Court Opinion

ID: 9724021
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:41:49.821177+00
Date Added: 2024-06-11T18:24:54.469569
License: Public Domain

HENDERSON, Justice
(specially concurring; concurring in result).
Issue 1
Based upon the following rationale and authorities, I specially concur on Issue 1.
SDCL 10-59-11 begins, “Any tax, penalty or interest due from a taxpayer is a lien in favor of the state upon all property and rights to property whether real or personal belonging to the taxpayer ...” I agree with the majority’s interpretation that the sales tax lien attached to the property at the time the tax is due. Thus, every taxpayer who collects a sales tax essentially has a lien against the property of the taxpayer. For Dion’s title to take priority over the sales tax lien, she must be a purchaser for value without actual notice of the lien. SDCL 10-59-11. Based upon the following, Dion was not a purchaser for value. Hence, the hen was perfected.
From 1982 through 1985, Time-Out Steakhouse and Restaurant was under intense investigation by the Department of Revenue and Internal Revenue Service. Time-Out was owned and operated by Chris Karras. Karras v. State, Dept. of Revenue, 441 N.W.2d 678 (S.D.1989). In January of 1985, Time-Out was incorporated with Chris and his family named as individual corporate officers and directors. On June 12, 1985, Chris was served with a summons to appear before the IRS with all of his business records. On July 5, 1985, he transferred several pieces of real property, including his control of TimeOut, to his wife, Dion.
Dion paid no consideration to Chris in exchange for the deeds. However, she supposedly assumed the loan on the 71 acre traet and paid it off as scheduled. Evidence strongly indicates that Chris continued to treat the property as his own and used his money to pay off the loan on the 71 acres. Such a facade equates to lack of consideration for the conveyances. Buhl v. McDowell, 51 S.D. 603, 216 N.W. 346 (1927). Dion has failed to prove the existence of a bona fide transaction. Buhl, 216 N.W. at 347; *254Churchill & Alden Co. v. Ramsey, 45 S.D. 454, 188 N.W. 742 (1922).*
The July 5, 1985 land conveyances have also been examined in federal court. In Karras v. Karras, 16 F.3d 245 (8th Cir.1994), Chris transferred several other properties— not those at issue here — to Dion who thereafter executed a mortgage on part of the property to her children. Meanwhile, the IRS filed a lien against the property and the children attempted to foreclose the mortgage. Affirming summary judgment granted to the United States, via the IRS, the Eighth Circuit held:
The record also contained default admissions that Chris did not receive reasonably equivalent value for the conveyance, that Dion did not assume the mortgages on the properties in her own name, and that Chris continued to make mortgage payments. Thus, the record before the court established that Dion did not give fair consideration for the conveyance.
16 F.3d at 247. Chris Karras’ slight of hand did not fool the federal court nor should the same modus opemndi prevail in the courts of South Dakota. The sales tax lien was perfected. SDCL 10-59-11.
Although I concur that Dion was not a purchaser for value, I disagree that she had actual notice. According to Department investigators, Dion had a habit of not recording every guest check presented to her when she operated the cash register at her husband’s business. Thus, the sales tax collected was not being recorded. She had actual knowledge of a failure to remit a sales tax due. An unperfected lien was automatically created per SDCL 10-59-11. Because of this fact, majority states, “Knowledge and notice of these facts was sufficient to put a prudent person on notice or at the very least, inquiry.”
This very sentence is the definition of “constructive notice.” SDCL 17-1-4. Dion may have been on constructive notice, but any notice she may have had would be that the business was subject to a sales tax lien. It cannot be said that she had actual notice that real property, separate and apart from the business, would also be subject to said lien. If one reads our previous decisions in this entire Karras scenario, it is not expressed that Dion owned this business or that she was prosecuted for any sales tax deficiencies. A sales tax deficiency was against Chris Karras, d/b/a the Time-Out Restaurant. As the plain language of SDCL 10-59-11 states, actual notice is the standard. Constructive notice is not enough. Perforce, the lien did not effectuate any priority based on actual notice.
