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Yarnall v. First National Bank of Stillwater
Citations: 74 B.R. 3; 1986 U.S. Dist. LEXIS 20181Docket: Civ. No. 86-1024; Bankruptcy No. 181-00062; Adv. No. 184-0032
Court: District Court, D. South Dakota; September 19, 1986; Federal District Court
Rick A. Yamall, trustee for the bankruptcy estate of Ernest and Arlene Williams, appeals a bankruptcy court judgment favoring the First National Bank of Stillwater, which found that the Bank holds a valid judgment lien on the sale proceeds from real properties sold by the Williams via contracts for deed. The Bank had previously transcribed a judgment of $88,809.44 against Ernest M. Williams from Washington County, Minnesota, to Codington County, South Dakota, to secure a lien on his real property. Prior to the docketing of this judgment, Williams sold three tracts of land on contracts for deed. The first parcel was sold to Stanley and Patricia Anderson, the second to George H. Hestad, Jr., and the third to Charles F. Robinson. The Williams filed for Chapter 11 bankruptcy on June 30, 1981, later converting to Chapter 7 on March 28, 1983. The key issue on appeal is whether the judgment lien affects Williams’ interest in the three parcels sold prior to the lien being filed. The court referenced South Dakota law, noting that a contract for deed creates two interests: the vendee holds equitable interest and possession, while the vendor retains legal title until the contract is fulfilled. The court concluded that Williams retained legal title to the properties, which is subject to the Bank’s judgment lien, as established in precedent set by Reid v. Gorman. The trustee's arguments that the legal title is personal property and that Reid v. Gorman has been overruled were rejected. Appellant references cases such as Phillis v. Gross and State v. Weide, which establish that in a contract for deed sale of real property, the vendee gains equitable ownership while the vendor retains legal title. This concept of 'equitable conversion' does not alter judgment liens against the vendor's interest in the property, as reaffirmed in Reid v. Gorman, which is consistent with the earlier cases cited. Additionally, Appellant's second argument is deemed irrelevant. The South Dakota Supreme Court's decision in Jordan v. O’Brien overruled Reid v. Gorman only to the extent of conflicting with Fridley v. Munson; however, Reid v. Gorman does not conflict with Fridley v. Munson in this case. The Court will not address issues not raised in the appeal. The ruling of the United States Bankruptcy Court is affirmed, and the matter is remanded for further proceedings aligned with this ruling.