MENNONITE BOARD OF MISSIONS v. ADAMS
Legal provision: Due Process
ORAL ARGUMENT OF WILLIAM J. COHEN, ESQ., ON BEHALF OF THE APPELLANT
Chief Justice Burger: We'll hear argument next in Mennonite Board of Missions versus Adams.
Mr. Cohen, I think you may proceed whenever you are ready.
Mr. Cohen: Mr. Chief Justice, may it please the Court.
This is an appeal from the Indiana Court of Appeals.
This case presents the question of whether the Indiana tax sale statutes which were in effect at the time this case arose violate due process in equal protection.
It is the position of the Mennonite Board of Missions that the Indiana tax sale statutes violate due process because they only provide for constructive notice to a mortgagee of record.
The statutes only provided for notice by posting at the courthouse and publication in a newspaper.
This case arose as a quiet title action filed by the Appellee, Richard C. Adams.
Mr. Adams had purchased the property at 1829 Stevens Avenue in Elkhart at a tax sale on August 8, 1977.
Prior to the tax sale, Jean Moore owned the property in fee simple.
The Mennonite Board of Missions had a mortgage on that property.
The most significant fact in this case is that the Mennonite Board of Missions mortgage was recorded.
It was a matter of public record.
It was found in the Elkhart County recorder's office in Volume 388, page 693 of the Elkhart County records.
The name and address of the Mennonite Board of Missions was thus a matter of public record.
Under the terms of that mortgage Moore was required to pay the property taxes.
She failed to pay those taxes.
Unidentified Justice: Does the record show why?
Mr. Cohen: No, it does not, Justice Blackmun, as to why she did not pay the taxes.
But she was, despite not paying the taxes, she was paying that mortgage each month to the Mennonite Board of Missions, which I think is also a very significant point.
Under Indiana law if the taxes aren't paid on property for more than 15 months, the county auditor will compile a list of delinquent property tax... properties.
And, in this case, they would then send notice under Indiana law to the legal title owner.
Indiana law does not provide any mailed notice to an owner of the property.
It is the position of the Mennonite Board of Missions that due process requires, at a minimum, mailed notice to a mortgagee of record.
Had there been notice mailed to the Mennonite Board of Missions, in this case, I submit to this Court that the Mennonite Board of Missions would have paid the taxes.
That's demonstrated by the fact that soon after they learned that the property had actually been sold for delinquent taxes, they immediately tendered to the trial court the statutory amount due to redeem their property.
Unidentified Justice: Mr. Cohen, is there any provision of Indiana law that assures that by inspecting the record of the mortgage, the place at which it has been recorded, whichever, a person would be able to apprise themselves of the present address of the mortgagee as well as the name of the mortgagee?
Mr. Cohen: The mortgage was filed in the county records in Goshen.
The county auditor's office is in the same city.
Their name and address was on the mortgage.
More importantly, the Mennonite Board of Missions offices have been located in Elkhart County for over 50 years.
Unidentified Justice: You're advocating a principle of request, sending mailed notice to any mortgagee of records, I take it.
Now what I'm trying to find out is if there might not be situations in which there hasn't been a recorded mortgage... where the present address of the mortgagee was not available from the recording data.
Mr. Cohen: --Justice Rehnquist, if the mortgage was not recorded, I do not believe that the county auditor would be forced to search titles and give notice to anybody.
If the mortgage wasn't recorded, they couldn't have sent notice.
Unidentified Justice: No, but--
--What if the mortgage had been recorded, but the mortgage either didn't show the mortgagee's address or the mortgagee had moved.
Mr. Cohen: That is a question that is not applicable to this case, but that would be something that would be a fact question that would possibly relieve the county auditor from sending notice... actual notice.
But I do believe that if the mortgage was recorded in your given hypothetical, then it would be incumbent upon the county auditor to send notice to the last known address.
In this case--
Unidentified Justice: Would he be entitled to treat the mortgage... the address shown on the mortgage as the last known address even if it turned out, in fact, to be the third last known address?
Mr. Cohen: --Yes, I believe he would unless the county auditor knew that the mortgagor... or rather the mortgagee had actually moved.
If the facts could be shown that the county auditor knew that the mortgagee's address had changed and the county auditor knew that, I think it would be incumbent upon the county auditor to send notice under those circumstances.
Unidentified Justice: Does the record show the contents of the notice that was published in this case?
Mr. Cohen: No, it does not, Justice O'Connor.
But we are not questioning the form of published notice given in this case itself.
We're saying, however, that published--
Unidentified Justice: What is in... what is contained in that published form of notice?
Mr. Cohen: --Under Indiana law, the statutes provide that the name of the owner of the property will be listed, an address, if possible, but it does not require a specific street address.
The legal title should be in the notice, and that's--
Unidentified Justice: And the mortgagee's name or not?
Mr. Cohen: --There is no present... there is no requirement under the Indiana law in effect at the time this case arose to send mailed notice at all to a mortgagee.
Unidentified Justice: Yes, but I'm just asking about the published notice, what it contained.
Mr. Cohen: --Okay.
It would contain the name of the legal title owner.
It would not contain the name of the mortgagee.
In this particular case, the published records of Elkhart County demonstrate that although the county auditor sent notice to Moore, she never picked up the certified mailing, that the property was then sold to Adams, but significantly, Moore continued to pay the property... to pay the money due and owing under the mortgage to the Mennonite Board of Missions.
Indiana law provides for a two-year period of time to redeem the property following the sale at... by a county official.
The Indiana statutes provide for giving notice to the legal title owner prior to the expiration of the redemption period.
But there was absolutely no provision in Indiana law at the time this case arose to notify a mortgagee of record that the redemption period is about to expire.
