Lead Opinion
Union Pacific Railroad Company (“Union Pacific”), formerly Missouri Pacific Railroad Company (“Missouri Pacific”), owned mineral rights to three parcels of land in Arkansas until 2005 when the rights were forfeited due to tax delinquency. Linn Farms and Timber Limited Partnership (“Linn Farms”), as the surface rights owner to the parcels, purchased the mineral rights from Mark Wilcox, the Arkansas Commissioner of State Lands (“Commissioner”). Thereafter, Union Pacific, unaware of the forfeiture, leased the mineral rights to Chesapeake Exploration, LLC (“Chesapeake Exploration”), who then recorded the lease. Discovering the lease, Linn Farms sued to quiet title to the mineral rights. Linn Farms, Union Pacific, and Chesapeake Exploration each filed a motion for summary judgment. The district court
I
The parties dispute the ownership of mineral rights to three parcels of land located in Van Burén County, Arkansas. Linn Farms, an entity owned by Danny and Linda Linn, owns the surface rights to each of the parcels. Missouri Pacific, originally headquartered in Fort Worth, Texas, previously owned the mineral rights, but at some point before the relevant dates of this case it merged with Union Pacific, headquartered in Omaha, Nebraska. As a result, the mineral rights became the property of Union Pacific. However, Union Pacific failed to inform the Van Burén County Assessor’s Office of either the merger or the resulting change in mailing address.
On June 26, 2003, the Van Burén County Tax Collector certified to the Commissioner, that the mineral rights, which were still recorded as being owned by Missouri Pacific, were forfeited to the State of Arkansas for nonpayment of taxes. The Commissioner sent a notice to Missouri Pacific on October 20, 2003, informing it the mineral rights would be sold in two years due to tax delinquency if the rights were not redeemed. The Commissioner sent the notice to Fort Worth, Texas, but because Missouri Pacific had moved to Omaha, Nebraska, the notice was returned “NOT DELIVERABLE AS ADDRESSED-UNABLE TO FORWARD.” Two years later, on October 19, 2005, the Commissioner sent another letter to Missouri Pacific, stating the mineral rights had been certified to the state due to tax delinquency, the surface owner of the parcels intended. to purchase the mineral rights, and Missouri Pacific had until November 22, 2005, to redeem its rights. Like the first notice, the second notice was addressed to Fort Worth and was also returned “NOT DELIVERABLE AS ADDRESSED-UNABLE TO FORWARD.”
During this same time frame, however, the Commissioner did successfully provide Missouri Pacific notice on properties in other counties. On October 16, 2003, and again on February 14, 2006, the Commissioner sent notices to Missouri Pacific at the Omaha address regarding tax delinquencies on a property located in Faulkner County, Arkansas. In January 2004, the Commissioner also sent a tax delinquency notice to Missouri Pacific at the Omaha address for property located in Woodruff County, Arkansas. Jerry Bradshaw, an employee of the Commissioner dealing exclusively with tax delinquencies on mineral rights and the one who sent Missouri Pacific’s 2005 notice, indicated some notices were sent to the Omaha address while others were sent to Fort Worth because the Commissioner keeps separate records for mineral rights and redemption deeds and each had different addresses. Bradshaw explained the notices reaching Missouri Pacific came from the Office of the Land Commissioner, which deals with redemption deeds and is located in a different physical location from Bradshaw’s office, which focuses on mineral rights. Bradshaw indicated his office did not know of Missouri Pacific’s merger with Union Pacific and the change of address until 2008 even though the Office of the Land Commissioner knew as early as 2003.
Because both notices were sent to the wrong address, Union Pacific failed to redeem its mineral rights by November 22, 2005, and the Commissioner proceeded to sell the rights. Linn Farms paid the de
Unaware of the forfeiture, Union Pacific proceeded as the owner of the mineral rights, executing an oil and gas lease with Chesapeake Exploration on February 25, 2008, which Chesapeake Exploration filed with Van Burén County on April 9, 2008. Linn Farms discovered the lease and brought suit against Union Pacific and Chesapeake Exploration. Linn Farms sought to quiet title in its favor and also sought damages for intentional clouding of its title in violation of Ark.Code Ann. § 5-37-226(a). The parties filed cross-motions for summary judgment. Linn Farms moved for judgment declaring it the rightful owner of the mineral rights based on the deeds issued by the Commissioner. Union Pacific’s summary judgment motion argued the deeds relied on by Linn Farms were invalid because the Commissioner failed to comply with the due process requirement of notifying Union Pacific of its tax delinquency and impending forfeiture before it issued new deeds. Chesapeake Exploration’s motion adopted the position of Union Pacific and further asserted its filing of the lease did not violate Arkansas law by intentionally clouding title.
