Annul") naming as defendants Pas A Vendre, as successor in interest to Mr. Moreland; and Norman S. Foster, in his capacity as Ex–Officio Tax Collector for the City ("Tax Collector"). R & N sought to nullify the Tax Sale Deed because the defendants failed to notify R & N of the tax delinquency and the Tax Sale in violation of Louisiana law governing tax sales and redemptions, and in violation of due process under the United States and Louisiana Constitutions.
Under Louisiana law at the time of the 2007 Tax Sale, "in order to give property owners reasonable notice so as not to deprive them of constitutionally protected property rights, the tax collector is required to provide each ‘tax payer’ with written notice, sent by certified mail return receipt requested, alerting each record owner of the immovable property that the owner's failure to pay the taxes within twenty days will result in the sale of the property." C & C Energy, L.L.C. v. Cody Inv., L.L.C. , 09-2160, p. 7 (La. 7/6/10), 41 So.3d 1134, 1139 (citing former La. R.S. 47:2180).
On March 6, 2017, Pas A Vendre filed an "Exception of Res Judicata or, Alternatively, of Lis Pendens" ("Exception of Res Judicata "). Pas A Vendre argued that R & N's 2016 Petition to Annul should be dismissed as barred by res judicata because the 2012 Judgment was conclusive between the same parties, and extinguished any subsequent causes of action existing at the time of the 2008 Judgment, and arising out of the same transaction or occurrence, i.e., the Tax Sale.
After a hearing, the trial court rendered a judgment on April 10, 2017: (1) sustaining Pas A Vendre's Exception of Res Judicata ; (2) denying Pas A Vendre's Exception of Lis Pendens as moot; and (3) dismissing R & N's Petition to Annul, with prejudice. R & N filed a timely Motion for Devolutive Appeal.
DISCUSSION
Standard of Review
The standard of review of an exception of res judicata requires this Court to determine if the trial court's decision is legally correct or incorrect. Igbokwe v. Moser , 12-1366, p. 4 (La. App. 4 Cir. 4/24/13), 116 So.3d 727, 730. "In Louisiana, the doctrine of res judicata is stricti juris ; any doubt regarding the application of the doctrine must be resolved against its application." Bd. of Supervisors of Louisiana State Univ. v. Dixie Brewing Co. , 14-0641, p. 6 (La. App. 4 Cir. 11/19/14), 154 So.3d 683, 688.
Res Judicata
In general, the doctrine of res judicata precludes re-litigation of claims and issues arising out of the same factual circumstances when there is a final judgment. Ins. Co. of N. Am. v. Louisiana Power & Light Co ., 08-1315, p. 5 (La. App. 4 Cir. 3/4/09), 10 So.3d 264, 267. It is designed to promote judicial efficiency and final resolution of disputes. Id.
Louisiana's res judicata statute is La. R.S. 13:4231, which provides:
Except as otherwise provided by law, a valid and final judgment is conclusive between the same parties, except on appeal or other direct review, to the following extent:
(1) If the judgment is in favor of the plaintiff, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished and merged in the judgment.
(2) If the judgment is in favor of the defendant, all causes of action existing at the time of final judgment arising out of the transaction or occurrence that is the subject matter of the litigation are extinguished
and the judgment bars a subsequent action on those causes of action.
(3) A judgment in favor of either the plaintiff or the defendant is conclusive, in any subsequent action between them, with respect to any issue actually litigated and determined if its determination was essential to that judgment.
Five elements must be satisfied for a finding that a second action is precluded by res judicata:
(1) the judgment is valid; (2) the judgment is final; (3) the parties are the same; (4) the cause or causes of action asserted in the second suit existed at the time of the final judgment in the first litigation; and (5) the cause or causes of action asserted in the second suit arose out of the transaction or occurrence that was the subject matter of the first litigation.
Chevron U.S.A., Inc. v. State of Louisiana, 07-2469, p. 10 (La. 9/8/08), 993 So.2d 187, 194.
Is the 2012 Judgment Valid?