Under Indiana law, once the redemption period expires the tax deed purchaser, in this case Adams, obtains a fee simple absolute, free and clear of any prior lien or encumbrance.
In this case we submit to this Court that the fact that the notice was only constructive and, by posting and publication initially to the Mennonite Board of Missions, in conjunction with the fact that there was absolutely no notice given at all to the Mennonite Board of Missions prior to the expiration of the redemption period, results in the Mennonite Board of Missions having their prior reported mortgage taken from them by state action with inadequate notice and without any compensation at all.
Unidentified Justice: Just a question of procedure.
You stated the title in fee simple blossomed in the purchaser at the tax sale after the expiration period.
Does he nevertheless have to go into court on a quiet title action?
Mr. Cohen: He does, Justice Blackmun.
But the statute provides that if notice were given to the legal title owner and that is then prima facie evidence that the tax sale was conducted in an improper manner.
We do not represent Jean Moore.
Our interests are not the same as hers.
We could not represent her for that reason.
We do not dispute the fact that there was notice sent to Moore under the statute, although she never picked up the notice, but--
Unidentified Justice: Anyway, he'd have to go in and get his title cleared up?
Mr. Cohen: --Yes, but--
Unidentified Justice: And this is when your people got the notice.
Mr. Cohen: --That was the first time they actually learned that the property had been sold for taxes.
Unidentified Justice: What does an ordinary bank mortgagee do in Indiana?
Mr. Cohen: --Well, Justice Blackmun, I'm not really sure what an ordinary bank would do in Indiana.
I'm sure that many banks would vary their type of arrangements of looking after their particular loan.
However, the Mennonite Board of Missions is not a professional money-lending institution.
It's a charitable religious organization, a branch of the Mennonite Church.
They were not in the business of making money.
They loaned money--
Unidentified Justice: But they went into the business in this case?
Mr. Cohen: --Much to their chagrin, at this time.
Unidentified Justice: Part of the response to Justice Blackmun's question, indeed, that in many cases banks and insurance companies that have numerous mortgages that they are holding arrange... make arrangements to see that all of the legal publications are sent to them and checked by someone.
That's inherent in the notice by publication system, is it not?
Mr. Cohen: --I think notice by posting and publication to a bank or to the Mennonite Board of Missions, each, under Indiana law would be unconstitutional.
Unidentified Justice: Even if the bank sees the notice?
Mr. Cohen: --Not if the bank actually saw the notice, Your Honor, no.
If the bank actually had actual notice, had seen the publication, we have a different case.
Unidentified Justice: Well, this is not inherence, and part of the system of lending on secured loans with mortgages or trusts, that there's an obligation on the part of the holder of the mortgage to keep in touch with the situation.
Mr. Cohen: I think the Mennonite Board of Missions did exactly that in this case.
They did the one most important thing they could do to protect their interests.
They recorded it, and it was a matter of public record.
It was notice to the Elkhart county auditor of what their interest was.
It was notice to the whole world of what their interest was.
There was no requirement under Indiana law that they do anything else.
Unidentified Justice: There are no requirements for a bank or an insurance company to keep a close check on possible foreclosures or additional liens against their security, but they do it as a matter of prudence.
Mr. Cohen: --They have, perhaps, the resources and the sophistication to do that, but the Mennonite Board of Missions as a charitable organization was not accustomed to doing something like that nor did the law require that they do that.
They did everything, I submit, Mr. Chief Justice, that the law required them to do under the circumstances.
Mr. Cohen, was your client's interest in the property totally destroyed by the fact of the tax sale purchase alone, or is... to follow up on Justice Blackman's question, was there yet to be another proceeding whereby the tax sale purchaser confirmed his title?
His... our interest was finally adjudicated in the quiet title action itself but the adjudication was a foregone conclusion, is what I meant to say to Mr. Justice Blackmun.
That is, under Indiana law, once the tax deed purchaser obtained his tax deed from the county auditor after the expiration of the redemption period, under Indiana law he had the property free and clear.
Unidentified Justice: So, it isn't simply a question of having to pay a penalty plus the amount the tax sale purchaser paid by the time your client had notice?
Mr. Cohen: That's correct.
By the time our client obtained actual notice of the tax sale itself it... the redemption period expired and they were never given an opportunity.
Unidentified Justice: How long was the redemption period?
Mr. Cohen: The redemption period is two years when the property is purchased by a private individual as in this case.
Unidentified Justice: You mean, that for two years this property had been sold for taxes and your client had a mortgage on it, but had no knowledge of the fact that it had been sold for taxes?
Mr. Cohen: That's correct, Justice Rehnquist.
In the meantime, the mortgagor, Moore, continued to pay them each month on the mortgage.
Unidentified Justice: And was in possession?
Mr. Cohen: And was in possession of the property.
There was no attack on that property, so to speak, by the State of Indiana.
The only situation that happened was posting and publication in a newspaper to the Mennonite Board of Missions.
Unidentified Justice: I think most mortgagees in the agreement between the mortgagor and the mortgagee have an agreement whereby the mortgagor has to pay taxes, and the mortgagee his some overseeing by virtue of an escrow fund, doesn't it?
Mr. Cohen: As far as what type of sophisticated mortgage transaction there may be in the case you mentioned as far as escrowing the money, that is not what happened in this case.
The Mennonites are trusting people.
When they had the mortgage with Moore, and Moore was required to pay the taxes, they believed she would do it.
And she continued to pay the--
Unidentified Justice: Well do you think that's really the basis for a constitutional argument?
To say that you trusted someone to do it and, therefore, you're not bound by any constructive service or third party notice statutes at all?
Mr. Cohen: --Under the facts of this case I do believe that's correct, Mr. Justice Rehnquist, because I think the focus of this Court really should be on what the state did, or really what the state failed to do.
