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finding the "most significant factor in the Mennonite case . . . was the immediate subordination of the mortgagee's interest"
Summary of this case from District of Columbia v. MayhewOpinion
Argued October 5, 1987
Decided December 23, 1987
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, Stanley Harwood, J., Howard E. Levitt, J.
Bernard S. Meyer, Michael A. Ciaffa and Kenneth L. Gartner for Helene E. McCann, appellant in the first above-entitled proceeding. Edward T. O'Brien, County Attorney (Joshua A. Elkin of counsel), for John V. Scaduto, respondent in the first above-entitled proceeding.
Steven Wimpfheimer for Shirley Stone, respondent in the first above-entitled proceeding. Bernard S. Meyer and Kenneth L. Gartner for appellant in the second above-entitled proceeding.
Edward T. O'Brien, County Attorney (Joshua A. Elkin of counsel), for John V. Scaduto and another, respondents in the second above-entitled proceeding.
Eugene R. Hurley, Jr., for Shirley Stone, respondent in the second above-entitled proceeding.
Each of these article 78 proceedings challenges the forfeiture of petitioner's home under the former real estate tax collection enforcement provisions of the Nassau County Administrative Code (the Code) on the ground that the Code's procedures violated the Federal constitutional guarantee of due process of law. We agree with petitioners that the Code's failure to provide property owners with actual notice of tax lien sales was a deprivation of due process.
"[P]rompted in part by the outcry caused by the extreme results" of the McCann case and other cases, as the dissenters below noted ( 123 A.D.2d 111, 119), the Code has been amended, effective November 17, 1986, substantially changing the provisions applicable to these appeals (Local Laws, 1986, No. 13 of County of Nassau). We do not consider the constitutionality of the new procedures.
Summary of the Relevant Code Provisions
At the core of both proceedings are the former provisions of the Nassau County Administrative Code pertaining to real estate tax collection enforcement procedures.
The Code provided that each year the Nassau County Treasurer would compile a list of properties for which taxes had not been paid in the previous year. These taxes became a tax lien against each property (Code § 5-24.0 [4]). The County Treasurer then set a date for a sale of these tax liens (Code §§ 5-37.0, 5-39.0 [a]). The list of tax liens, together with a notice to property owners that the liens would be sold unless the outstanding charges were paid by a certain date, had to be published three times in a newspaper of general circulation (Code § 5-37.0 [a], [c]). The only provision in the Code for notice to the property owner of the tax lien sale was by publication; there was no provision for actual notice. The tax liens for which payment was not made by the date specified in the published notice were then sold at public auction to the bidders willing to accept the lowest rate of interest on the outstanding balance (Code § 5-37.0 [c]; § 5-39.0 [a]; § 5-40.0).
The sale triggered a two-year redemption period. During that time a property owner could satisfy the lien by making payment to the County Treasurer of the outstanding taxes, together with interest, penalties and expenses (Code §§ 5-48.0, 5-50.0). Prior to the tax lien sale, the annual interest rate was 12% on overdue taxes. After the sale, however, the Code provided the following maximum interest and penalties. To satisfy the lien in the first six months after the tax lien sale, a property owner had to pay the overdue taxes and accrued interest plus a penalty equivalent to a percentage of the lien purchase price (the lesser of 10% or the interest rate agreed to by the purchaser). To redeem in the second six-month period, a second identical penalty was imposed; a third and fourth penalty were added for successive periods (Code § 5-40.0). In addition to satisfying the back taxes, interest and penalties, the owner had to reimburse the County and the lien purchaser for their expenses (Code § 5-50.0).
At any time after the expiration of 21 months from the tax lien sale, the purchaser of the tax lien had to serve a three-month notice to redeem by certified mail, return receipt requested, upon the record owner and other specified parties (Code § 5-51.0). The notice informed the recipient that title to the property was to be conveyed to the lienholder unless the lien was redeemed by the end of the redemption period (Code § 5-51.0 [former b] [4]). If the owner failed to redeem in the specified period, the lienholder either had to commence a foreclosure proceeding to obtain title, or simply apply to the County Treasurer for a deed of conveyance (Code § 5-51.0 [former b]). If the lienholder chose the latter option, the County Treasurer, upon receipt of the notice to redeem and proof of service, simply issued a deed of conveyance to the lienholder (Code § 5-51.0 [e]; § 5-53.0), vesting absolute title in the lienholder (Code §§ 5-53.0, 5-54.0 [b]).
