ZINVEST, LLC, a Montana limited liability company, Plaintiff and Appellee,
GUNNERSFIELD ENTERPRISES, INC., a California corporation, Defendant and Appellant.
Submitted on Briefs: August 23, 2017
Court of the Eighteenth Judicial District, In and For the
County of Gallatin, Cause No. DV-13-670B Honorable Mike
Salvagni, Presiding Judge
Appellant: Mark L. Evans, Axilon Law Group, PLLC, Bozeman,
Montana Elizabeth L. Griffing, Axilon Law Group, PLLC.
Appellee: W. Scott Green, Daniel Larry Snedigar, Patten,
Peterman, Bekkedahl & Green, PLLC.
In 2008, Gunnersfield Enterprises, Inc. purchased five
condominium units and an adjoining vacant lot. The deed was
properly recorded and a Realty Transfer Certificate was
submitted to the Department of Revenue, which did not
correctly update its ownership records for the vacant lot.
Gunnersfield received notice of and paid the tax assessments
for the five condominium units each year, but the Gallatin
County Treasurer continued to send the tax bills for the
vacant lot to the previous owner. When the taxes went unpaid,
the Treasurer sold the lot for delinquent taxes. Zinvest, LLC
acquired the County's interest. Gunnersfield now appeals
the District Court's determination to quiet title to
Zinvest. We reverse and remand, concluding that the
Department of Revenue's defective property tax assessment
voided the tax lien sale.
AND FACTUAL BACKGROUND
In June 2008, Gunnersfield purchased five commercial
condominium units, known as Units 1 through 5, and an
adjacent fenced lot, known as Lot 6A, from Prospero, LLC in a
single transaction. A single Warranty Deed conveying all of
the property to Gunnersfield was recorded that same month in
the records of the Gallatin County Clerk and Recorder. The
Department of Revenue (Department) received both a copy of
the deed and the Realty Transfer Certificate in 2008. While
the Department correctly updated its ownership records for
Units 1 through 5, it did not update the ownership record for
Gunnersfield paid all property tax notices it received from
the Gallatin County Treasurer (County) for the property. The
notices it received, however, were for the five condominium
units only. From 2009 through 2012, the County continued to
send tax bills for Lot 6A to Prospero, the former owner.
Beginning in the second half of 2009 and continuing in the
subsequent years, the taxes for Lot 6A went unpaid. In July
2010, the County offered a property tax lien for sale against
Lot 6A for the 2009 delinquent taxes. At that time there was
no purchaser and the County was listed as the purchaser of
In 2012, Zinvest, LLC became interested in the property and
took action to acquire the tax lien from the County. Zinvest
sent the statutorily required notice of pending assignment of
the tax lien to Prospero, which the U.S. Postal Service
returned undelivered. Zinvest did not send notice to
Gunnersfield. Upon Zinvest's payment of the delinquent
taxes, interest, and fees, the County assigned its tax lien
interest in the property to Zinvest on October 9, 2012.
Zinvest then began the process to acquire a tax deed on the
property. During this process, Zinvest obtained a Litigation
Guarantee from Stewart Title, which revealed that the title
to Lot 6A had vested in Gunnersfield in 2008. Zinvest sent a
notice that a tax deed may issue to Prospero, to
Gunnersfield, and to the County. Gunnersfield admits that it
received this notice. In an affidavit from Jon Chaney, the
President and majority shareholder of Gunnersfield,
Gunnersfield attested that it inquired with the County about
what property was at issue in the notice. The County office
staff informed Gunnersfield that the notice pertained to the
property located at 153 Shepherd Trail, the street address
for the condominium building. Lot 6A has no street address.
Gunnersfield maintains that it assumed the notice must relate
to condominium Units 6 and 7, which it believed Prospero
still owned, because Gunnersfield had never been notified,
and was unaware, of any delinquent taxes on its own
properties. In September 2013, when the period for redemption
expired, the County issued a tax deed to Zinvest.
Zinvest filed a quiet title action for the property in the
District Court in October 2013. During this litigation,
Zinvest's attorney sent a letter to Gunnersfield
requesting that it sign a Disclaimer of Interest.
Gunnersfield signed and returned the Disclaimer of Interest,
again believing that the proceedings related to Units 6 and
7, and not to Lot 6A. The District Court granted final
judgment and quieted title to Zinvest in May 2014.
