Laura Denvir Stith, Judge.
Realty Acquisition, LLC, appeals the circuit court's judgment sustaining motions by Beemer Construction Company and Seal-O-Matic Paving Company to set aside a tax sale of certain real property to Realty. Realty argues that the trial court erred in holding that, because Beemer and Seal-O-Matic had mechanic's liens on the property, they were entitled to personal notice by mail of the tax sale. In support, Realty notes that section 141.540, RSMo Supp. 2013, the statute governing notice of tax sales, requires only notice by publication to persons other than owners. This Court affirms.
A mechanic's lien properly filed with the clerk of the court constitutes a substantial property interest that is entitled to due process protection, including the giving of personal notice by mail of a tax sale to those mechanic's lienholders whose names and addresses are reasonably ascertainable from public records. The clerk of each circuit court maintains a book of abstracts of mechanic's lien filings that includes the name and address of each person with a mechanic's lien claim on particular property. § 429.090, RSMo 2000. This Court recognized in State ex rel. Erbs et al. v. Oliver, 361 Mo. 836, 237 S.W.2d 128, 130 (Mo. banc 1951), that the abstract is "a proper public record." No reason is given as to why holders of properly filed mechanic's liens are not entitled to due process protection of their property interests, including personal notice by mail, other than that it would require the county collector of revenue to look in two locations rather than in a single location to determine who is entitled to personal notice. This minimal additional burden is not sufficient to outweigh the due process rights of those possessing mechanic's liens on a property whose names and addresses are reasonably ascertainable from the public records maintained by the county in its circuit clerk's office, as required by statute.
Because it is uncontested that, as required under the pertinent provisions of section 429.080,
Sunnypointe, LLC, an administratively dissolved Missouri limited liability company, owned a parcel of real property, commonly known as Sunny Pointe 2nd Plat, located at the southeast intersection of R.D. Mize Road and N.E. Chapman Drive in Blue Springs (the "property"). In August 2006, Beemer installed sanitary sewers, storm sewers, and water mains on the property. In January 2007, Seal-O-Matic installed curbs and asphalt for streets on the property. Sunnypointe did not pay Beemer or Seal-O-Matic for their services. Beemer, in April 2007, and Seal-O-Matic, in December 2007, filed mechanic's liens against the property with the clerk of the Jackson County circuit court. Beemer's
Sunnypointe did not pay the 2007 taxes on the property before they became delinquent, so on May 24, 2010, the Director of Collections for Jackson County (the "collector") filed a petition
The collector scheduled the tax sale for August 22, 2011. He provided publication notice of the sale as well as notice by certified mail to Sunnypointe on or about June 28, 2011. But, although Beemer and Seal-O-Matic had filed their mechanic's liens with the clerk of the circuit court and the clerk's abstract book showed these liens and the lienholders' names and addresses, no attempt was made to examine the clerk's records or otherwise identify or personally notify these mechanic's lien claimants. Therefore, neither Beemer nor Seal-O-Matic received personal notice of the tax sale, and neither was aware of the publication notice prior to the occurrence of the tax sale.
Realty purchased the property at the tax sale for $51,000. The notice of sale to Realty states that this included $341.47 in taxes, interest, penalties, attorney fees, and costs that were owed on the property at the time of the sale.
On November 9, 2011, after learning about the sale, Beemer and Seal-O-Matic entered appearances in the tax foreclosure action to oppose confirmation of the tax sale, arguing that the failure to give them prior personal notice of the tax sale violated their due process rights because of their interest in the property represented by their respective mechanic's liens. On June 4, 2012, the trial court set aside the tax sale as null and void. Realty appealed. Following an opinion by the court of appeals, this Court granted transfer. Mo. Const. art. V, § 10.
