Liens

1. Liens Michael MooreBeadle County States Attorney

2. General Info

3. Definitions • Lien: a legal right or interest that a creditor has in another’s property • can follow person and will attach only to property • Judgment: a court order, can be against a person or a thing (property)

4. What is a County Lien? • A County lien is a lien against a person, but enforced against property.

5. Types of County Liens • County Poor Lien • SDCL 28-14 • Court Appointed Attorney Lien • SDCL 23A-40 • Prisoner Care Lien • SDCL 24-11 • Liens Generally • SDCL 44

6. County Poor Liens

7. What claims does the county have? • SDCL 28-14-1 – County has a claim against a person who receives poor relief under SDCL 28-13 • SDCL 28-14-3 – Burial expense claims paid by county are also included in poor lien scheme • SDCL 28-14-5 – County holds lien on all real and personal property of the recipient for the amount of assistance given • This includes joint tenancy and homestead interests (SDCL 28-14-6 says the lien applies to all property of the poor person’s spouse too – even if only owned by spouse; as long as both names appear on the lien statement) • This also includes real or personal property acquired after the lien attaches • Lien becomes effective immediately upon payment by county and filing with Register of Deeds • Additional payments by county attach to the same lien

8. More Info Regarding County Aid Liens • SDCL 28-14-8 – certified copies of county aid liens may be filed in any other SD county • i.e. if recipient moves away or owns real estate elsewhere – the same “all property” lien is created there • SDCL 28-14-15 - commissioners can compromise liens • SDCL 28-14-19 – lien is terminated immediately when the recipient’s estate is closed or terminated • NO CHAPTER OF BANKRUPTCY DISMISSES COUNTY AID LIENS

9. Court Appointed Attorney Liens

10. Court Appointed Attorney Liens • SDCL 23A-40-11 – lien created against all real & personal property of any person (including parents of a minor child, up to $1500) for whom court appointed attorney is provided (23A-40-12 requires the judge in criminal cases to set the amount of a PDO lien for counties that use PDO’s) • NOTE: this provision does NOT say the lien includes after-acquired property, like the poor lien section above. However, I believe the lien does attach to property acquired after the lien arises, since it rests against all property. • SDCL 23A-40-10 – court in criminal cases may order payment of court appointed attorney fees (CAAF) or public defender office fees (PDOF) – any payments made under these orders are credited against the county’s poor lien • SDCL 23A-40-13 – lien is fixed on payment and filing of statement of claim by Auditor (here again, the lien statement can be filed in other counties where the recipient has or may acquire an interest in real or personal property) • SDCL 23A-40-14 - commissioners can enforce, foreclose, satisfy, compromise, settle, subordinate, release or “otherwise dispose” of the lien • SDCL23A-40-15 – this lien cannot be foreclosed against homestead or exempt personal property

11. Court Appointed Attorney Liens (cont): • SDCL 26-7A-32: In juvenile cases have lien up to $1500 against parents for A&N, CHINS and Delinquent Child cases; • NOTE: 26-7A-32, says if there is no adjudication of the child a lien is not allowed

12. Prisoner Care Liens

13. Prisoner Care Lien • SDCL 24-11-45: prisoner liable for cost of his confinement: room & board, medical, dental, optometric, psych, vocational ed training, chemical dependency training received while in jail • (the judge in criminal case can waive this – I don’t think they normally do) • 24-11-45.1 - county has lien – just like ch 28-14 – for these expenses

14. Other Important Things To Note

15. “Perfecting” a Lien • 2 kinds of debt: secured and unsecured • Secured debt = debt is guaranteed, in a way, by collateral. • Two steps to making a debt secured: • 1) attachment of the security interest; • Attachment happens when the debtor signs a security agreement, or in our cases, when the county makes payment on behalf of the debtor. • 2) perfection of the security interest • Perfection occurs when the security interest becomes enforceable as to third parties by being filed in the proper place.

16. BANKRUPTCY

17. Can County Poor Liens Survive Bankruptcy? • County Poor Liens CAN survive bankruptcy if: • The debt is incurred (by payment of the poor relief); and • The lien statement is filed with the register of deeds before the bankruptcy petition is filed with the bankruptcy court

18. In re Taylor, 1998 BkDSD 4 • This was one of those tricky post-bankruptcy motions to discharge judgments and liens • Ruling: judgments were discharged, county aid lien was not • County aid liens are statutory liens against Debtor’s property

19. What, if any, poor liens are released in BR? • The only liens that get discharged are ones that were not perfected (filed with the Register of Deeds) before the bankruptcy petition was filed.

20. Can a county maintain its lien against a person even after the debt is discharged in BR? • To clarify: county aid liens are not liens against people, but against property. Thus, even though the debtor gets discharged from personal liability for the $ paid by the county, his/her property remains subject to the county’s lien after the bankruptcy is completed.