¶7 Realizing its error in February 2015, Gunnersfield
filed a motion for relief from judgment with the District
Court. The court granted the motion and struck
Gunnersfield's prior Disclaimer of Interest from the
record, reasoning that it was "not unreasonable"
for Gunnersfield to assume that the proceedings did not
pertain to its property and that "negligence in this
instance [was] excusable." Following additional briefing
and argument, the District Court denied Gunnersfield's
motions for summary judgment and granted Zinvest's
motion. It issued a final judgment on December 2, 2016,
quieting title to Zinvest.
This Court reviews a district court's grant or denial of
summary judgment de novo. RN & DB, LLC v.
Stewart, 2015 MT 327, ¶ 13, 381 Mont. 429, 362 P.3d
61. Like the district court, we apply the criteria of M. R.
Civ. P. 56(c)(3) to determine whether there is a
"genuine issue as to any material fact" and whether
"the movant is entitled to judgment as a matter of
law." M. R. Civ. P. 56(c)(3); see also RN & DB,
LLC, ¶ 13. If there is no genuine issue of material
fact, we review for correctness the district court's
conclusion that the moving party is entitled to judgment as a
matter of law. RN & DB, LLC, ¶ 13.
We review de novo a district court's interpretation and
application of a statute. Dick Irwin Inc. v. State,
2013 MT 272, ¶ 18, 372 Mont. 58, 310 P.3d 524.
Whether the defective property tax assessment voided the
tax lien sale.
It is undisputed that Gunnersfield properly recorded its deed
to Lot 6A and that the Department received the Realty
Transfer Certificate, which showed correctly the conveyance
of Lot 6A from Prospero to Gunnersfield. It is also
undisputed that the Department continued to assess Lot 6A to
Prospero, rather than to Gunnersfield; that Gunnersfield did
not receive any notices of taxes due on Lot 6A; and that
Gunnersfield paid all taxes due on the notices it did receive
for Units 1 through 5. Gunnersfield argues that, under these
facts, the Department's tax assessments on Lot 6A were
Among its arguments before the District Court, Gunnersfield
contended that errors in the tax assessment of the property
invalidated the assessment and therefore rendered void the
tax deed to Zinvest. The District Court disagreed and held
that, even though the wrong party was assessed, the tax
assessment was valid under § 15-8-201(4), MCA. The
District Court reasoned further that the language in the
misnomer statute protecting tax lien sales, § 15-17-325,
MCA, supported this understanding. It quoted two cases from
this Court in support-Cobban v. Hinds, 23 Mont. 338,
349, 59 P. 1, 2 (1899), and Meyer v. Chessman, 132
Mont. 187, 192, 315 P.2d 512, 514 (1957).
On appeal, Zinvest argues that the District Court decided the
case correctly and that the tax assessments were procedurally
proper. In support, it argues that the language of
§§ 15-8-201(4) and 15-17-325, MCA, as well as some
of our prior case law, indicates that taxation is an in rem
proceeding, not an in personam proceeding. Zinvest thus
contends that a valid assessment does not require that the
actual owner of the property be assessed, as long as some
individual person or entity is assessed for the parcel of
property at issue. Finally, Zinvest argues that it is the
responsibility of taxpayers to exercise diligence and ensure
their property taxes are paid.
Title 15 of the Montana Code Annotated encompasses the
statutes governing taxation in the state of Montana. It
prescribes a detailed process both for the assessment and
taxation of property and for the sale of property for unpaid
taxes. The process involves multiple steps and multiple
levels of government. The Department of Revenue is tasked
with valuing all of the taxable property in the state and
with maintaining the database of ownership and property value
information. See §§ 15-7-101, -304,
15-8-101, -201, MCA. Based on information from the
Department, each taxing jurisdiction calculates its own mill
levy and submits it to the Department. See
§§ 15-10-201, -202, MCA. The Department computes
the taxes, fees, and assessments to be levied and provides
this information to each county's clerk and recorder and
treasurer. Section 15-10-305, MCA. The county treasurer in
turn produces and mails the property tax bills, collects the
property taxes, and distributes the monies to the taxing
jurisdictions. Sections 15-16-101, -104, MCA. Failure to pay
taxes can result in the county treasurer taking actions under
Title 15, ...