The Code Provisions as They Were Applied to Petitioners
Petitioner Helene McCann lost her 30-year residence worth approximately $175,000 for a tax debt of $864.50; in Rinaldo a home worth more than $90,000 was sold because of unpaid taxes of $463.92. In both cases the tax lien sales — at which respondent Shirley Stone acquired her interest in each property — set in motion the process ending two years later in the transfer by respondent John Scaduto, Nassau County Treasurer, of absolute title to both homes to respondent Stone, upon her demand. No actual notice of the tax lien sale was shown to have been furnished to either owner, although at all times their names and addresses were known to the County. Instead, in accordance with the Code, notice of the tax lien sale was published in a newspaper of general circulation. The only actual notice provided to each petitioner before the conveyance of title to her home was a notice to redeem served by certified mail three months before the redemption period expired. There was no foreclosure proceeding; the property owners were afforded no right to a hearing and no right to return of the very substantial surplus over their indebtedness.
Respondents urge us to avoid the constitutional issue by reading into the Code the notice provisions of the Real Property Tax Law (RPTL 1002) — which require mailed notice to owners of impending tax sales — and presuming that the statutory requirement was satisfied (see, e.g., Matter of Driscoll v Troy Hous. Auth., 6 N.Y.2d 513). We agree with the court below ( 123 A.D.2d 111, 114, n 2), however, that since the Code contains its own specific provision for notice, the RPTL notice provision does not apply (see, RPTL 2006; Matter of Stevens Med. Arts Bldg. v City of Mount Vernon, 72 A.D.2d 177).
The dissent (at 179) speaks of evidence in the record indicating that petitioner McCann was sent actual notice, in effect mooting the constitutional issue. Petitioner denied that she received notice. As the Appellate Division found on the facts, the County failed to establish that actual notice had been given to petitioner.
In both cases, the lien was not redeemed within the two-year period and the property was conveyed to respondent Stone. Each homeowner then instituted an article 78 proceeding seeking an order vacating the deed and directing the County to accept payment necessary to satisfy the tax liens. They contended that they had been denied due process because they had not received actual notice of the tax lien sales, because they had been denied any hearing before conveyance of the property, and because the notice they did receive was inadequate to inform them of the situation. In McCann, Special Term dismissed the petition and the Appellate Division affirmed. In Rinaldo, Special Term granted the petition and the Appellate Division reversed. Upon reargument the Appellate Division adhered to its dispositions.
Concluding that the failure to provide petitioners with actual notice of the tax lien sales in the circumstances deprived them of due process of law, we now reverse the Appellate Division orders. In view of this disposition, we do not reach the additional two grounds tendered in support of reversal.
Development of the Concept of Due Notice in Proceedings Affecting Property
The central meaning of procedural due process has long been clear. "Parties whose rights are to be affected are entitled to be heard; and in order that they may enjoy that right they must first be notified" at a reasonable time and in a reasonable manner (Baldwin v Hale, 1 Wall [68 US] 223, 233, quoted in Fuentes v Shevin, 407 U.S. 67, 80). But the actual requisites of proper notice have not been static. Historically, the reasonableness of notice depended on whether a proceeding was characterized as in personam or in rem. Generally, if in personam, due process required personal service or its equivalent (see, e.g., Hamilton v Brown, 161 U.S. 256; Pennoyer v Neff, 95 U.S. 714); but if in rem, notice by publication was good enough (see, e.g., Longyear v Toolan, 209 U.S. 414; Ballard v Hunter, 204 U.S. 241; Leigh v Green, 193 U.S. 79).