With respect to the first element, R & N asserts that the 2012 Judgment is not valid for purposes of res judicata because the Tax Sale was an absolute nullity due to the lack of due process notice to R & N. R & N relies on this Court's opinion in Sutter v. Dane Inv., Inc. , 07–1268, 07-1269 (La. App. 4 Cir. 6/4/08), 985 So.2d 1263, writ denied , 08-2154 (La. 11/14/08), 996 So.2d 1091 ; and the Supreme Court's decision in Chase Bank USA , N.A. v. Webeland , 10–2180, 2011 WL 6779555 (La. App. 1 Cir. 12/21/11), rev'd , 12-0240 (La. 9/28/12), 98 So.3d 823.
Sutter v. Dane
In Sutter , a tax purchaser acquired property at a tax sale conducted for unpaid ad valorem taxes. Id. , 07–1268, p. 2, 985 So.2d at 1265. The property was not redeemed and the tax purchaser brought an action to confirm his tax title, naming the original owner as the defendant. Id. Service of process was effected and a default judgment was rendered in favor of the tax purchaser. Id. No appeal was timely taken of the confirmation judgment. Id. Approximately one year later, after the confirmation judgment had been entered, the original owner brought an action to annul the tax sale. Id. The tax purchaser responded with an exception of res judicata . Id. The trial court declined to grant the exception. Id. This Court granted Sutter's supervisory writ, but declined to grant the relief sought by Sutter, preserving Sutter's right to reargue his exception of res judicata following trial on the merits. Id. The matter proceeded to trial, after which the trial court concluded that, because Dane did not receive reasonable notice of the tax delinquency and the subsequent tax sale, the tax sale was an absolute nullity. Id. , 07–1268, p. 3, 985 So.2d at 1265.
On appeal, Sutter argued that Dane's attempt to nullify the tax sale should have been barred under Louisiana's res judicata statute because Dane's claim to annul the tax sale arose out of the same facts and circumstances as Sutter's suit to confirm tax title. Id. , 07–1268, pp. 6–7, 985 So.2d at 1267. Dane, on the other hand, argued that because he did not receive a notice of tax delinquency required by due process, the tax sale was an absolute nullity, and could not produce a valid, final judgment with the effect of barring future claims. Id. , 07–1268, p. 7, 985 So.2d at 1267–68.
This Court affirmed the trial court's decision to annul the tax sale based on its finding that the absence of notice of the tax delinquency and the subsequent tax sale offended the owner's due process rights. The Court found that because the underlying tax sale was an absolute nullity, the judgment confirming the tax sale was also an absolute nullity. The Sutter Court reasoned as follows:
[T]he validity of the judgment to quiet title entered in favor of Sutter was called into question on the grounds of lack of notice to Dane. Due to this, the judgment was subsequently invalidated and the tax sale was annulled. Louisiana Civ. Code art. 2030, provides, in pertinent part, that "[a] contract that is absolutely null may not be confirmed. Given that, because the tax sale is null, then for purposes of res judicata, where the validity of the judgment is called into question, there is no res judicata . We find that the underlying nullity of the contract, i.e., the tax sale, makes the judgment confirming the title acquired from this null tax sale invalid. Thus, the trial court's decision setting aside Sutter's default judgment confirming his tax title and declaring that tax sale an absolute nullity was proper.
Sutter , 07–1268, p. 8, 985 So.2d at 1268 (emphasis added).
Chase Bank v. Webeland
In Chase Bank USA, N.A. v. Webeland , Inc. , Clifford Lane Keen, Jr. and his wife Vickie Sue Keen (the "Keens") purchased immovable property in St. Tammany Parish. In 2004, the tax collector/sheriff mailed a property tax notice addressed to "KEEN, CLIFFORD L JR ETUX." The notice was returned undelivered. In 2005, a title company purchased the property at a tax sale. The company then sold the property to Webeland by quitclaim deed, and the sale was recorded in the mortgage records. Eight months later, the Keens executed and recorded a promissory note and mortgage in favor of Chase Bank to build a house on the property. Three years after the sale, Webeland filed an action to confirm and quiet title of the property, naming the Keens and Chase Bank as defendants. Both defendants were properly served. Neither Chase Bank nor the Keens answered the lawsuit.
More than six months after service, Webeland filed a motion for preliminary default, and on April 23, 2009, the trial court entered a default judgment in favor of Webeland confirming and quieting title. One year after the judgment was entered, Chase Bank filed suit seeking to reinstate the mortgage on the basis of the nullity of the tax sale and the default judgment confirming the tax sale. Chase Bank argued that the tax sale was null for lack of constitutionally required notice, and that such a tax sale could not be confirmed. Webeland filed a motion for summary judgment attacking Chase Bank's claims of lack of notice. Webeland also filed an exception of res judicata , arguing that Chase Bank was precluded from relitigating the issue of notice of the tax sale, which had already been resolved by the final judgment confirming and quieting Webeland's title. The trial court denied Webeland's motion for summary judgment, finding that the notice of the tax sale that identified Mrs. Keen as simply "et ux" did not give her sufficient pre-sale notice, rendering the sale an absolute nullity under La. C.C. art. 2030. The trial court then denied Webeland's exception of res judicata, concluding that an "absolutely null" judgment based on an " ‘absolutely null’ tax sale" is not valid and cannot support an exception of res judicata .
Webeland sought supervisory writs from the First Circuit Court of Appeal. The First Circuit granted the writ application, reversed the judgment of the trial court, and maintained Webeland's exception of res judicata. Chase Bank USA v. Webeland , Inc. , 10–2180, 2011 WL 6779555 (La. App. 1 Cir. 12/21/11). The Court concluded that the default judgment confirming and quieting tax title met all of the statutory elements of res judicata , and the final judgment had acquired the authority of the "thing adjudged." In so doing, the First Circuit expressly disagreed with the Sutter decision, stating that Sutter cast doubt upon the efficacy of a suit to quiet a tax title.
Thereafter, the Supreme Court granted Webeland's supervisory writ application, and reversed the First Circuit's decision. Chase Bank USA, N.A. v. Webeland, Inc. , 12-0240 (La. 9/28/12), 98 So.3d 823. The Court found that the trial court did not err in denying Webeland's exception of res judicata, and reinstated the trial court's ruling that the judgment confirming the tax sale was not res judicata as to the tax debtor's claim for nullity. Without further explanation, the Supreme Court cited the Sutter decision.
Under Sutter and Chase , the doctrine of res judicata does not apply to a final judgment confirming a tax sale where the validity of the judgment is called into question, and the judgment is subsequently invalidated and the tax sale annulled based on due process violations.
Importantly, in Sutter and Chase , the trial courts decided the merits of the plaintiffs' claims that they did not receive notice of the tax sale, in violation of due process. On appeal, the Courts ultimately concluded that the lack of proper notice invalidated the tax sales, so that the judgments confirming the tax sales had no res judicata effect. In the instant case, there has been no finding by the trial court as to whether R & N received adequate notice, and thus whether the Tax Sale and subsequent confirmation judgment are absolute nullities. Furthermore, there is no evidence in the record as what pre-sale notice, if any, was given to R & N. Thus, we cannot review the correctness of the trial court's finding that the final judgment confirming and quieting the tax title was valid, thereby supporting an exception of res judicata .
Accordingly, we vacate the trial court's decision to maintain Pas A Vendre's Exception of Res Judicata and remand to give the parties the opportunity to present evidence and arguments on the merits of R & N's due process claim, noting that the peremptory exception may be re-urged in the trial court in accordance with La. C.C.P. art. 928(B). See SCS Enters ., Inc. v. St. Pierre , 15-116, p. 7 (La. App. 5 Cir. 9/23/15), 176 So.3d 663, 667 & n.5.
CONCLUSION
For the foregoing reasons, we vacate the trial court's April 10, 2017 judgment maintaining Pas A Vendre's Exception of Res Judicata , and remand for further proceedings consistent with this opinion.
VACATED AND REMANDED
BARTHOLOMEW–WOODS, J., CONCURS IN THE RESULT.