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Jordan v. Jensen

Supreme Court of Utah

January 10, 2017

James Harvey Jordan, Trustee of the James H. Jordan Revocable Trust[1], Appellees,
v.
Eddie R. Jensen and Ly-Thi Jensen, Appellants.

         On Direct Appeal Eighth District, Vernal Dep't The Honorable Samuel P. Chiara No. 130800084

          Clark B. Allred, Vernal, A. Erin Bradley, Salt Lake City, for appellees James Harvey Jordan Trustee, Martha Jordan Boright, and Laura Ward

          A. John Davis III, Christopher R. Hogle, Mark L. Burghardt, Salt Lake City, for appellee Axia Energy, LLC

          Rick L. Knuth, Brady L. Rassmussen, Salt Lake City, for appellees Stonegate Resources, LLC, and Wasatch Oil & Gas, LLC

          Daniel A. Jensen, Terry E. Welch, Matthew E. Jensen, Salt Lake City, for appellants Eddie R. Jensen and Ly-Thi Jensen

          G. Wesley Quinton, Farmington, for amici Utah Petroleum Association and Utah Mining Association

          Sean D. Reyes, Att'y Gen., Laron J. Lind, Ass't Att'y Gen., Salt Lake City, for amicus Utah State Tax Commission

          Chief Justice Durrant authored the opinion of the Court, in which Associate Chief Justice Lee, Justice Himonas, Judge McKelvie, and Judge Gardner joined.

          Having recused themselves, Justice Durham and Justice Pearce did not participate herein; Third District Court Judges Richard D. McKelvie and James D. Gardner sat.

          OPINION

          DURRANT, CHIEF JUSTICE

         Introduction

         ¶ 1 Here, we consider whether Utah Code section 78B-2-206 bars a challenge to a tax title based on a tax sale effected without notice to an interested party. On May 25, 2000, Uintah County conducted a tax sale, yet failed to provide the record mineral interest owners notice of the sale. Now, over a decade later, the purchaser of the tax title and the individuals who were the record owners of the mineral interest prior to the tax sale dispute for the first time who rightfully owns the mineral reserve. The purchasers of tax title raise Utah Code section 78B-2-206 as a defense. That statute precludes a party from challenging the validity of a tax title that was conveyed at a tax sale more than four years prior to suit. The record mineral interest owners argue that in failing to provide notice of the tax sale—a factual point the purchaser of the tax title concedes—the county violated their due process rights and that, therefore, the statute of limitations does not bar their suit.

         ¶ 2 We agree with the record mineral interest owners. Because Utah Code section 78B-2-206 was triggered by the county's tax sale— which it conducted in violation of the Due Process Clause of the Fourteenth Amendment—we cannot apply that limitations statute to bar the record mineral interest owners' suit. And because in Utah a failure to provide notice to an interested party of a tax sale also serves as a jurisdictional defect, we conclude that the county failed to obtain jurisdiction over the mineral interest at issue, thereby preventing that property interest from passing at the tax sale.

         Background

         ¶ 3 The facts of this case are complex, and focus primarily on various conveyances related to the property at issue. The appellees in this matter include the Jordans and Axia. The Jordans obtained the property in question from certain predecessors and retained ownership of the mineral interest before conveying the surface estate to a subsequent owner. Believing they still owned the mineral interest, the Jordans signed leases with various parties to develop this mineral interest. One of these leases was eventually assigned to Axia, which is also an appellee in this matter. After the Jordans conveyed the surface estate, the subsequent owner failed to pay taxes and Uintah County purported to sell the property at a tax sale for unpaid taxes. The Jensens, the appellants, eventually purchased the tax title sold by Uintah County at that tax sale. These facts are discussed in greater detail below.

         ¶ 4 On October 25, 1954, Olivia Jordan, Marie Robertson, and Caroline Kelley (the Jordans' predecessors in interest) acquired surface and mineral rights to roughly forty acres of property (Property) in Uintah County, Utah, by a warranty deed.[2] Forty years later, on February 3, 1995, Olivia Jordan, Marie Robertson, and Caroline Kelley conveyed the surface interests of the Property to Jonathan Anthony Andrews by a warranty deed, expressly and intentionally reserving the Property's oil, gas, and mineral rights.

