Barnette v. HBI, LLC

Taking tax-foreclosed property requires proper notice

Cases > Property Rights > Barnette v. HBI, LLC
Lost: U.S. Supreme Court declined to hear Walter Barnette's case.

In 2002, Walter Barnette was working in the Omaha suburb of Bellevue when he spotted an acre of land in a growing neighborhood. Though he lives across the nearby border with Iowa, he bought the property with the intent of one day building a home. Walter fell on hard times, however, and failed to pay his 2010 and 2011 property taxes—$986.50—to Sarpy County, Nebraska. Sarpy County sold that debt to an investment company, with the requirement that they send notice warning that if Walter failed to pay his full debt, the County would give his land to the investor. The investment company sent notice via certified mail, which the post office returned as unclaimed. Walter never received notice. But rather than try sending a first-class letter, the company published a notice in a small Nebraska newspaper.

The county then gave Walter’s $25,000 property to the private investor and gave Walter nothing. The Nebraska Supreme Court ruled that that this poor attempt at notice was enough. It is unfair to take such a valuable property as payment for a smaller debt. But it is even more unfair, as the government failed to ensure meaningful notice before inflicting extreme financial consequences on a citizen.

Walter Barnette is a recently retired mechanic who lives in Council Bluffs, Iowa, just a few miles from Omaha, Nebraska. In 2002, while working in the Omaha suburbs of Sarpy County, Walter bought an acre of land there, intending to one day build a home in the growing suburban neighborhood. 

As the years passed, however, Walter fell on hard times. He was unable to pay the 2010 and 2011 taxes on his still-vacant property, and had a tax debt of $986.50. Unbeknownst to Walter, a private investment company called Pontian Land Holdings bought his tax liens from Sarpy County in 2013 by paying the taxes he owed—a total that had grown to $1,180.90 with interest and other costs. 

The sale allowed Pontian to pursue repayment from Walter for the tax debt with interest. If he failed to pay, Pontian could take the entire property, beyond what was due to cover the debt. 

State law charged Pontian with notifying Walter of the impending foreclosure. As required by state law, Pontian sent notice via certified mail. To receive certified mail, a property owner has to be home and sign for the mail. When no on signs, the post office leaves a sticker noting its attempt and the name of the sender. After three attempts, it is ordinarily sent back to the local post office and held temporarily in case the sticker prompts the intended recipient to claim the mail. Walter failed to claim the mail before it was sent back. That’s not especially surprising, since he didn’t know anything about the sender and had no idea he was in danger of losing his property and all of his equity in it.   

When Pontian received the mail back, they didn’t bother to try to send any notice via first-class mail, email, or even via a phone call. Instead, Pontian published a notice of the impending foreclosure in the Papillion Times, a small weekly newspaper that is not circulated where the property is located or where Walter lives. 

When time ran out for Walter to pay his debt and save his property, the title went to Pontian, and along with it, the property’s entire $25,000 value. Though he owed Pontian a fraction of his property’s value, Walter received nothing and instead lost half his net worth. 

Walter would have saved his property had he known he was in danger of losing it. Property owners like Walter have a right to receive notice before the government or its agents take their property.  

The Nebraska Supreme Court said receiving stickers about the unclaimed mail was sufficient notice. Most other courts recognize the feeble attempts by Pontian are not constitutionally adequate. In fact, the U.S. Supreme Court required more in a similar case 14-years ago called Jones v. Flowers.  But the Nebraska Supreme Court said it wouldn’t require the additional attempts from Jones—like a regular letter—because Walter’s land wasn’t “anything more than a vacant lot.” 

Represented by PLF free of charge, Walter asked the U.S. Supreme Court to reverse the Nebraska Supreme Court and affirm that due process requires proper notice before government can seize property. The Supreme Court declined to hear the case.

Nebraska is one of 13 states that regularly allow tax collectors to take a windfall when seizing property over delinquent taxes. PLF is working to put an end to these predatory laws that incentivize governments and tax lien investors to provide poor notice to owners. 

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What’s at stake?

  • Property taxes must be paid, and it is legal for governments to take property to pay an outstanding debt. However, the government shouldn’t keep any money beyond what’s owed or allow a private investor to take that windfall.
  • Proper notice is the most important way to prevent unnecessary foreclosures. Government must ensure meaningful notice before taking anyone’s property.

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September 04, 2020

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