Service required for foreclosure of irrigation district tax lien, sales price and redemption rights

IRRIGATION ‑- DISTRICTS ‑- PROPERTY ‑- TAXATION ‑- SERVICE OF PROCESS ‑- ATTORNEYS ‑- COSTS ‑- Service required for foreclosure of irrigation district tax lien, sales price and redemption rights

            1.   Service must provide notice reasonably calculated to inform interested parties of proceedings which may directly and adversely affect t heir legally protected interests.  Notice by publication and posting is adequate where the name and address of the owner are not known or cannot be discovered by a governmental entity with a minimal effort.  Whether any particular service is adequate is a factual question that cannot be resolved in an Attorney General's Opinion.

            2.   An irrigation district cannot include reasonable attorney fees or statutory attorney fees in a certificate of delinquency or as part of the amount that must be paid to redeem the property.

            3.   RCW 87.06.100(1) provides that an entity buying property at a foreclosure sale must pay the full amount of all property taxes and certain other taxes before receiving a deed from the irrigation district.  RCW 87.06.070 provides that the court shall specify the minimum sales price below which the property shall not be sold.  While there is no statutory requirement that the minimum sales price set by the court included the full amount of all property taxes and other taxes, the effect of these two statutes is that the district cannot provide a deed unless the taxes specified in the statute are paid.

            4.         RCW 87.06.050 provides that any party in interest of property for which a certificate of delinquency has been prepared may redeem the property as provided by the statutes.  RCW 87.06.010(4) defines party in interest as an occupant of the property, the owner of record, and any other person having a financial interest of record in the property.

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 [[Orig. Op. Page 2]]
                                                                October 11, 1991

Honorable Margaret Rayburn
State Representative, District 15
1610 South Euclid
Grandview, Washington 98930
                                                                                                                 Cite as:  AGO 1991 No. 30

Dear Representative Rayburn:

            You have requested our opinion on several questions concerning the foreclosure of property by irrigation districts under chapter 87.06 RCW.  We paraphrase your questions:

            1.                     Do the provisions of RCW 87.06.040 regarding service of notice and summons regarding foreclosure by an irrigation district violate the Due Process Clause, amendment 14 of the United States Constitution?

            2.                     Can irrigation districts include reasonable attorney's fees or statutory attorney fees in certificates of delinquency or as part of the amount that must be paid to redeem property prior to a foreclosure sale?

            3.                     Is the minimum sales price established by a court for the sale of foreclosed property by irrigation districts required to cover the amount of delinquent assessments and other costs associated with the foreclosure process and/or required to be related to the fair market value of the foreclosed property?

            4.                     Can any person other than the owner of the property redeem property that an irrigation district is preparing to sell before the date of the foreclosure sale?

            We answer questions 1 and 3 in the manner set forth below.  The answer to question 2 is no.  The answer to question 4 is yes.

            Question 1:

            Do the provisions of RCW 87.06.040 regarding service of notice and summons regarding foreclosure by an irrigation district violate the Due Process Clause, amendment 14 of the United States Constitution?

             [[Orig. Op. Page 3]]

            Your question refers to RCW 87.06.040 which sets forth the statutory procedure for foreclosing on delinquent assessments owed to an irrigation district.  RCW 87.06.040(1) provides that the irrigation district treasurer shall give notice and summons of the application for judgment foreclosing assessment liens to all parties in interest disclosed by the title search.  RCW 87.06.040(3) addresses service of the notice and summons:

                        The notice and summons shall be served in a manner reasonably calculated to inform each party in interest of the foreclosure action.  At a minimum, service shall be accomplished by either (a) personal service upon a party in interest, or (b) publication once in a newspaper of general circulation that is circulated in the area in which the property is located and mailing of notice by certified mail to the party in interest.

            The Attorney General's Office has a long-standing policy that it will not express an opinion as to the constitutionality of a duly enacted law.  See, e.g., AGO 1991 No. 8 at 4.  We presume all laws constitutional until they have been declared otherwise by the courts of this state.  To do otherwise might cast a cloud on the validity of a current law or create a potential conflict for the office in the event we are later called upon to defend the law in court.

            Because we presume RCW 87.06.040 to be constitutional, we cannot offer many specific comments on the issues you raise which include:  a) whether notice by publication and certified mail is adequate service when the certified mail is delivered to a minor, b) whether service by publication and certified mail to the last known address is adequate service when a current address cannot be determined for a party in interest, and c) whether service by publication alone is adequate when a diligent search reveals neither a current or last known address for a party in interest.