Several justifications were commonly advanced for the sufficiency of constructive notice in in rem proceedings. First, nonresident landowners — who themselves could not be served — often had local caretakers to watch over their land and advise them of published notices affecting their property (see, e.g., Ballard v Hunter, 204 U.S. 241, 254-255, supra; Huling v Kaw Val. Ry., 130 U.S. 559, 563-564). Second, all landowners were charged with a duty to keep informed about the status of their land and presumed to know the consequences of nonpayment of taxes (see, e.g., Longyear v Toolan, 209 U.S. 414, 418, supra). Third, in in rem proceedings, only "the land itself" was in issue; affected individuals did not have to be present (see, e.g., Ballard v Hunter, 204 U.S. 241, 258, supra). Finally, costly notice requirements impeded the State's vital interest in collecting its revenues quickly and inexpensively, making constructive notice a reasonable balance of the competing interests (see, e.g., Leigh v Green, 193 U.S. 79, 89, supra; see also, Comment, Mennonite Board of Missions v Adams: Insufficient Notice Under the New York In Rem Statutes, 33 Buffalo L Rev 389, 392-393).
While continuing to retain some validity today, the concept that publication affords due notice in all in rem proceedings has been markedly eroded over time.
In Mullane v Central Hanover Trust Co. ( 339 U.S. 306) — decided nearly 40 years ago — the Supreme Court concluded that the rigid distinction between in personam and in rem proceedings could no longer be justified as a basis for denying property owners meaningful notice of proceedings affecting their property interests. (Id., at 312-313.) Instead, the court embraced a flexible standard: an "elementary and fundamental requirement of due process * * * 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." (Id., at 314.) The "means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it." (Id., at 315.) Whether the proceeding involved person or property, due process required a balancing of the State's interests and the individual's interest in actually being informed of proceedings affecting rights or property. (Id., at 314-315.)
In Mullane itself, published notice of an action to settle the accounts of a common trust fund was held insufficient to inform the beneficiaries — whose names and addresses were known — of the pending action. (Id., at 320.) Notice by publication was inadequate because "under the circumstances it [was] not reasonably calculated to reach those who could easily be informed by other means at hand." (Id., at 319.) Following Mullane, constructive notice of condemnation proceedings has been recognized as inadequate to notify a landowner whose identity was known to the City (Walker v City of Hutchinson, 352 U.S. 112); publication and posting were held insufficient to apprise a property owner of condemnation proceedings when his name and address were readily ascertainable from public records (Schroeder v City of New York, 371 U.S. 208); and posting of a summons on an apartment door was found inadequate to provide notice in forcible entry and detainer actions (Greene v Lindsey, 456 U.S. 444).
Such decisions marked a departure from the early justifications underlying the conclusion that published notice was due notice, and a recognition that the "caretaker" theory, the presumption that every landowner read every newspaper of general circulation, and the notion that only "the land itself" was affected, had become increasingly unrealistic. Measured against these fictions supporting constructive notice, the simple act of mailing notice to a known property owner — actual notice — emerged from the succession of Supreme Court decisions as minimal "due process." As succinctly stated in Schroeder v City of New York ( 371 U.S. 208, 212-213, supra): "The general rule that emerges from the Mullane case is that notice by publication is not enough with respect to a person whose name and address are known or very easily ascertainable and whose legally protected interests are directly affected by the proceedings in question."
In Botens v Aronauer ( 32 N.Y.2d 243, appeal dismissed 414 U.S. 1059), this court addressed the question whether notice by publication was adequate in the case of a tax sale — where the State's vital interest in collecting revenues remains a central concern — and we concluded that there was no requirement of actual notice either of a tax lien sale or of the redemption period; constructive notice sufficed. We distinguished Mullane on the ground that the property holder there had no reason to expect that its property interest was being affected, while in the case of a tax sale, the taxpayer had notice of its obligation to pay taxes and of the consequences flowing from nonpayment. Even in Botens (supra, at 249), however, we recognized the progression of the law from the time when "land ownership was much more parochial and there was a less mobile populace than now." We invited the Legislature to "address itself to this problem [and reexamine the statutes in issue] with the view that owners of property be afforded notice reasonably calculated to better apprise them of the pendency of either a tax sale or of the final date of redemption." ( 32 N.Y.2d 243, 249-250, supra.) The Legislature indeed accepted the court's invitation, and promptly amended the Real Property Tax Law to require personal service upon the property owner of both the notice of sale of the tax lien and the notice to redeem, a requirement which would be applicable as well when municipal laws contained no specific provision for notice (Real Property Tax Law § 1002 [4]; § 1014 [3]; § 2006).
