Illinois Supreme Court Holds That Flaws in Tax Sale Notices Don’t Void the Tax Deed

Is an order issuing a tax deed void where the statutory take notices to the owner are missing certain information required by the statute? Does due process require that the buyer at the tax sale demonstrate that the former owner of the property actually received the notices? This morning, in an opinion by Justice Thomas, a unanimous Illinois Supreme Court held in DG Enterprises, LLC –Will Tax, LLC v. Corneliusthat the answer to both questions was “no.” Our detailed report on the underlying facts and lower court opinions and the oral argument at the Supreme Court is here.

DG Enterprises began when the plaintiff bought the 2007 delinquent real estate taxes on a property in Joliet. The Property Tax Code requires that to begin the process of securing ownership, the buyer at a tax sale must deliver the preprinted form called Take Notice 1 to the clerk, “completely filled in,” for mailing to the owner. (35 ILCS 200/22-5.) The Take Notice advises the owner of the sale and provides information about how the property may be redeemed. The Take Notice delivered by the buyer in DG Enterprises did not contain the address and phone number of the Will County clerk.

Between three and six months prior to expiration of the period of redemption, the Code requires that a second notice, called Take Notice II, be sent to the owner. This form also calls for the clerk’s address and phone number, and once again, the form provided by the buyer to the clerk was missing that information.

Finally, the Property Tax Code requires that notice of the sale be published in a newspaper. The statute sets forth the information which must be included in the published notice – which does not include the address and phone number of the clerk.

In DG Enterprises, the clerk tried three times to send Take Notice I to the property via certified mail. All were returned unclaimed. The buyer hired a licensed process server, who tried eleven times to personally serve the notices, all without success. The notice was subsequently published in a Joliet newspaper on three occasions spaced two weeks apart.

In November 2011, the defendant former owner having neither appeared nor made any attempt to redeem the property, the trial court ordered issuance of a tax deed. Five months later, the defendant appeared, moving to vacate the prior order and dismiss the action on the grounds that the notices were fatally defective and the whole procedure violated due process. The trial court agreed and vacated the tax deed. A divided Appellate Court affirmed.

The Supreme Court reversed. The Court found that the Code struck a balance between competing interests – the interest of the former owner in avoiding a forced sale of the property versus the societal interest in the marketability of a tax deed. The legislature struck that balance by providing in Section 22-45 of the Property Tax Code that tax deeds may be challenged only on four grounds: (1) proof that the taxes were paid prior the sale; (2) proof that the property was tax-exempt; (3) clear and convincing evidence that the tax deed had been procured by fraud or deception; or (4) proof that a person with a recorded interest in the property had not been named as a party in the publication notice and that the purchaser had not made a diligent inquiry and effort to make service of the statutory notice on that person.

The defendant argued (and the Appellate Court had agreed) that the defects in the statutory notices meant that no notice had been accomplished at all. But nothing in Section 22-45 suggested that technical flaws in the notice were grounds for vacating the tax deed, the Court held.

Before the Supreme Court, the deceased defendant’s administrator argued that the word “and” in Section 22-45, providing that a deed may be vacated upon proof that an owner had not been named in the publication notice and that the purchaser had not diligently attempted service, could be read as “or” – meaning that a tax deed could be vacated simply because the buyer didn’t try hard enough to accomplish serve. The Court disagreed, finding no evidence that reading the statute to mean what it says – including the “and” – would defeat the purpose of the statute.

The Court then turned to the defendant’s claim that the failure of notice meant that the sale violated the owner’s due process rights. The defendant claimed that the buyer should have taken additional steps to find and notify the owner. The problem with that, the Court held, was that the buyer had taken several steps to achieve notice, ordering a title examination and commitment for title insurance and repeatedly attempting personal service, as well as causing the County Sheriff and the clerk to attempt mail service. The former owner argued that if the buyer had searched County records, it would have found a mortgage release providing an address for the owner’s administrator in Wheaton. But the Court held that the buyer had no obligation to engage in an “open-ended search for a new address” once the statutory steps failed.

The Court concluded by briefly suggesting that the former owner’s estate might still have a remedy through the indemnity fund set up by the Property Tax Code, which provides that a former owner seeking a recovery less than $99,000 may recover indemnity from the fund merely by showing equitable entitlement (irrespective of negligence or fault).

Image courtesy of Flickr by Phillip Ingham (no changes).