State ex rel. Steffen v. Peterson

• Decision Date: 15 March 2000
• Docket Number: No. 21025.,21025.
• Citation: 2000 SD 39,607 N.W.2d 262
• Parties: STATE of South Dakota, ex rel. Sandy STEFFEN, Plaintiff and Appellant, v. Jerry PETERSON, the Gregory County Register of Deeds, Defendant and Appellee.
• Court: South Dakota Supreme Court

607 N.W.2d 262

2000 SD 39

STATE of South Dakota, ex rel. Sandy STEFFEN, Plaintiff and Appellant, v. Jerry PETERSON, the Gregory County Register of Deeds, Defendant and Appellee.

No. 21025.

Supreme Court of South Dakota.

Argued January 11, 2000.

Decided March 15, 2000.

Sandy J. Steffen, Gregory County State's Attorney, Burke, South Dakota, Attorney for plaintiff and appellant.

Richard L. Travis and David A. Pfeifle of May, Johnson, Doyle and Becker, P.C., Sioux Falls, South Dakota, Attorneys for defendant and appellee.

MILLER, Chief Justice

[¶ 1.] County¹ appeals from the circuit court's holding that its register of deeds did not commit malfeasance or nonfeasance in the collection, remittance and accounting of fees so as to warrant removal. County also appeals from a judgment against it for disbursements. By notice of review, the register of deeds appeals the trial court's denial of additional fees and costs. We affirm the retainment in office, but modify the full award of disbursements. Further, we affirm the denial of additional fees and costs.

FACTS

[¶ 2.] Jerry Peterson was elected Gregory County Register of Deeds in 1982, and took office in January 1983. He continues to hold such position, having been re-elected to that position in 1986, 1990, 1994 and 1998. As part of his statutorily prescribed duties, Peterson is responsible for collecting fees charged for recording various documents. Each month, his office is required to transmit a statement to the county auditor showing the amount of fees collected that month. He is also required to submit the fees he collects to the county treasurer on a monthly basis. At the time of the events precipitating this action, both the fee statement and the fees were to be remitted to the other county offices no later than the fifteenth day of the following month.²

[¶ 3.] In 1993 and 1995 the South Dakota Department of Legislative Audit, an agency charged with auditing state and local government entities, conducted routine audits of County. In each audit, a random one-month sample was reviewed to ensure the fee statement and the fees were timely remitted to the auditor and treasurer, respectively. Both audit samples revealed that although the fee statement had been timely remitted to the auditor, the fees had not been timely remitted to the treasurer. Each time the legislative auditor made a comment to Peterson that he was to remit the fees by the fifteenth day of the following month. However, neither legislative auditor submitted a formal written recommendation of such action to the county board of commissioners (Board).

[¶ 4.] In July 1997 County was due for another routine audit. In conjunction with that audit, and as the result of a reported shortfall of money and allegations of theft against Peterson, a more thorough examination of the register of deeds' office was performed. During this audit, it was discovered that Peterson had been late in remitting fees to the treasurer each month for the previous thirty months. In addition, it was discovered that Peterson had been receiving a $15 payment from a credit reporting agency (CBC) nearly every month since 1991 for performing lien and judgment searches. Rather than reporting this payment to the auditor and submitting it to the treasurer, Peterson had simply been depositing it into the register of deeds' checking account. Finally, a "potential shortage" of approximately $1,500 was noted by the legislative auditor.

[¶ 5.] The Board met regarding the findings of this audit on August 5 and August 13, 1997. At the August 5th meeting, the Board asked Peterson to explain why he had been late in remitting his fees. He stated the late remittances were due to accounts receivable. At the August 13th meeting, the Board inquired about the shortage of funds and alleged that Peterson had taken it. The Board asked him to replace the money and resign. Peterson responded that he would replace the money, but that he was not a thief and did not intend to resign. The Board also asked about Peterson's failure to report and remit the CBC fees. He admitted that his handling of the CBC payments had been wrong. At a third meeting on an unspecified date, Peterson claims he was asked again about the shortfall and for his resignation. He did not try to provide an explanation for the shortfall because he was not sure the Board was "really looking for answers anyway." On August 20, 1997, Peterson deposited $1,500 of personal funds into the register of deeds' checking account to "catch up."

