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Hardy v. Phelps

Supreme Court of Idaho

May 20, 2019

JEFFREY T. HARDY and JOHNNA A. HARDY, husband and wife, Plaintiffs-Counterdefendants-Respondents,
v.
RONALD O. PHELPS and DONNA J. PHELPS, husband and wife; RONALD O. PHELPS and DONNA J. PHELPS, TRUSTEES OF THE PHELPS FAMILY TRUST U/D/T/ SEPTEMBER 16, 2004; and DOES I-X as individuals with interest in real property located in Boise County, Idaho, legally described as Lots 26 and 27 of Mores Creek Heights, according to the plat thereof, recorded as Instrument No. 95549, records of Boise County, Idaho, Defendants-Counterclaimants-Appellants. RONALD O. PHELPS and DONNA J. PHELPS, husband and wife; RONALD O. PHELPS and DONNA J. PHELPS, TRUSTEES OF THE PHELPS FAMILY TRUST U/D/T/ SEPTEMBER 16, 2004; and DOES I-X as individuals with interest in real property located in Boise County, Idaho, legally described as Lots 26 and 27 of Mores Creek Heights, according to the plat thereof, recorded as Instrument No. 95549, records of Boise County, Idaho, Cross Claimants-Appellants,
v.
BOISE COUNTY, a political subdivision of the State of Idaho, and JOHN and JOHN DOE I through X, whose true identities are unknown, Cross Defendant-Respondent

          Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Boise County. Peter Barton, District Judge.

         The order of the district court finding that Boise County's efforts to notify the Phelpses of the tax deed satisfied the notice provision of the statute and were sufficient to satisfy due process requirements is affirmed. Costs on appeal are awarded to Respondents.

          Johnson & Monteleone, L.L.P., Boise, attorney for Appellants. D. Samuel Johnson argued.

          Jones, Gledhill, Fuhrman, Gourley, P.A., Boise, attorneys for Counter-defendants and Respondents Hardy. Chad E. Bernards argued.

          Borton-Lakey Law & Policy, Meridian, attorneys for Cross-defendants and Respondents Boise County. Joseph W. Borton argued.

          BEVAN, JUSTICE.

         I. Nature of the Case

         Jeffrey and Johnna Hardy ("the Hardys") purchased two properties at a tax sale and brought action to quiet title against the original owners, Ronald and Donna Phelps ("the Phelpses"). The Phelpses counterclaimed against the Hardys and cross-claimed against Boise County, alleging that Boise County failed to provide them proper notice of tax deficiency. Following a bench trial, the district court entered judgment quieting title to the properties in the Hardys and denying the Phelpses' counterclaim. The Phelpses appealed, asserting the lack of notice makes the Hardys' deeds void.

         II. Factual and Procedural Background

         In the early 1980s, the Phelpses purchased seven parcels of property in Mores Creek Heights, a subdivision in Boise County. Two of those seven lots are at issue in this appeal ("Lot 26" and "Lot 27").

         On October 1, 2004, the Phelpses recorded a quitclaim deed and trust transfer deed, transferring each of the seven lots into their trust. Each deed contained the statement "Mail Tax Statements to: Ronald O. Phelps, Donna J. Phelps, 1 Craftsbury Place, Ladera Ranch, CA 92694." The Phelpses moved to this address in 2005 and resided there at the time of the bench trial on November 16, 2017. The Phelpses signed for the receipt of certified mail sent to the Ladera Ranch address from Boise County as late as May 18, 2013, and again on December 7, 2015; however, the Phelpses' mailing address on file with Boise County beginning in 2009, and at all times relevant here, was P.O. Box 1047, El Toro, CA, 92630. Boise County mailed notices regarding property taxes on the lots to the Phelpses at the El Toro address beginning in 2009.

         The Phelpses did not pay property taxes on the lots for 2010 or any year thereafter. On or about March 21 and March 24, 2014, Boise County ordered and obtained litigation guarantees from Alliance Title for each of the Phelpses' seven lots. The litigation guarantees listed the parties who have a publicly recorded interest in each property. The computer program used to produce the litigation guarantees searches all recorded documents held by every county in Idaho, also searching for nicknames, the names of spouses, maiden names of spouses, and possible misspellings of names. Alliance Title's March 2014 litigation guarantee for Lot 26 and Lot 27 listed P.O. Box 1047, El Toro, CA and 1 Craftsbury Place, Ladera Ranch, CA as the two addresses for the Phelpses.