         ¶ 5 Between 1995 and 1999, Uintah County assessed annual taxes against the Property. No other taxes were assessed against the Property during that time. The tax notice for the 1995 property taxes—the year the Jordans' predecessors in interest conveyed the surface interests to Mr. Andrews—was mailed to Olivia Jordan c/o Jonathan Anthony Andrews, though she never received that notice. Thereafter, Uintah County sent all tax notices to Mr. Andrews. In 1997, Olivia Jordan conveyed by warranty deed her remaining interest in the oil and gas mineral reserve to James Harvey Jordan, Martha Jordan Boright, and Mary Edna Jordan (the Jordans). After the February 1995 severance of the mineral rights, Mr. Andrews, the new surface owner, failed to pay the property taxes for 1995, [3] 1998, and 1999, leaving $167.19 in unpaid property taxes.

         ¶ 6 Utah law provides for the annual sale of real property in May or June "following the lapse of four years from the date the property tax became delinquent."[4] Before selling real property for unpaid taxes, a county must provide notice of the tax sale, "sent by certified and first class mail to the last-known recorded owner . . . and all other interests of record, as of the preceding March 15, at their last-known address."[5] Once the county conveys tax title to the purchaser at the tax sale, any action to challenge the validity of the tax title must be brought within "four years from the date of the sale."[6] If an action is brought more than four years from the date of the tax sale, it is barred by Utah Code section 78B-2-206.

         ¶ 7 On May 25, 2000, Uintah County seized the Property for unpaid taxes and sold it to Quality Remediation Services (QRS) at a tax sale for $6, 000.00. The district court found that "[n]o notice was ever given to the Jordans, " who are owners of record, "of the [tax] assessment of 1995, the failure to pay the taxes, or the tax sale." The tax title conveyed by the county to QRS contains no reservations or exceptions, failing to recognize the Jordans' severed mineral interest. On December 13, 2000, QRS conveyed the Property to the Jensens by a warranty deed for $5, 500.00. As with the tax title conveyed to QRS, the deed from QRS to the Jensens contains no reservation or exceptions. In a 2001 Real Property Transfer Survey Standard Land Questionnaire, the Jensens noted that the purchase from QRS did not include the severed mineral interest.

         ¶ 8 In early 2003, the Jordans purportedly leased the mineral interest rights in the Property to Landco Energy, Inc. (Landco). In May 2011, the Jordans leased the Property's mineral rights to Stonegate Resources, LLC (Stonegate). Three months later, on August 1, 2011, Stonegate assigned its lease to Axia, reserving an overriding royalty interest. Sometime thereafter, Stonegate conveyed a portion of its royalty interest to Wasatch Oil & Gas, LLC (Wasatch).

         ¶ 9 On November 7, 2011, Axia entered a Surface Use Agreement and Grant of Easement (Surface Use Agreement) with the Jensens. The following year, Axia secured two title opinions from two different attorneys to ensure that the Jordans owned the leased mineral interest. Both attorneys raised concerns "as to whether the mineral estate . . . passed under the Tax Deed, " thereby making ownership uncertain. After Axia received these title opinions casting doubt on the Jordans' ownership, on March 29, 2013, the Jordans' counsel sent a letter to the Jensens asking them to sign a mineral rights quitclaim deed and explaining that if the Jensens were unwilling to sign the deed, the Jordans would be compelled to file a quiet title action. In response, the Jensens claimed ownership over the mineral estate for the first time.

         ¶ 10 The Jordans filed a complaint to quiet title on July 5, 2013. Among other things, the complaint alleges that no notice was given to the Jordans or their predecessors of the 1995 taxes, subsequent delinquency, or the May 2000 tax sale as required by due process. The Jensens filed their answer and counterclaim on August 9, 2013, seeking a declaratory judgment to quiet title to the mineral interest and alleging that the Jordans' action was barred by Utah Code section 78B-2-206. Eventually, the Jensens amended their counterclaim, adding a third-party complaint against Axia, which had leased the oil, gas, and mineral rights from the Jordans. For purposes of this appeal, we refer to the Jordans and Axia collectively as the Appellees.

         ¶ 11 After concluding discovery, the parties filed motions for summary judgment. The district court granted the Appellees' motions for summary judgment, [7] concluding that it could not apply section 206 because of Uintah County's due process violation and that the failure to provide notice to the Jordans prevented their property interest—the mineral reserve—from passing at the tax sale. The Jensens appealed the district court's judgment, and we retained jurisdiction to decide the issue.

         Standard of Review

         ¶ 12 We address one issue on appeal: whether the district court correctly determined that the failure to provide constitutionally adequate notice to the Jordans of the May 2000 tax sale renders Utah Code section 78B-2-206[8] inapplicable, thereby allowing the Appellees to have the 2000 tax title declared void to the extent it purports to transfer the Jordans' mineral estate.[9] This issue requires us to interpret the Fourteenth Amendment to the United States Constitution and Utah Code section 78B-2-206. The correct interpretation of those authorities is a legal issue we review for correctness.[10] Jurisdiction over this issue is proper pursuant to Utah Code section 78A-3-102(3)(j).

