Roberts v. Robert – 5/31/2007

June 8, 2007

Arizona Court of Appeals Division One Holds That a Decedent’s Heir Has a Right to Redeem a Tax Lien On Decedent’s Real Property, and a Tax Lien Purchaser Must Properly Join and Serve the Heir As a Defendant In a Foreclosure Action In Order to Foreclose the Heir’s Right to Redeem.

Appellees, purchasers of two Arizona real property tax lien certificates, filed suit to foreclose the redemption rights for those tax liens pursuant to A.R.S. § 42-18201. Appellees named as defendants the owner of the property, the Mojave County Treasurer, various fictitious parties, and the “unknown heirs of any of” them “if they be deceased.” While attempting to serve the owner of the property, Appellees learned that the owner was deceased, but a son of the owner, purporting to be in charge of the owner’s estate, accepted service and negotiated to allow default judgment in favor of Appellees. Service on the remaining fictitious and unknown parties was made by publication pursuant to Arizona Rule of Civil Procedure (“ARCP”) 4.2(f) and (g). A year after default judgment was entered, Appellant, claiming also to be a son and an heir of the owner, filed an application for a new trial pursuant to ARCP 59(j). Appellant alleged that as an heir he had a right to redeem the tax liens, and his right could not have been foreclosed by the default judgment because he had not been properly served either in person or by publication. The trial court denied Appellants motion and granted sanctions under ARCP 11 to Appellees.

The Court of Appeals reversed. First, the court held that under clear Arizona law a decedent’s heir has a right to redeem tax liens. A.R.S. § 42-18151 provides that a tax lien may be redeemed by, among others, “the owner” or “any person who has a legal or equitable claim in the property.” Because an heir succeeds to the ownership interest of a decedent by operation of law in Arizona, an heir qualifies to redeem under this statute. As a result, an heir must be joined in an action to foreclose all rights to redeem a tax lien. Appellees argued that they joined Appellant by naming all “unknown heirs” and that Appellant was properly served by publication. The Court of Appeals disagreed. While recognizing that the analysis in these cases is largely driven by the factual circumstances, the court held that a tax lien holder seeking to foreclose redemption rights must at a minimum conduct a diligent search and inquiry to locate heirs. Such an inquiry might include a public record search and questioning of relatives and friends of the owner. In the present matter, Appellees spoke directly with an individual claiming to be an heir, but failed to ask him whether other heirs might exist, nor did the record contain any evidence of any steps taken by Appellees to locate possible heirs. As a result, Appellees had not met the burden for justifying service by publication.

Presiding Judge Norris authored the unanimous opinion, joined by Judge Barker and Judge Thompson.