HAWKINS & GRYPHON, INC. v. Bruno Yacht Sales, Inc.

Decision Date31 July 2000
Docket NumberNo. 3231.,3231.
PartiesAllen Lee HAWKINS and Gryphon, Inc., Appellants, v. BRUNO YACHT SALES, INC., Beaufort County, A Political Subdivision of the State of South Carolina, and Joy Logan in the capacity of Treasurer for Beaufort County, South Carolina, Respondents.
CourtSouth Carolina Court of Appeals

Julius H. Hines, of Buist, Moore, Smythe & McGee, of Charleston, for appellants.

Ladson F. Howell, of Howell, Gibson & Hughes, of Beaufort; Stephen P. Groves, Sr., and Stephen L. Brown, both of Young, Clement, Rivers & Tisdale, of Charleston; and John Hughes Cooper, of Sullivan's Island, for respondents.

SHULER, Judge:

In this action to set aside a tax sale, the master-inequity granted judgment to defendants Bruno Yacht Sales, Inc., Beaufort County, and Joy Logan. Allen Lee Hawkins and Gryphon, Inc. appeal. We reverse and remand.1

FACTS/PROCEDURAL HISTORY

In July 1987 Allen Lee Hawkins accepted delivery of a 52foot Tayana sailboat, which he christened the "LadyHawk" and documented with the United States Coast Guard. Hawkins spent more than $300,000 to acquire and outfit the boat for sailing. In December 1989, on the advice of his attorney, Hawkins transferred title of the LadyHawk to Gryphon, Inc., a Florida corporation of which he was the sole shareholder and officer. Two years later, apparently upon an order of the family court in Hawkins' divorce proceeding, Gryphon transferred the vessel back to Hawkins. The LadyHawk was then re-documented with the Coast Guard in Hawkins' name. At the end of August 1995, Hawkins received two separate notices from the Beaufort County Treasurer. The notices, dated August 16 and August 24 respectively, informed Hawkins his 1994 property taxes for the LadyHawk in the amount of $2,814.67 were delinquent and that the boat was subject to sale on October 2. Hawkins immediately retained an attorney to dispute the original tax assessment; however, Hawkins did not pay the taxes and the vessel was sold to Bruno Yacht Sales, Inc. of Wilmington, Delaware for the exact amount of the delinquency. Hawkins learned of the sale on December 16, 1995 when law enforcement officers in Fort Lauderdale, Florida evicted him and took possession of the LadyHawk.

On December 19 Hawkins filed a petitory action in federal district court to quiet title in the LadyHawk, and the following day the court authorized a Warrant of Arrest in Rem for the vessel. Bruno in turn filed a motion to vacate the arrest and dismiss the action, asserting it was the LadyHawk's lawful owner as a result of the tax sale. On March 7, 1996, the district court held a show cause hearing on Bruno's motion. Ultimately, the court determined it lacked jurisdiction over the petitory action because Hawkins was neither the current owner of the LadyHawk nor the real party in interest.2 Consequently, on July 16 the court dismissed Hawkins' action without prejudice and vacated the arrest of the LadyHawk. In so doing, however, the district court specifically noted the dismissal was not an adjudication of title to the vessel.

On August 1, 1996, Hawkins brought the instant action to set aside the sale of the LadyHawk and restrain Bruno from selling or otherwise encumbering the vessel. The circuit court ordered the case referred to the Master-in-Equity for Beaufort County. On March 5, 1998, Bruno motioned the court to dismiss the complaint or, alternatively, grant summary judgment on the basis of judicial estoppel because Hawkins had claimed in the prior federal proceeding that Gryphon, Inc., not he, was the LadyHawk's true owner. The master declined to grant the motion and Hawkins filed a motion to join Gryphon, Inc. as a necessary party. The master granted this motion on May 29, 1998. As a result, Hawkins filed a third amended complaint on June 18 adding Gryphon, Inc. as a party plaintiff.

The case was tried before the master on July 1, 1998.3 At the close of the evidence, Hawkins moved to amend his complaint to assert additional causes of action for fraud and conversion plus a claim for money damages. The motion was based upon the fact that he had learned, just days earlier, that the LadyHawk had been sold in July 1997 despite Bruno's repeated assurances to the contrary.4 The master took the motion under advisement and reserved ruling. On May 11, 1999 the master issued an order upholding the tax sale and entering judgment in favor of the defendants. As an additional ground for the judgment, the master ruled Hawkins was judicially estopped from asserting an ownership interest in the LadyHawk because, in the previous federal proceeding in Florida, he had argued Gryphon, Inc. owned the vessel.5 In addition, because Hawkins' ancillary claims were contingent upon a favorable disposition on the tax sale issue, the master denied his motion to amend the complaint.