The district court denied Linn Farms’s motion for summary judgment but granted Union Pacific’s and Chesapeake Exploration’s motions, finding the Commissioner violated Union Pacific’s due process right by failing to provide adequate notice of the tax delinquency and forfeiture and, given Linn Farms’s deeds were invalid, the district court found Chesapeake Exploration could not have clouded Linn Farms’s title.
II
Linn Farms argues the district court erred in granting summary judgment in favor of Union Pacific and Chesapeake Exploration because the notice provided to Union Pacific was constitutionally sufficient. Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(a). We review a district court’s grant of summary judgment de novo, “ ‘drawing all reasonable inferences, without resort to speculation, in favor of the nonmoving party.’” Haigh v. Gelita USA, Inc.,
The Due Process Clause of the Fourteenth Amendment requires the government to provide owners “notice and opportunity for hearing appropriate to the nature of the case” before it may take property as a result of unpaid taxes. Mullane v. Cent. Hanover Bank & Trust, Co.,
The Supreme Court previously addressed the notice requirement of the due process clause in another case involving a tax forfeiture in Arkansas, Jones v. Flowers,
Subsequently, Flowers purchased the house. She then delivered an unlawful detainer notice to the property. Id. The notice was served on Jones’s daughter who was living in the house at the time, and she notified Jones of the sale. Id. Jones then filed suit against the Commissioner, arguing the Commissioner failed to provide adequate notice of the forfeiture in violation of his due process rights. Id.
The United States Supreme Court, holding in favor of Jones, concluded when a notice is returned unclaimed, the government is required to take additional reasonable steps to attempt to provide notice before a tax sale. Id. at 225,
In the present case, the Commissioner prepared and sent two letters to Missouri Pacific, but both were returned and marked “NOT DELIVERABLE AS ADDRESSED-UNABLE TO FORWARD.” The Commissioner knew neither letter was actually received by the intended recipient and thus was aware Missouri Pacific, under the new name Union Pacific, had no actual notice of the impending forfeiture. With knowledge the notices were undelivered, the Commissioner should have taken any reasonable additional steps available to apprise Union Pacific of the impending forfeiture. See id.
Nevertheless, we can glean from the import of Jones whether any reasonable additional steps existed in the present case. As the Court explained in Jones, “[w]hat steps are reasonable in response to new information depends upon what the new information reveals.” Id. at 234,
The record indicates after he received the returned notice, Bradshaw did follow up by asking various land men
First, we agree with the district court as to one additional step being an internal inquiry as to “whether employees of the Commissioner’s office had a correct address for Missouri Pacific.” Appellant’s
Linn Farms further rejects an internal inquiry because it claims it was not reasonable given the other Commissioner’s offices are in different physical locations. The mere requirement of travel did not preclude the Court in Jones from suggesting the reasonable additional step of physically posting notice on the door of the residence on the property to be forfeited. Id. at 235,
In conjunction with an internal inquiry, the Commissioner could have also performed a search of the Commissioner’s electronic records to determine whether another address for Missouri Pacific was on file. The Commissioner’s records of all properties certified as delinquent are stored electronically and include the last-known address for the owner on record. However, a cross-county search of the system for a particular owner, such as Missouri Pacific, is not possible because the system records are sorted by county. Consequently, to determine whether Missouri Pacific has an address other than the one on file in Van Burén County, the Commissioner would have to execute a search in each county’s system individually. Linn Farms contends the Commissioner cannot be required to engage in such an exhaustive search of each county’s internal records because it is too complex, too burdensome, and therefore is unreasonable. Viewing the record in the light most favorable to Linn Farms, a full search of the Commissioner’s records does appear to be beyond the scope of what we would define as a reasonable additional step. However, the existence of these electronic records
Finally, we suggest the Commissioner could have performed an internet search to locate an updated address. Bradshaw conceded in his deposition that upon learning an address is incorrect, in addition to talking with land men, he also occasionally searches the internet.
In reaching this conclusion, we are mindful of the language in Jones suggesting an “open-ended search” was not required of the Commissioner in that case.
the return of Jones’ mail marked “unclaimed” did not necessarily mean [the address] was ati incorrect address; it merely informed the Commissioner that no one appeared to sign for the mail before the designated date on which it would be returned to the sender. An open-ended search for a new address ... imposes burdens on the State significantly greater than the several relatively easy options outlined above.
