Title: Wyoming Dept. of Revenue and Taxation-Excise Tax Div. v. First Wyoming Bank, N.A.-Kemmerer

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Wyoming Dept. of Revenue and Taxation-Excise Tax Div. v. First Wyoming Bank, N.A.-Kemmerer1986 WY 100718 P.2d 31Case Number: 85-285Decided: 04/24/1986Supreme Court of Wyoming
WYOMING DEPARTMENT OF 
REVENUE AND TAXATION-EXCISE TAX DIVISION, Appellant (Defendant), Andy E. 
Marshinsky, Vanetta M. Marshinsky, Andy Marshinsky, Jr., and Jill Marshinsky, 
Borg Warner Acceptance Corporation, Bay's Construction, Inc., Credit Bureau of 
Kemmerer, Bombardier Corporation, (Defendants),

v.

FIRST WYOMING BANK, N.A. 
- KEMMERER, Appellee (Plaintiff).

Appeal from District 
Court, LincolnCounty, John D. Troughton, 
J.

A.G. McClintock, 
Atty. Gen., Peter J. Mulvaney, Deputy Atty. Gen., Robert J. Walters, Asst. Atty. 
Gen., for 
appellant.

John C. Patton 
and Sherrill A. Veal of Carmichael, McNiff & Patton, Cheyenne, for appellee.

Before THOMAS, C.J., and BROWN, CARDINE, URBIGKIT 
and MACY, JJ.

BROWN, 
Justice.

[¶1.]     This appeal involves 
the question of whether a tax lien filed on property to collect delinquent sales 
tax takes priority over an earlier recorded mortgage interest of record in the 
property. Appellee First Wyoming Bank, N.A.-Kemmerer (the bank) filed an amended 
complaint seeking judicial foreclosure requiring appellant Wyoming Department of 
Revenue and Taxation-Excise Tax Division (the state) to set up any claim they 
may have against the subject property, and seeking to declare the bank's 
mortgage superior to any interest held by the state. Both parties moved for 
summary judgment and stipulated to the facts. The trial court granted summary 
judgment in favor of the bank and the state appeals, raising the following 
issues:

"I

"Did the district court 
err in its holding as a matter of law that a sales tax lien does not relate back 
to the date that unpaid sales taxes became due?

"II

"Did the district court 
err in its holding that a sales tax lien becomes effective when recorded to 
resolve the relative priorities of competing liens?"

[¶2.]     The bank states the 
issue as:

"Whether an unperfected 
lien for deficient sales taxes which is not a matter of public record should 
have priority over a third party creditor, who has a prior, properly perfected 
mortgage interest of record which intervenes between the time the sales tax 
liability may have accrued and the time when the state's interest is made a 
matter of public record."

[¶3.]     We will affirm. 

[¶4.]     The property in 
question was owned by Andy and Vanetta Marshinsky. The property was used to 
operate a business known as "Andy's, Inc." in Kemmerer, Wyoming. Some of the activities of the 
business included the retail sale of automobiles, snow machines, related 
equipment accessories, as well as repair work done on the 
same.

[¶5.]     Audits were conducted 
on the business by the state, and sales tax deficiencies were levied against the 
Marshinskys for the period August 1, 1976, to July 30, 1979 inclusive. The 
Marshinskys did pay sales tax during this period, but subsequent audits by the 
state revealed a deficiency.

[¶6.]     On July 11, 1980, the 
state sent a deficiency assessment to the Marshinskys. This assessment was later 
revised, and other assessments were sent. When no response was rendered by the 
Marshinskys, the state filed a certificate of lien with the Lincoln County Clerk 
on June 5, 1981, covering all real and personal property owned by the 
Marshinskys.

[¶7.]     The bank claims a debt 
owed to it by the Marshinskys arising from nonpayment of three notes secured by 
a mortgage recorded March 19, 1979. This mortgage covered real estate in 
connection with the business, and several other lots unrelated to the business. 
The question presented is which interest takes priority - the bank's mortgage 
recorded March 19, 1979, or the state's subsequent tax lien filed June 5, 
1981.

[¶8.]     We will consider both 
of the state's issues together. The state contends the district court erred in 
holding that the sales tax lien did not "relate back to the date that unpaid 
sales taxes became due," thus making the bank's prior perfected mortgage 
superior to the sales tax lien.

[¶9.]     Our discussion begins 
with a recitation of the applicable statute, § 39-6-410, W.S. 1977 (May 1985 
Replacement), which states in relevant part:

"(a) Any tax due under 
this article constitutes a debt to the state from the persons who are parties to 
the transaction and is a lien from the 
date due on all the property of those persons. The tax due together with 
interest, penalties and costs may be collected by appropriate judicial 
proceedings or the board may seize and sell at public auction so much of the 
persons' property as will pay all the tax, interest, penalties and costs. * * 
(Emphasis added.)

"(b) The tax imposed by this article is a lien with 
preference over all creditors except for taxes and debts due the 
United 
States and liens of record which have been 
filed or recorded prior to the imposition of a tax lien upon the 
property of any vendor who discontinues or sells his business or stock of goods. 
The vendor shall file a return within thirty (30) days after discontinuing or 
selling his business. His successor in business shall withhold from the purchase 
price enough money to pay the taxes, penalties and interest due on the 
outstanding amount of all credit, installment and conditional sales upon which 
the tax has not been paid until the time the former owner produces a receipt 
from the board showing that all taxes have been paid or a certificate that no 
taxes are due. If the successor fails to withhold from the purchase price the 
amount due and the taxes, penalty and interest are unpaid the original vendor 
and successor vendor are liable for the payment of the unpaid taxes, penalties 
and interest." (Emphasis added.)

[¶10.]  Other than the preference enunciated in 
subsection (b) above, the statute does not state whether sales tax liens shall 
have priority over previously recorded interests. Nor does the statute state how 
a sales tax lien is to be perfected.

[¶11.]  Appellant contends the sales tax lien "is 
an automatic lien arising by operation of law on the date the corresponding 
sales tax became due." This is so, appellant contends, even though the tax 
deficiency is not discovered until later, and in spite of another encumbrance 
filed of record between the time the taxes became due and discovery of the 
deficiency. Appellant further contends that the sales tax lien has priority over 
the bank's mortgage because § 39-6-410(a) states that "any tax due * * * is a 
lien from the date due * * *."

[¶12.]  It is true that Section 39-6-410(a) 
provides that any tax due is a debt to the state and is a lien on all property 
from the date the tax is due; however, this subsection does not say that the 
lien is superior to an intervening lien properly recorded. The state bootstraps 
its theory of priority by reference to § 39-6-410(b), which arguably applies to 
circumstances where the business is sold or discontinued. Further ambiguity is 
manifest by the term "imposed" appearing in subsection (b). This term implies 
some affirmative action other than a tardy audit.

[¶13.]  The trial court held that a sales tax 
lien becomes effective against prior lienholders when it is recorded or the 
state otherwise provides notice of its lien. In its order the court 
stated:

"8. The State's lien did 
not relate back to the first date that unpaid sales taxes became due, nor is its 
priority, as against third parties and other creditors relying on the public 
record, preserved by sending notices of deficiency to the taxpayer. The State's 
earliest priority date, as against bona fide purchasers and others relying on 
the public record, is June 5, 1981.

"9. The State's lien, 
perfected June 5, 1981, could not take priority over a prior, perfected mortgage 
interest in the taxpayer's property, properly recorded March 19, 
1979."

[¶14.]  We think the trial court reached the 
correct result. Once the bank perfected its interest in the land by recording 
the mortgage pursuant to § 34-2-109, W.S. 1977, such gave notice that the bank 
held an interest in the property. Furthermore, a mortgage of property in this 
state is a "conveyance" pursuant to § 34-1-102, which is to be recorded under § 
34-1-121. A recorded interest in land constitutes notice to others. Section 
34-1-121 provides in part:

"(a) Each and every deed, 
mortgage, instrument or conveyance touching any interest in lands, made and 
recorded, according to the provisions of this chapter, shall be notice to and 
take precedence of any subsequent purchaser or purchasers from the time of the 
delivery of any instrument at the office of the register of deeds (county 
clerk), for record. * *"

[¶15.]  Sales tax liens are solely objects of 
statutory creation. State Board of Equalization v. Courtesy Motors, Wyo., 362 P.2d 134 
(1961). As noted earlier, § 39-6-410 is ambiguous when applied to the facts 
here. Therefore, resort must be made to principles of statutory construction. 
When construing statutes, the intention of the lawmaking body must be 
ascertained from the language of the statute as nearly as possible. McArtor v. 
State, Wyo., 699 P.2d 288 (1985); State v. 
Sodergren, Wyo., 
686 P.2d 521 (1984); McGuire v. McGuire, Wyo., 
608 P.2d 1278 (1980). We must construe statutes in pari materia with other 
relevant statutes. Citizens of Otto v. WyomingState 
Committee for School District Organization, Wyo., 705 P.2d 831 (1985); and Matter of Shapiro, Wyo., 703 P.2d 1079 
(1985).