[¶ 6.] An even more thorough investigative audit of the register of deeds' office was conducted in September 1997, covering records from 1983 through July 1997. This review revealed that in 140 of the previous 175 months, Peterson had been late in remitting fees to the treasurer. The delinquencies ranged from one to one hundred days late. In addition, a total of $1,060 in CBC payments had been received by Peterson and deposited into the register of deeds' checking account, but never recorded on the fee statement nor submitted to the treasurer. Further, $198.60³ of $216,308.60 was found to have been recorded on the fee statement, but never remitted to the treasurer. Other potential defalcations included uncollectable accounts receivable in the amount of $406.90,⁴ uncollectable non-sufficient fund (NSF) checks in the amount of $138.95, and miscellaneous expenses in the amount of $76.73 bypassing the appropriate voucher system.

[¶ 7.] On September 23, 1997, Peterson told the Board he was not going to resign. A removal proceeding ensued. Throughout the proceedings, Peterson admitted that he had been late in remitting fees to the treasurer and that he had improperly handled the CBC funds. However, he adamantly denied stealing any money from his office. Peterson attributed the perpetually late remittances to an admitted shortage in the register of deeds' checking account, which was in turn caused by the accounts receivable, uncollectable accounts, supplies purchased, check charges and "things like that." While Peterson conceded that, pursuant to statute, his office was to collect fees in advance and not allow people to charge, the Minnehaha County Register of Deeds testified on his behalf that such was the common practice. It was also common practice to remit fees from the current month to pay for fees which have been charged for the prior month and which have not yet been paid, a process called "lapping." Peterson's expert witness, a CPA, testified that over a period of time, uncollectable and late accounts receivable could create a "pyramid" effect and cause a shortage in cash flow. Finally, Peterson admitted that his handling of the CBC funds was a "mistake," but that he had always deposited the payments into the register of deeds' checking account and never used any of it for personal gain.

[¶ 8.] In addition to the other allegations, County also asserted at trial that Peterson was improperly conducting political activities while on duty, as evidenced by the fact that he asked two of his deputies to work on political flyers while on county time.

[¶ 9.] At the conclusion of its three-day bench trial, the court ruled that the CBC payments received were not "fees" as defined by statute, that Peterson did not intend to evade the fifteen-day requirement for remitting funds to the treasurer, and that Peterson had not committed malfeasance, nonfeasance, theft or any other crimes in office so as to warrant removal. In a later hearing, the trial court also awarded Peterson $25,677.12 in expenses incurred in his defense.

[¶ 10.] On appeal, County raises two issues:

1. Whether the trial court abused its discretion in failing to remove Peterson for malfeasance or nonfeasance pursuant to SDCL 3-17-6?

2. Did the trial court err in finding that the decision was "favorable" to Peterson, and abuse its discretion in awarding him total disbursements?

[¶ 11.] By notice of review, Peterson raises the following issue:

3. Whether the trial court erred in denying additional disbursements for attorney fees and expenses?

DISCUSSION

[¶ 12.] 1. The trial court did not abuse its discretion in failing to remove Peterson from office.

[¶ 13.] As to removal proceedings under SDCL 3-17-6, this Court has stated:

It [has been asserted] that, under our statute, if any misconduct, malfeasance, or nonfeasance on the part of the officer charged is found as a fact, then the court where the proceeding is pending has no option whatsoever but is absolutely compellable as a matter of law to enter judgment of immediate ouster from office. With this contention we are unable to agree. The proceeding is at least quasi judicial in nature, and we are convinced that the trial court has some discretion in the matter, and that it is for the trial judge to determine in the first instance, doubtless subject to review in each particular case whether, under all the circumstances, the given misconduct, malfeasance, or nonfeasance found, if any is found, is sufficient to justify or require removal from office.

State ex rel. Hooper v. Tarr, 62 S.D. 305, 309, 252 N.W. 854, 856 (S.D.1934). Thus, the standard of review is under an abuse of discretion standard. "`Abuse of discretion' is discretion not justified by, and clearly against, reason and evidence." Nelson v. Nelson Cattle Co., 513 N.W.2d 900, 906 (S.D.1994) (citing Dacy v. Gors, 471 N.W.2d 576, 580 (S.D.1991)). "The test is whether a judicial mind, in view of the law and circumstances, could reasonably have reached the [same] conclusion." Id.

[¶ 14.] The trial court found that although Peterson's failure to timely remit the fees "certainly is wrong," it concluded that his misconduct did not rise to the level sufficient to warrant removal. However, the court did order Peterson to remit $1,060, (the amount of the unreported and unremitted CBC fees), and $198.60, (the shortfall between fees reported and fees remitted), to the treasurer. These...