That is, the state failed to send adequate notice in this case.
Unidentified Justice: May I ask... there was no notice before either the tax sale or the expiration of the redemption period.
In your view would notice be adequate if either one of those was given?
Mr. Cohen: Had there been mailed notice to the Mennonite Board of Missions, yes.
In fact, as this case was pending... as it worked its way up the appellate level in the State of Indiana, the Indiana legislature actually amended the tax sale statutes, and they now provide for the very type of notice that we are requesting here.
Unidentified Justice: Was that because of this litigation?
Mr. Cohen: I submit that that's in all likelihood true, Justice Blackmun.
I think it's a legislative recognition by the Indiana legislature that the system that was in effect was simply unconstitutional, that it was not difficult or burdensome for a county auditor to look at the public records and send notice.
Unidentified Justice: How prevalent are the statutes requiring notice to mortgagees?
Mr. Cohen: Are you talking about nationwide, Justice White?
Unidentified Justice: Yes.
Mr. Cohen: There is a Yale Law Review article cited in the brief and it is a 1975 article.
In that brief it talks about 21 states that only provide for notice by posting and publication, and I might add the author urges those legislatures to amend those statutes.
Unidentified Justice: How about the remaining case of states?
Mr. Cohen: Of those 21 there... since that law review article--
Unidentified Justice: I know, but how about the other states besides the 21?
Mr. Cohen: --Most states do provide for notice by mail to owners of property.
Unidentified Justice: Well, your inference is that all the other states besides the 21, correct?
Mr. Cohen: I can't... I cannot affirmatively tell you that.
I do not know.
Unidentified Justice: Well, if not, the number would be more than 21.
Mr. Cohen: It may well be the remaining 29 do, Justice White, but I do not know for sure.
I cannot tell you at this point.
But I think--
Unidentified Justice: Mr. Cohen, I suppose it's totally irrelevant but was Mrs. Moore a member of the church?
Mr. Cohen: --No, she was not a member of the Mennonite Church, and this was an arms-length transaction between the parties.
She was not the agent of the Mennonite Board of Missions nor was she the caretaker for the Mennonite Board of Missions in this particular case.
It was an arms-length transaction and, in this case, there is inadequate notice to the Mennonite Board of Missions.
Unidentified Justice: In this recording of the mortgage deed, is an address given for the Mennonite Board of Missions to which notice could be sent?
Mr. Cohen: --Okay.
In the mortgage that was recorded in Elkhart it lists the Mennonite Board of Missions.
The specific street address is not listed, Justice... Mr. Chief Justice.
Unidentified Justice: In a small community, how would one go about finding out the... where to locate the Mennonite Board of Missions?
Mr. Cohen: I submit, Mr. Chief Justice, in Elkhart County, the Mennonite Board of Missions are well-known.
Unidentified Justice: Well I'm... that's why I pointedly did not pick Elkhart.
We don't decide constitutional questions just for Elkhart, Indiana.
The generality is of some importance.
Now, let us say in Fairfax County, Virginia, or anywhere out in the rural Virginia, how would you go about finding the Mennonite Board of Missions?
Mr. Cohen: I'm not sure I quite understand your question.
Unidentified Justice: How could you find out if you wanted... suppose you wanted to join the church?
Let's make it something to their interests.
How would you go about finding them?
Mr. Cohen: In Fairfax, Virginia?
You might call Elkhart, Indiana and find out.
Unidentified Justice: Well I'm... some people might be that much interested in it to make such a call, but a great many might not be.
Mr. Cohen: But, confining ourselves to the specific facts of this case, this Court has said that adequate notice under due process is notice reasonably calculated to inform interested persons of a pending action to provide them an opportunity to appear and assert their rights.
In this particular case, under the Indiana statute in effect at the time this case arose, notice by posting and publication is simply inadequate, that it would be a very relative, easy matter for the Elkhart County auditor to have sent notice by mail.
This Court has set forth the balancing test of what should be looked at as far as what due process is accorded in a given situation.
In this case, the private interest at stake is the permanent loss of the Mennonite Board of Missions' mortgage without any adequate notice of the initial tax sale.
Unidentified Justice: Doesn't the Mennonite Board obey the condition of the mortgage that you annually send us the receipt for your taxes?
Mr. Cohen: They did not have anything like that.
Unidentified Justice: I say, couldn't they have done that.
Mr. Cohen: They could have, Justice Marshall, but again, I think what private individuals may do is not the focus of this case.
What the Mennonites or a bank could have done is not the focus.
Unidentified Justice: Why not?
Mr. Cohen: --Because constitutionally I believe the focus should be on what the state did.
Unidentified Justice: This country has gone for about almost two hundred years now with notice by publication in many areas, affecting important rights.
You speak of it as though this is something written in the Constitution or implied.
Mr. Cohen: Mr. Chief Justice, I think that this is something that has been determined by this Court in Mullane... in the Mullane case and has been determined by--
Unidentified Justice: Yes, but not in this precise context.
Mr. Cohen: --The--
Unidentified Justice: If it had been, you wouldn't have to be here.
Mr. Cohen: --That is correct, Mr. Chief Justice.
But the comparison with the facts of this case as to what happened in Mullane, there... I submit to this Court, this case falls squarely within Mullane, that this case cannot really be distinguished from Mullane.
And on that basis, I submit that this Court would have to reverse the Indiana Court of Appeals.
And this case, I submit, Mr. Chief Justice, also falls squarely within the case decided by this Court, the City... Walker versus City of Hutchinson cases.
In that case this Court said that notice by publication only of a condemnation action where the owner of the property's name and address were a matter of public record is unconstitutional.
