Yarnall v. First National Bank of Stillwater

MEMORANDUM OPINION DONALD J. PORTER, Chief Judge. Rick A. Yamall, trustee for the bankruptcy estate of Ernest and Arlene Williams, appeals from a judgment and order rendered by the bankruptcy court on April 25,1986 in favor of the First National Bank of Stillwater. Judge Ecker determined that the Bank has a valid judgment lien on the sale proceeds from certain real properties sold by the Williams on contracts for deed. The appeal to this Court was taken under Rule 8001 of the Bankruptcy Court Rules, Part VIII. This Court has jurisdiction of the appeal. I. BACKGROUND On or about April 7, 1980, First National Bank of Stillwater (Bank) transcripted a judgment from the District Court of Washington County, Minnesota to the Circuit Court, Codington County, South Dakota. The judgment, in the amount of $88,809.44 against Ernest M. Williams, was duly docketed and filed in Codington County, South Dakota in order to perfect a lien upon any real property owned by Ernest M. Williams. Prior to the docketing of the Minnesota judgment, Ernest Williams sold three tracts of land located in Codington County, South Dakota on contracts for deed. One parcel, known as Lot 3, in Block 1, of the Plat of Meadow Glen Subdivision to the City of Watertown, was originally sold on a contract for deed by James A. Clark to Stanley and Patricia Anderson on February 14, 1977. On December 28, 1977, James A. Clark assigned his interest as vendor to — 4 — Ernest and Arlene Williams as joint tenants. A second parcel, known as the South Half except the Southeast Quarter of the Southeast Quarter of the Southeast Quarter thereof, in Section 5, Township 117 North, Range 53 West of the Fifth Principal Meridian, was sold on a contract for deed to George H. Hestad, Jr., on or about April 18, 1978. On March 31, 1980, Ernest M. Williams sold to Charles F. Robinson on a contract for deed a third parcel, known as Lots 16, 17 and 18 in Block No. 8 of Rice Bros. Addition to Watertown. Subsequently, Ernest and Arlene Williams filed for Chapter 11 relief in bankruptcy on June 30, 1981. The debtors converted to a Chapter 7 proceeding on March 28, 1983. II. ISSUE The principal issue for decision in this appeal is whether the Minnesota judgment docketed and filed in Codington County establishes a lien on vendor Ernest Williams’ interest in the three tracts of land sold on contracts for deed prior to the docketing and filing of the judgment. III. DISCUSSION When real property is sold on a contract for deed in South Dakota, two interests are created. The vendee takes possession of the realty and an equitable interest, while the vendor retains legal title in the property until the contract is satisfied. Reid v. Gorman, 37 S.D. 314, 158 N.W. 780, 782-83 (1916); Fridley v. Munson, 46 S.D. 532, 194 N.W. 840, 841 (1923). Relevant in this appeal is Ernest Williams’ legal title in the three tracts of land in issue. Is Williams’ legal title subject to Bank’s judgment lien? Dispositive of the issue is the South Dakota Supreme Court’s opinion in Reid v. Gorman, 158 N.W. at 782-83. In discussing a contract for deed the Court stated: The interest of the vendee remains the same whatever name be given it, and the vendor still remains the holder of the legal title to secure his rights under the contract. Is this interest of the vendor an interest subject to the lien of a judgment, and therefore subject to levy and sale under attachment and execution? * # * # * # We believe that, under the overwhelming weight of authority, such interest is subject to the lien of a judgment and can be reached through an attachment of the land. It is therefore the decision of this Court that Ernest Williams retained legal title in the three parcels of realty sold on contracts for deed. That legal title, moreover, is subject to Bank’s judgment lien which was docketed and filed in the Circuit Court in and for Codington County, South Dakota. ' Appellant Trustee asserts two contentions; that Williams’ legal title is personalty and Reid v. Gorman is overruled. Neither contention is well taken in this appeal. First, Appellant cites this Court to such cases as Phillis v. Gross, 32 S.D. 438, 143 N.W. 373 (1913) and State v. Weide, 135 N.W. 696 (S.D.1912). Those cases are consistent with Reid v. Gorman in that two interests are created in a contract for deed sale of real property. The vendee becomes an equitable owner and the vendor the holder of legal title. Phillis v. Gross, 143 N.W. at 379; State v. Weide, 135 N.W. 699-700. Such “equitable conversion”, however, does not affect judgment liens against vendor’s interest in the realty, see Reid v. Gorman, 158 N.W. at 782, and neither Phillis v. Gross nor State v. Weide hold to the contrary. Appellant’s second contention is immaterial. In Jordan v. O’Brien, 69 S.D. 230, 9 N.W.2d 146 (1943), the South Dakota Supreme Court announced that Reid v. Gorman was overruled to the extent that it was inconsistent with Fridley v. Munson, 46 S.D. 532, 194 N.W. 840 (1923). There is, however, nothing in Reid v. Gorman applicable to this case which is inconsistent with Fridley v. Munson. — 5 — This Court has been asked for further rulings on two additional issues outside the scope of the briefed materials. No rulings will be rendered on issues not properly raised on appeal. It is ordered that the United States Bankruptcy Court is affirmed and that this matter be remanded for further proceedings consistent with this decision. .