Furthermore, the final sentence of the majority’s discourse on “Notice” stretches the interpretation of SDCL 10-59-11 beyond its plain language. SDCL 10-59-11 should not be restricted to “non-family members who are not intricately involved in that part of taxpayer’s business accountable for the delinquencies.” Such language is a forced interpretation. As we have upheld the sales tax lien due to lack of consideration, there is no need to expand the concept of notice in SDCL 10-59-11.
Issue 2
Based upon the following rationale and authorities, I concur in result on Issue 2.
SDCL 43-25-17 controls the “ ‘race to the courthouse’ situation as it relates to prior recorded conveyances which were recorded in good faith and made for valuable consideration.” Taylor v. Tripp, 330 N.W.2d 542, 545 (S.D.1983). Department’s lien was recorded in Lincoln County on July 23,1986, five days before Dion recorded her deed. Dion had received the deed over a year earlier.
Under Murphy v. Plankinton Bank, 13 S.D. 501, 83 N.W. 575 (1900), an unrecorded deed is good as against an attaching creditor. Department qualifies as an attaching creditor. As such, its judgment lien could only attach and become operative on whatever title and interest the lien debtor (Karras) had, if any, in the property at the time of the lien’s perfection. Because Karras sold the *255disputed property to Dion before the lien was perfected, there was nothing upon which the Department could attach.
The Murphy rationale was also followed in Bliss v. Tidrick, 25 S.D. 533, 127 N.W. 852 (1910); Haynie v. Bennett, 22 S.D. 65, 115 N.W. 515 (1908); Kohn v. Lapham, 13 S.D. 78, 82 N.W. 408 (1900); Roblin v. Palmer, 9 S.D. 36, 67 N.W. 949 (1896); Bateman v. Backus, 4 Dak. 433, 34 N.W. 66 (1887).
However, Reid v. Gorman, 37 S.D. 314, 158 N.W. 780 (1916), undermined Murphy, its progeny and predecessors. It appears, by implication, that Reid overruled Murphy without saying so. Five years later, Bucholz v. Hinzman, 44 S.D. 336, 183 N.W. 993 (1921), specifically overruled Murphy in part. Since then, apparently no other case has held that an unrecorded deed is good as against an attaching creditor. Reid and Bucholz were the final chapters for over 60 years until the case at hand.
Additionally, the SDCL 43-25-19 definition of “encumbrances” includes tax liens. Through legislative definition, what once was an “attachment creditor” might now fall under the auspices of “encumbrance,” thereby permitting such a lien to take priority over a previously unrecorded deed. It would appear that the Murphy precedent has been abandoned. Therefore, relying upon the Attorney General opinion (Op. Att’y Gen. 83 (1959-60)) is misplaced and irrelevant. It does not have the legal effect of a judicial decision. County of Spink v. Heinold Hog Market, Inc., 299 N.W.2d 811, 812 (S.D.1980).
Reaching an opinion, in any given decision, presents a question concerning the manner in which the conclusion was reached. Another appropriate inquiry is to determine if the conclusion is justifiable. An inquiring mind, seeking justification for the conclusion, reaches out desiring to know what factors were considered which produced the conclusion. But that same mind wants to know the manner whereby the conclusion is justified. Of course, all of this involves the basic premise of arriving at any decision, known as legal reasoning. But the legal decision process (how was the result reached?) is an interesting travel on the road to justice. There are different ways to justify a decision. Believing that the conclusion of the majority opinion is correct in its ultimate decision, I cannot subscribe to the process of its justification. Nevertheless, it is my opinion that justice has been rendered in this case.

 See also Rushmore State Bank v. Kurylas, Inc., 424 N.W.2d 649, 662 (S.D.1988), which adopted the same rationale as United States v. Galvin, 199 F.Supp. 4 (E.D.N.Y.1961). There is no need to go to a federal court in New York when we already have pertinent authorities in South Dakota.