Pursuant to Rule 59(e), SCRCP, Hawkins filed a motion to alter or amend the judgment. On May 25, 1999, the master amended his prior order and addressed more specifically Hawkins' arguments regarding the validity of the tax sale. Hawkins now appeals, arguing the master erred in applying the doctrine of judicial estoppel to bar his claims and in finding the sale of the LadyHawk valid despite the Beaufort. County Treasurer's failure to comply with statutory requirements for the seizure and sale of delinquent tax property.

LAW/ANALYSIS
Standard of Review

An action to set aside a tax sale lies in equity. See Godfrey v. Webb, 277 S.C. 246, 285 S.E.2d 883 (1982)

; Folk v. Thomas, 336 S.C. 466, 520 S.E.2d 327 (Ct.App.1999). Accordingly, this Court may take its own view of the preponderance of the evidence. Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 221 S.E.2d 773 (1976); Folk, 336 S.C. at 469,

520 S.E.2d at 329.

I. Validity of the Tax Sale
A. Levy Notices

Hawkins first argues the master erred in upholding the tax sale because the County's levy notices were defectively worded. We agree.

The procedure for collecting delinquent property taxes is governed by statute. See S.C.Code Ann. § 12-51-40 (Supp. 1999); Durham v. United Companies Fin. Corp., 331 S.C. 600, 603, 503 S.E.2d 465, 467 (1998) ("The sale of the property of a defaulting taxpayer is governed by statute."); F.C. Enterprises, Inc. v. Dibble, 335 S.C. 260, 516 S.E.2d 459 (Ct.App.1999). Because Hawkins does not dispute he owed and failed to pay 1994 property taxes on the LadyHawk in Beaufort County, the treasurer properly issued an execution authorizing the tax collector to levy on and sell the vessel. See S.C.Code Ann. § 12-45-180(A) (Supp.1999) ("If the taxes, assessments, and penalties are not paid before the seventeenth day of March, the county treasurer shall issue his tax execution to the officer authorized and directed to collect delinquent taxes...."). Thereafter, the County was required to mail a delinquency notice informing Hawkins that, in the event the full amount due was not paid, the LadyHawk "shall be advertised and sold to satisfy the delinquency." S.C.Code Ann. § 12-51-40(a) (Supp.1999). In addition, since the taxes remained unpaid, the tax collector was obliged to take exclusive possession of so much of the LadyHawk as was necessary to satisfy the tax debt plus penalties and costs. Id. at § 12-51-40(b).

To accomplish this constructive possession, or "levy by distress," the statutory scheme directs the County to mail the taxpayer a copy of the delinquency notice which "shall specify that if the taxes, assessments, penalties, and costs are not paid before a subsequent sales date, the property must be duly advertised and sold...." Id. (emphasis added). In an effort to effectuate this mandate, Beaufort County employs a rubber stamp to imprint the following message upon delinquency notices in red ink:

IF NOT PAID ON OR BEFORE 31 AUGUST THIS PROPERTY WILL BE DULY ADVERTISED AND SOLD FOR DELINQUENT TAXES AS DESCRIBED ABOVE ON THE FIRST MONDAY IN OCTOBER, THIS YEAR. RETURN OF THIS "CERTIFIED RECEIPT" SHALL BE DEEMED EQUIVALENT TO "LEVYING BY DISTRESS[.]"

By indicating payment is required "on or before 31 August," this stamped annotation clearly contradicts the explicit statutory language requiring notice to the taxpayer that if the taxes are not paid before the date of sale, in this instance October 2nd, the property will be sold. Moreover, the County compounded its error by sending Hawkins a notice letter, dated August 24, which also contained the stamped annotation in red ink and read in pertinent part:

The attached tax notice is delinquent. The property is subject to sale at the October 2, 1995 delinquent tax sale. Receipt of this notice constitutes levy by distress.
All tax payments must be received by September 15, 1995 to avoid your name and property being advertised in The Beaufort Gazette and The Island Packet.

Although the defendants maintain the August 31 and September 15 deadlines set forth were merely dates by which Hawkins should have tendered payment in order to avoid the advertising of the LadyHawk for sale, we agree with Hawkins that these notices give the clear impression, contrary to statutory mandate, that he was required to pay the taxes, penalties and costs at least two weeks before the October 2 "subsequent sales date." We further agree the imposition of these artificial deadlines rendered the County's attempted notice inadequate.

B. Restricted Delivery Mail

Hawkins next argues the tax sale was invalid because the treasurer failed to send the levy notices via "restricted delivery" mail. We agree. Section 12-51-40(b) provides, in relevant part:

In the case of real property, exclusive possession is taken by mailing a notice of delinquent property taxes ... to the current owner of record ... by "certified mail, return receipt requested-restricted delivery". In the case of personal property, exclusive possession is taken by mailing the notice ... to the person at the address shown
...

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