Rylwell, LLC, and Pulaski Lands, LLC v. Arkansas Development Finance Authority

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SUPREME COURT OF ARKANSAS  No.  07­334  RYLWELL,  L.L.C.  AND  PULASKI  LANDS, L.L.C.,  APPELLANTS,  VS.  ARKANSAS DEVELOPMENT FINANCE  AUTHORITY,  APPELLEE,  Opinion Delivered  December 13, 2007  APPEAL  FROM  THE  PULASKI  COUNTY CIRCUIT COURT,  NO. CV­2006­9080,  HON. ALICE S. GRAY, JUDGE,  AFFIRMED.  ANNABELLE CLINTON IMBER, Associate Justice  The instant appeal arises from a suit to quiet title and foreclose filed by Appellee  Arkansas  Development  Finance  Authority  (“ADFA”),  a  state  agency,  against  Allcon  Enterprises, Inc. (“Allcon”), National Bank of Arkansas (“NBA”), and Appellants Rylwell,  L.L.C.  (“Rylwell”)  and  Pulaski  Lands,  L.L.C.  (“Pulaski  Lands”).    The  Circuit  Court  of  Pulaski County ruled in favor of ADFA, granting it a judgment against Allcon in the amount  of $239,750.02, along with pre­ and post­judgment interest and reasonable attorneys’ fees,  and  declaring  that  any  existing  or  potential  adverse  claims  to  the  subject  property,  particularly those of NBA, Rylwell, and Pulaski Lands, were inferior to ADFA’s mortgage  lien.  Rylwell and Pulaski Lands now appeal, alleging as their sole point of error that the  circuit  court  erred  in  determining  that  Ark.  Code  Ann.  §  22­5­402  (Repl.  2004)  was  applicable and in ruling that their interests in the subject property were inferior to ADFA’s mortgage lien.  As this appeal presents an issue of statutory interpretation, our jurisdiction  is pursuant to Ark. R. Sup. Ct. 1­2(b)(6) (2007).  We find no error and affirm.  The real property at issue in this appeal is located in Pulaski County and was owned  in  fee  simple  by  Allcon  until  August  of  2004.    Allcon  had  executed  a  purchase­money  mortgage on the property in favor of ADFA.  The mortgage, which was recorded on June 4,  1998, secured the repayment of the original principal amount of $212,000 for the purchase  of the property, pursuant to a promissory note.  Allcon failed to pay the real estate taxes on  the subject property for the years 1999, 2000, 2001, 2002, and 2003.  As a result of the  nonpayment of taxes, the subject property was certified to the Commissioner of State Lands  by Pulaski County on March 23, 2002, pursuant to Ark. Code Ann.  §  26­37­101 (Repl.  1997).  The Commissioner, in accordance with Ark. Code Ann. § 26­37­301 (Repl. 1997 &  Supp. 2007), provided notice to all owners and interested parties, including ADFA.  The  Commissioner  then  sold  the  property  at  a  tax  sale  to  Rylwell  on  August  18,  2004.  Meanwhile,  in  February  of  2003,  Allcon  also  defaulted  on  payments  pursuant  to  the  promissory note.  After  the  tax  sale,  the  Commissioner  issued  limited  warranty  deeds  covering  the  property to Rylwell; these deeds were recorded on September 1, 2004. Rylwell subsequently  encumbered the subject property by granting a mortgage in favor of NBA.  Additionally, in  January of 2005, Allcon executed a quitclaim deed granting any interest it had in the property  to Pulaski Lands.  The quitclaim deed was recorded on January 24, 2005.  At the time of the  commencement of this suit, Allcon remained in default under the terms of the promissory ­2­  note held by ADFA, and ADFA had not released the mortgage.  On  August  18,  2006,  ADFA  filed  a  complaint  to  quiet  title  and  foreclose  on  the  subject  property.  The  complaint  averred  that  ADFA  was  entitled  to  and  had  chosen  to  accelerate the amount due under the promissory note.  Furthermore, it asserted  that any  interest Rylwell might claim in the subject property pursuant to the limited warranty deeds  was void as against ADFA’s prior perfected interest, in accordance with Ark. Code Ann. §  22­5­402 (Repl. 2004).  The complaint also stated that any claim NBA might attempt to  assert in the property pursuant to the mortgage granted in its favor by Rylwell was void, as  well as inferior to ADFA’s prior perfected interest, and that any claim Pulaski Lands might  attempt to assert pursuant to the quitclaim deed was subordinate to ADFA’s prior perfected  interest.  