[¶16.]  Subsection (b) of § 39-6-410 cited 
earlier, provides that a sales tax lien is subject to other liens "filed or 
recorded prior to the imposition of a 
tax lien upon the property of any vendor who discontinues or sells his business 
or stock of goods." (Emphasis added.) The word "imposition" implies that some 
affirmative act is required by the state to identify and perfect its lien. Such 
is in conformity with the definition of imposition, "the act of imposing." 
Websters New Collegiate Dictionary, p. 576 (1976). See also, 10A Thompson on 
Real Property § 5312 pp. 671-672 (1957). Until the state takes some affirmative 
action to determine the deficiency and identify the extent of its lien, no one 
is placed on notice that there is a deficiency which may result in a lien being 
placed on the property.

[¶17.]  In this case, the first notice given the 
Marshinskys by the state that there was a sales tax deficiency occurred on July 
11, 1980, over a year after the bank recorded its mortgage on the property on 
March 19, 1979. On June 5, 1981, some two years after the bank's mortgage had 
been recorded, the state filed its sales tax lien on the 
property.

[¶18.]  Further light is shed on the problem when 
one looks at the procedure for filing other liens on property. A lien filed for 
delinquent real estate taxes is "subject to all prior existing valid liens" 
under § 39-3-102, W.S. 1977 (May 1985 Replacement). A real estate tax lien is 
not made superior to prior existing perfected liens as the state proposes in 
this case regarding sales tax liens. Furthermore, Title 29, governing liens (§§ 
29-1-101 through 29-7-301, W.S. 1977 (June 1981 Replacement)), provides that a 
lien must be filed with the county clerk in order to have a perfected lien. § 
29-1-301.

[¶19.]  In State Board of Equalization v. 
Courtesy Motors, Inc., Wyo., 362 P.2d 134 (1961), we construed § 
39-300, W.S. 1957, the predecessor of § 39-6-410(b), as applied to the sale of a 
business. The state brought suit against the purchaser of a business claiming 
the purchaser was liable for a sales tax deficiency owed by the previous owner. 
The question was whether a sales tax lien had priority over a previously 
recorded chattel mortgage. This court said no. The case has limited 
applicability to the case at bar since the sales taxes in question did not 
become due until after the chattel mortgage was executed and 
filed.

[¶20.]  Here, the sales taxes accrued between 
August 1, 1976 and July 30, 1979. However, as noted previously, the state did 
not file its lien for the deficient taxes until June 5, 1981. The state claims, 
however, that such lien is superior to a previously perfected mortgage even 
though no one had notice of such lien. This seems to be in derogation of the 
purpose of our recording statutes, which entitle one to rely on public records 
and determine whether or not a certain property is subject to liens, prior 
encumbrances or other outstanding claims.

[¶21.]  Were we to agree with the position urged 
by the state, long established lending practices would of necessity have to be 
changed, and existing loans would be in jeopardy for an uncertain time. Lending 
institutions would never know if they had a sufficiently secured 
loan.

[¶22.]  To endorse the state's claim that a sales 
tax lien has "super priority" over all other interests would be tantamount to 
sanctioning secret liens. Creditors and others who have an interest in property 
should be able to rely on public records to determine whether the property is 
subject to other competing interests. This enables a creditor to evaluate the 
risks of making a loan, and enables an interested purchaser to make an informed 
decision regarding the purchase of a property. If the state's argument 
prevailed, creditors, purchasers, and other interested parties could not make 
these evaluations because of the possibility of a secret tax lien not yet filed 
of record, but nevertheless taking priority over all other interests. In the 
absence of any authority, we cannot think the legislature intended such a 
result.

[¶23.]  Having found no reversible error, the 
summary judgment granted by the district court is 
affirmed.

[¶24.]  Affirmed.