The trial court's judgment will be sustained unless there is no substantial
Realty argues that the trial court erred in setting aside the tax sale simply because the collector did not give personal notice to the holders of mechanic's liens. It argues that notice had to be given only as set out in section 141.540 and that section requires only publication notice, not personal notice, to persons other than the property owner. Beemer and Seal-O-Matic agree that section 141.540 requires only publication notice to persons other than the property owner, but argue that their filing of their mechanic's liens gives them a substantial property interest entitling them to due process protection and that, under the governing law as explained by this Court and by the United States Supreme Court, this requires notice by mail or other means reasonably likely to apprise them of the tax sale.
Section 141.540 sets out the statutory requirements for notice of tax sales. Section 141.540.5 states that the county collector must provide notice by certified, registered, or restricted mail of the tax sale to:
Section 141.540.6 states that the county collector "may, at his or her option" provide certified, registered, or restricted mail notice to a mortgagee or security holder.
Missouri statutes do not require notice by mail to any other persons, instead requiring only generalized publication notice by posting the tax sale notice in the county courthouse and on the property, and by publishing notice in certain newspapers.
The question before the Court is whether the principles underlying these decisions similarly require notice of a tax sale be given by mail, rather than merely by publication, to a holder of a mechanic's lien on land subject to the tax sale when the lien
In determining whether due process requires personalized notice to those holding mechanic's liens, it is helpful to review the development of the constitutional principles that require notice to holders of other property interests. The seminal case discussing the constitutional requirements for notice is Mullane v. Central Hanover Bank & Trust, 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). Mullane addressed whether newspaper publication of judicial settlement of a common trust fund provided constitutionally sufficient notice to identifiable beneficiaries and other interested parties. Id. at 307, 309, 70 S.Ct. 652. In balancing the need of interested parties to learn about an event that will materially affect their interest with the burden imposed on the one who would be required to give notice, Mullane said:
Id. at 314-15, 70 S.Ct. 652(internal citations omitted) (emphasis added).
Applying these principles, Mullane held that the beneficiaries of the trust had a substantial interest. As such, "[i]t would be idle to pretend that publication alone... is a reliable means of acquainting interested parties of the fact that their rights are before the courts.... Chance alone brings to the attention of even a local resident an advertisement...." Id. at
In Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983), the Supreme Court extended to mortgagees the due process protection that had been applied to trust beneficiaries in Mullane. In Mennonite, an Indiana statute required only publication and posting notice of pending tax sales. 462 U.S. at 793, 103 S.Ct. 2706. Mennonite held that the lack of personalized notice was inadequate to protect the property interests held by a mortgagee. Id. at 800, 103 S.Ct. 2706.
In particular, Mennonite noted that a mortgagee acquires a lien on the property that "may be conveyed together with the mortgagor's personal obligation to repay the debt secured by the mortgage." Id. at 798, 103 S.Ct. 2706. Importantly, Mennonite also made the fact that the mortgagee had a security interest in the property a key factor in determining its property interest was sufficiently substantial to require due process protection, stating:
Id. Additionally, Mennonite noted that:
Id. Mennonite concluded that these effects of a tax sale on the property interest of a mortgagee were sufficiently substantial to entitle the mortgagee's interest to due process protection, stating that "[s]ince a mortgagee clearly has a legally protected property interest, he is entitled to notice reasonably calculated to apprise him of a pending tax sale." Id. (Emphasis added.)
Publication, Mennonite held, is inadequate to meet due process requirements:
Id. This is because "[n]otice 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." Id. at 800, 103 S.Ct. 2706 (emphasis added).
These same notice requirements, Mennonite said, apply regardless of whether the affected party is "unlettered or well versed in commercial practice" and regardless of whether any party might have other means to find out about the sale, for "a party's ability to take steps to safeguard
In Lohr v. Cobur Corp., 654 S.W.2d 883 (Mo. banc 1983), this Court was called on to determine whether deeds of trust were subject to Mennonite's holding that the notice provisions of a statute may not be sufficient to satisfy due process. Lohr held that, as with mortgagees, when the deed of trust beneficiary is identified in the public records, the identity of the beneficiary is reasonably ascertainable and due process requires that notice by publication alone is insufficient and must be supplemented by notice mailed to the beneficiary's last known address or by personal service. Id. at 887.
