M & M Investment Group v. Ahlemeyer Farms (IN)

Summary: The statutory requirement that a mortgagee complete a form requesting future notice of any possible pending tax sales for properties in which they have a recorded interest is constitutional. It does not place an unreasonable burden on the mortgagee and is the only reasonably certain way for an auditor to know who has a viable mortgage on property so that notice may be delivered.

M & M Investment Group, LLC v. Ahlemeyer Farms, Inc., 994 N.E.2d 1108 (Ind. 2013).


Facts: In September 2010, M &M Investment Group (M & M) purchased property at a tax sale. The previous owner, Ahlemeyer Farms, had two properly recorded mortgages with Monroe Bank (Monroe) on the property. Monroe did not receive notice of the pending tax sale.

The Indiana Code states that before property can be sold at a tax sale, the county auditor of the county in which the property is located must mail a notice by certified mail to “any mortgagee who annually requests a copy of the notice.” Ind. Code Ann. § 6-1.1-24-3 (West). The mortgagee requests notice by submitting a form to the auditor. Monroe did not submit the form and thus did not receive pre-sale notice. In compliance with the Indiana Code, M & M timely notified Monroe of the executed sale and its intent to seek a tax deed. M & M then filed a petition to direct the auditor to issue a tax deed for the property. Monroe filed a response challenging the notice statute as unconstitutional under the Fourteenth Amendment to the U.S. Constitution.

The trial court did not certify the challenge to the constitutionality of a state statute to the Attorney General of Indiana, and instead issued an order holding that the Indiana statute was unconstitutional and denied M & M's petition. M & M appealed.

Holding: Reversed. A party challenging a statute as unconstitutional must clearly overcome a presumption of constitutionality. The constitutional challenge is a question of law that the Indiana Supreme Court can resolve without further proceedings in trial court. Thus, the failure of the trial court to certify the question to the State Attorney General was not fatal, especially here, where the state was not denied a chance to protect its interest because it had submitted an amicus brief.

The notice statute is subject to the 14th Amendment because the process of tax sales results in an elimination of a mortgagee’s interest in property. Although constitutionally sufficient notice is that which is reasonably calculated to result in actual notice, it depends on the practicalities and peculiarities of each case, and the U.S. Supreme Court rejects any specific formula. Here, the statutory requirement of an additional form to be completed by mortgagees as to which properties they would like to receive notice on and which is aimed at providing notice does not violate due process rights.

The United States Supreme Court in Mennonite Bd. of Missions v. Adams held that the interest-holder's ability to take reasonable steps to protect his interest is a crucial aspect of the balancing test. 462 U.S. 791 (1983). Although a party’s ability to take steps to protect its property does not relieve the state of its obligation to provide adequate notice, there is still a balancing test between the interest of the state and the interest sought to be protected. Monroe’s position would tip the scales of the balancing test too far against the state and would not result in a greater likelihood of successful notification. The open-ended, cross-agency search to check for mortgages on property that Monroe advocates for would place a heavy burden on the state to search and identify all relevant and current mortgages as well as who is holding the note at the time. Furthermore, because today approximately 60% of the nation’s mortgages are not recorded in the name of the actual lender, a cross-agency search is not likely to result in actual notice.

The court held that the only reasonable way of knowing who has a viable mortgage is for the mortgagee to submit the form. The burden is much lighter on the mortgagee compared to the state if the alternative was required, and placing the burden on the mortgagee is more likely to result in actual notice.


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By: ATG Underwriting Department | Posted on: Fri, 01/03/2014 - 10:20am