American General Financial v. Carter

Citation184 P.3d 273
Decision Date16 May 2008
Docket NumberNo. 98,031.,98,031.
PartiesAMERICAN GENERAL FINANCIAL SERVICES, INC., Appellant, v. Jeff L. CARTER, Gina L. Carter, Board of County Commissioners of Reno County, Kansas, Defendants, and The State of Kansas, Appellee.
CourtCourt of Appeals of Kansas

Before BUSER, P.J., MALONE and McANANY, JJ.

McANANY, J.

This is a real estate foreclosure action brought by the purchase money mortgagee. At issue is the distribution of the proceeds following the foreclosure sale. In this appeal we consider the relative priorities of a lien for unpaid sales taxes and a later purchase money mortgage given by the defaulting taxpayers to acquire the property which is later sold in foreclosure. The district court found that the tax lien has priority. We conclude that the mortgage given to secure the loan used by the taxpayer to purchase the property has priority and, therefore, reverse the decision of the district court.

In November 2001, the Kansas Department of Revenue (KDR) filed a tax warrant in Reno County District Court against Jeff L. Carter and others for failure to pay sales tax in the amount of $266,550.23. The record does not disclose whether during the period November 2001 to June 2004 Carter owned any real estate in Reno County to which the tax lien would have attached. In any event, in June 2004, Carter and his wife, Gina, (the Carters) purchased a home in Hutchinson. They financed the purchase through American General Financial Services, Inc. (American). As evidence of the debt, they gave American their promissory note in the principal amount of $65,681.37, secured by a purchase money mortgage on the home they were buying.

In October 2004, the Carters obtained an additional $15,000 from American, which was evidenced by another promissory note and secured by a second mortgage on the Carters' home.

In April 2005, KDR filed two additional tax liens for unpaid sales and withholding taxes in the amounts of $97,421.40 and $4,199.77, respectively.

The Carters defaulted in the payment of real estate taxes on their home. They also defaulted on their promissory notes to American. Accordingly, in March 2006 American commenced this foreclosure action, naming the Board of County Commissioners of Reno County and the State of Kansas as additional interested parties.

The Carters defaulted in the foreclosure action, and the court foreclosed on both mortgages and entered money judgments against the Carters. Following a hearing on the issue of the relative priorities of the lien creditors, the property was sold at a foreclosure sale and the court ordered that the proceeds be disbursed in the following priority: (1) KDR's initial sales tax lien, (2) American's first mortgage, (3) American's second mortgage, and (4) KDR's additional sales and withholding tax liens. American appeals the court's order giving KDR's initial sales tax lien priority over American's purchase money mortgage. Our research discloses that apparently this is an issue of first impression in Kansas.

Since the matter was submitted to the district court on stipulated facts, our consideration of those facts is de novo. In re Harris Testamentary Trust, 275 Kan. 946, 951, 69 P.3d 1109 (2003). Our review of the district court's conclusions of law is also de novo. Crawford v. Hrabe, 273 Kan. 565, 570, 44 P.3d 442 (2002). Likewise, we have unlimited review of the relevant statutes. LSF Franchise REO I v. Emporia Restaurants, Inc., 283 Kan. 13, 19, 152 P.3d 34 (2007).

Our initial task in considering a statute is to determine the legislature's intent in enacting it. Since the legislature expressed its intent through the words of the statute, we give effect to the plain and unambiguous meaning of those words. See Winnebago Tribe of Nebraska v. Kline, 283 Kan. 64, 77, 150 P.3d 892 (2007). To that end, we give ordinary words their ordinary meanings without adding words not found in the statute or ignoring words found in the statute. State v. McElroy, 281 Kan. 256, 262, 130 P.3d 100 (2006). Further, we try to construe statutes in a manner that avoids unreasonable results, since we presume the legislature did not intend to enact useless or meaningless legislation. Hawley v. Kansas Dept. of Agriculture, 281 Kan. 603, 631, 132 P.3d 870 (2006). Finally, we do not consider parts of an enactment in isolation, but rather consider and construe all parts of an act together in order to reconcile the different provisions to the extent possible so that they are consistent, harmonious, and make sense. See McIntosh v. Sedgwick County, 282 Kan. 636, 642, 147 P.3d 869 (2006).

KDR claims its initial tax lien against the Carters' residence takes priority over American's first mortgage because it was filed years before American's first mortgage. American claims its first mortgage lien has priority because it is a purchase money mortgage, i.e., a mortgage securing a loan to the Carters for them to purchase their home, the mortgaged asset. K.S.A. 58-2305 provides: "A mortgage given by a purchaser to secure the payment of purchase money shall have preference over a prior judgment against such purchaser."

K.S.A. 2007 Supp. 79-3617 describes the procedure for collecting unpaid or delinquent state taxes and imposing tax liens on real property:

"The secretary of revenue ... shall issue a warrant ... directed to the sheriff ... to levy upon and sell the real and personal property of the taxpayer found within the sheriff's county to satisfy the tax ... and to return such warrant to the secretary ... and pay to the secretary ... the money collected ... not more than 90 days from the date of the warrant.... The sheriff shall, within five days, after the receipt of the warrant file with the clerk of the district court of the county a copy thereof, and thereupon the clerk shall either enter in the appearance docket the name of the taxpayer mentioned in the warrant the amount of the tax or portion of it, interest and penalties for which the warrant, is issued and the date such copy is filed and note the taxpayer's name in the general index.... The amount of such warrant so docketed shall thereupon become a lien upon the title to, and interest in, the real property of the taxpayer against whom it is issued. The sheriff shall proceed in the same manner ... prescribed by law with respect to executions issued against property upon judgments of a court of record....

