JOE SELF CHEVROLET, INC., d/b/a Friendly Motors, Appellee, v. BOARD OF COUNTY COMMISSIONERS OF SEDGWICK COUNTY, KANSAS, Appellant.
No. 64,508
Supreme Court of Kansas
December 7, 1990
802 P.2d 1231 | 247 Kan. 625
Ronald D. DeMoss, of Wichita, argued the cause and was on the brief for appellee.
The opinion of the court was delivered by
LOCKETT, J.: The Board of County Commissioners of Sedgwick County, Kansas, (Sedgwick County) appeals the Sedgwick County District Court‘s ruling that
On September 28, 1988, Joe Self sold a 1980 GMC Suburban to George and Janet Hays, who registered the title to the truck in joint tenancy. Joe Self financed the Hayses’ purchase of the truck and perfected its security interest. At the time of purchase, George‘s lawn business, Hays Lawn Service, owed delinquent personal property taxes for the years 1979-1987, and George owed delinquent personal property taxes for the tax years 1979, 1981, and 1983-1987. Tax warrants had been issued and filed with the clerk of the district court against Hays Lawn Service and George. On October 7, 1988, an execution to collect a portion of the $18,517.64 due for delinquent personal property taxes from the lawn service and George resulted in the seizure of the GMC truck.
After the GMC truck was seized by Sedgwick County, the Hayses defaulted on their truck payments, owing a balance of $2,760 to Joe Self. Joe Self filed this declaratory judgment action, claiming that Sedgwick County‘s use of
The parties stipulated to the following facts:
“1. Joe Self Chevrolet, Inc., d/b/a Friendly Motors (Joe Self) is a corporation organized and existing under the laws of the State of Kansas with a principal place of business at 8801 East Kellogg, Wichita, Kansas 67278-0577.
.“2. Friendly Motors is a used car dealership wholly owned by Joe Self with a business address of 2337 S. Broadway, Wichita, Kansas 67211.
“3. On September 28, 1988, George L. Hays and Janet B. Hays purchased a 1980 GMC Suburban pickup truck (VIN TCL16AF523650) from Joe Self.
“4. Joe Self has a perfected, purchase money security interest in the truck, and its lien has been duly noted on the truck‘s title issued to George L. Hays and Janet B. Hays by the Kansas Department of Revenue, Division of Vehicles.
“5. Joe Self‘s lien on the truck is in the amount of $2,760.00.
“6. George L. Hays and Janet B. Hays are in default on the terms of the sales contract by which they purchased the truck from Joe Self and have refused to make additional payments required by contract.
“7. On October 7, 1988, the County filed a praecipe for execution and caused the issuance of an execution against the property of Hays Lawn Service and George Hays. The execution was filed under Sedgwick County District Court Case No. 88 CW 638 and directed the Sedgwick County Sheriff to seize any non-exempt property belonging to Hays Lawn Service and George Hays in Sedgwick County and to sell the property in satisfaction of delinquent personal property taxes for the years 1979 through 1987. The total amount of the County‘s claim against Hays Lawn Service and George Hays for delinquent personal property taxes owed by Hays Lawn Service for the years 1979 through 1987 is $17,343.75 including interest to October 10, 1988, and costs.
“8. On December 22, 1988, the County filed a praecipe for execution and caused the issuance of an execution against the property of George L. Hays. The execution was filed under Sedg-
“9. On December 21, 1988, the Sedgwick County Sheriff levied on the truck in which Joe Self has a perfected security interest.
“10. The County has construed
. . . .
“12. It is the County‘s position that if the vehicle herein is sold by the County to satisfy the delinquent taxes of George Hays and Hays Lawn Service, the County will be able to provide an unencumbered title to any purchaser.
“13. Attorney William R. Wood was hired by the County as an independent contractor to collect the delinquent personal property taxes at issue herein.”