Rylwell, Pulaski Lands, and NBA filed timely answers to the complaint; however,  Allcon  failed  to  file  an  answer  or  otherwise  enter  an  appearance.    Rylwell  then  filed  a  counterclaim  to  quiet  title  and  foreclose,  alleging  that  the  tax  sale  was  completed  in  conformity with all relevant laws and regulations and that the subject property remained  unredeemed after it was forfeited to the State, despite the fact that proper notice had been  given.  The counterclaim acknowledged that ADFA might have had an interest in the subject  property but asserted that ADFA’s interest was extinguished by the tax sale and failure to  redeem.  Following a hearing at which the parties indicated to the circuit judge that the only  issue  before  the  court  was  one  of  statutory  interpretation,  the  parties  submitted  joint  stipulations of facts, as well as simultaneous briefs.  ADFA then filed a motion for summary ­3­  judgment, contending that it was entitled to have the title to the subject property quieted in  its favor, “[b]ecause tax deeds are void as against an interest of the state as a matter of law.”  The circuit court entered an order granting judgment in favor of ADFA and stating that “as  a matter of law, the mortgage interest of ADFA in the Property was not extinguished by the  tax  sale  of  the Property on or about August 18, 2004, and that the tax titles of separate  defendant  Rylwell  to  the  Property,  evidenced  by  the  limited  Warranty  Deeds  from  the  Commissioner, are null and void  in  both  law and equity as against the mortgage lien of  ADFA.”  Rylwell and Pulaski Lands filed a timely notice of appeal.  The statute at issue in the instant appeal reads as follows, in its entirety:  No tax title shall be valid or binding against the equitable or legal  interest of this state in or to any real estate whatever.  However, such tax titles  shall be void so far as they shall conflict with the interest of the state and shall  be treated and considered as null and void in both law and equity in all courts  of the state.  Ark. Code Ann. § 22­5­402 (Repl. 2004).  The circuit court ruled that the statute applied to  these facts and that it made Rylwell’s tax title null and void as against ADFA’s interest in  the property.  We review issues of statutory interpretation de novo, as it is for this court to  decide what a statute means.  Maddox v. City of Fort Smith, 369 Ark. 143, ___ S.W.3d ___  (2007).    In  this  respect,  we  are  not  bound  by  the  trial  court’s  decision;  however,  in  the  absence of a showing that the trial court erred, its interpretation will be accepted as correct  on appeal.  Id.  Our  rules  of  statutory  interpretation  are  well  settled.    When  reviewing  issues  of  statutory interpretation, we are mindful that the first rule in considering the meaning and ­4­  effect of a statute is to construe it just as it reads, giving the words their ordinary and usually  accepted meaning in common language.  Id.  When the language of a statute is plain and  unambiguous, there is no need to resort to the rules of statutory construction.  Id.  A statute  is ambiguous only where it is open to two or more constructions, or where  it  is of such  obscure or doubtful meaning that reasonable minds might disagree or be uncertain as to its  meaning.  Id.  When a statute is clear, however, it is given its plain meaning, and we will not  search for legislative intent; rather, that intent must be gathered from the plain meaning of  the language used. Id. We are very hesitant to interpret a legislative act in a manner contrary  to its express language, unless it is clear that a drafting error or omission has circumvented  legislative intent.  Id.  Pursuant to these rules, we hold that the statute at issue here is plain and unambiguous  and, therefore, must be construed in accordance with its plain meaning.  When its words are  given  their  ordinary  and  usually  accepted  meaning,  the  statute  is  open  to  only  one  construction.  We  can  find  no  reason  to  believe  that  a  drafting  error  or  omission  has  circumvented the obvious legislative intent, and Rylwell and Pulaski Lands have not pointed  us to one.  The intent inherent in this statute is clear:  to protect the State’s property, and  property in which the State has an interest, from conveyance by tax sale.  