The purpose of this hearing is to consider the petition by Bharpur Takhar to rescind the tax sale of property he formerly owned at 16473 County Road 99 (APN 027-430-005-000). See Attachment A. Because the purchaser of the property did not consent to rescinding the tax sale, the Board must hold a hearing after providing notice to the purchaser, which was provided on March 27, 2017. See Attachment B. After the hearing is held, the Chief Financial Officer recommends that the Board grant the petition and rescind the tax sale.
Before the property was sold at the tax sale, Mr. Takhar had failed to timely pay property taxes on the property since 2009, save for one payment in 2011, despite annual tax bills mailed to him. During that time, he has accrued $68,748.75 in back taxes, penalties, interest and fees (as of October 1, 2016). After five years of delinquency, the Department of Financial Services (“DFS”), acting as the County Tax Collector, sold the property at a tax sale on October 17, 2016. World Investments, LLC (owned by Nadim Rehman of Sacramento) was the winning bidder, purchasing the property for $182,300.00.
Prior to initiating the tax sale, DFS sent a notice to Mr. Takhar to the mailing address he had on file. However, Mr. Takhar apparently moved from that address in or around 2012 without updating his address with the Assessor or DFS. DFS also published notices in the Davis Enterprise on September 11, 16, and 21, 2016, as required by law. Mr. Takhar claims that he was unaware of the delinquent taxes and did not receive actual notice of the tax sale. He eventually learned about the tax sale when DFS sent a notice of excess proceeds from the sale (the amount of the sales price remaining after taxes/penalties/interest had been deducted) to a mailing address DFS was able to find in Accurint, a subscription-based public records database.
Revenue & Taxation Code Section 3731 allows the Board to rescind a tax sale if the Board determines “that the property should not have been sold.” The basis for Mr. Takhar’s petition is that DFS failed to comply with Revenue & Taxation Code Section 3365, which requires DFS to “make a reasonable effort to ascertain the address of the last assessee of the tax-defaulted property” before selling a property. The extent of such “reasonable efforts” is not spelled out, but the statute provides that they should include, at a minimum, review of assessment records and the most recent telephone books in the County.
DFS staff relied on an outside contractor to provide contact information for interested parties prior to a tax sale. The scope of work with the contractor requires that the contractor provides “all mailing addresses available for all parties” who have an ownership interest. However, the contractor’s search for addresses is apparently limited to searching the chain of title. DFS staff mistakenly believed that further research was within contractor’s scope of work. Outside of its contractor’s review, DFS did not conduct a separate investigation for Mr. Takhar’s address. A review of assessment records and the telephone books would not have been fruitful, because Petitioner did not update his address with the Assessor and local telephone books available to staff do not contain residential white pages. It is possible that “reasonable efforts” required by the statute would have included reviewing services like Accurint to find a more current address.
Nevertheless, even if DFS failed to make additional “reasonable efforts,” the statute does not provide authority to nullify the sale. Revenue & Taxation Code Section 3365 specifically provides, “Any failure of the tax collector to make a reasonable effort to ascertain the address of the last assessee as required by this section shall not affect the validity of any subsequent sale to satisfy the lien of unpaid taxes.” As a result, DFS’s failure to review phone books and make other reasonable efforts does not provide a basis to rescind the sale under the Revenue & Taxation Code.
But Section 3365 is not the only form of relief available to Mr. Takhar. The due process clauses of the federal and state constitutions provide another, more fundamental, basis for rescinding the sale. The County cannot deprive someone of their property “without due process of law.” It is not clear what amount of notice is required by due process, and it is not a requirement that a property owner receive actual notice. Due process simply requires that the County takes steps reasonably calculated to provide notice of the intent to sell the property. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (“An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality 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.”). The question for this Board to determine is, in light of the circumstances, whether DFS’s notices by mailing to an outdated address and publication were sufficient.
The Board would be justified if it wished to deny the petition and not rescind the sale. Mr. Takhar failed to update his address with the Assessor and Tax Collector for several years, and should have known that there was something amiss when he did not receive tax bills after receiving them at his old address. Indeed, the fact that he made one tax payment in 2011, during the delinquency period, suggests that he was on notice of his tax obligations for the property and knew that he was delinquent. Further, the County put him on notice that the sale was going to happen by publishing a notice in the newspaper and mailing him a notice to the address he kept on record. It is arguable that due process does not require more, especially for a taxpayer who should expect to receive annual tax notices by mail. See Chesney v. Gresham, 64 Cal. App. 3d 120 (1976) (“The very nature of annually assessed ad valorem property taxes is such that a property owner is already on notice that he should be receiving a bill every year in the mail and that if he does not the taxes will become delinquent and the property might be sold to the state to satisfy them.”); Tannhauser v. Adams, 182 P.2d 280 (Cal. 1947) (holding that notice by publication is constitutional minimum for tax sale).
Notwithstanding Mr. Takhar’s own failures to update his contact information and pay his taxes on time, the Chief Financial Officer recommends that the Board rescind the tax sale. DFS was aware that prior notices to the address on file had been returned undeliverable, and its reliance on the contractor to find a newer address was misplaced. Because DFS was able to identify a current mailing address through Accurint after the tax sale, and Mr. Takhar’s address could have been found on other online databases, it is reasonable to conclude that further efforts on DFS’s part would have found another mailing address to use. See Sinclair & Valentine Co. v. County of L.A., 201 Cal. App. 3d 1021 (1988) (“County’s failure … to undertake the relatively modest administrative burden required to discover plaintiff’s whereabouts … constituted a violation of both of California statutory law and the Due Process Clause of the Fourteenth Amendment.”). It is more likely than not that a court would find that this failure constituted a due process violation. DFS has corrected this deficiency in procedures for future sales.
Rescinding the tax sale should make everyone whole: Mr. Takhar would get his property back, the County would be paid the taxes, interest, and penalties owed on the property, and the buyer (World Investments, LLC) would receive its money back, with interest. See Nadon v. City of Los Angeles, 104 Cal. App. 3d 487 (1980). Although a rescission might negatively impact World Investments, LLC’s plans for the property, it purchased the property with knowledge that a tax sale could be rescinded. See Routh v. Quinn, 20 Cal. 2d 488, 493 (1942) (describing “buyer beware” doctrine in tax sales). The law provides for mechanisms to undo a sale that should not have occurred, and a buyer acquires the property aware of that possibility during the statutory period.
Attachments
- Petition
- Notice of Hearing
- Recommended Findings
- Notice of Tax Sale Served by Mail
- Notice of Tax Sale Served by Publication
- Accurint Printout
|