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CCD-SAT, Inc. v. Pratt

May 28, 2009


Appeal from the Superior Court of the District of Columbia. (CA 534-99) (Hon. Geoffrey M. Alprin, Trial Judge).

The opinion of the court was delivered by: Thompson, Associate Judge

Submitted February 18, 2009

Before FISHER and THOMPSON, Associate Judges, and PRYOR, Senior Judge.

Appellant CCD-SAT, Inc. ("CCD-SAT"), a Maryland corporation, challenges an order of the Superior Court quieting title to a parcel of real property in the District of Columbia (Lot 879 in Square 5214) in favor of appellee Clarence T. Pratt. CCDSAT had purchased the property in 1988, but failed to pay property taxes on it. Pratt obtained a deed to the property through the tax sale process on March 10, 1997, having paid to the District of Columbia the delinquent property taxes, interest, and penalties then owing on the property. Subsequently -- after CCD-SAT's sole director Carol C. Davis asserted that CCD-SAT continued to own the property -- Pratt brought his action to quiet title. CCD-SAT responded by moving the court to set aside the tax deed on the ground that the District of Columbia failed to provide the statutorily-required notice to CCD-SAT before deeding the property to Pratt. In an Order Denying Defendant's Motion to Set Aside Tax Deed dated July 23, 2007 ("Order"), the Superior Court ruled that no notice was required because, at the time when notice to CCD-SAT would otherwise have been due, the company was in default under Maryland law and its corporate status was forfeited. Given the particular facts of this case, we are constrained to disagree with the trial court's conclusion. Accordingly, we reverse and remand.

As recounted in the trial court's order, beginning in 1990, CCD-SAT failed to pay taxes on the property. Order at 2. In the ensuing years, CCD-SAT twice forfeited its corporate status, first for failure to file a personal property return and then for failure to pay a late filing penalty. See also MD. CODE ANN., CORPS. & ASS'NS § 3-503 (2007 Repl.) For over eleven years beginning on October 3, 1995, the company was continually in defunct status. Order at 2. Articles of Revival restoring CCD-SAT's corporate status were not filed until April 11, 2007. Order at 3.

The District first put the property up for tax sale in 1992. The District tax-sale statute law then in effect established several routes to a private sale of property on which taxes were overdue in the event that the property failed to sell at public auction.*fn1 Whatever the route, D.C. Code § 47- 1303.2 (b)(1) (1997 Repl.) required the District, "[b]efore accepting offers on the bid off property for private sale," to "[s]end a final notice to the owner of the bid off property stating that the bid off property will be offered for private sale unless the bid off property is redeemed within 30 days after the date of the final notice by paying all taxes and assessments, including penalties, interest, costs, and charges against the bid off property." See 41 D.C. Reg. 1221 (March 11, 1994). The property in dispute here having remained unsold after several annual tax sales, the District transferred the property to Pratt via a private sale in 1997.

The District "can effectuate a 'valid conveyance of property for nonpayment of real estate taxes only by strict compliance with the tax sale statute and regulations.'" Langon v. Reilly, 802 A.2d 951, 953 (D.C. 2002) (quoting Boddie v. Robinson, 430 A.2d 519, 522 (D.C. 1981)); see also Bembery v. District of Columbia, 852 A.2d 935, 941 (D.C. 2004) (explaining that, in disposing of property burdened by a delinquent tax obligation, the District must "provide notice that complies strictly with the requirements of applicable statutes and regulations, and that comports with the due process requirement that it be reasonably calculated to apprise interested parties of the imminent prospect of their loss of valuable property rights") (internal citation omitted). "Accordingly, if the District fails to comply in every respect with the statute and regulations, the sale is invalid and must be set aside." Jones v. Thompson, 953 A.2d 1121, 1125 (D.C. 2008) (internal citation, quotation marks, and brackets omitted); see also District of Columbia v. Mayhew, 601 A.2d 37, 39 (D.C. 1991). This court has "applied that strict rule to invalidate a tax sale where the District failed to provide notice of an expiring redemption period in strict accordance with applicable regulations." Jones, supra, 953 A.2d at 1125.*fn2

During discovery in this case, the District, which had been joined as a defendant, was unable to produce a certified mail receipt or any other evidence that it actually sent CCD-SAT timely notice (or, indeed, any notice) of the sale of the property in dispute here and of the impending expiration of the redemption period. As a result, the trial court was "unable to determine whether the city complied with the statutes and regulations regarding notice" to CCDSAT. Order at 4 n.1; cf. Jones, 953 A.2d at 1126 (declining to infer that a certified mailing occurred for one tax sale property from the production of a certified mail green card relating to another property that was transferred at the same tax sale, because "any such inference is simply too weak to establish strict compliance" and "was not significantly probative of whether the District strictly complied with its obligations" (citation and internal quotation marks omitted).

The trial court recognized that, as a matter of due process, an "owner is entitled to written notice as a constitutional precondition to safeguard [its] interest in the adversely affected property." Order at 4 (quoting Langon, supra, 802 A.2d at 953). The court also recognized that "corporations have due process rights . . . just as a natural person does. . . ." Order at 5. The court found, however, that CCD-SAT "effectively did not exist at the time of the 1997 sale to [Pratt]."*fn3 Id. The court concluded that "where the statutory requirement cannot be followed because . . . the party to receive notice no longer exists, the court cannot find constitutional infirmity in the sale . . . ." Id. The court found that the corporation CCD-SAT "had no due process rights [at the time the property was transferred to Pratt] because it was defunct." Id. at 7.

What the trial court's analysis does not take into account is that, under Maryland law (which governs CCD-SAT as a Maryland corporation), "[o]nce a corporation's existence has been terminated, . . . [its] assets are automatically transferred to the corporation's directors, who become the trustees of the assets of the defunct corporation for purposes of liquidation." Scott v. Seek Lane Venture, Inc., 605 A.2d 942 (Md. 1992) (holding that because defunct status of corporate entity was known, effort to give notice of foreclosure proceeding to directors-trustees was required).*fn4

Although CCD-SAT's corporate status was in forfeiture at the time the thirty-day notice requirement was triggered, Davis, as sole director of the corporation, stood in the shoes of the defunct corporation. We do not conclude that the District was required to send the thirty-day notice to Davis in her capacity as director of CCD-SAT; for one thing, the record does not disclose whether the District knew of CCD-SAT's forfeited status.*fn5 But what is of critical significance in this case is the representation, which Pratt has not disputed, that sole-director Davis has been the "registered agent [of CCD-SAT] since the formation of the corporation. She has remained the primary point of contact since that time."*fn6 Thus, any notice sent to CCD-SAT would have been sent to Davis, the director who became the trustee of its assets upon its forfeiture. Given these particular facts, we are unable to conclude that strict compliance with the statutory notice requirement was excused or that there was no constitutional infirmity in failure to send the statutorily-required thirty-day notice to CCD-SAT.*fn7

Accordingly, we reverse the judgment of the trial court and remand for entry of an order setting aside the tax deed to appellee Pratt and for further proceedings consistent with this opinion.*fn8

So ...

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