In Mennonite Bd. of Missions v Adams ( 462 U.S. 791), the Supreme Court thereafter specifically applied Mullane's balancing test to real property tax proceedings. In Mennonite, an Indiana county sued a property owner for nonpayment of taxes, complying with statutory notice requirements by mailing notice to the owner, by publication, and by posting the notice of tax sale. The property was sold at the tax sale and, at the close of a two-year redemption period, the county sent the landowner an additional notice stating that title would pass to the tax-sale purchaser if the taxes were not paid. The landowner ignored the notice. Upon expiration of the redemption period, the county issued a tax deed to the tax-sale purchaser vesting all title in him free and clear of all liens or encumbrances — including the interest of a mortgagee who had never been given actual notice of the tax sale or pending title transfer. The Supreme Court concluded that the notice provided to the mortgagee was not "due process."
A mortgagee, the Supreme Court reasoned, has a substantial property interest that is significantly affected by a tax sale and is therefore entitled to notice reasonably calculated to apprise it of the event. Notice by publication and posting is unlikely to reach those who, although they have an interest in the property, do not make unusual efforts to stay abreast of such notices. A county's use of these indirect forms of notice is not reasonable where there are inexpensive and efficient direct alternatives — such as personal delivery or mailing. "Notice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable." (Id., at 800.) This court subsequently applied Mennonite in Congregation Yetev Lev D'Satmar v County of Sullivan ( 59 N.Y.2d 418), a case involving a tax lien sale. Although the facts there supported the adequacy of constructive notice, we recognized that actual notice must be given to "all parties readily ascertainable who have a substantial interest in the property." (Id., at 425.)
What seems plain from this progression of the case law is that where the interest of a property owner will be substantially affected by an act of government, and where the owner's name and address are known, due process requires that actual notice be given. To the extent that Botens holds that actual notice of tax sale proceedings need not be given a known property owner, it has already been implicitly overruled by Mennonite and Congregation Yetev Lev D'Satmar, and should not be followed.
Application of the Developed Concept of Due Notice to These Facts
Respondent's assertion that Mennonite can be applied only prospectively from June 1983, and not retroactively to these prior tax lien sales, is without basis. Mennonite did not establish new law, but rather carried forward a principle of fair notice made clear in Mullane; moreover, application of the rule to these sales will further, not undermine, its salutary purpose (see, Chevron Oil Co. v Huson, 404 U.S. 97, 106-107). Even where a new principle has only prospective application, the party who has successfully challenged existing law may have the benefit of its reversal (see, e.g., Stovall v Denno, 388 U.S. 293, 301).
In an effort to distinguish Mennonite, the court below and the dissent in this court point to several factual differences between the Indiana tax sale and the Nassau County tax lien sale. Of course there are factual differences. What is common to both the Indiana statute and the Nassau County Administrative Code, however, is the fact that the sales create immediate, substantial adverse consequences for the property holder. The Nassau County tax lien sale is the event that moves the Sword of Damocles directly over the head of a property owner. The tax lien sale commences enforcement proceedings that may terminate 24 months later in forfeiture upon the mere request of the tax lien purchaser, without any requirement or opportunity for a hearing or any court intervention. The tax lien sale is a condition precedent to the transfer of title.
Moreover, substantial interest, penalties and expenses accrue upon that sale. Beginning 18 months from the tax lien sale, for example, a property owner seeking to redeem property may have to pay not only the taxes and interest but also a penalty approximating 40% of the lien purchase price, and reimburse both the Town and the lien purchaser for their actual expenses. These costs cannot be shrugged off as insignificant consequences, particularly for persons such as petitioner McCann subsisting on Social Security payments and a weekend job delivering magazines, and particularly when measured against the negligible cost and burden that would be imposed on the County if it were required to mail a notice to her.
Our dissenting colleagues apparently do not dispute the statement of the law set forth in this opinion, but disagree that the consequences of the tax lien sale are substantial, and they therefore conclude that constructive notice to petitioners was good enough. We conclude that the tax lien sale, in the context of this Code, creates "momentous consequences" for the homeowner ( 123 A.D.2d 111, 126) and that — balanced against these consequences — requiring that a notice be mailed to a person whose name and address are known imposes a minimal burden on the County. Actual notice is therefore required.
Nor can the Nassau County statutory scheme withstand constitutional scrutiny because — unlike Mennonite, where there was no provision for actual notice at all — the Code requires mailing of the notice to redeem to the property owner three months before the deed is conveyed to the purchaser of the tax lien. We recognize that what is reasonable for purposes of notice is usually a legislative policy determination; however, whether legislative choice passes constitutional muster is a decision for the courts. It is significant here that the Nassau County legislators did not design a scheme providing for only three months to redeem. The mechanism designed by the legislators to provide what they deemed was adequate notice to property owners contemplated that before automatic forfeiture, there would be a 24-month redemption period. It is their failure to provide due process notice of the tax lien sale that has shrunk that period to a mere three months and defeated the legislative intention. We thus cannot agree with the court below that we should now redesign the legislative scheme by substituting three months for 24 as the redemption period. Moreover, notice which does not afford a realistic opportunity to produce the funds necessary to avoid forfeiture of the title or sell the encumbered property does not afford due process. The truncated three-month period would in any event be troubling as satisfying the due process notice requirement, particularly where very large surpluses are at stake.
To uphold a statutory scheme permitting substantial impairment of a known property owner's title to her home without actual notice to her would ignore the clear import of Mennonite and signal a return to the fictions of landownership appropriate to an earlier time. The realities of our complex, mobile society are fundamentally inconsistent with a statutory scheme premised on constructive notice as the means of informing known property owners of events which hasten the ultimate forfeiture of their homes, with no opportunity for court intervention, when they can so easily and inexpensively be advised by letter.
Accordingly, in each case, the order of the Appellate Division should be reversed, with costs. The proceedings should be converted to declaratory judgment actions, the former real estate tax collection enforcement provisions of the Nassau County Administrative Code under which respondent Stone obtained Treasurer's deeds should be declared unconstitutional, the deeds declared a nullity, and petitioners permitted to redeem their properties. Recognizing that our declaration could have broad, unsettling effect on the marketability of otherwise settled titles to property, we conclude that our decision in these cases is to have no general retroactive application and shall apply only to cases where tax titles are "`still in the normal litigating process'" (see, Gurnee v Aetna Life Cas. Co., 55 N.Y.2d 184, 191, quoting Gager v White, 53 N.Y.2d 475, 483).
Chief Judge WACHTLER and Judges ALEXANDER, TITONE and BELLACOSA concur with Judge KAYE; Judge SIMONS dissents and votes to affirm in a separate opinion in which Judge HANCOCK, JR., concurs.
In each case: Order reversed, with costs, proceeding converted to a declaratory judgment action and judgment granted in favor of petitioners in accordance with the opinion herein.
Under the provisions of the Nassau County Administrative Code (Code), property may not be sold by the County for nonpayment of taxes until expiration of a two-year redemption period. The Code also provides that property owners, and certain other interested parties, must receive actual notice at least three months before expiration of the redemption period that a deed will issue unless the taxes are paid. The majority holds such notice is inadequate; that the Code must provide actual notice to the property owner when the tax lien is sold, at the beginning of the two-year period. Accordingly, it holds that Nassau County has deprived these property owners of their property without due process of law under the Fourteenth Amendment to the United States Constitution. Because this holding is neither compelled by the United States Supreme Court's decision in Mennonite Bd. of Missions v Adams ( 462 U.S. 791), on which the majority relies, nor supported by our precedents, I dissent.
Since the majority has chosen to emphasize the impact of the Code provisions on these individual litigants it should be noted that neither has ever denied that they received their tax bills during the two years in question or claimed that they paid the taxes due and neither has suggested that they were unaware of the consequences of failing to do so. Indeed, petitioner McCann had some familiarity with tax proceedings because on three prior occasions she failed to pay her taxes, experienced the sale of tax liens on her premises and was forced to redeem the property before a deed issued. Moreover, there is evidence in the record which would indicate that she was sent actual notice of the tax lien sale in this case, the same notice which the majority says was required, and thus that she should not be entitled to relief even if the rule adopted by the majority is applied to her. Finally, even after petitioners received actual notice to redeem, more than four months elapsed before a deed was issued for the Rinaldo property and more than nine months elapsed before a deed was issued for the McCann property. Petitioners did nothing during that time to avoid forfeiture and waited several months more before instituting these proceedings.