Similarly, and particularly relevant here, Anheuser-Busch Employees' Credit Union v. Davis, 899 S.W.2d 868, 869 (Mo. banc 1995), held that a credit union that had loaned money to a property owner and had publicly recorded its interest was entitled to mailed notice of a tax sale of the property, stating:
See also In re Foreclosure of Liens for Delinquent Land Taxes by Action in Rem, Maximilian Invs., 190 S.W.3d 416, 420 (Mo.App.2006) (explaining that due process requires notice to mortgagees).
It is undisputed that only publication notice, and no personalized notice, was given to Beemer and Seal-O-Matic. It is also undisputed that abstracts of both of their mechanic's liens were publicly recorded in the office of the clerk of the Jackson County circuit court.
But the parties disagree as to: (1) whether the interest of the holder of a properly filed mechanic's lien is sufficient to require personalized notice and, if so, (2) whether the fact that the names and addresses of such lienholders were contained in the public records of liens statutorily required to be maintained by the circuit clerk means that they were reasonably ascertainable by the collector such that he was required to give them "[n]otice by mail or other means as certain to ensure actual notice." Mennonite, 462 U.S. at 800, 103 S.Ct. 2706.
Realty argues that this Court should hold that, while a mechanic's lien is a property interest, the holder of that lien interest is not entitled to the due process notice protections required by Mullane, Mennonite, and their progeny. While Realty does not lay out its reasoning expressly, it appears it believes that a lienholder's interest is insufficiently substantial to justify the added trouble it would impose on
As noted earlier, Mennonite held that a mortgagee's interest is sufficiently substantial to be entitled to due process protection after noting that: (1) the mortgagee acquires a lien on the mortgagor's property; (2) that lien is given priority over most other subsequent security interests, and a purchase money security interest is given priority even over prior security interests; and (3) a tax sale diminishes or nullifies the mortgagee's lien interest. Mennonite, 462 U.S. at 798, 103 S.Ct. 2706.
Similarly, the Missouri legislature has provided that the holder of a mechanic's lien has a lien on the structure or real property subject to the mechanic's lien, and it has given the mechanic's lienholder priority over almost every other type of lien. See sections 429.010; 429.060, RSMo 2000.
Indeed, in Home Bldg. Corp. v. Ventura Corp., 568 S.W.2d 769 (Mo. banc 1978), this Court addressed the rights of a lienholder against a municipal housing authority that purchased the property. The Court recognized that the lien arose under the "first spade rule" from the visible commencement of the work and that the filing of the lien with the clerk and the later filing of suit continued the lien. Id. at 773. The lawsuit, it said, was to "adjudicate and enforce" the lien that had arisen at the first spade. Id.
In other words, contrary to the suggestion of the concurring opinion, a judgment on the lien is not necessary to transform a "claim" into an actual "lien," which the concurring opinion recognizes is a substantial property interest. The lien — and, therefore, the substantial property interest — exists immediately, subject to divestment, in effect, if the statutory steps later are not taken to protect it. Id. Indeed, Rosenzweig, relied on by the concurring
Rosenzweig v. Ferguson, 348 Mo. 1144, 158 S.W.2d 124, 128 (1941) (emphasis added). See also W. Cent. Concrete, LLC v. Reeves, 310 S.W.3d 778, 782 (Mo.App.2010) ("Section 429.170 requires an action to enforce a mechanic's lien `shall be commenced within six months
That is no doubt why, in Home Bldg. Corp., this Court specifically rejected the argument that a municipal authority that took possession of property subject to a mechanic's lien before judgment could limit the lienholder's right to maintain and enforce the lien, stating that what the lienholder:
Home Bldg. Corp., 568 S.W.2d at 777(emphasis added).
Nonetheless, section 141.550.3 allows a mechanic's lienholder's interest to be nullified by a tax sale by providing that a tax sale conveys the "whole interest" of "every person having or claiming any right, title or interest in or lien upon such real estate, whether such person has answered or not." Further, section 141.570.2 states that, upon the sale, all persons "shall be barred and forever foreclosed of all such right, title, interest, claim, lien or equity of redemption, and the court shall order immediate possession of such real estate be given to such purchaser."
As a result, it is undisputable that a tax sale will "immediately and drastically diminish[] the value" of a mechanic's lienholder's interest "by granting the tax-sale purchaser a lien with priority over that of all other creditors." Mennonite, 462 U.S. at 798, 103 S.Ct. 2706. Similar concerns are what led Mennonite to recognize a mortgagee's interests as substantial property interests subject to due process notice protections. This Court finds that mechanic's liens on real property are substantial property interests subject to due process notice protections.
Because a mechanic's lien is subject to due process protection, notice of a tax sale must be reasonably calculated to reach a mechanic's lienholder whose name and address is reasonably ascertainable. In Mennonite, the Supreme Court explained, "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."
Applying these principles here, it is uncontested that the names and addresses of Beemer and Seal-O-Matic were in the records of mechanic's liens maintained by the circuit clerk of Jackson County. Realty argues that the county collector already must examine the recorder of deed's records to identify those with mortgages or other recorded interests and that to require the county collector also to search the circuit clerk's abstract book requires unreasonable efforts. This Court disagrees.
In so determining, the Court particularly notes that Beemer and Seal-O-Matic
At some point a search may become unreasonable and place on the collector a substantially greater duty than envisioned by Mullane and Mennonite.
For these reasons, the collector was required to undertake reasonable additional efforts to identify and give notice to holders of mechanic's liens. It is not too much to require that those reasonable additional efforts include checking the abstract book maintained, as required by statute, in the circuit clerk's office. Not only has this Court held that the circuit clerk's records are "proper public records" chosen by the legislature as the repository of information about mechanic's liens, but, in many if not most counties, the circuit clerk's office is in the same building as is the recorder of deed's office. A search of the circuit clerk's records of mechanic's liens is the type of reasonable search envisioned by Mullane and Mennonite. In failing to give notice by mail or other means as certain to ensure actual notice to Beemer and Seal-O-Matic, despite the fact that their mechanic's liens were filed with the circuit clerk and were reasonably available to the collector, the collector's notice was inadequate. The notice was not reasonably
A mechanic's lien constitutes a substantial property interest, which is significantly affected by a tax sale, and is subject to due process protection. Notice of a tax sale must be given in a manner that is reasonably calculated to reach a mechanic's lienholder whose name and address are reasonably ascertainable. The name and address of a mechanic's lienholder is reasonably ascertainable through a search of the abstract book, which is a public record required by statute to be maintained by the clerk of the circuit court of each county. It is not unreasonable to require the party providing notice to search both the circuit clerk's office and the recorder of deed's office. Here, the collector did not provide notice to Beemer and Seal-O-Matic, despite the fact that their names and addresses were reasonably ascertainable from the circuit clerk's public records. Because Beemer and Seal-O-Matic did not receive notice, the trial court properly set aside the tax sale in question. The judgment is affirmed.
Russell, C.J., Breckenridge, Draper and Teitelman, JJ., concur; Wilson, J., concurs in separate opinion filed; Fischer, J., concurs in opinion of Wilson, J.
Paul C. Wilson, Judge Concurring.
The principal opinion holds that due process entitles a mechanic's lienholder, whose name and address are reasonably ascertainable, to individual notice of a tax sale because a mechanic's lien constitutes a legally protected property interest that would be affected by a tax sale. I agree. I write separately, however, to emphasize that this holding applies only to a lienholder, i.e., someone who has prosecuted a claim for mechanic's lien to judgment. In particular, this holding does not apply to an entity that has filed a mechanic's lien claim — or a subsequent mechanic's lien petition — but for which judgment has not been entered under sections 429.210 to 429.240.
