Indiana Supreme Court Revisits And Reaffirms Constitutionality Of Tax Sale Mortgagee Notice Requirements

A recent Indiana Supreme Court ruling in M & M Investment Group, LLC v. Ahlemeyer Farms, Inc. and Monroe Bank, No. 03S04-1211-CC-645 (Ind. 2013) reaffirms the constitutionality of the statutory tax sale mortgagee notice requirements in Indiana. The decision should serve as a reminder to any person, anywhere that provides mortgage financing on Indiana real estate that County Auditors can provide pre-sale notices if requested.

Rather than paraphrase, the following is Indiana Supreme Court Justice Steven David's summary of the issue, facts and the court's holding in M & M Investment:

Before a parcel of real property can be sold at a tax sale, the Indiana Code requires the county auditor to mail notice of the pending sale to any mortgagee holding a mortgage on the property-provided, however, that the mortgagee has first affirmatively requested such notice by submitting a form to the auditor. Is such a procedure permissible under the Due Process Clause of the Fourteenth Amendment? The answer, we said over two decades ago, is "Yes."

But in this case a bank failed to submit the required form to the Bartholomew County auditor and therefore was not notified that one of its mortgaged properties was tax-delinquent until after the property had been sold and the buyer requested a tax deed. The bank objected, challenging the constitutionality of this statutory scheme in light of a more recent case from the U.S. Supreme Court. The trial court below agreed with the bank and refused to issue the tax deed, but we remain firm that the answer to the constitutional question is still "Yes," and therefore reverse.

Pursuant to legislative changes made in 1988, which remain applicable today, the provision under the Indiana tax sale scheme requiring pre-sale notice to mortgagees of an impending tax sale was amended to require the auditor to mail notice by certified mail "to any mortgagee who annual requests a copy of the notice" (I.C. §6-1.1-24-3(b)) in addition to those long standing requirements of notification generally by publication and posting notice in the county courthouse.

The Indiana Supreme Court had previously addressed and upheld the revised statutory scheme on three separate occasions, all in the same year. First in Elizondo v. Read, 588 N.E. 2d 501 (Ind. 1992) where certified mail notice was mailed to an invalid address on file in the auditor's office and was returned unclaimed (after the mortgagee moved twice without updating the auditor's records)...