            In addition, we cannot answer the specific issues you raise because it would require us to make factual assumptions regarding efforts by an irrigation district to locate the person to be notified.  For example, there are factual issues inherent in your inquiry regarding whether service by publication and certified mailing to the last known address is adequate when a current address cannot be determined.

            Nonetheless, we point out that the key case to apply in analyzing issues concerning the constitutional adequacy of notice is Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 94 L. Ed. 865, 70 S. Ct. 652 (1950).  InMullane, the United States Supreme Court stated that a state must provide notice reasonably  [[Orig. Op. Page 4]] calculated to inform interested parties of proceedings which may directly and adversely affect their legally protected interests.  Based onMullane and its progeny, the Washington Supreme Court held that former RCW 87.03.310 violated due process requirements in that it did not require an owner of property subject to an irrigation assessment foreclosure be notified of the foreclosure proceedings by personal service or mail.  Wenatchee Reclamation Dist. v. Mustell, 102 Wn.2d 721, 726, 684 P.2d 1275 (1984)1/.

             "Notice by publication and posting is constitutionally inadequate where the name and address of the owner are known or can be discovered by the governmental entity with minimal effort; personal service or mailed notice is required."  102 Wn.2d at 726.  See also,Brower v. Wells, 103 Wn.2d 96, 690 P.2d 1144 (1984)2/.

             Thus, inherent in any inquiry regarding the adequacy of service by publication and/or mailing is a factual examination of the efforts made by the notifying governmental agency to ascertain the address of the person to be notified3/.

            For example, when the name and address of the person to be notified were known to governmental officials and contained within governmental records, publication was held to be inadequate service.  Walker v. City of Hutchinson, 352 U. S. 112, 1 L. Ed. 2d 178, 77 S. Ct. 200 (1956).  Similarly, when the name and  [[Orig. Op. Page 5]] address of the person to be notified were readily ascertainable from public records, service by publication and posted notices was inadequate.  Schroeder v. New York City, 371 U.S. 208, 9 L. Ed. 2d 255, 83 S. Ct. 279 (1962).

            In sum, the notice given must be reasonably calculated to inform persons that their rights regarding a foreclosure proceeding are going to be affected with finality.  A pragmatic approach to the type of notice that will accomplish this goal, given all the circumstances, should be taken4/.

            If an irrigation district does not make diligent or reasonable efforts to locate the person to be notified, service could be rendered ineffective in a particular case, although the statutory service requirements remain constitutional.

            Question 2:

            Can irrigation districts include reasonable attorney fees or statutory attorney's fees in certificates of delinquency as part of the amount that must be paid to redeem property prior to a foreclosure sale?

            The answer to your question is no.  RCW 87.06.020 and [87.06].050 are pertinent to your question.  RCW 87.06.020 describes preparation of certificates of delinquency by irrigation districts:

                        (1) After thirty-six calendar months from the month of the date of delinquency, the treasurer shall prepare certificates of delinquency on the property for the unpaid irrigation district assessments, and for costs and interest.  An individual certificate of delinquency may be prepared for each property or the  [[Orig. Op. Page 6]] individual certificates may be compiled and issued in one general certificate including all delinquent properties.  Each certificate shall contain the following information:

                        (a) Description of the property assessed;
                        (b) Street address of property, if available;
                        (c) Years for which assessed;
                        (d) Amount of delinquent assessments, costs, and interest;
                        (e) Name appearing on the treasurer's most current assessment roll for the property; and
                        (f) A statement that interest will be charged on the amount listed in (d) of this subsection at a rate of twelve percent per year, computed monthly and without compounding, from the date of the issuance of the certificate and thatadditional costs, incurred as a result of the delinquency, will be imposed, including the costs of a title search;

                        (2) The treasurer may provide for the posting of the certificates or other measures designed to advertise the certificates and encourage the payment of the amounts due.

(Emphasis added.)

            RCW 87.06.050(1) explains the process for redeeming property prior to a foreclosure sale by an irrigation district:

                        Any party in interest of property for which a certificate of delinquency has been prepared, but against which a foreclosure judgment has not been entered, may pay to the treasurer, in person or by agent, the total amount of the assessment lien, as listed under RCW 87.06.020(1)(d), plus any additional costs and interest, including any title search costs.  If a foreclosure judgment has been entered, then any party in interest may pay to the treasurer, in person or by agent, the lien amount for which the judgment has been rendered, so long as payment is received by the treasurer during regular business hours before the day of the foreclosure sale.  The treasurer shall give a receipt for each payment received under this subsection.