         ¶ 13 We note that the parties preserved four other issues for appeal that we do not reach. The first is a challenge to the Jensens' first notice of appeal as premature. We decline to reach this issue as our jurisdiction over this appeal is no longer in dispute.[11] The remaining issues raised by the parties are left unaddressed in this opinion because the due process issue decisively settles the dispute. The first of these issues is whether the district court correctly determined that Uintah County lacked the authority under Utah Code sections 59-2-101, et seq., to assess the severed mineral interest. We do not address this issue because whether or not Uintah County was required to assess or had the authority to assess the severed mineral interest does nothing to alter the fact that they conducted the tax sale in violation of due process, thereby preventing the Jordans' severed mineral interest from passing at the tax sale.

         ¶ 14 The second issue—closely related to the first—is whether the district court erred in concluding that Uintah County did not actually assess the mineral interest because its assessment occurred after that property interest was severed from the surface estate. We decline to reach this issue for the same reason we declined to reach the previous issue: whether or not Uintah County actually assessed the mineral interest post-severance does not change the fact that the county conducted the tax sale in violation of due process, thereby preventing the mineral interest from passing at the tax sale.

         ¶ 15 The third issue appealed by the parties—unrelated to the first two—focused on whether the term "ore" in Utah's wrongful removal of ores statute, Utah Code section 40-1-12, encompasses "oil and gas" for purposes of treble damages. Because we ultimately conclude that the May 2000 tax sale did not convey the severed mineral interest, this issue is moot because it now amounts to an attempt by the Jensens to claim treble damages for oil and gas deposits that they never owned.

         Analysis

         ¶ 16 The sole issue we address on appeal is whether Utah Code section 78B-2-206 can apply to bar the Appellees' challenge to the validity of the Jensens' tax title even though Uintah County failed to provide the Jordans with notice of the tax sale as required by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. To avoid unnecessary confusion, we clarify at the outset that the issue is not whether Uintah County violated the Jordans' due process rights in failing to provide them with any notice of the May 2000 tax sale. The Jensens concede that the county failed to provide the Jordans with constitutionally adequate notice of the tax sale, and the record supports this concession.[12] Instead, the issue on appeal is whether we should nevertheless apply section 206 to bar the Appellees' challenge to the validity of the tax title despite the fact that title was conveyed without due process of law.

         ¶ 17 The district court concluded that section 206 "does not apply to bar the [Appellees'] challenge to the tax sale, " because "[t]he sale, if intended to convey the severed mineral interest, was without due process of law, and resulted in an unconstitutional taking." The Jensens argue that the district court erred in this conclusion because our precedent establishes that Uintah County's failure to provide constitutionally adequate notice did not render section 206 inapplicable, but merely made the tax title voidable during section 206's limitations period. In response, the Appellees argue that section 206 is not applicable because it was triggered by Uintah County's due process violation, and that therefore the tax title is void to the extent that it purports to convey the severed mineral interest.

         ¶ 18 As discussed below, we agree with the Appellees. Though in the past we have stated that section 206 can apply even where a due process violation is alleged, this is inconsistent with subsequent due process jurisprudence, which stands for the proposition that when state action conducted without due process of law triggers a limitations period, the statute cannot run against the aggrieved party. Because section 206 was triggered by Uintah County's tax sale, which was conducted in violation of the Jordans' due process rights, we cannot apply it. And because in Utah a failure to provide notice of a tax sale to an interested party also prevents a taxing authority from obtaining jurisdiction over the interested party's property, we conclude that the county failed to obtain jurisdiction over the Jordans' mineral interest, thereby rendering the tax title void to the extent it purported to convey that property interest. We now further discuss each issue in turn.

         I. Our Prior Caselaw Held that Section 206 Bars Challenge to Tax Title Even Where the Tax Sale Violated Due Process

         ¶ 19 Section 206 is "a special statute of limitations applicable to tax titles"[13] that prevents a party from seeking to quiet tax title four years after a tax sale. The statute provides, in relevant part, that

[a]n action or defense to recover, take possession of, quiet title to, or determine the ownership of real property may not be commenced against the holder of a tax title after the expiration of four years from the date of the sale, conveyance, or transfer of the tax title to any county, or directly to any other purchaser at any public or private tax sale.[14]

         The purpose of this statute is to bring "increased stability to tax titles" by preventing untimely challenge to such instruments, "thereby augment[ing] the revenues of state and local governments."[15] In this case, it is undisputed that the Jensens are holders of tax title to the property at issue and that more than four years have elapsed since the May 2000 tax sale.[16] So if section 206 applies, it will bar the Appellees' challenge to the validity of the tax title. The Appellees, as noted above, argue that applying section 206 in this case will violate due process.