Turning to the merits, I have no disagreement with the majority's holding that Botens v Aronauer ( 32 N.Y.2d 243, appeal dismissed 414 U.S. 1059) has been implicitly overruled by Mennonite Bd. of Missions v Adams ( 462 U.S. 791, supra) and Congregation Yetev Lev D'Satmar v County of Sullivan ( 59 N.Y.2d 418). To the extent that Botens holds that a property owner need not receive actual notice before transfer of his property, it can no longer be followed. Neither Mennonite nor Congregation Yetev Lev D'Satmar, however, compels the conclusion that actual notice must be given to a property owner prior to the sale of a tax lien for the owners property. What Mennonite does hold is that a property owner must receive actual notice before his rights are "significantly affected" (id., at 798).
The question is then at what point were the property interests of these petitioners "significantly affected" by the County's actions. Under the circumstances in the Mennonite case that occurred when the tax lien was sold. Therefore, the court required actual notice before the sale. These cases differ substantially and in my view the taxpayers' property interest was not significantly affected until the period of redemption expired. Accordingly, constitutional due process required actual notice only before that date. Whether the notice was sufficient because sent only three months in advance of expiration is another question, one best answered by the Legislature absent clear abuse, but under the facts of these cases petitioners certainly have no basis to complain.
Analysis starts with the Mennonite case. That action was brought by a mortgagee of premises in default for unpaid taxes which was not notified of the tax proceedings, other than by publication, before expiration of the two-year redemption period. It did not receive the tax bills on the property, as did the petitioners in these cases, and it had no reason to presume that the owner was not paying the taxes on the real property because even after the tax lien was sold the property owner continued to make the mortgage payments. Two questions were before the Supreme Court: the first was whether the Indiana statutes conformed with due process insofar as they failed to afford mortgagees with actual notice prior to the sale of the tax lien. The second was whether the Indiana statutes were unconstitutional insofar as they failed to give a mortgagee notice prior to the expiration of the redemption period. The Supreme Court answered the first question, thus rendering the second question academic (see, 462 US, at 800, n 6, supra). For purposes of this litigation, however, it is important to explain why the Supreme Court decided as it did.
Under the Indiana's statutory scheme some of the incidents of ownership are transferred at the time of the tax sale. Thus, the successful bidder is permitted to record the equivalent of a lis pendens (Indiana Code § 6-1.1-24-1), the statute refers to sale of the property rather than sale of a lien (Indiana Code § 6-1.1-24-9 [a]) and it specifies that the certificate of sale delivered to the successful bidder must contain a description of the property and the name of the "former owner" (Indiana Code § 6-1.1-24-9 [a] [2]; § 6-1.1-25-6). Moreover, under Indiana law, the Statute of Limitations for actions contesting the tax proceedings runs from the date of the certificate of sale given immediately after the tax sale (Indiana Code § 6-1.1-24-9 [a]; § 6-1.1-24-11 [b]). Indeed, there appears to be authority that the purchaser, by acquiring the certificate of sale in an Indiana tax sale, is entitled to immediate possession of the premises and may commence proceedings to obtain it (Ethel v Batchelder, 90 Ind. 520; Barton v McWhinney, 85 Ind. 481).
The most significant factor in the Mennonite case, however, was that under the Indiana statutes before the court, tax liens were sold at public auction to the bidder willing to pay the highest price. Because the successful bid constituted a prior claim on the property, the consequence of a tax lien sale was the immediate subordination of the mortgagee's interest and, if the bid price substantially exceeded the tax and penalties due, the sale might result in diminution or even extinguishment of the mortgagee's interest (Indiana Code § 6-1.1-24-9 [a]; § 6-1.1-24-9 [b]; § 6-1.1-25-6 [a] [7]). Thus, the mortgagee's security for its loan was immediately and drastically affected by the sale under the Indiana statute because redemption required not only the payment of taxes and penalties, but potentially of some additional sum paid by the successful bidder which, depending on the amount, might adversely affect the mortgagee's security interest in the property. Thus, it is quite understandable that the Supreme Court found in Mennonite that the mortgagee's rights were "significantly affected" by sale of the tax lien and required that mortgagees be afforded notice and the opportunity to protect their rights before tax lien sales took place.
