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COOPER v. MAKELA

March 6, 1986

CHARLES COOPER, Plaintiff,
v.
WILLIAM J. MAKELA, JR., UNITED STATES OF AMERICA, et al, Defendants



The opinion of the court was delivered by: TELESCA

MICHAEL A. TELESCA, United States District Judge

DECISION and ORDER

 This is an action to quiet title to a piece of land located in Schuyler County, New York which was originally brought by the plaintiff in state court, and subsequently removed to this Court pursuant to 28 U.S.C. §§ 2410 and 1444. The plaintiff asks that a mortgage lien of the United States of America should be extinguished, and barred as the result of an in rem tax foreclosure proceeding brought by the treasurer of Schuyler County.

 The Government now moves for summary judgment, claiming that it was never given adequate notice of the tax sale and therefore its mortgage lien cannot be extinguished. The Government requests this Court to determine that New York Real Property Tax Law §§ 1002 and 1014 are unconstitutional since they fail to require adequate notice to a mortgagee having a claim or interest in the property subject to foreclosure in violation of the Due Process Clause of the Fourteenth Amendment. *fn1" The question presented therefore is whether the New York Real Property Tax Law §§ 1002 and 1024, which do not require personal notice to mortgagees prior to an in rem tax foreclosure, are unconstitutional in light of Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S. Ct. 2706, 77 L. Ed. 2d 180 (1983). *fn2"

 BACKGROUND

 The facts which give rise to this case are not in dispute. In November of 1978, Mr. and Mrs. William Makela, codefendants in this action, obtained two loans from the Farmers Home Administration (FmHA), an agent of the United States Government. As security for one of these loans, the Makelas executed and delivered to the U.S. Government a mortgage to the property in question here, a fifty-two acre tract in Schuyler County. It is not disputed that this mortgage was duly recorded in the Schuyler County Clerk's Office.

 The Makelas failed to pay their real property taxes on this land in 1978. As a result, the property was sold at a tax sale on December 12, 1979 to Schuyler County, pursuant to Article 10 of the New York Real Property Tax Law ("RPTL"). The FmHA was never informed of the impending sale of the property, and was unaware of the Makelas' delinquent taxes. In fact, the FmHA continued to receive the required mortgage payments, and had no knowledge that its property interest was in jeopardy. Schuyler County, pursuant to RPTL § 1002, did publish notification of the impending sale of land in two local newspapers once a week for six weeks. But at no time did the FmHA receive actual notice of the impending sale of this property, and the property was eventually sold without its knowledge.

 RPTL § 1024 provides for a three-year period of redemption for property which is mortgaged at the time of the tax sale. The county treasurer must again publish a notice once a week for six weeks, within three months prior to the expiration of the redemption period (RPTL § 1014). The county treasurer fulfilled that requirement in this case, and once again, the FmHA received no actual notice of its redemption right.

 When no one stepped forward to redeem this property, the land was deeded to Schuyler County on August 1, 1983. A few months later, the property was conveyed to the plaintiff, Charles Cooper, for $1,300.00. *fn3" In June of 1984, the plaintiff filed an action to quiet title to this property in Supreme Court of New York, Schuyler County, naming the debtor, the U.S. Government and others as defendants. The United States removed the action to this Court, and now moves for summary judgment. *fn4"

 DISCUSSION

 The Fourteenth Amendment of the U.S. Constitution guarantees that no one shall be deprived of life, liberty or property without due process of law. One of the fundamental elements of the due process guarantee is reasonable notice of the opportunity to appear and be heard. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950). The case at bar presents the question of whether §§ 1002 and 1014 of the New York Real Property Tax Law, which authorize tax sales for delinquent property taxes after only constructive notice to known mortgagees, fulfill the notice requirement of the Fourteenth Amendment. For the reasons specified below, I must conclude they do not.

 Article 10 of the New York Real Property Tax Law (RPTL) governs the collection of delinquent property taxes. Section 1002, which regulates the notice to be given prior to the commencement of a tax sale proceeding, provides that notice shall be given by publication only. *fn5" The same is true of Section 1014, which governs the notice which must be given prior to the sale of unredeemed property. *fn6"

 It is interesting that the county treasurer must in addition to giving notice by publication at least three months before the expiration of one year, send that same notice of redemption by first class mail to the "owner or occupant, as shown on the assessment roll of each parcel sold and unredeemed . . . " No such personal notice is required to be given to a mortgagee. RPTL 1014(3). Thus, a mortgagee is effectively denied any notice of either the commencement of the delinquent tax sale proceedings or of its right to redeem the taxes and bid in on the tax sale. Since the tax sale purchaser acquires title free of all liens and other encumbrances, the interest of an unnotified mortgagee is immediately and drastically diminished since he is denied his right to redeem after the sale.

 Mullane v. Central Hanover Bank & Trust Co. (339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 ) held that where a property interest is at stake, a party must be afforded that degree of 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. That case concerned the notice required to beneficiaries of a trust in a proceeding to judicially settle the trustee's accounts. The Supreme Court held that notice by publication alone of such a proceeding to the beneficiaries whose names and addresses appeared on the trustee's records was insufficient notice under the Due Process Clause. Since the names and addresses were either known or reasonably ascertainable by the trustee, he was required to provide notice by mail or other means as certain to ensure actual notice to the beneficiaries interested in the proceeding. The Court held that the minimum requirement of Due Process ". . . is notice reasonably calculated under all of the circumstances, to apprise interested parties of the ...


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