         ¶ 20 Due process prevents the state from extinguishing a citizen's property rights without notice and an opportunity to be heard.[17]Notice "is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party."[18] Consequently, notice of a tax sale must be given to satisfy due process.[19] Constitutionally adequate notice 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."[20] When an interested party's "name and address are reasonably ascertainable, " the state must provide notice by "means as certain to ensure actual notice."[21]

         ¶ 21 Here, the Jensens concede that Uintah County failed to provide the Jordans with constitutionally adequate notice of the tax sale.[22] But they argue that the county's failure to provide notice merely rendered the tax title voidable within section 206's four-year limitations period. To support this argument, the Jensens rely on Hansen v. Morris.[23] In that case, we rejected an argument that a failure to provide statutorily required notice would prevent the predecessor to section 206 from applying.[24] We also rejected a due process challenge to the application of section 206, concluding that the "defendants' assertion that such statute deprives them of property without due process of law[] cannot be sustained under the authorities applicable to limitations statutes generally."[25]

         ¶ 22 In rejecting these arguments, we noted that the purpose of section 206 was to validate tax titles.[26] With this purpose in mind, we ultimately held that section 206 applies to tax deeds "valid on their face . . . and executed by the same authority that could have passed good title if each and every statutory step . . . had been followed, without the aid of a limitations statute."[27] Accordingly, as the Jensens correctly argue, this court stated in Hansen that a failure to provide notice or a due process violation does not prevent section 206 from applying to "validate tax titles."[28] The Jensens argue that this case settles the issue before us. Yet, because of subsequent Supreme Court caselaw interpreting the Due Process Clause, Hansen is no longer good law on this point.

         II. Subsequent Due Process Jurisprudence Makes Clear that a Limitations Period—Like Section 206—Cannot Apply When It Is Triggered by State Action

         ¶ 23 The Appellees argue that Hansen v. Morris[29] is inconsistent with subsequent United States Supreme Court decisions regarding the requirements of due process. Specifically, they claim that, inter alia, Mennonite Board of Missions v. Adams, [30] Schroeder v. City of New York, [31] and Tulsa Professional Collection Services, Inc. v. Pope, [32]involved limitations periods that did not apply because the state failed to provide constitutionally required notice. The Jensens seek to distinguish each of these cases, arguing that none of them dealt with whether a generally applicable statute of limitations can bar challenge to an unconstitutional taking. We agree with the Appellees. These Supreme Court cases stand for the proposition that a statute providing a limitations period will not apply when it is triggered by constitutionally defective state action.

         A. Mennonite Board of Missions v. Adams

         ¶ 24 In Mennonite, a county tax sale triggered a two-year redemption period.[33] A mortgagee did not receive notice of the tax sale or of the conveyance of the property at the end of the two-year statutory redemption period.[34] The Court declined to decide whether the mortgagee was constitutionally entitled to notice at the end of the redemption period "[b]ecause [it] conclude[d] that the failure to give adequate notice of the tax sale proceeding deprived [the mortgagee] of due process of law."[35] In other words, the Court would not consider whether a redemption period could still apply with constitutionally sufficient notice because of the prior due process violation at the tax sale that triggered the redemption period.

         ¶ 25 The Jensens seek to distinguish this case from the facts now before us, arguing that Mennonite "addresses the quality of notice required to satisfy due process in the first instance, not whether a statute of limitations can bar a due process claim once notice fails to comply with [the requirements of due process]." This distinction does not adequately address the Court's opinion in Mennonite. As noted above, the Court refused to consider whether the mortgagee was entitled to notice at the end of a redemption period because "the failure to give adequate notice of the tax sale proceeding [which triggered the redemption period] deprived [the mortgagee] of due process of law."[36] If the Jensens' distinction is correct, surely the Court would have considered whether the mortgagee, with adequate notice, would have been barred from challenging the tax sale at the expiration of the redemption period. The Court's failure to do so strongly suggests that application of a limitations period is inappropriate when that period is triggered by a due process violation. The Court's refusal to apply a limitations period that is triggered by a due process violation can similarly be seen in Schroeder.

         B. Schroeder v. City of New York

         ¶ 26 In Schroeder, a limitation statute in the New York City Water Supply Act prevented a party from pursuing damages more than three years after the city diverted water.[37] Yet, because the city failed to provide constitutionally adequate notice to an owner of a diversion that occurred more than three years previous to suit, [38] the Supreme Court remanded to allow the owner to seek damages for the diversion.[39] The ...


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