21. Timeframe for Filing a Lien • There is no timeframe before bankruptcy filing that a lien statement needs to be filed. • Although some liens filed just before a bankruptcy petition might be set aside as “preferences,” this does not apply to statutory liens. (BRC 547(c)(6)) • County aid liens need only be filed before (minutes, even) the bankruptcy petition is filed with the bankruptcy clerk. • Once you have paid a bill that gives rise to a lien, you can hurry to file the lien, even if you know the person who received county aid is about to file bankruptcy.

22. Automatic Stay • Purpose: prevent race to the courthouse • Starts the moment the BR petition is filed with the BR clerk • Stops almost ALL debt collection activity • This is EXTREMELY important in the poor lien context! • Also important in real estate tax context! (tax certificates)

23. What is dischargeable? • If payment has been court ordered, neither court appointed attorney fees, prisoner room and board fees, nor health care is dischargeable under bankruptcy. • These things are statutory liens, and they survive bankruptcy. In fact, they don’t have to be court ordered. • Judges can NOT preclude filing of a county aid lien for court appointed attorney’s fees. • The debtor’s personal liability to repay the obligation is discharged, but the liens can still be enforced against his/her property. • The only liens that get discharged are ones that were not perfected (filed with the Register of Deeds) before the bankruptcy petition was filed.

24. Does the County have to be notified of a bankruptcy filing in order for the case to have any effect on county liens? • County liens generally stay in place anyhow, so this question might be moot. • Bankruptcy law generally says that creditors who don’t receive notice do not have their debts discharged – but that said, the bankruptcy court ALWAYS grants debtors permission to amend their petitions, even after the fact, to name creditors that the debtor originally forgot. • When this happens, if the debt was originally dischargeable, it remains so.

25. COLLECTION OF LIENS

26. Collect that Lien? • SDCL 28-14-11: Foreclosure • Real Property • Index against person’s property • Personal Property • Vehicle (SDCL 32-3-43) • Judgment?

27. SDCL 32-3-43 • 32-3-43.   Notation of lien on certificate of title--Liability of holder of certificate of title for refusal to deliver. The county treasurer, upon receipt of a lien or title instrument duly executed in the manner prescribed by law governing such instruments, together with the fee prescribed for notation thereof which is nonrefundable, shall notify the holder of the certificate of title to deliver to the treasurer, within fifteen days from the date of notice, the certificate of title to permit notation of a lien, and, if necessary, the issuance of a new certificate of title provided in § 32-3-36. After the notation of lien the treasurer shall deliver the certificate of title to the owner or as otherwise directed by the owner. The secured party shall be mailed or delivered notification of the party's security interest as filed and noted on the certificate of title. The holder of a certificate of title who refuses to deliver a certificate of title to the treasurer for the purpose of showing the lien on the certificate of title within fifteen days from the date when notified to do so by the treasurer, is liable for damages to the lien holder for the amount of damages the lien holder suffered by reason of the holder of the certificate of title refusing to permit the showing of the lien on the certificate of title.

28. Lien Foreclosure • 28-14-11 - lien can be foreclosed by action – • this means we can sue to satisfy the lien (plus interest, costs, and foreclosure expenses) – • BUT this can’t be done until a year has passed since the last payment is made to or for the recipient’s benefit – it also can’t be done against the homestead during the recipient’s lifetime (or surviving spouse’s interest in homestead) • 28-14-12 - property acquired through foreclosure to be sold by commissioners after taking bids on 2 weeks’ published notice • 28-14-13 - if county forecloses lien on real estate, it can rent it out or sell it and apply the proceeds to the same fund from which the lien $ was drawn

29. To what exactly does the lien attach? • The county aid lien attaches to property, not to the person who receives the county-paid services. Thus, you can decide to foreclose the lien against a person who has bought property that was subject to a lien. • If that buyer purchased title insurance, it will be the title insurer’s (or abstractor’s) problem to clear up the county aid lien. • Even if you don’t foreclose, the lien should show up at a future property transfer (or mortgage), and the county should still eventually get paid.

30. Foreclosure on Personal Property • Ch. 21-53 - actions to foreclose liens on personal property: • - 1 - authority to sue • - 2 - judgment in foreclosure action must specify amount & nature of lien and direct sale of enough of the property sufficient to satisfy the judgment – sale should be similar to sheriff’s execution sale (the word “the” seems to mean the property has to be identified in the action to foreclose – and we won’t usually know what the debtor owns at that point)

31. Foreclosure by advertisement • Ch. 21-54 – foreclosure of lien on personal property by advertisement: • 5 - lienholder (county) issues notice of sale, containing info about names of property owner & any other lienholders, description & location of the property to be sold, statement of grounds for lien & reference to lien’s filing w/RoD, nature of debtor’s default (not paying the lien amount), amount claimed, and time/place of planned sale • 6 - notice of sale to be served on property owner & any other lienholders & published • 7 - sale can be held at any public place • 10 - sale is auction-style to highest bidder • 14 - record of sale proceedings to be filed w/RoD • – here again, as in the paragraph above, I think we have to identify what property we are going after to pursue this kind of foreclosure

32. Satisfaction • If lien paid in full make sure you complete a satisfaction (SDCL 44-3-8)