Because we find  the statute to be plain and unambiguous, we need not address the legislative­intent argument  propounded by Rylwell and Pulaski Lands.  Rylwell and Pulaski Lands nonetheless argue that the plain­meaning version of Ark.  Code Ann. § 22­5­402 is illogical.  They point out that the Commissioner is in total control ­5­  of  State­owned  property  and  that  every  piece  of  property  that  is  certified  to  the  Commissioner due to the nonpayment of taxes becomes the property of the State. Thus, they  argue, under the plain meaning of Ark. Code Ann. § 22­5­402, the Commissioner would  never be permitted to transfer property via a tax title because such a transfer would always  be in conflict with the State’s interest.  This argument is flawed in two ways.  First, the  statute giving control of State lands to the Commissioner contemplates caveats provided in  other  code  provisions:  “The  landed  interests  of  this  state  shall  be  controlled  by  the  Commissioner of State Lands, and he or she shall dispose of them as provided by law.”  Ark.  Code Ann. § 22­5­206 (Repl.  2004) (emphasis added).  This statute clearly subjects the  action of the Commissioner to the requirements of other laws, such as Ark. Code Ann. § 22­  5­402.  Second, Rylwell and Pulaski Lands are incorrect in their contention that the plain  meaning of Ark. Code Ann. § 22­5­402 prohibits the Commissioner from issuing any tax  titles whatsoever.  The statute does not prevent the Commissioner from executing tax titles  in  favor  of  private  individuals,  as  was  done  in  the  instant  case,  as  long  as  any  interest  belonging to the State remains unaffected.  The purchaser at the tax sale must take subject  to  any  prior  interests  in  the  property  claimed  by  the  State.    Thereby,  the  statute  is  not  violated, because there is no conflict with the State’s interest.  We also find unavailing the argument of Rylwell and Pulaski Lands that the statute  cannot apply to tax titles conveyed by the Commissioner.  We note that the statute contains  no express or implied exception for titles conveyed by the Commissioner. The statute clearly  refers to all tax titles.  Furthermore, the Commissioner conveys all tax titles, pursuant to Ark. ­6­  Code Ann. § 26­37­101:  “All lands upon which the taxes have not been paid for one (1) year  following the date the taxes were due, October 10, shall be forfeited to the State of Arkansas  and transmitted by certification to the Commissioner of State Lands for collection or sale.”  Ark.  Code  Ann.  §  26­37­101(a)(1).    The  statute  further  states  that,  “Upon  receipt  of  certification, title to the tax­delinquent lands shall vest in the State of Arkansas in care of the  Commissioner of State Lands.”  Ark. Code Ann. § 26­37­101(c).  If Ark. Code Ann. § 22­5­  402 does not apply to tax titles conveyed by the Commissioner, then it does not apply to any  tax titles at all, rendering the statute meaningless.  We construe statutes so that no word is  left void, superfluous, or insignificant, and we give meaning to every word in the statute, if  possible. Weiss v. Maples, 369 Ark. 282, ___ S.W.3d ___ (2007).  To construe a statute that,  by its plain meaning, refers to all tax titles as one that essentially applies to no tax titles  would contravene our rules of statutory interpretation.  Rylwell and Pulaski Lands cite us to the concurring opinion in Cracraft v. Meyer, 76  Ark. 450, 88 S.W. 1027 (1905), for the proposition that Ark. Code Ann. § 22­5­402 has no  application to titles conveyed by the Commissioner. Cracraft involved property acquired by  deed from the Commissioner, and the appellant, in an attempt to nullify the deed, relied upon  the predecessor to Ark. Code Ann. § 22­5­402.  Id.  The opinion stated that the statute was  inapplicable, as it did not contain a reference to titles conveyed by the Commissioner.  Id.  Rylwell and Pulaski Lands construe this statement to mean that Ark. Code Ann. § 22­5­402  can never apply when  a  tax  title is conveyed by the Commissioner; however, they have  mischaracterized the meaning of the statement by truncating it.  