And similarly this Court in City... Schroeder versus City of New York did the same thing.
In that case it was another condemnation action and the owner's name and address was a matter of public record and this Court held the New York statute in that case unconstitutional for the same reason.
That is, there was not adequate notice given where the name and address is known, that due process requires at a minimum notice by mail.
This Court recently, just last term, in Green v. Lindsey reaffirmed those well-entrenched principles established in Mullane.
The Green v. Lindsey case involved the Kentucky forceful entry and detainer act.
In that case the procedure utilized by Kentucky is more likely intended to reach a tenant.
The case involved an eviction of a tenant and in the Kentucky statutes it first provided for personal service by the sheriff.
There was absolutely no requirement of personal service in this case.
If the tenant was not home that case provided for posting on the door of the tenant's apartment.
I submit to this Court that posting on the property or an intrusion on the property by the state is far more likely or reasonably calculated to inform a person of an eviction action than is the form of notice chosen by Indiana in this case.
There have been other states that have considered virtually the same question as raised in this case.
In the State of Arizona, the Arizona Supreme Court, back in 1954, determined that the sale of property by posting... rather publication... only violated due process as established by this Court in the Mullane case and in the Schroeder case.
The State of Florida has ruled the same way.
The State of Kansas and the State of Michigan, the State of Missouri and the State of New Jersey are all--
Unidentified Justice: Are all of those under the Federal Constitution or under state constitutions?
Mr. Cohen: --The... all of those cases interpreted this Court's rulings in Mullane and in Schroeder and in Walker and all talked about the Federal Constitution and not state constitutional questions.
Although the New Jersey court referred to its state constitution, it did indicate that their decision was based upon the Federal Constitution.
If there are no further questions at this time, I'd like to reserve a few moments for possible rebuttal.
Chief Justice Burger: Mr. Miller.
ORAL ARGUMENT OF ROBERT W. MILLER, ESQ., ON BEHALF OF THE APPELLEE
Mr. Miller: Mr. Chief Justice, may it please the Court.
I believe the beginning point is to determine whether or not this is a property right.
And we concede that the Mennonite Board of Missions' interest in this real estate is a "property right".
But I think the first place to begin is that the Court should understand and determine under Indiana law that a mortgagee is not an owner of any property.
The Furnish case which is a case in Indiana where the supreme court reiterated the decision that it made in Mennonite Board versus Adams, I quote,
"that a mortgagee is not an owner as well established by Indiana law, and further, a mortgagee has not title to the land mortgaged. "
Now that is mentioned because, in a due process question as such as is before the Court, Court... case law indicates that there is a balancing test.
Unidentified Justice: So, if we were in a title state it wouldn't make a difference?
Mr. Miller: The question wouldn't be any different?
I don't know.
I only know in Indiana there is no interest in real estate.
Arizona, the last case, as I call it, is the only case, I submit, at least that I can find, that has answered the question as to whether a mortgagee requires notice by mail in the 50 jurisdictions, excluding Puerto Rico and others.
Unidentified Justice: And yet the loss is just as great, whether it's non-ownership or--
Mr. Miller: Well, let me--
Unidentified Justice: --or estate or a title one.
Mr. Miller: --Let me answer it this way.
I'll get to that and some of the questions that were asked earlier.
The question is, is a mortgage a significant property interest?
One thing the Court should note for the balancing test that comes next is that in Indiana it's no... it's not one of the bundle of sticks that I learned about.
It's a lien.
Now within... balance the interests of--
Unidentified Justice: But you started out by saying it was a property right.
Mr. Miller: --Well, my reading indicates that whether it is an interest in real estate or a "property right" as used in the Constitution wouldn't make any difference.
This Court has many times said a property right is something that's not real property.
Unidentified Justice: But a property right isn't an interest in property?
Mr. Miller: It is.
Unidentified Justice: And it's owned by the mortgagee?
--It belongs to the mortgagee?
It's his right?
I'll put it that way, is it his right?
Or its rights or--
Mr. Miller: I don't think I understand the question.
In Indiana a mortgagee has no interest in real property.
It does not have legal interest, equitable interest, none of the bundle of sticks.
What it has is a "property right" to have a lien on a piece of property that at a future date it may be able to sell to satisfy an obligation.
If this Court would determine that it's not a significant interest in property, it would be a finding of... to affirm the Court of Appeals.
In the... if the Court determines that it is a property right, the next question is, we have to balance the interests.
Unidentified Justice: --Do you think this Court's previous holdings give an indication that we would regard a mortgage interest as so insignificant as to not come within the kinds of interests that we have protected--
Mr. Miller: Oh, no.
Unidentified Justice: --under a Mullane type doctrine?
Mr. Miller: Anticipating the question, I believe it is.
I concede it's a property right.
My brief concedes that it's a property right.
I wanted the Court to know that it's not an interest in real property because that comes to play in the balancing test as between the interests of the state and the interests of the mortgage company.
I think if a person is an owner there's a greater interest in the balancing as between the state's interests and the owner of the real estate.
a legal or equitable owner.
Unidentified Justice: I'm going to assume that Indiana has a lien law comparable to all other states so that a mechanic or a laborer who performs some services or furnishes materials could file a lien on the property.
Mr. Miller: Yes.
Unidentified Justice: Now that's certainly a property right, isn't it?
Mr. Miller: Yes.
Unidentified Justice: But is it essentially an Indiana law the same as the mortgage lienor's... mortgagees lien rights?
Each has a lien.
Mr. Miller: --Each has a lien.
Now, in some states, it may be that an interest in a mortgage is an equitable interest in the real estate.
I want the Court to know that in Indiana it is not.