             [[Orig. Op. Page 7]]

(Emphasis added.)

            Your question asks whether, under RCW 87.06.020(1)(f) and RCW 87.06.050(1), "additional costs" includes either reasonable or statutory attorney fees.  We conclude that the phrase "additional costs" does not include either reasonable or statutory attorney's fees.

            Chapter 87.06 RCW does not define "additional costs."  In attempting to determine the meaning of "additional costs" that was intended by the Legislature, neither chapter 87.06 RCW nor other state laws concerning foreclosure sales provide guidance.  We turn next to established rules regarding the award of attorney fees in civil litigation.  The general rule is that attorney fees will not be awarded in the absence of a contract, statute, or recognized ground of equity.  Hsu Ying Li v. Tang, 87 Wn.2d 796, 557 P.2d 342 (1976); White v. Wilhelm, 34 Wn. App. 763, 665 P. 2d 407 (1983).  Equitable exceptions to the general rule of no attorney fees include when the losing party's conduct constitutes bad faith or the common fund exception.  Hsu Ying Li,supra.  In addition, courts have the inherent equitable power to award attorney fees.  Hsu Ying Li,supra.

            The court inState ex rel. Macri v. Bremerton, 8 Wn.2d 93, 111 P.2d 612 (1941) stated that "costs"

            in the absence of statute or agreement does not include counsel fees; in other words, the general rule is that counsel fees are not costs either in suits in equity or actions at law.

8 Wn.2d at 102.

            In addition, Black's Law Dictionary, 346 (6th Ed. 1990) at 346, defines costs as:

                        A pecuniary allowance, made to the successful party (and recoverable from the losing party), for his expenses in prosecuting or defending an action or a distinct proceeding within an action.  In federal courts, costs are allowed as a matter of course to the prevailing party unless the court otherwise directs; also, specified fees and certain court expenses may be taxed as costs.  (Citation omitted.)  Generally, "costs" do not include attorney fees unless such fees are by a statute denominated costs or are by statute allowed to be recovered as costs in the case.

             [[Orig. Op. Page 8]]

                        Fees and charges required by law to be paid to the courts or some of their officers, the amount of which is fixed by statute or court rule; e.g. filing and service fees.

            Consistent with the above general rules regarding the award of attorney fees in civil litigation, we conclude that the phrase "additional costs" was not intended to include attorney fees.  Neither RCW 87.06.020 or 87.06.050 expressly state that attorney fees may be included in certificates of delinquency or in the amount that must be paid to redeem the property.  In contrast, both statutes specifically state that interest and title search costs are to be included in the total amount.  The Legislature is presumed to be familiar with judicial decisions construing existing statutes,Fain v. Chapman, 94 Wn.2d 684, 619 P.2d 353 (1980), and to be aware of past legislation and judicial interpretations when enacting and amending statutes.  Department of Licensing v. Ramirez, 34 Wn. App. 430, 661 P.2d 1009 (1983).

            Accordingly, we believe that if the Legislature had intended for some type of attorney fees, whether reasonable or statutory fees, to be included by irrigation districts, it would have provided so by express language.

            Question 3:

            Is the minimum sales price established by a court for the sale of foreclosed property by irrigation districts required to cover the amount of delinquent assessments and other costs associated with the foreclosure process, and/or required to be related to the fair market value of the foreclosed property?

            The answer to your question is no.  The first part of your question asks about the price of property to be sold by irrigation districts with respect to delinquent assessments and other costs associated with the foreclosure process.  We begin with RCW 87.06.070:

                        (1) If the court renders a judgment of foreclosure, the court shall direct the treasurer to proceed with the sale of the property and shall specify the minimum sale price below which the property is not to be sold.

                        (2) The treasurer shall sell the property to the highest and best bidder.  All sales shall be made on Friday between the hours of nine a.m. and five p.m. at  [[Orig. Op. Page 9]] a location designated by the treasurer.  However, sales not concluded on Friday shall be continued from day to day, Saturdays, Sundays, and holidays excluded, during the same hours until all properties are sold.

(Emphasis added.)