The opinion went on to say ­7­  the following:  “It [the statute] had no reference whatever to titles conveyed by the State  Land  Commissioner,  or,  if  so,  it  is  only  the  interest  of  the  state  in  the  land  that  can  be  affected by it.  The state has parted with all her interest in this land.  At least she is not here  attempting to assert any interest.”  Id. at 460, 88 S.W. at 1030.  Cracraft involved a suit  between two private individuals who had each obtained deeds from the Commissioner to the  same piece of property.  Id.  The State was not involved in any way and asserted no interest  in the property.  Id.  Therefore, Cracraft does not, as Rylwell and Pulaski Lands suggest,  stand for the proposition that Ark. Code Ann. § 22­5­402 does not apply to titles conveyed  by the Commissioner.  Rather, it stands for the proposition that the statute does not apply  when the State is not asserting an interest in the property.  Thus, Cracraft is distinguishable  from the case at bar and has no applicability here.  Rylwell and Pulaski Lands further suggest that Ark. Code Ann. § 22­5­402 does not  apply because the Commissioner gave proper notice of the pending tax sale to all owners and  interested  parties,  including  ADFA.  However,  ADFA  is  correct  in  noting  that  the  applicability of the statute does not in any way depend on whether proper notice was given.  There is no mention of notice or any other procedure in the plain language of the statute.  Section  22­5­402  does  not  condition  its  applicability  on  whether  notice  was  defective.  Moreover, tax titles obtained through procedurally deficient tax sales are voidable regardless  of whether Ark. Code Ann. § 22­5­402 applies.  See Mays v. St. Pat Props., L.L.C., 357 Ark.  482, 182 S.W.3d 84 (2004).  Section 22­5­402 would be meaningless if it applied only to  procedurally deficient tax sales, because such sales are already voidable. ­8­  Finally, Rylwell and Pulaski Lands offer two bases for contending that, even assuming  that Ark. Code Ann. § 22­5­402 applies to tax titles issued by the Commissioner, it does not  apply to the facts of the instant case.  First, they argue that the State does not have an interest  in the property at issue, because ADFA is independent of the State, pursuant to Ark. Code  Ann. § 15­5­201 (Repl. 2003).  Section 15­5­201 refers to ADFA as “a public body politic  and corporate, with corporate succession, to be an independent instrumentality exercising  essential public functions[.]”  Ark. Code Ann. § 15­5­201.  We disagree with the assertion  of Rylwell and Pulaski Lands that ADFA is not a state agency, and we emphasize that the  parties stipulated to the fact that ADFA is a state agency.  Rylwell and Pulaski Lands also contend that the State has no interest in the property  at issue because a suit to quiet title in State property can only be commenced by the Attorney  General or an assistant attorney appointed by the Governor, pursuant to Ark. Code Ann. §  22­5­401 (Repl. 2004).  We note that Ark. Code Ann. § 22­5­401 indicates it is the duty of  the Attorney General or an assistant attorney appointed by the Governor to bring such a suit,  but the statute does not prohibit other attorneys from doing so.  Ark. Code Ann. § 22­5­  401(a).  The record in the instant case includes a letter from an assistant attorney general to  ADFA’s general counsel indicating that in­house counsel or approved outside counsel should  pursue the case, because an action to quiet title could possibly include the Commissioner of  State  Lands  as  a  party,  thus  causing  a  conflict­of­interest  situation  for  the  Office  of  the  Attorney General.  In any event, Ark. Code Ann. § 22­5­401 applies only in cases where the  State’s interest in the subject property does not appear in the records of the Commissioner ­9­  of State Lands.  Ark. Code Ann. § 22­5­401(a).  There is no indication that such is the case  here.  In accordance with Ark. Code Ann. § 22­5­402, the limited warranty deeds issued to  Rylwell were void as against ADFA’s mortgage lien on the property.  Thus, the circuit court  was correct in its ruling that the property interests of Rylwell and Pulaski Lands were inferior  to that of the State.  Affirmed. ­10­ 

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