Bialota v. Lakota Lakes, LLC

1

2023 S.D. 55

EMILY BIALOTA, Plaintiff and Appellant, v. LAKOTA LAKES, LLC, a Minnesota limited liability company, PETER J. TAUNTON, KRISTIN J. TAUNTON, and all persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the complaint adverse to plaintiff's title or a cloud on plaintiff's title thereto, Defendants and Appellees.

No. 29851-r-SRJ

Supreme Court of South Dakota

October 25, 2023

CONSIDERED ON BRIEFS AUGUST 30, 2022

REASSIGNED JULY 31, 2023

APPEAL FROM THE CIRCUIT COURT OF THE SEVENTH JUDICIAL CIRCUIT PENNINGTON COUNTY, SOUTH DAKOTA THE HONORABLE ROBERT A MANDEL Retired Judge

BRIAN L. UTZMAN of Smoot & Utzman, P.C. Rapid City, South Dakota Attorneys for appellant.

NATHAN R. CHICOINE of DeMersseman, Jensen, Tellinghuisen &amp Huffman, LLP Rapid City, South Dakota Attorneys for appellees.

JENSEN, CHIEF JUSTICE

[¶1.] Emily Bialota began an action to quiet title in Pennington County, claiming fee simple ownership in certain real property previously owned by Lakota Lakes but sold at a tax sale. Lakota Lakes moved for summary judgment, arguing that it had not been validly served with the notice of intent to take tax deed, rendering the tax deed void. Bialota cross-motioned for summary judgment, arguing that she had served Lakota Lakes and that Pennington County had properly issued a tax deed based upon her affidavit of completed service. The circuit court granted Lakota Lakes' motion for summary judgment and denied Bialota's motion. Bialota appeals, arguing she properly served Lakota Lakes. We reverse and remand.

Factual and Procedural History

[¶2.] This appeal concerns vacant real property in Pennington County, South Dakota, in the Lakota Lake Encampment Subdivision. On May 27, 2008, Peter and Kristin Taunton purchased the property for the purpose of future development. Subsequently, they formed Lakota Lakes, LLC, in Minnesota with the aid of a Minnesota attorney. The Tauntons contributed the property to Lakota Lakes by quit claim deed on June 4, 2009. Lakota Lakes failed to pay the property taxes owed for tax year 2015. Pennington County offered the property for tax sale in December 2016, and when no bid was received at the sale the property was "struck off" the rolls and sold to Pennington County for $18,480.01, which was the amount due for the nonpayment of taxes, penalties interest, and costs for 2015.

[¶3.] Pennington County attempted correspondence with Lakota Lakes on three occasions: first, by sending a letter of intent to seek tax deed on May 15, 2019; second, by letter indicating it was initiating a tax deed action on November 25, 2019; and third, by letter giving notice of intent to take tax deed on December 19, 2019. The December 19 notice of intent was sent to an address in Chaska, Minnesota, and returned as undelivered mail. Throughout this time, Lakota Lakes failed to make any effort to pay the property taxes or update its mailing address.

[¶4.] Bialota purchased the tax certificate from Pennington County for the outstanding tax debt, and the County assigned the tax certificate to her on October 27, 2020. Once again, Pennington County attempted to send Lakota Lakes notice of the tax sale at the Chaska address, and it was returned as undelivered. Bialota also paid Pennington County the additional unpaid property taxes owed through 2020. An ownership and encumbrance report Pennington County ordered showed no mortgages, liens, or judgments recorded against the property.

[¶5.] After Bialota purchased the tax certificate, her husband, James, researched how to serve Lakota Lakes with the notice of intent to take tax deed (Notice). He contacted the Office of the South Dakota Secretary of State and was informed that because Lakota Lakes was not transacting business in South Dakota, did not have a presence in South Dakota, and was not a registered entity in South Dakota, the Notice would need to be served upon Lakota Lakes in Minnesota.

[¶6.] James then contacted the Minnesota Secretary of State, which provided the address of a suite in Eden Prairie, Minnesota, listed in Lakota Lakes' corporate filings as its business address. It also informed James that Lakota Lakes had been administratively terminated on August 3, 2012.

[¶7.] James attempted to serve the Notice upon Lakota Lakes at its business address in Eden Prairie. He learned that the property was listed for lease, contacted the listing agent, and discovered that the suite was vacant and had been so for about a year. James also attempted to serve the Notice upon Lakota Lakes at the Chaska address that the Tauntons provided in the quit claim deed that contributed the property to Lakota Lakes. He contacted the Carver County Recorder's Office to determine if the Tauntons owned any property in Carver County and was instructed on how to conduct an ownership search online. After doing so, James learned that the Tauntons no longer owned the property at the address in the quit claim deed.

[¶8.] Unable to locate Lakota Lakes at its business address, or anyone associated with Lakota Lakes elsewhere, James prepared an "affidavit of not found" stating there was an attempt to serve the business at the registered office address and the address was vacant and had been for about a year. James delivered the affidavit and Notice to the Minnesota Secretary of State, which was Lakota Lakes' registered agent. The affidavit contained a notation that a check for the filing fee was enclosed and included a request to "[p]lease return Service of Process to Emily Bialota" at the address provided. After receiving the affidavit and Notice, the Minnesota Secretary of State issued a "Service of Process Acknowledgment" on November 5, 2020, for Bialota, as plaintiff, and Lakota Lakes, as defendant.^[1]

[¶9.] Upon receipt of the service of process acknowledgment, Bialota filed an affidavit of completed service with the Pennington County Treasurer on November 9, 2020. In the affidavit, Bialota recited that she was the legal owner and holder of the tax sale certificate she purchased in 2016 for delinquent real estate taxes owed on the subject real property. The affidavit included the acknowledgment of service from the Minnesota Secretary of State and recited that "service of the [Notice], a copy of which is attached and incorporated herein by this reference, was made upon The Registered Agent of the Business (State of Minnesota SOS) at 60 Empire Dr. #100 Saint Paul MN 55103) (See attached Certificate of Service) was made on November 5th, 2020[.]" Lakota Lakes failed to redeem the property within sixty days after the affidavit of completed service was filed with the Pennington County Treasurer. Pennington County issued a tax deed to Bialota on January 11, 2021.

[¶10.] Peter Taunton claims to have first learned of the tax deed in January 2021 through his real estate agent who had been marketing the property since 2019. Taunton contacted Bialota and sought to repurchase the property from her by reimbursing the taxes she had paid on the property. She refused the offer and brought a quiet title action on February 15, 2021. Lakota Lakes filed reinstatement paperwork with the Minnesota Secretary of State on March 9, 2021. On March 26, 2021, it filed an application for certificate of authority to do business with the South Dakota Secretary of State, providing a principal office address in Excelsior, Minnesota, and a mailing address in Miami, Florida.

[¶11.] Lakota Lakes answered and counterclaimed for a declaratory judgment that the tax deed was void for failure to personally serve Lakota Lakes with the Notice and for cancellation of the deed. It subsequently moved for summary judgment, arguing that there were no genuine issues of material fact in dispute because Bialota did not personally serve Lakota Lakes with the Notice as required by South Dakota law. Lakota Lakes argued that the tax deed was void as a matter of law.

[¶12.] Bialota filed a cross-motion for summary judgment, arguing that service upon Lakota Lakes was proper because at the time of the Notice, Lakota Lakes was administratively terminated, and thus, by operation of law, "[t]he Minnesota Secretary of State [was] Lakota Lakes['] agent[.]" She contended that she was entitled to summary judgment quieting title to the property, as she had complied with the requirements for procuring a tax deed and Lakota Lakes had failed to redeem the tax certificate within sixty days from the date of filing of the affidavit of completed service of the Notice, as required by SDCL 10-25-8.1.

[¶13.] The court denied Bialota's motion for summary judgment and granted Lakota Lakes' motion for summary judgment. The court proceeded with an analysis under South Dakota law without addressing the applicability of Minnesota law, determining that service upon Lakota Lakes, a business entity, was governed by SDCL 15-6-4(d)(1), allowing personal service "on the president, partner or other head of the entity, officer, director, or registered agent thereof" or if none of those could be conveniently found, "by leaving a copy of the summons and complaint at any office of such business entity within this state, with the person in charge of such office[.]" It determined that personal service was not effectuated, nor was there evidence of substantial compliance with personal service requirements. Additionally, the court found that Bialota did not seek permission to serve process by publication. Accordingly, the circuit court concluded that because the Notice was not given to Lakota Lakes, the tax deed was void.

[¶14.] Bialota appeals the circuit court's grant of summary judgment to Lakota Lakes, raising two issues which we restate as follows:

1. Whether South Dakota or Minnesota law governing

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