South Carolina Tax Commission v. Belk

• Citation: 266 S.C. 539,225 S.E.2d 177
• Decision Date: 17 May 1976
• Docket Number: No. 20216,20216
• Court: United States State Supreme Court of South Carolina
• Parties: SOUTH CAROLINA TAX COMMISSION, Appellant, v. Robert D. BELK et al., Respondents.

Page 177

225 S.E.2d 177

266 S.C. 539

SOUTH CAROLINA TAX COMMISSION, Appellant, v. Robert D. BELK et al., Respondents.

No. 20216.

Supreme Court of South Carolina.

May 17, 1976.

Atty. Gen. Daniel R. McLeod and Asst. Attys. Gen. Joe L. Allen, Jr., G. Lewis Argoe, Jr., and John C. Von Lehe, Columbia, for appellant.

M. M. Weinberg of Weinberg, Bryan, Warner & Brown, Robert W. Burkett, Sumter, and Eugene L. Nettles of Nettles, Thomy & Smith, Lake City, for respondents.

NESS, Justice:

Appellant, South Carolina Tax Commission, recorded four tax liens, two against Robert Belk personally and two against Mohawk Construction Company, a corporation solely owned by Mr. Belk. The Commission conditionally waived the liens against Mohawk, reserving a right of revocation. Thereafter, Mrs. Belk, as part of a settlement of property and alimony rights in a divorce action against Robert Belk, obtained title to a 700 acre tract of land through a conveyance from Mohawk to Robert Belk to Mrs. Belk. After Mrs. Belk obtained title, the Commission revoked the waiver of the tax liens and instituted this declaratory judgment action to determine the priority of the four liens vis a vis Mrs. Belk's interest in the 700 plus acre tract of land. ¹

Respondent, Mrs. Belk, sought and was granted summary judgment. The lower court held the Commission had expressly waived the liens against Mohawk and by implication waived the liens against Robert Belk. The court held Mrs. Belk satisfied the terms of the conditional waiver, and concluded all four liens were subordinate to Mrs. Belk's title. In addition, the court concluded that even if the liens against Robert Belk had not been waived, they did not attack to the 700 acre tract of land because his only claim to title was as a 'conduit' in a transfer from Mohawk to Mrs. Belk. We reverse and remand.

A rather complete factual recitation is required but, essentially, this appeal turns upon whether Mrs. Belk can claim rights as an innocent purchaser for value; whether the liens against Robert Belk attached to the land by reason of the conveyance from Mohawk to Robert Belk; and whether a judgment is enforceable against after acquired property obtained during the period in which a judgment may be satisfied.

In June, 1972, the Commission issued and recorded the four income tax warrants. When tax warrants are recorded, they become a lien upon the title to real property the same as a judgment duly docketed. S.C.Code § 65--345 (1962). Because Mohawk was a real estate company in the land development business and, in order for it to convey clear title to lots, Mohawk sought a waiver of the tax liens.

Mohawk, Robert Belk and the Tax Commission entered into a waiver agreement. The agreement, duly recorded, waived the liens against Mohawk, but provided for revocation of the waiver at the instance of the Commission. By negative implication, any revocation was to be retroactive except 'to any lot or lots when conveyed to an innocent purchaser or creditor for value by the said corporation prior the revocation.' (Exhibit E, p. 2) In 1975 the Commission revoked the waiver. The question becomes was Mrs. Belk an innocent purchaser for value and thereby exempt from the revocation of the waiver?

In 1973 Mrs. Belk obtained title to the land as a result of a property settlement, later incorporated into a divorce decree. The 700 acre tract owned by Mohawk was conveyed to Robert Belk, reciting five dollars as consideration, and a minute later, conveyed to Mrs. Belk. In consideration for the property settlement, Mrs. Belk forfeited alimony and property rights and, based on this, the lower court concluded she was an innocent purchaser for value.

A person may not invoke the doctrine of innocent purchaser for value unless he establishes '(1) (T)hat the purchase money was actually paid before notice of outstanding incumbrances or equities (giving security for the payment is not sufficient, nor is past indebtedness a sufficient consideration); (2) that he has purchased and acquired the legal title, or the best right to it, before notice of outstanding incumbrances or equities; and (3) that he purchased bona fide without notice.' Jones v. Eichholz, et al., 212 S.C. 411, 422, 48 S.E.2d 21, 26 (1948); Cook v. Knight, 173 S.C. 278, 283, 175 S.E. 506 (1934); Kirton v. Howard, 137 S.C. 11, 36, 134 S.E. 859 (1926).

These conditions are not satisfied when sufficient record notice is available to charge the purchaser with a duty to inquire which, if pursued with due diligence would have supplied him with knowledge of the rights of other parties. Kirton v. Howard, supra. This Court has been most exacting in determining what actions satisfy the requirements of inquiry notice. We have denied subsequent purchasers comfort under the umbrella of a bond fide purchaser when the exercise of prudence would have avoided the difficulty.

In National Bank of Newberry v. Livingston, 155 S.C. 264, 152 S.E. 410 (1930) this Court held a subsequent purchaser's interest was subordinate to a prior Unrecorded timber deed because a senior recorded mortgage referred to the timber deed. The Court observed, 'every prior conveyance or mortgage, duly recorded, unsatisfied of record, constitutes constructive notice to him, not only of the actual conveyance or incumbrance, But of the recitals which affect the title.' (Emphasis in original) p. 283, 152 S.E. p. 417.

In a later case of Adams v. Willis, 225 S.C. 518, 83 S.E.2d 171 (1954) a subsequent purchaser was subordinated to a prior recorded option to purchase. The option was recorded as part of a lease agreement which provided the lease (and thus the coterminous option) would not commence until certain repairs to the property had been made. The subsequent purchaser had computed the option period from the date the lease was recorded and erroneously determined it had expired. The court concluded that due diligence required the purchaser make inquiry of the lessor or lessee as to the actual time the lease-option commenced.

These cases stand for the proposition that a purchaser cannot carelessly disregard record notice of potential incumbrances, even when the adequacy of notice is questionable. In each of the cited cases, the Court held, in effect, that a subsequent purchaser, seeking circumvention of a superior recorded interest, has a duty to make an independent investigation to ascertain the rights of potentially conflicting claims.

In the instant appeal, the predominate purpose of the waiver obviously was to allow for the sale of lots, with clear title, in the ordinary course of Mohawk's business....