            In addition, RCW 87.06.100(1) directs that before an irrigation district treasurer may execute and convey a deed, persons acquiring property at a foreclosure sale must pay certain costs:

                        Prior to the treasurer executing and conveying the deed, all persons or entities acquiring property at the foreclosure sale shall be required to pay the full amount of all assessments, costs, and interest for which judgment is rendered; and the full amount of the following if due at the time of the foreclosure sale:  Property taxes, drainage or diking district assessments, drainage or diking district improvement assessments, irrigation district assessments, and costs and interests relating to such taxes or assessments.  This subsection does not apply to the irrigation district's acquisition of property.

            RCW 87.06.080(2) sets forth the notice of the foreclosure sale that the irrigation district treasurer must post.  The notice states, in part:  "This sale is made in order to pay for delinquent assessments, costs, and interest owed to __________."

            There is no statutory requirement that a court establish a minimum sales price which covers all assessments and costs.  However, the practical effect of RCW 87.06.100(1) is that even if a court were to set a minimum sales price less than the total of all assessments, costs, interest, and other enumerated taxes and assessments, the irrigation district could not provide a purchaser who paid the minimum sales price with a deed until the purchaser paid all the above taxes and assessments.

            The second part of your question asks about the price of property to be sold by irrigation districts with respect to fair market value of the property.  Again, as with the first part of this question, the practical effect of RCW 87.06.100(1) is that the amount owed at the time of foreclosure, i.e., the sum of assessments listed under RCW 87.06.100(1), is the minimum sales price, even if it is greater than the fair market value of the property.

             [[Orig. Op. Page 10]]

                        In addition, RCW 87.06.080(4) states:

                        If the bid amount paid for the property is in excess of the lien amount for which the judgment has been rendered, plus any additional assessments, costs, and interest which have become due after the date of preparation of the certificate of delinquency and before the date of sale, then the excess shall be remitted, on application therefor, to the owner of the property.  If no claim for the excess is received by the treasurer within three years after the date of the sale, the treasurer, at expiration of the three‑year period, shall deposit the excess in the current expense fund of the district.

(Emphasis added.)

            The effect of RCW 87.06.080(4) is that for any bid exceeding "the lien amount for which the judgment has been rendered" and any other assessments and costs, the excess shall be paid to the property owner on request.  This is true whether the bid amount is greater than or less than the fair market value of the property.

            Thus, under both RCW 87.06.080(4) and 87.06.100(1), a purchaser must pay, at a minimum, the total of all assessments, costs, interest, and other enumerated taxes and assessments, regardless of the fair market value of the property5/.

             Question 4:

            Can any person other than the owner of the property redeem property that an irrigation district is preparing to sell before the date of the foreclosure sale?

             [[Orig. Op. Page 11]]

            The answer to your question is yes.  RCW 87.06.050 addresses payment before foreclosure:

                        (1)Any party in interest of property for which a certificate of delinquency has been prepared, but against which a foreclosure judgment has not been entered, may pay to the treasurer, in person or by agent, the total amount of the assessment lien, as listed under RCW 87.06.020(1)(d), plus any additional costs and interest, including any title search costs.  If a foreclosure judgment has been entered, then any party in interest may pay to the treasurer, in person or by agent, the lien amount for which the judgment has been rendered, so long as payment is received by the treasurer during regular business hours before the day of the foreclosure sale.  The treasurer shall give a receipt for each payment received under this subsection.

                        (2) Upon receipt of payment under this section, the district shall abandon any foreclosure proceedings commenced against the property.  If a notice of lis pendens has been filed with the county auditor, the treasurer shall record a release of lis pendens with the auditor.

(Emphasis added.)

            RCW 87.06.050 answers your question.6/

            The statute provides that any party in interest of property for which a certificate of delinquency has been prepared but prior to entry of a foreclosure judgment may pay the total amount of the assessment lien.  Similarly, any party in interest may pay the amount for which a foreclosure judgment has been entered.  Upon receiving such a payment, the irrigation district must abandon any foreclosure proceedings commenced against the property.

            RCW 87.06.010(4) defines "party in interest" as "an occupant of the property, the owner of record, and any other person having a financial interest of record in the property."  Thus, an  [[Orig. Op. Page 12]] occupant of the property, owner of record of the property, or any other person with a financial interest of record in the property may redeem the property pursuant to RCW 87.06.050 before a foreclosure sale.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

KENNETH O. EIKENBERRY
Attorney General

LAURIE S. HALVORSON
Assistant Attorney General