Beemer Construction Company ("BCC") and Seal-O-Matic Paving Company ("SOMP") challenged the foreclosure on the ground that the County failed to give them individual notice of the foreclosure sale of the relevant property. They also challenged on the ground that they were entitled to individual notice when the County filed the tax foreclosure petition and when judgment was entered in that case under the notice provisions of sections 141.440 and 141.500, respectively. The County's filing of the tax foreclosure petition (and the entry of judgment in the action) occurred long before judgment was entered in favor of BCC or SOMP on their mechanic's lien petitions. Accordingly, even though BCC's and SOMP's perfected and enforceable mechanic's liens were "legally protected property interests" worthy of protection under due process, they did not have perfected and enforceable mechanic's liens (and, therefore, no right to individual notice under due process) until judgment was entered in their favor on April 22, 2011, on their mechanic's lien petitions.
A party seeking to establish an enforceable mechanic's lien must file a timely claim (or "demand") with the circuit clerk pursuant to section 429.080, RSMo Supp. 2013. Within six months of that filing, the party must then file an action to perfect the claimed lien, and this action must be "prosecuted without unnecessary delay to final judgment." § 429.170. It is the judgment,
When a tort plaintiff sues a defendant for money damages in a county where the defendant owns real property, the plaintiff will have an enforceable lien on (or legally protected interest in) the defendant's property in that county the moment judgment is entered in the plaintiff's favor. Until that judgment is entered, however, the plaintiff has no legally protected property interest in the defendant's property. The same is true with a mechanic's lien claimant. Until judgment is entered in favor of the claimant on a timely mechanic's lien petition, the filing of a mechanic's lien claim is "comparable to the filing of a lis pendens notice." Home Bldg. Corp. v. Ventura Corp., 568 S.W.2d 769, 774 (Mo. banc 1978). Both the mechanic's lien claim and the mechanic's lien petition are filed in pursuit of — but neither, by itself, constitutes — a legally protected property interest.
Because it is the mechanic's lien judgment that creates the legally protected property interest on which due process protections depend, the sequence of events in this case illustrates why the Court's holding is limited to BCC's and SOMP's right to notice of the foreclosure sale and does not extend to the claim that they were entitled to notice of the tax foreclosure petition and judgment. The relevant dates and actions are:
Date Mechanic's Lien Actions Tax Foreclosure Actions April 30, 2007 BCC files mechanic's lien claim Oct. 26, 2007 BCC files mechanic's lien petition Dec. 7, 2007 SOMP files mechanic's lien claim June 9, 2008 SOMP files mechanic's lien petition June 10, 2008 BCC and SOMP petitions are consolidated May 24, 2010 County files petition to foreclose liens for delinquent taxes Aug. 31, 2010 BCC and SOMP mechanic's lien petitions are tried Nov. 12, 2010 Judgment of foreclosure of liens for delinquent land taxes April 12, 2011 Judgment is entered on BCC and SOMP mechanic's lien petitions June 28, 2011 Notice of foreclosure sale given Aug. 22, 2011 Foreclosure sale
As this timeline illustrates, the judgment giving BCC and SOMP enforceable mechanic's liens on the subject property came nearly 11 months
Due process requires "notice reasonably calculated, under all of the circumstances, to apprise interested parties of the pendency of the action." Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 94 L.Ed. 865 (1950). These protections were extended to mortgagees in Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77 L.Ed.2d 180 (1983). The Supreme Court held that, because a "mortgagee clearly has a legally protected property interest, he is entitled to notice reasonably calculated to apprise him of a pending tax sale."
On the other hand, the County was not obligated to give BCC and SOMP individual notices when it filed the tax foreclosure action (and when judgment was entered in that case) because those events occurred prior to the April 12 judgment in their mechanic's lien cases. Even though BCC and SOMP had filed timely mechanic's lien claims under section 429.080 and timely mechanic's lien petitions under section 429.170, they had no legally enforceable interests in the property and no due process right to individual notices concerning the property until judgments were entered on their mechanic's lien petitions under sections 429.210 to 429.240.