After the district court found
STANDING TO CHALLENGE
Sedgwick County argues that Joe Self, a nonparty to the tax litigation, cannot request the court to determine the constitutionality of
Where there is an actual controversy the district court has the power to make binding adjudications of rights. Standing to sue means that a party has sufficient interest in a justiciable controversy to obtain judicial resolution of that controversy. Dutoit v. Board of Johnson County Comm‘rs, 233 Kan. 995, 1003, 667 P.2d 879 (1983).
If a seller retains an interest in goods sold to secure payment of some or all of the price, he has a purchase money security interest. The security interest can be perfected by the filing of a financing statement. Joe Self retained an interest in the GMC truck and filed its financing statement. A secured creditor with a lien on the property has a due process right in the property seized. See Hillhouse v. City of Kansas City, 221 Kan. 369, 375, 559 P.2d 1148 (1977) (citing Mitchell v. W.T. Grant Co., 416 U.S. 600, 40 L. Ed. 2d 406, 94 S. Ct. 1895 [1974]).
Under the facts of this case, Joe Self, a secured creditor, has sufficient interest in the justiciable controversy to obtain a judicial resolution as to the constitutionality of
TRIAL COURT‘S MEMORANDUM OPINION
In his memorandum opinion the district judge found:
”
K.S.A. 79-2111 is simple, concise and does not lack clarity. Our Court has stated on several occasions that it is the duty of courts to uphold legislation rather than defeat it. (See Kansas Board of Healing Arts v. Acker, 228 Kan. 145, 612 P.2d 610 [1980] and State v. Thompson, 237 Kan. 572, 701 P.2d 694 [1985]).“Nevertheless, no legislature has the power or authority to pass legislation which either directly or indirectly divests its citizens of property rights or interests.
“As stated more succinctly by the United States Supreme Court:
‘An elementary and fundamental requirement of due process in any proceeding which is accorded finality is notice reasonably calculated, under all
the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.’ Mullane v. Central Hanover Trust Co., 339 U.S. 306, 94 L. Ed. 865, 70 S. Ct. 652 (1949). “The United States Supreme Court also stated in Wolff v. McDonnell, 418 U.S. 539, 41 L. Ed. 2d 935, 94 S. Ct. 2963 (1974), as follows:
‘This Court has consistently held that “some kind of hearing is required at some time before a person is finally deprived of his property interests.“’
“The 14th Amendment to the United States Constitution was ratified in 1868. It is but reinforcement to those principles found in Sections 1, 2 and 18 of the Kansas Bill of Rights.
“As can be seen, the law requires that the instant plaintiff (as any citizen) is entitled to due process with regard to his property interests.
K.S.A. 79-2111 does not only [not] provide a method of assuring a citizen due process, it simply denies the existence of due process to a citizen like the Plaintiff.“Therefore, the Court finds
K.S.A. 79-2111 to be unconstitutional in that it denies due process of law.”
NOTICE
Since Joe Self, a secured creditor, has sufficient interest in the justiciable controversy to obtain judicial resolution, did the district court correctly determine that Joe Self is entitled to notice of Sedgwick County‘s intent to sell the GMC truck to collect George‘s delinquent taxes?
The essence of due process is protection against arbitrary government action. State ex rel. Stephan v. Smith, 242 Kan. 336, Syl. ¶ 9, 747 P.2d 816 (1987). The basic elements of procedural due process of law are notice and an opportunity to be heard at a meaningful time in a meaningful manner. In re Petition of City of Overland Park for Annexation of Land, 241 Kan. 365, 370, 736 P.2d 923 (1987).
More recently the United States Supreme Court in Mennonite Board of Missions v. Adams, 462 U.S. 791, 77 L. Ed. 2d 1383, 103 S. Ct. 3530 (1983), held that the sale of real property for delinquent taxes required that the mortgagee be given actual notice. The Supreme Court found when a tax sale “immediately and drastically diminishes the value of [the mortgagee‘s] security interest” that “actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interests of any party, whether unlettered or well versed in commercial practice, if its name and address are reasonably ascertainable.” Mennonite, 462 U.S. at 798, 800.