Id. at 236,
Ultimately, we note it is not this court’s duty “ ‘to prescribe the form of service that the [government] should adopt,’ ” id. at 238,
On a final note, we turn to Linn Farms’s argument as to whether we should reject Union Pacific’s challenge to the adequacy of the notice because Union Pacific “has not identified a single instance of a departure from the requirements of Arkansas law.... Everyone did what they were supposed to do except the railroad failed to provide the correct address.” Appellant Br. at 15-16. The Commissioner did comply with Arkansas law requiring the Commissioner to notify a tax-delinquent property owner of his “right to redeem by paying all taxes, penalties, interest, and costs” by certified mail to the owner’s last known address. Ark.Code Ann. § 26-37-301(a)(l). “If the notice by certified mail is returned undelivered ... the Commissioner of State Lands shall send a second notice to the owner ... at any additional address reasonably identifiable through the examination of the real property records” such as deeds, mortgages, or other recorded documents filed with the county where the property is located. Id. § 26-37-301(a)(4). Even though the Commissioner fully complied with Arkansas law, mere compliance with a state’s notice statute may not be sufficient to satisfy the constitutional obligation of providing adequate notice as required under Mullane and the Due Process Clause. See Jones,
Ill
We affirm the district court’s decision granting summary judgment in favor of Union Pacific and Chesapeake Exploration.
Notes
. The Honorable J. Leon Holmes, United States District Judge for the Eastern District of Arkansas.
. The Commissioner, having erroneously issued the deeds to Danny and Linda Linn personally instead of to Linn Farms, issued corrected deeds on June 18, 2009.
. The district court also rejected a statute of limitations argument raised by Linn Farms, determining the statute of limitations under Arkansas law had not yet run on Union Pacific’s ability to challenge the tax sale. This issue was not appealed.
. According to Bradshaw, land men research properties in the courthouses and also are responsible for acquiring signatures on leases.
. The record suggests Bradshaw may have conducted an internet search for Missouri Pacific, but the record is unclear as to any details from which we can reasonably infer such a search was actually completed or whether the search was sufficient to comport with due process. See Haigh,
Dissenting Opinion
dissenting.
The question presented on this appeal is whether the State of Arkansas deprived Union Pacific Railroad Company of property without due process of law when the Commissioner of State Lands forfeited and sold mineral rights owned by Union Pacific. Because the Commissioner gave notice that was reasonably calculated to apprise Union Pacific of a tax delinquency on the property, an impending forfeiture of the property to the State, and a forthcoming sale of the mineral rights, there was no violation of the Due Process Clause of the Fourteenth Amendment. See Mullane v. Central Hanover Bank & Trust Co.,
This case involves mineral rights in certain parcels of land in Van Burén County, Arkansas. Under Arkansas law, “[w]hen severed mineral interests are forfeited to the state and conveyed by certification to the Commissioner of State Lands for nonpayment of property taxes, title to the severed mineral interests shall vest in the State of Arkansas in the care of the Commissioner of State Lands.” Ark.Code Ann. § 26-37-314(a)(l). The Commissioner is then required by statute to “notify the owner of record by certified mail at his or her last known address.” Id. § 26-37-314(a)(2). After a redemption period, the Commissioner is directed to sell the mineral rights to the surface owners if they opt to purchase them. Id. § 26-37-314(b)(l).
Union Pacific, by virtue of a merger with Missouri Pacific Railroad Company, owned mineral rights in parcels of land in Van Burén County. It is undisputed that Union Pacific failed to pay delinquent taxes on the property, and that the Commissioner sent two notices of forfeiture and forthcoming sale of mineral rights to Missouri Pacific at the address last recorded with the Van Burén County Collector. Under Arkansas law, Union Pacific had an obligation to furnish its correct address to the county collector of taxes, Ark.Code Ann. § 26-35-705, but it failed to do so. As a result, the Commissioner mailed the notices to a former address of Missouri Pacific. The notices were returned with markings that the letters were not deliverable as addressed, and that the postmaster was unable to forward them. The Commissioner later sold the mineral rights to the surface owners, Linn Farms and Timber Limited Partnership.
Relying on Jones v. Flowers,
Here, the Commissioner knew that the postmaster had attempted to deliver the letters, but that the address was incorrect, and that the letters could not be forwarded. At that point, Jones demonstrates, the Due Process Clause did not require “[a]n open-ended search for a new address— especially when the State obligates the taxpayer to keep his address updated with the tax collector.” Id. at 236,
The court’s holding that “the next step should have been to locate a new, correct address for Missouri Pacific,” ante, at 359, is contrary to the limitation of Jones. Just as the Constitution did not require the Commissioner in Jones to undertake simple measures to find a new, correct address for the taxpayer, the Due Process Clause did not require the Commissioner here to make internal inquiry of an indefinite number of state employees at different locations, to search the agency’s electronic records, or to conduct an Internet search to locate an updated address for Missouri Pacific. Once the Commissioner determined that notice had been sent to the last known address of Missouri Pacific, that the address was incorrect, and that the letters could not be forwarded, the Commissioner had discharged his obligation under the Due Process Clause by reasonably attempting to provide actual notice. See Dusenbery v. United States,
For these reasons, I would reverse the judgment of the district court.