The consequences of the sales of tax liens in these cases are quite different. The Nassau County Administrative Code, unlike the Indiana statute, makes clear that all incidents of ownership remain with the taxpayer until the redemption period expires and that a purchaser at a tax sale acquires no more than a lien for the delinquent taxes, penalties and interest. Thus, after a tax lien is sold in Nassau County title unquestionably remains with the owner until expiration of the redemption period, no lis pendens is filed against the property before or after the sale and the certificate of sale does not give the lien buyer any claim to ownership or possession (Nassau County Administrative Code § 5-52.0). Moreover, the Statute of Limitations does not commence to run until the tax deed, issued by the County Treasurer after the redemption rights have expired, has been recorded (Nassau County Administrative Code § 5-54.0 [b] [3]).
Most importantly, however, under the Nassau County Administrative Code the successful bid is measured by the lowest rate of interest the bidder is willing to receive for paying the delinquent taxes, not the highest price he is willing to pay. The lien for delinquent taxes may be repurchased and satisfied by payment of the taxes plus penalties and interest due to the County to the date of the tax lien sale. No greater amount is ever included in the tax lien sale price in Nassau County (Nassau County Administrative Code §§ 5-33.0, 5-35.0 [a] [2], [3]; § 5-36.0 [c]). Additional penalties, computed by the interest bid, are imposed after the lien is sold, however, to compensate the bidder for the use of his money during the redemption period (Code § 5-40.0). The owner may redeem the property by paying the accumulated taxes, interest and penalties, the costs of the sale and the interest penalty due the bidder (Code § 5.50).
In sum, the sale of the tax lien by Nassau County starts the time for redemption running, requires the taxpayer to reimburse the County for the costs of the tax lien sale and adds interest and penalties. The effect of the tax sale has little more effect on the owner's interest than increasing the interest and penalties due because of the passage of time and adding a penalty in the form of interest to the successful bidder for the use of the bidder's money to satisfy the taxes past due. These charges do not jeopardize the owner's title or possession any more than adding interest for late payment of taxes 30 days after the payments are first due, except in amount, and no one would seriously contend actual notice must be given to the taxpayer before that is done. The lien purchaser does not acquire anything at the sale which prevents the owner, by his own act, from fully using and exploiting his property if only the taxes are paid. Under the Indiana statutory scheme before the court in Mennonite (supra), by contrast, the mortgagee might pay the taxes in full with interest and penalties, even though it was not required to, and still not recover its security interest in the property. Thus, the effect of a tax sale in Nassau County on an owner's property rights are substantially different from the consequences the Indiana statutes imposed on the mortgagee which caused the Supreme Court to determine in Mennonite that the tax sale triggered the mortgagee's due process right to notice.
Nevertheless, petitioners and the majority contend that title is significantly affected at the tax sale because the cost of redemption is increased after the tax lien is sold. They argue the mere cumulation of interest and penalties, legally imposed, is enough to significantly affect the taxpayer's interest in his property for due process purposes. In response, it should be noted first that it is not clear that the issue is properly before us. Petitioners are not claiming that they failed to redeem their properties because of the increased sums that they had to pay as a result of the sale of the lien. They seek only to recover title to the property, even though they acknowledge they were afforded actual notice by certified mail more than three months prior to the date when their property interest could be extinguished. All that they lost because actual notice was given at a later, rather than an earlier, date was money in the form of increased tax penalties. Yet they cite to no authority which requires personal notice prior to an event which is followed by an increase in monetary penalties (contra, Township of Montville v Block 69, Lot 10, 74 N.J. 1, 78, 376 A.2d 909, 912 ["applicability of the Due Process Clause is not affected by the municipality's sale of the property for unpaid taxes and issuance of a certificate to the purchaser"; actual notice need only be provided when the owner's redemption period will expire]).