Subsequent to Tulsa Collection Services v. Pope, 485 U.S. 478, we determined that a creditor whose claim against a decedent‘s estate was denied under the Kansas nonclaim statute was denied the due process protection of the
Where a tax sale will immediately and drastically diminish the value of a lienholder‘s interest, actual notice to the lienholder is a minimum constitutional precondition to a proceeding which will adversely affect the property interest of that party, if the name and address of the creditor is reasonably ascertainable. Under our facts, the trial court correctly determined that Joe Self, a secured creditor, had an interest in the personal property seized and was entitled to notice of Sedgwick County‘s intent to sell
IS K.S.A. 79-2111 CONSTITUTIONAL?
It is uniformly recognized that the power to levy taxes is inherent in the power to govern, but the exercise of that power is dependent upon the existence of legislation designating the kinds of property to be taxed. The authority to impose taxes rests with the legislature. Taxes are not a lien upon the property against which they are assessed except by specific statutory authority. A statutory lien for taxes is an interest in the taxpayer‘s property that attaches to and remains with the property until paid.
In Kansas, the procedure for collection of delinquent personal property taxes is authorized by
Sedgwick County actually proceeded under
G.S. 1899, § 7189, the predecessor of
“If the personal property of any taxpayer be seized by any legal process and if the taxpayer does not have a sufficient amount of other property to pay the taxes which is exempt from levy and sale under such legal process, then the taxes on the personal property of such taxpayer shall at once fall due, and be paid from the proceeds of the sale of the property so taken on such legal process, in preference to all other claims against it.”
An appellate court has the duty to construe a statute in such a manner that it is constitutional. The constitutionality of a statute is presumed; all doubt must be resolved in favor of its validity. The purpose of all rules of statutory construction is to ascertain the intention of the legislature as expressed in the statute. These rules do not permit the courts to read into a statute something that does not come within the wording of the statute. Statutes must be construed with reason, considering the practicalities of the subject matter addressed. In re Tax Protest of Strayer, 239 Kan. 136, 141, 716 P.2d 588 (1986).
Under our stipulated facts, Sedgwick County construed
Sedgwick County argues that
The three-factor test for an exception to the due process clause, as outlined in Fuentes is:
“First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance.” Fuentes v. Shevin, 407 U.S. at 91.
Sedgwick County contends that the three-factor test places
The Fuentes three-factor test for exception to the due process clause does not apply to 79-2111. The statute does not establish a procedure for Sedgwick County to seize and sell the property of a delinquent taxpayer to satisfy its judgment for the delinquent taxes without notice to creditors having an interest in the property. The language of 79-2111 simply states if personal property of a taxpayer is seized by legal process, under certain stated circumstances, the delinquent taxes due shall be paid from the proceeds of the sale of the property in preference to all other claims against the property sold. A preference is a right held by a creditor, by virtue of a lien or security, to be preferred above
In Robbins-Leavenworth Floor Covering, Inc. v. Leavenworth Nat‘l Bank and Trust Co., 229 Kan. 511, 625 P.2d 494 (1981), we discussed
We determined that the bank was not responsible for the tax under 79-2111 because it had obtained the vehicles through a voluntary surrender by the owner. Where a debtor voluntarily surrenders personal property to a secured party after the debtor‘s default, the secured party has not obtained possession of the personal property through the use of “legal process” as required by 79-2111.
We adhere to the proposition that the constitutionality of a statute is presumed and that all doubts must be resolved in favor of its validity. Before a statute may be stricken down, it must clearly appear that the statute violates the constitution. Moreover, it is the court‘s duty to uphold the statute under attack, if possible, rather than defeat it, and, if there is any reasonable way to construe the statute as constitutionally valid, that should be done. State v. Huffman, 228 Kan. 186, Syl. ¶ 1, 612 P.2d 630 (1980).