The second question, and I think my opponent didn't make it clear... my research indicates that this Court has never determined that notice by publication is not constitutionally sufficient for an owner of real estate sold at a tax sale or a tax deed.
There are extremely good reasons as to why notice by publication is or would be sufficient.
There is only one state, and that is Arizona, that I can find that indicates that notice by mail is required to a mortgage holder or a lien holder, and that is, Laz.
The law review article that was mentioned as 84 Yale Law Journal indicated at the time of the writing there were 21 states whose statutes say that notice by publication to the owner of the real estate is constitutionally sufficient.
In my research, it indicates that 33 states indicate that notice to a mortgage holder is only done by publication.
Of the other states, 33, just publication, to a mortgage holder.
And I must say to the Court, I've given the benefit of the doubts, and some of them are very confusing.
New York, for example, I understand reading it, has an alternate method.
They can either go publication or they can go actual notice to the owner.
Texas, I don't understand at all.
I've put that in one of the other states.
Now the question has never been briefed or argued before this Court, whether notice by publication to divest a land owner of his interests in real estate if he doesn't pay his taxes, has never been decided.
The... and there are courts who have decided that it is permissible to give notice mere... by mere publication to divest a land owner of his interests in real estate by not paying his taxes, that's Coleman v. Sheeve.
And that's the district court of... it's in the District of Columbia in the Court of Appeals in 1976.
In the Township of Montville... that's an Arizona... excuse me, a New Jersey case, four to three determined that notice by publication is insufficient constitutionally under the the Mullane test.
The dissent in that case cited a number of reasons why, as to owners, that notice by publication would be sufficient.
He mentions that real estate taxes are a life blood of municipal government.
And it... the case is an extremely good case, and the judge at the end of that indicates that realizing the due process notice requirement he would follow Mullane in all cases where there is a significant interest of property and he would carve out an exception for taxes.
People, owners know they're due.
It's a just system.
But I'm not here to argue that today.
We've skipped... I called that the missing link... we've skipped that.
This Court has never heard, as far as I know, the argument... at least made a decision, I understand they may have heard the argument, but they've never made that... rendered that opinion.
Unidentified Justice: May I ask you, Mr. Miller, does the dissent in the New Jersey case, which I have not read, or maybe you have if an argument ready, what is the state interest in not giving notice?
I suppose the state... you say it's a life blood... taxation is the life blood of the state, and they need the money.
Wouldn't it be to their interest to give notice to as many people who might possibly--
Mr. Miller: Well--
Unidentified Justice: --pay up?
Mr. Miller: --The answer to that is yes and no.
The practical answer is, I think, a state is interested in getting the money.
The state is also interested in doing it as cheaply and as efficiently as possible.
I can, unfortunately... you see, I believe that the state should give notice to owners by mail.
It makes a lot of sense.
I've read cases that frankly the other side has some arguments.
The only good one I could find is in the dissent in the Montville... Montville, New Jersey case, where the judge just says it's a just concept that you own it, you know you're supposed to pay the taxes.
The length of time in New Jersey was four years.
And after four years, you don't pay your taxes, you're putting a burden on the other taxpayers.
The state's not getting your money like it should.
If you don't pay it, you ought to know it, with exceptions, unless you're incompetent or something else.
And it is just fair.
And why should... notice to owners?
Well, that's the next question.
Is it notice to all those that have an interest in the property?
The Laz case in Arizona... their decision was based upon a statute that says you give notice to persons with an interest in the lot.
And the supreme court in Arizona decided, well, an interest means not only the owner but the mortgage lien holders, judgement lien holders, lists pendents notice.
In the Arizona dissent, they found in Arizona that that could cause a lot of problems.
Does the Elkhart County recorder or any recorder drive to the county seat, drive to the courthouse and check the judgment dockets for judgment liens?
A person who doesn't pay his mortgage, one would think, doesn't pay his bills.
One would think he'd get sued.
One would think would have judgments against him.
One would think those are liens on the real estate, so the possible work for mortgage companies and I don't want to... I'm trying to get to the issue of the mortgage, the lien holder.
To the owner it makes a lot of sense.
There are... and I'm not really here to argue... owners.
There are some reasonable reasons why it shouldn't be necessary.
Unidentified Justice: Even in the case of mortgages, it occurs to me that, although of course 70 or 80 percent of the mortgages are held by big institutions, when interest rates get real high as they have been in the last few years, there are a lot of purchase money mortgages held by individuals on second mortgage interests and the like and I suppose that's the area in which there's the possibility of this sort of thing happening.
Mr. Miller: Yes, there is.
And I think it's happening, and I think there is that possibility.
And I guess all I can say is that you better protect yourself and you better draw up the instrument or you have the attorney or yourself draw it up to protect yourself.
But to have trust in the person that is going to do it, to ignore the payment of taxes for five years, I don't know if that's constitutionally protected or should be.
I think the issue is... is that was this notice reasonably calculated, Mullane test, if we get that far.
But... and I think we have to... was it reasonably the notice, reasonably calculated under all the circumstances to apprise a lien holder of what action was going to be taken in giving that lien holder an opportunity to object, and in this case opportunity to pay the taxes if it chose.
Now, I submit that the Court of Appeals in this case said it quite well.
And that is, the Court of Appeals in this case, the Adams case, had its reasons in terms of was it reasonably calculated.
It says it is understandable while actual... why actual notice has not been extended to mortgagees.
Most mortgagees are in the business of lending money and as professional money lenders, prudence requires them to be aware of the conditions involving their collateral.
They can be expected to protect their interests by keeping records of the mortgagor's discharge of his obligations.
In a footnote it goes on to say the Mennonite Board of Missions may not be a professional money lender but it freely chose to enter an area of sophisticated financial investment and thereby necessarily chose to incur the risk inherent therein.
And I agree with that.
I also point out in Texaco Inc. v. Short, an Indiana case that was decided last year, the dissent in that case, by Justice Brenner at page 801, in a lawyers' edition.
Court... "The Court", that is the majority,
"would appear to treat property owners as businessmen of whom we do indeed expect the greatest attentiveness to regulatory obligations in the conduct of their business affairs. "
The Board... and I take umbrage at some of the things that, a, do not appear in the record, but Elkhart County's population of 150 thousand people... I honestly didn't know where to get a hold of the Mennonite Board of Missions.
I think that's all irrelevant.
It is not in the record.
They chose to do it.
They held the mortgage.
It wasn't a free mortgage.
It was seven percent.
As I recall it was in '73.
I think that was a reasonably marketable mortgage in '73.
It may have been under the market slightly.
It was an arm-length... arms-length transaction.
She was a woman, I think.
I've never met the individual.
And she was paying her mortgage.
Why she stopped, I don't know.
But we publish... or the state published notice to a... to the people that held the mortgages.
And as it was stated in Mathews v. Eldridge, the Social Security disability case, decided in this Court in 1971, talking about due process and notice, and it says all that is necessary is that the procedures be tailored in light of the decision to be made to the capacities and circumstances of those who are to be heard.
Now the question is would a letter have done it better.
In this case, no, which I'll bring out in a moment.
But notice by publication, I think the Chief Justice indicated that most institutions have employees, people.
I think that's the Nelson v. the City of New York, decided in 1956, in this case.
And that's where the notice of a tax sale to the owner went to the bookkeeper.
Unidentified Justice: Wouldn't you think that most of the professional moneylenders, big institutions whom you say can take care... whom you say can take care of themselves, would take care of themselves in a way that there would never be an occasion to have a tax sale or send out any notice.
They would follow... they would know when there... at least if they use some mechanisms, they would know... they would make sure that the taxes are paid.
So the classic cases in which, the universe of cases in which you're going to have to have a foreclosure or send out a notice are going to be reduced to a lot of people mostly who don't take care of themselves, and don't know enough to take care of themselves.
Mr. Miller: Well, I... can agree with that.
In part I do.
Unidentified Justice: I would suppose you have to--
Mr. Miller: Well, in part I do, because it's obviously true in part, but two answers: One, I think the question before the Court is, what's the constitutionally necessary minimum; and, two, in Mullane--
Unidentified Justice: --In argument I would think you'd be making the same argument if they never published anything.
Mr. Miller: --No, I think--
Unidentified Justice: No notice, no publication.
Mr. Miller: --No--
Unidentified Justice: Mortgagees can take care of themselves.
Mr. Miller: --No... no, because in--
Unidentified Justice: Well, you know that nonprofessionals aren't going to go look... go get any notice from publication.
Mr. Miller: --No, and I don't rest my argument on the fact that they would take care of themselves.
I'm saying to the Court that there was in fact notice.
There was notice by publication.
The question you have to ask yourself--
Unidentified Justice: Not actual notice, just notice.
Mr. Miller: --It was not actual.
The question is--
Unidentified Justice: Wasn't that published notice for the purpose of attracting a lot people to come in and bid?
Mr. Miller: --It's one of the reasons.
Unidentified Justice: One?
Isn't that the primary reason in terms of getting... trying to liquidate the indebtedness, whether it's a tax sale or a mortgage sale.
Whoever has the money due is trying to get it back so there's a real purpose... the publication is not a matter of form.
It's a matter of substance, and there are people who are scanning the published notices every day in the week and every city in this county and deciding whether they want to go in and bid.
Mr. Miller: Right.
Unidentified Justice: But it serves a real purpose.
Mr. Miller: It does, and I--
Unidentified Justice: It doesn't serve the purpose of giving notice to the mortgagees.
Mr. Miller: --Well it's not in the record, but that is not so... at least... in my experiences, is the banks always check and have people... or at savings and loans... they always check and have people to check those.
Because at times computers make mistakes, people make mistakes.
Unidentified Justice: They want to know when the sale is so they can bid.
Mr. Miller: I submit that notice by publication is notice to the people in that county to protect themselves.
Unidentified Justice: Okay.
Do you concede that notice by mail would be more effective for the mortgagees?
Mr. Miller: In a... where the post office name and address of the mortgagee is in the system yes, it would be.
Now it depends, Justice, on each system.
The Elkhart County auditor... there's the Elkhart County recorder.
Those are not necessarily the same office, but... which I think is irrelevant.
But one of the problems, also, is how does the Court define mortgagee?
Is that lien holder, which can cover a number of problem areas with counties and states notifying all lien holders.
But the question that the Court, I believe one of them, has to decide is wasn't notice by publication reasonably calculated under the circumstances... the circumstances, I allege, as a mortgage company who chose to enter into a field of giving a mortgage and making a profit if not on the books but still a seven percent interest on the money as a... balancing it with the interests of the state.
The fact that they decided to enter into this field and even... in this case, even if the Court would determine that it's not reasonably calculated without hearing the arguments as to maybe why notice to publication to owners is all that is necessary.
I would point out... this is the, I believe, the most important argument I can make here under Mullane.
The brief of my Appellant, at page 27, has a footnote that indicates as follows: Indiana code 32-821
"requires the name and addresses of the mortgagee be on their recorded mortgage. "
That is not quite right.
That statute validates mortgages if they do not have the
"full name and post office address of the mortgagee as required by other older Indiana law. "
"And I quote, full name and post office address. "
The Joint Appendix in this case at page 45 has the address of the Mennonite Board of Missions as follows, Mennonite Board of Missions, a Corporation of Wayne County in the State of Ohio.
That is not a post office address.
That is not a mailing address.
And I submit--
Unidentified Justice: Where is that in the Joint Appendix?
Mr. Miller: --Page 45, where the mortgage of the Mennonite Board of Missions is set out.
Unidentified Justice: I find that it appears to be some sort of a brief on page 45... is it this tan--
Mr. Miller: Yes, the tan Joint Appendix.
Unidentified Justice: --Where is it now?
Mr. Miller: Page 45.
Unidentified Justice: I think your... this seems to be a section of arguments.
Could you check your own page 45 and--
Mr. Miller: I have mortgage and--
Unidentified Justice: --I think... at least some of us up here don't seem to have the same numbering or perhaps the same document.
Mr. Miller: --I can only tell you that I got my Joint Appendix from the other counsel.
His page now says 67--
Unidentified Justice: It's on page 67.
Mr. Miller: --His page is 67.
I don't know why mine is 45.
He gave me the Joint Appendix.
Page 67, the Court will find... I'll read from the actual mortgage,
"The address, Mennonite Board of Missions a Corporation, of Wayne County, in the State of Ohio. "
There is no other address in this record or in that auditor's office or in that recorder's office of any other address other than Mennonite Board of Missions of Wayne County, State of Ohio.
Unidentified Justice: So if the tax collector had gone to this particular mortgage but gone no further, they really... he really would have had no mailing address by which to mail?
Mr. Miller: Correct.
Unless he either was a Mennonite and happened to belong to that church and knew what the Mennonite Board of Missions is.
That is something, it is not the Mennonite Church.
And if he knew that that organization that may be in Elkhart County is not... is the same organization that is in Ohio.
Unidentified Justice: Is this an alternate ground for affirming?
Mr. Miller: This would be an alternate ground to affirm under Mullane.
Mullane is... all it says is clear as a bell to the beneficiaries, if post office names and addresses weren't there, they don't have to do it.
"where the names and post office addresses of those affected by the proceedings are at hand the reason disappears. "
In the Mullane case, the trustee had on its books the names and addresses of the income beneficiaries.
I agree that if these are all the same people, and if we wanted to go outside the normal course of the auditor and/or the recorder, that we could have gotten a letter to them.
A letter to Wayne County, Ohio was not going to get to the Mennonite Board of Missions.
Unidentified Justice: Well now, why do you say that?
Suppose you had addressed an envelope--
Mr. Miller: Because I did, but that's--
Unidentified Justice: --To the Mennonite Board of Missions, County Seat, Wayne County, Indiana... whatever it is... why do you think it might not well find its way?
Mr. Miller: --Well for two reasons.
One, it's my understanding of the postal regulations that mail will only be addressed... delivered to a postal address, either a box or an address, and secondly, from personal knowledge that I don't think has any business in this case.
The question of names and post office address is not present in this case.
Unidentified Justice: Well we get mail directed to Judge Zilch, care of the Department of Justice, Washington, D.C., but it comes here.
Mr. Miller: Presumably that's the wrong place.
I notice the address of this Court is simply The Supreme Court, Washington, D.C., with the zip.
Unidentified Justice: We also get mail directly addressed that gets here a month later.
Mr. Miller: Well, back to the point.
Unidentified Justice: Actually, I guess the Court of Appeals of the Indiana Court didn't really rely on the difficulty in finding the mortgagee, did it?
Mr. Miller: --No, it determined that notice by publication--
Unidentified Justice: It wasn't necessary.
Mr. Miller: --It wasn't... notice by publication is necessary.
Notice by mail is not.
Their ground was it was reasonably calculated because they entered into a sophisticated area of financing.
They're on notice.
The notice is supposed to be... depending on if it was a person on welfare, that's one thing.
This was supposed to be a businessman.
They chose to enter into the field.
Those are all the reasons.
Unidentified Justice: May I ask you if the new Indiana statute requires that the mortgagee designate his address when he records his mortgage?
Mr. Miller: No, it does not.
Unidentified Justice: But it nevertheless requires mailed notice.
Mr. Miller: No, it does not, either.
Unidentified Justice: Oh, I--
Mr. Miller: I take umbrage with my opponent.
I don't know why they changed it but what they did is add a provision and that provision says that if the mortgagee will pay up to ten dollars, two to the auditor, and provide his name and post office address, that when the auditor sends out those little notices that your taxes... your property is about to be sold for taxes, he'll send one to the lien holder also.
But the lien holder has the affirmative duty under the statute to provide that name and address to the auditor.
Unidentified Justice: --And ten dollars?
Mr. Miller: Up to.
That's the statute.
Unidentified Justice: Oh, so--
Mr. Miller: It's a very cheap state.
Unidentified Justice: --But he has to... does he have to pay the--
Mr. Miller: Oh, yes, the mortgagee has to pay--
Unidentified Justice: --Well, when he gets the notice or before?
Mr. Miller: --No.
Unidentified Justice: Whenever he takes mortgage he writes a check to the auditor and says--
Mr. Miller: No.
Unidentified Justice: --In the event taxes aren't paid please notify me.
Mr. Miller: No.
When... see, the mortgagee... and again, the cases that... or the footnote that I referred to in the brief mentions Indiana case law.
The procedure in Indiana is this.
A mortgagee takes his mortgage to the recorder's office and records it for public record.
The statute now says that if he wants to receive notices that the taxes are delinquent and that there's about to be a sale, he must go to the auditor and pay a fee.
Unidentified Justice: Right then?
Mr. Miller: Right then.
And notify the auditor of his name and address and pay whatever... the statute says the auditor can set a fee, the county auditor can set a fee, but not more than ten dollars.
Unidentified Justice: I see.
Mr. Miller: And he provides the name and address, his name and address, and then, if the taxes are not paid for 15 months and the notice goes out that there's going to be a sale, the auditor is required to send not only a certified letter to the owner--
Unidentified Justice: Every county may be different on the fee?
Mr. Miller: --The statute in my memory says... the state statute says the county shall determine the fee to be charged but not more than--
Unidentified Justice: Yes.
Do you know what the fee is in this county?
Mr. Miller: --In Elkhart?
Unidentified Justice: Yes.
Mr. Miller: I have no idea.
Unidentified Justice: Have they got around to determining it if it's a new statute?
Mr. Miller: I'm sorry.
Unidentified Justice: Have they got around to determining it in Elkhart County, if it's... or you just don't know.
Mr. Miller: I have no idea.
I hold no mortgages.
I've never had the opportunity to use it.
That statute is used in my research in some of the... some of the other states.
The Appellant in this case has indicated in his brief and, again in that same footnote, that the law of the State of Indiana is that a deed and mortgage is taken to the auditor.
The law in the State in Indiana is, is that a deed, before it be recorded, is taken to the auditor and placed on there are the words to be entered for taxation, or words to that effect.
The auditor writes down who owns the property and their address and... so that the county knows, that are going to be taxed.
As to mortgages, the statute says and only says, that before the auditor makes that endorsement on the deed, he may require a tax identification number, and I emphasize may, on other instruments including mortgages that divest a person of a mortgage.
That sounds a little complicated, but Indiana has a law that if you have a mortgage on a piece of property, you pay less property taxes because you have that mortgage.
There is no requirement to take the mortgage to the auditor's office.
In other words, there's no way for an auditor under the Indiana scheme of things to have a name and post office address.
But in this case there was no post office address.
There was notice that was reasonably calculated in the general scheme of things and I reasonably submit under Mullane, even if the Court felt that all these mortgage holders should get notice that Mullane and all of the cases afterwards... in the case of Laz versus Arizona, they made a point that Laz versus Arizona requires a letter to a mortgage holder that the taxes, or the property's going to be sold, or it's going to be deeded.
But even in Laz, it says that's only to the mortgage or the lien holders whose names and post office addresses are in the public record without inquiry.
They're open and available, as was said in Mullane.
This Court held in Mullane that the--
Chief Justice Burger: Your time is up, counselor.
Mr. Miller: --Thank you.
Chief Justice Burger: Do you have anything further, Mr. Cohen?
ORAL ARGUMENT OF WILLIAM J. COHEN, ESQ., ON BEHALF OF APPELLANT -- REBUTTAL
Mr. Cohen: Yes, Mr. Chief Justice.
Unidentified Justice: Mr. Cohen, does the record show who prepared this mortgage?
Mr. Cohen: Yes, it does, Justice Powell.
The mortgage was actually prepared by Edna Carpenter who worked for the Mennonite Board of Missions.
It was not prepared by an attorney.
However, with respect to Mr. Miller's point as to no post office address actually being on the mortgage itself.
I submit that there was no difficulty for Mr. Adams in this case to send the Elkhart County sheriff directly to the Mennonite Board of Missions offices, which were located for over 50 years in Elkhart.
Unidentified Justice: Well, but the county seat is in Goshen, isn't it?
Mr. Cohen: Yes, it is.
Yes, it is, Justice Rehnquist.
Unidentified Justice: How is it from... and is the sheriff in Goshen?
Mr. Cohen: The sheriff has an office in Goshen and in Elkhart.
And the county... the county recorder's... well, some of the records are in Elkhart and in Goshen, both.
Unidentified Justice: What's the... what's the population of Goshen and of Elkhart, roughly?
Mr. Cohen: Elkhart's about 42 thousand, Goshen is about 15, 20 thousand.
Unidentified Justice: Thank you.
Mr. Cohen, the mortgage also provided that Mrs. Moore would pay the insurance on the house.
Mr. Cohen: Yes.
Unidentified Justice: Do you know whether that was continued after she defaulted on taxes?
Mr. Cohen: It was my understanding that she continued to pay everything and unbeknownst to the Mennonite Board of Missions, she did not pay the taxes right after the period of time to redeem the property expired.
She was asked to leave the property and she went to the Mennonite Board of Missions and informed them that she was in trouble.
The first time that they learned there was problem was from her at that time.
With respect to a question that was asked by Mr. Stevens, Justice Stevens.
In this case, the only interest of the state is for the collection and payment of taxes and that if mailed notice was sent to mortgagees that would actually further the states interest of collecting taxes.
In the brief, I cite an Indiana case where the mortgagor and there were... the mortgagor and the mortgagee, one or the other... their property was listed for sale for delinquent taxes and the county auditor mailed notice to... after the tax sale, mailed notice to the mortgagee, informed them that the property had been sold for delinquent taxes.
The mortgagee promptly paid the tax and, in investigating what happened as far as why the taxes hadn't been paid, learned that the property taxes... the payment had not gone onto a computer list and had it gone onto the computer list, it would have never made the tax sales in the first place.
So the mailing of notice would actually assist the state in notifying mortgagees who are likely to pay the taxes and in all likelihood would pay the taxes.
And it would further the state's interest of collecting the taxes as soon as possible and in a fast and expeditious manner.
Unidentified Justice: Well it is hard to understand how that would have helped the board in this case with no address, and I don't think our cases have gone so far as to require county sheriffs to go out personally and look for locations.
Mr. Cohen: Mullane says, Justice O'Connor, if the name is a matter of public knowledge or if easily ascertainable.
Chief Justice Burger: Thank you, gentlemen.
The case is submitted.
Unidentified Justice: The Honorable Court is now adjourned until Monday the 4th of April at 10:00.