Moreover, the increased costs that the sale of the lien imposed on the taxpayers should have come as no surprise. Our decisions both before and after Mennonite (supra) have consistently adhered to the principle that an owner of real property is charged with knowledge of the statutory provisions affecting the control or disposition of his or her property (Sheehan v County of Suffolk, 67 N.Y.2d 52, 58, cert denied sub nom. MacKechnie v County of Sullivan, 478 U.S. 1006; Congregation Yetev Lev D'Satmar v County of Sullivan, 59 N.Y.2d 418, 423, supra; see also, United States v Locke, 471 U.S. 84, 108; Texaco, Inc. v Short, 454 U.S. 516, 531). When, as here, property owners are afforded both notice and an opportunity to be heard with respect to the assessment of their property and the imposition of taxes on it and actual notice prior to final expiration of the redemption period, individual notice of an increased interest and penalties is not required. Taxpayers are under an obligation to pay their taxes and they are presumed to know the consequences of nonpayment. While other historical justifications for sustaining the adequacy of notice by publication are no longer recognized the principle that a landowner, like any other citizen, is presumed to know the law retains its continued validity after Mennonite and Mullane (see, United States v Locke, supra, at 108, citing favorably North Laramie Land Co. v Hoffman, 268 U.S. 276, 283).
For example neither the "caretaker" theory (see, e.g., Huling v Kaw Val. Ry., 130 U.S. 559, 563-564) nor the "in rem" justification (see, Ballard v Hunter, 204 U.S. 241, 258) for holding that notice by publication is constitutionally valid retains validity after the Supreme Court's decisions in International Shoe Co. v Washington ( 326 U.S. 310) and Shaffer v Heitner ( 433 U.S. 186). (See generally, Mennonite Bd. of Missions v Adams, 462 U.S. 791, 796-797, n 3.)
In sum, it is the issuance of the deed to the lien purchaser which significantly affects the owner's interest in his property under the Code and the Code requires that the owner receive actual notice of that future event. The sale of the tax lien is neither "the event that moves the Sword of Damocles directly over the head of a property owner", nor is it the sole "condition precedent" to the transfer of title as the majority opinion suggests (majority opn, at 176). Rather, the actual condition precedent to the transfer of title is the filing by the lien purchaser of affidavits proving that he or she served the property owner and all other interested parties notifying them of the need to redeem the property within three months (Nassau County Administrative Code § 5-51.0 [e]; § 5-53.0 [4]). It is then that the provisions of the Code set in motion procedures which lead inexorably to the loss of title unless the property is redeemed and it is then that petitioners' property interests were significantly affected (Mennonite Bd. of Missions v Adams, supra, at 798).
Finally, the majority suggest that the three-month notice prescribed by the Nassau County Administrative Code will not withstand constitutional analysis because the time period is too short.
The purpose of the notice, of course, is to give owners an opportunity to act, either by paying the delinquent taxes or selling the property subject to the tax lien, to protect their equity. What is reasonable for that purpose is usually a legislative policy determination not subject to overcall by the courts unless clearly erroneous. In reviewing the legislative determination, it must be noted that the period of redemption is two years, not three months. In no event may title pass before the two years has expired and notwithstanding the sale of the lien, the taxpayer may redeem his property at any time during the two years before title is transferred by satisfying the tax lien. Furthermore, before personal notice is made several things occur which bring home the fact of delinquency to the taxpayer. There is the knowledge of universal tax liability imputed to owners of real property (see, Sheehan v County of Suffolk, 67 N.Y.2d 52, cert denied sub nom. MacKechnie v County of Sullivan, 478 U.S. 1006, supra; Congregation Yetev Lev D'Satmar v County of Sullivan, 59 N.Y.2d 418, supra), annual tax bills are mailed to owners indicating nonpayment of past taxes, and the fact that delinquency is published by notice of the sales of tax liens in the newspaper. Moreover, the shorter time specified between notice and the expiration of the redemption period may be justified because the sums of money necessary for redemption under the Nassau County bidding scheme are relatively small.
Accordingly, I must dissent and vote to affirm the order of the Appellate Division.