In Int. Harvester Corp. v. Goodrich, 350 U.S. 537, 100 L. Ed. 681, 76 S. Ct. 621 (1956), the constitutionality of a state statute that granted the State‘s highway use tax liens priority over the security interests of conditional vendors of the trucks operated by a motor carrier on the New York highways was challenged by the conditional vendors. The conditional vendors claimed they were denied due process because their security interests in the trucks were made subordinate to the State‘s liens for taxes owed by the carrier.
“The fees, taxes, penalties and interest accruing under this article shall constitute a lien upon all motor vehicles and vehicular units of such carrier. The lien shall attach at the time of the operation of any motor vehicle or vehicular unit of such carrier within this state and shall remain effective until the fees, taxes, penalties and interest are paid, or the motor vehicle or vehicular unit is sold for the payment thereof. Such liens shall be paramount to all prior liens or encumbrances of any character and to the rights of any holder of the legal title in or to any such motor vehicle or vehicular unit.”
The United States Supreme Court stated:
“There is no doubt that the State may impose and enforce a lien covering all taxes owed to it by a carrier for the privilege of using the State‘s highways, where such lien applies to vehicles owned by the carrier free and clear of encumbrances. The lien for such taxes may be enforced against any or all of such trucks, regardless of whether the taxes accrued from the carrier‘s operation of one or the other of such trucks, or even whether they occurred from the carrier‘s use of the highways before its acquisition and operation of any of the particular trucks subjected to the lien. . . . Such liens are simple illustrations of the State‘s exercise of its prerogative right to impose a statutory lien for delinquent taxes upon the taxpayer‘s property. See Marshall v. New York, 254 U.S. 380, 382-384[, 65 L. Ed. 315, 41 S. Ct. 143 (1920)].” 350 U.S. at 544.
The Supreme Court noted that the controversy arose because the State treated the trucks to which the conditional vendors still hold title in the same manner as it does unencumbered trucks. The State did not dispute the validity of the conditional sales agreements; however, it treated them as security interests in property rather than as absolute interests. The Supreme Court pointed out that the State had an unquestionable right to regulate the use of conditional sales agreements within the state. The prescribed priority of its highway tax liens over the rights of conditional vendors may be regarded, therefore, as in the nature of a supplement to the
A similar result was reached in State v. Hi-Lo Foods, Inc., 62 Wash. 2d 534, 383 P.2d 910 (1963). In Hi-Lo, a corporation
Hi-Lo continued to operate its grocery store until it became hopelessly insolvent three years later. A receiver was appointed to conserve the assets and wind up the affairs of the debtor company. The assets, on liquidation of the company, were insufficient to pay both the tax liens and the trust‘s mortgage. By statute, the State‘s tax lien had priority over the mortgage. The mortgagees claimed that the State‘s priority statute deprived them of their property without due process of law.
The court determined the State undoubtedly had the power to fix priority of liens and its power quite logically extended to the State itself to declare its tax lien superior to all liens incurred in the operation or conduct of a business or occupation without regard to the element of time. The Washington court noted that in most jurisdictions statutes give such priority to tax liens. The court found that the statute was merely a constitutional exercise of the State‘s taxing power.
The legislature may adopt any reasonable method for collection of taxes subject only to the fundamental principle that a person whose property is subject to be seized for the collection of the delinquent tax is entitled to due process of law. Tax liens and their priority are determined by the constitution and statute. The legislature may make tax liens a first lien upon the property of the taxpayer, giving them priority over a mortgage or any other lien existing against the property, whether created before or after the assessment of the tax. Our legislature enacted
A statute may be constitutional as applied to one set of facts and unconstitutional as applied to another. State v. Kee, 238 Kan. 342, 352, 711 P.2d 746 (1985). Though the district court erred by declaring the statute unconstitutional, its decision was correct because, under the stipulated facts, Sedgwick County applied the statute in an unconstitutional manner. The judgment of the trial court, if correct, is to be upheld, even though the court may have relied upon a wrong ground or assigned an erroneous reason for its decision. Sutter Bros. Constr. Co., 238 Kan. at 93.
Affirmed as modified.
HERD, J., concurring: I concur in the final result but would affirm the district court‘s holding that