         On May 23, 2014, Boise County mailed multiple envelopes, each containing a "Notice of Pending Issue of Tax Deed" ("Pending Issue Letter") that identified the parcel, the names of the owners, the amount of delinquency, the date of hearing, and the date that a tax deed to Boise County would be issued if the delinquency was not cured. Copies of this Pending Issue Letter for each of the Phelpses' lots were sent by certified mail to P.O. Box 1047, El Toro, CA and to 1 Craftsbury Place, Ladera Ranch, CA. Boise County also mailed the Pending Issue Letter by ordinary mail to P.O. Box 1047, El Toro, CA 92630. The letters each stated:

If said delinquency entry is not redeemed on or before July 22, 2014, by payment of said unpaid taxes together with late charges, interest, and all costs and expenses . . . I shall thereupon, as required by law, make application to the Board of County Commissioners of Boise County, State of Idaho, for a hearing to be held on July 23, 2014, at 10:00 AM, or as soon thereafter as said application can be heard, at 420 Main Street, Idaho City, ID for a Tax Deed conveying the above described property to said Boise County . . . .

         After receiving no reply to the letters, on June 18, 2014, Boise County published the first of four consecutive weekly advertisements on the pending issuance of tax deeds for the Phelpses' lots, including Lot 26 and Lot 27, in the Idaho World newspaper (the newspaper of general circulation in Boise County). The summary of the advertisement included the names of Mr. and Ms. Phelps, the P.O. Box 1047, El Toro, CA address, and the legal description of each of their seven lots. The summary further stated that

the time of redemption of said property from said taxes expires on July 22, 2014, at 5:00 PM, and if not paid a tax deed will be issued to said County of Boise.

         The final advertisement ran on July 9, 2014.

         On June 20, 2014, Ms. Phelps emailed Boise County, requesting confirmation that the Phelpses were "for sure up to date on our taxes." On June 23, Boise County replied to Ms. Phelps' email stating, "[y]our taxes are delinquent an[d] you need to pay the 2010 taxes of $11, 908.79 [b]efore July 23, 2014 to avoid a tax deed." The reply email does not mention the Pending Issue Letter or a specific hearing. Ms. Phelps verified by affidavit that she received this email but testified that she took the email to mean she would get a more formal notice after July 23, 2014.

         On July 2, 2014, one of the envelopes containing the Pending Issue Letter sent to the Phelpses at 1 Craftsbury Place, Ladera Ranch, CA was returned as unclaimed to Boise County. On July 16, 2014, affidavits of compliance for the tax deed process for Lot 26 and Lot 27 were recorded. The Boise County Commissioners ("the Board") held a public hearing and granted a motion to approve the properties on the tax deed listing. The Board issued its Findings of Fact and Conclusions of Law for Lot 26 and Lot 27 on July 22, 2014. The Board found:

On May 16th [sic], 2014, [Boise County] caused to be served a copy of the Notice of Pending Issue of Tax Deed by certified, registered mail, return receipt demanded, upon the record owner, at their last known address, for the above referenced property; which was no more than five (5) months and no less than two (2) months prior to the time set for the tax deed to issue.

         Also on July 22, 2014, the Board signed the tax deeds for Lot 26 and Lot 27. The tax deeds were recorded on July 24, 2014.

         On July 28, 2014, Boise County received two more unclaimed envelopes that they had sent by certified mail to the Phelpses at 1 Craftsbury Place, Ladera Ranch, CA and to P.O. Box 1047, El Toro, CA.

         Over a year later, on September 15, 2015, Boise County auctioned and sold all seven of the Phelpses' lots. The Hardys purchased Lot 26 and Lot 27 at the auction. The Phelpses took no action to pay their taxes, to contest the tax sale, or to redeem their lots prior to the auction.

         On September 22, 2015, Boise County granted the Hardys quitclaim deeds for Lot 26 and Lot 27. The original quitclaim deeds contained a spelling error, so the deeds were corrected and re-recorded on September 30, 2015. The Hardys have paid the property taxes on Lot 26 and Lot 27 every year since they purchased them.

         On November 24, 2015, Boise County sent an excess funds letter by certified mail to the Phelpses at 1 Craftsbury Place, Ladera Ranch, CA 92694. On December 7, 2015, Ms. Phelps signed for the letter. On February 8, 2016, Boise County received a letter from the Phelpses requesting payment for the excess proceeds from the tax sale. The letter requested that the payment be sent to a new address, P.O. Box 3779, Mission Viejo, CA 92690, even though the Phelpses maintained this had been their address for "the last 10 plus years." The March 2014 litigation guarantees did not include the Mission Viejo address for the Phelpses.

         After Boise County issued quitclaim deeds to the Hardys, the Hardys began making improvements to Lot 26 and Lot 27, which included survey work, excavation, permitting, and the building of a foundation. At the bench trial, the Hardys ...


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