Coeur d’Alene, Idaho, September 28, 2017. This blog is a follow-up to the May 10, 2017 post titled “Are You Losing Your Easement?” In that post, Art Macomber discussed the then-pending Idaho Supreme Court decision in the case of Regan v. Owen. On September 8, 2017, the Idaho Supreme Court issued its final decision in that case. A petition for rehearing has been filed.
The May 10, 2017 blog post linked above gave the background of this case. In short, the question before the Court was whether the issuance of a tax deed by a government entity on a parcel with unpaid property taxes extinguished easements over that parcel held by neighboring property owners. Stated differently, the question was whether an easement is an “encumbrance” that, under the previous version of Idaho Code section 63-1009, is extinguished upon issuance of a tax deed.
In the first appeal of this case (Regan v. Owen, 339 P.3d 1162 (2014) a.k.a. Regan I), the Idaho Supreme Court issued “guidance” (not required for that decision) on remand back to the First District Court in Kootenai County that an easement is an encumbrance unless “the easement is essential to the enjoyment of the land and it enhances the land’s value.” Regan, 339 P.3d at 1169. Applying that guidance, the First District Court ruled that a prescriptive easement is an “encumbrance” that, under the previous version of Idaho Code section 63-1009, is wiped out when the County issues a tax deed.
The Regans appealed that District Court ruling. They appealed on numerous grounds, including that the term “encumbrances” in the previous version of Idaho Code section 63-1009 should be limited to financial interests in property (such as a deed of trust), based on the plain language of examples of encumbrances given in Idaho Code section 55-613 (“The term ‘encumbrances’ includes taxes, assessments, and all liens upon real property.”) The Regans also appealed based on the Due Process Clause of the Fourteenth Amendment to the United States Constitution and other provisions of the Idaho Code, because Regans were given no notice of the taking.
On September 8, 2017, by a 3-2 decision, the State Supreme Court rejected the Regans’ appeal. The Court held that the 2014 guidance it had issued the First District Court on the meaning of “encumbrances” controlled this issue in 2017. In other words, it did not reconsider its language from the 2014 opinion indicating easements are “encumbrances” that, under the previous version of Idaho Code section 63-1009, are extinguished by issuance of a tax deed. The Court also rejected the Regans’ claims under the Due Process Clause of the Fourteenth Amendment and other provisions of the Idaho Code.
Justice Robyn Brody authored a dissent, which was joined by Justice Warren Jones. The dissent argued, based on the text and history of the relevant law, that the term “encumbrance” in the previous version of Idaho Code section 63-1009 should be more narrowly read to cover only financial interests in property like a deed of trust and not other property interests like an easement. On that basis, Justices Brody and Jones would have ruled that a prescriptive easement is not an “encumbrance” under the tax deed statute and therefore is not extinguished by a tax deed.
Here’s the upshot for Idaho landowners: based on the State Supreme Court’s interpretation of the previous version of Idaho Code section 63-1009, there could now be hundreds of real property takings claims across the State that easements have been wiped out. For properties conveyed by tax deed before March 30, 2016 (the date when Idaho Code section 63-1009 was changed), any easements on tax delinquent properties taken by cities or counties for back taxes may have been erased.
These potential deprivations of property rights may trigger claims for “just compensation” under the Takings Clause of the United States Constitution. U.S. Const., 5th Am. As stated in the above-linked May 10, 2017 post, “there is a four-year backward-looking window for the statute of limitations on takings claims by owners whose easements may have been taken without notice in violation of Idaho’s Constitution and the 14th amendment to the U.S. Constitution.” Landowners with easements running across tax-deeded parcels are therefore advised to determine as soon as possible if their property rights are affected by this State Supreme Court decision and, if so, what remedies might be available.
Unfortunately, many Idahoans could now face claims by their new tax deed-acquiring neighbors that legal access no longer exists across that neighbor’s tax deed-conveyed property. The Idaho courts may be faced with numerous legal disputes as a result. How these issues will develop remains to be seen, but there could be very expensive trouble ahead for Idaho landowners.
Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Macomber Law, PLLC at 866-511-1500 for a forty-five minute, no charge consultation to see if we can help.
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 As mentioned in the May 10, 2017 blog post linked above, in 2016 at the request of Macomber Law the Idaho Legislature amended Idaho Code section 63-1009, so that tax deeds will no longer extinguish the easement rights of a neighboring landowner. But this legislative change could not apply retroactively to save Regans’ easement, because tax deeds are contracts protected from interference by States under the United States Constitution. U.S. Const., Art. I § 10, cl.1.