"... If a warrant is returned, unsatisfied in full, the secretary ... shall have the same remedies to enforce the claim for taxes as if the state of Kansas had recovered judgment against the taxpayer for the amount of the tax."

American directs us to the section of K.S.A. 2007 Supp. 79-3617 which provides that "the secretary [of KDR]... shall have the same remedies to enforce the claim for taxes as if the state of Kansas has recovered judgment against the taxpayer for the amount of the tax." (Emphasis added.) From this American reasons that if KDR's tax lien is treated as a judgment and American is a purchase money mortgagee, K.S.A. 58-2305 gives its mortgage lien priority over KDR's tax lien.

KDR argues that K.S.A. 58-2305 does not apply because its tax liens, which are not the product of any ruling by a court but are merely registered by the clerk of the district court on its records, are not judgments. Bank of Kansas v. Davison, 253 Kan. 780, 785, 861 P.2d 806 (1993), supports the proposition that these tax liens are not judgments. Nevertheless, the court in Bank of Kansas observed that these liens are "treated in the same manner as judgments." 253 Kan. at 785, 861 P.2d 806. Thus, while they do not have all the attributes of judgments (e.g., they cannot be invoked to bar litigation of a claim under the doctrine of collateral estoppel), for collection purposes they are treated as judgments. 253 Kan. at 785, 861 P.2d 806.

There is nothing in K.S.A.2007 Supp. 79-3617 indicating that the legislature intended to abrogate common-law priority rules. As observed in In re Estate of Mettee, 10 Kan.App.2d 184, 187, 694 P.2d 1325, aff'd 237 Kan. 652, 702 P.2d 1381 (1985), when the legislature has intended to abolish a common-law rule, it has done so in an explicit manner. In the absence of such an expression of legislative intent, the common law remains part of our law. See In re Estate of Roloff, 36 Kan.App.2d 684, 689, 143 P.3d 406 (2006).

Harms v. Burt, 30 Kan.App.2d 263, 40 P.3d 329, rev. denied 274 Kan. 1111 (2002), cited by KDR, is instructive in the distinctions that arise when comparing its facts to those presently before us. In Harms, the homeowner, Burt, had several outstanding Sedgwick County judgments against her, each of which was a lien against her Wichita home. Thereafter, the Wrights contracted to purchase Burt's home. When the Wrights' title insurance company failed to note the presence of these prior judgment liens, the Wrights obtained a loan from Capital Federal Savings and Loan Association, gave Capital Federal a purchase money mortgage, and used the loan proceeds to buy Burt's home. Later, one of Burt's judgment creditors executed on his judgment and attached the Wrights' home. In the litigation that ensued, the district court invoked the equitable subrogation doctrine to give the Capital Federal purchase money mortgage priority. On appeal, this court reversed, finding that equitable subrogation was not available since the existence of the outstanding judgment liens that had attached to the property would have been readily apparent to the Wrights in the course of their title search. 30 Kan.App.2d at 267-68, 40 P.3d 329. The court relied upon Kuhn v. Bank, 74 Kan. 456, 458, 87 P. 551 (1906), for the proposition that, absent fraudulent conduct that induced the purchaser not to examine the county...

To continue reading

Request your trial
7 cases
  • State v. Kirkpatrick, 93,465.
    • United States
    • United States State Supreme Court of Kansas
    • May 30, 2008
    ......, district attorney, and Phill Kline, attorney general, were with him on the brief for appellee. . [184 P.3d 252] ...Carter, 284 Kan. 312, 326, 160 P.3d 457 (2007). Imperfect ......
  • ROBINSON v. CITY of WICHITA EMPLOYEES' Ret. Bd. of Tr.S
    • United States
    • United States State Supreme Court of Kansas
    • October 8, 2010
    ...legislative intent, the common law remains part of our law.” American General Financial Services, Inc. v. Carter, 39 Kan.App.2d 683, 687, 184 P.3d 273 (2008); see In re Estate of Mettee, 10 Kan.App.2d 184, 187, 694 P.2d 1325, aff'd 237 Kan. 652, 702 P.2d 1381 (1985). In my view, an explicit......
  • Robinson v. City Of Wichita Employees' Ret. Bd. Of Tr.S, 102,217
    • United States
    • United States State Supreme Court of Kansas
    • October 8, 2010
    ...intent, the common law remains part of our law." American General Financial Services, Inc. v. Carter, 39 Kan. App. 2d 683, 687, 184 P.3d 273 (2008); see In re Estate of Mettee, 10 Kan. App. 2d 184, 187, 694 P.2d 1325, affd 237 Kan. 652, 702 P.2d 1381 (1985). In my view, an explicit abolitio......
  • In re Sauer, 08-11663.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Kansas
    • March 11, 2009
    ...... weeks before filing their bankruptcy, George's financial difficulties led to garnishment or collection activity ...., 39 Kan.App.2d 758, 761, 184 P.3d 280 (2008); American General Financial Services, Inc. v. Carter, 39 Kan.App.2d ......
  • Request a trial to view additional results
1 books & journal articles
  • Professor Prufrock Revisited: Poetry and the Law
    • United States
    • Kansas Bar Association KBA Bar Journal No. 89-4, April 2020
    • Invalid date
    ...endnote 141. [112] Cooper v. Seaverns, 81 Kan. 267, 269 (1909). [113] Id. at 268. [114] Id., Syl. ¶ 1. [116] 39 Kan. App. 2d 683, 688, 184 P.3d 273 [117] Van Kleeck v. Ramer, 62 Colo. 4, 44-46, 156 P. 1108 (1916). [118] 223 Kan. at 69. [119] Id. at 70. [120] 39 Kan. App. 2d at 688. [121] Id......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT