Reversal: Tax deed holder entitled to summary judgment in ownership dispute

A dispute over a misspelled name that led to two entities both thinking they owned an Indianapolis property has been resolved in favor of the entity holding the tax deed, with the Indiana Court of Appeals finding the opposing party did not sufficiently rebut the validity of the tax deed.

Colorado-based Rainier Properties LLC came into possession of an Arnolda Avenue property in 2016 but failed to pay taxes. Thus, the property was scheduled for a tax sale in October 2017. However, when the deed for the property was recorded in 2016, the name of the owner was misspelled as Rainer, another Colorado property group.

A series of notices – notice of tax sale, notice of S&C Financial’s purchase of the property and notice of filing of a petition for tax deed – were sent to Rainier’s correct address but the wrong name, Rainer’s address and the Arnolda Avenue property. Notices sent via certified mail were returned, while those sent via first-class mail were delivered.

Shortly after S&C petitioned for the tax deed, Rainier conveyed the property to GPS Property Acquisition LLC, which then conveyed it to Ahmad and Pinky Khan. The title search did not identify a tax sale, and the Khans claimed they had no knowledge of the sale when they recorded their deed in February 2019.

But just 45 minutes before the Khan recorded their deed, S&C Financial had recorded its tax deed for the property. When the Khans learned of the competing deeds, they filed an emergency motion to set aside the tax deed.

The trial court ruled in the Khans’ favor, finding the notices were sufficient but the Khans “were bona fide purchasers with no actual or constructive knowledge of the tax sale which ‘overrules the sufficiency of the notices.’” But the Indiana Court of Appeals reversed in a Wednesday opinion, remanding for the entry of judgment in S&C’s favor in S&C Financial Group, LLC v. Pinky Khan and Ahmad Khan, 20A-TP-1934.

As an initial matter, the appellate court rejected S&C’s argument that the Khans lacked standing.

“As the Khans explained in their response to S&C Financial’s summary judgment motion, ‘The Khans’ personal stake in the outcome of this lawsuit is whether they own the Property. They will sustain a direct injury if they are not deemed title holders of the Property, as they paid valuable consideration … and have expended additional funds to maintain the Property and in paying a mortgage on the property.’ We therefore conclude that they have standing,” Judge Margret Robb wrote Wednesday.

The appellate panel also rejected S&C’s argument that the Khans’ challenge to the tax deed was timely, with Robb noting “there is an exception to the sixty-day requirement ‘where a motion for relief from judgment alleges a tax deed is void due to constitutionally inadequate notice, in which case an appeal must be brought within a reasonable time rather than within sixty days.’ Edwards v. Neace, 898 N.E.2d 343, 348 (Ind. Ct. App. 2008).”

However, the panel went on to note that actual notice is not required. Instead, notice must be “reasonably calculated under all the circumstances to apprise the owner of the action and give them an opportunity to respond.”

Here, the panel held, because only the notices sent by certified mail were returned, not those sent by first-class mail, notice of tax sale in this case was sufficient. It was not the auditor’s fault that Rainier’s name was misspelled, the panel added, but rather was the fault of whoever prepared the deed and of the parties.

“The issuance of the tax deed created a rebuttable presumption that the tax sale and all the steps leading up to the issuance of the tax deed were proper,” Robb continued. “… The Khans had the burden to rebut the presumption of the validity of the tax deed and they have not done so.”

The COA also rejected the argument that the Khans were “bona fide purchasers,” trumping S&C’s status as the tax sale purchaser. The validity of a tax deed can only be challenged under factors enumerated in Indiana Code § 6-1.1-25-16, and bona fide purchaser status is not a factor, the court held.

“Second, the Khans’ argument that they can both stand in the shoes of Rainier for purposes of challenging the sufficiency of notice and be bona fide purchasers is contradictory: if they are standing in Rainier’s shoes in this action, then the constitutionally sufficient notice to Rainier that there was a tax sale proceeding precludes the Khans from being bona fide purchasers,” Robb wrote. “Third, although the redemption statute does not deprive a delinquent taxpayer of his right to convey the property after a tax sale and prior to its redemption … there are statutory restrictions on such a conveyance,” including I.C. 32-21-8.

Finally, the COA distinguished Kumar v. Bay Bridge, LLC, 903 N.E.2d 114 (Ind. Ct. App. 2009), and determined the Khans were not entitled to summary judgment on legal or equitable grounds. “Instead,” Robb concluded, “S&C Financial is entitled to summary judgment in its favor because the presumption that the tax sale and all of the statutory steps leading to the issuance of the Tax Deed were proper was not rebutted by the Khans.”

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