October 8, 1986

Mr. William Mark Kratochvil 
Brookings County Deputy State's Attorney 
501 Third Street 
Brookings, South Dakota 57006

OFFICIAL OPINION NO. 86-40

Refund of property taxes on building on leased site

Dear Mr. Kratochvil:

You have requested my official opinion in the following factual situation:

FACTS: 

A property owner in Brookings County leased a building and land to a plumbing company in 1980.  The plumbing company, at its own expense and with the agreement of the property owner, constructed a steel warehouse building on the property.  The landowner advises that the understanding was that the steel warehouse building would remain the property of the plumbing company and could be removed. The property owner advises that the written lease has been destroyed and he is unable to provide a copy. 

The steel warehouse was built in 1980, and first assessed in 1981.  It was added to the land value and assessed to the property owner.  The property owner paid the taxes on all of the property in 1981, 1982, 1983, 1984, and 1985.  In 1986 the plumbing company went out of business and the property owner purchased the steel warehouse from the plumbing company.  The property owner recently determined that he paid the taxes on the steel warehouse from 1981 and 1985. He is now seeking a refund of such taxes.  The County Commission has voted to refund such taxes, however the question has arisen as to whether the Commission has the authority to refund such taxes.

Concerning this you have asked the following question:

QUESTION: 

Does the County Commission have the power to refund taxes paid by the landowner on the steel warehouse building for the tax years 1981 to 1985?

In 1978 the legislature enacted what is now SDCL 10-4-2.1 which reads: 

Buildings and improvements on leased sites are classified for tax purposes and are taxed as real property.  Delinquent taxes on these buildings and improvements shall be collected as provided in § §  10-22-1 to 10-22-3, inclusive, and § §  10-22-8 to 10-22-33, inclusive.

SDCL 10-18-1 permits the refund of taxes under certain conditions and in the following cases in §  10-18-1(1) and (4): 

(1)  Where an error has been made in identifying entry or description of the property, in entering the valuation thereof or in the extension of the tax, to the injury of the complainant; 

(4)  Where the complainant had no taxable interest in the property assessed against him at the time fixed by law for making the assessments.

It is interesting to me to note that you have not been able to obtain a copy of the lease from the owner.  This leads me to believe that not only is that no longer in existence but that the lease was never filed with the register of deeds which would have given rise to public knowledge on the part of county officials that this property was to be assessed under §  10-4-2.1 and not merely to be determined as the value of the real property and certified for tax purposes under SDCL 10-4-2 and SDCL 10-6-38, 39.

As this office has continually held, the overassessment and extension of taxes against the wrong person is not grounds for abatement.  1943-47 AGR 147.  Here apparently for all intents and purposes the land had a value which included the steel structure and the owner of the property not only received notice of the assessment but paid the taxes on it for five years.

You have cited 1935-36 AGR 513 as applicable, however, in that case it involved a tax sale certificate where the assessor had been listing a structure on one lot rather than on the other lot.  In the instant case that is not the fact because the steel structure is on the correct property.

You have referred also to 1943-44 AGR, page 147, and I concur with that opinion which holds that the fact that the property is assessed in the name of a person other than its true owner does not invalidate the assessment and the tax records may be corrected but the extension of the tax against the wrong person does not constitute grounds for abatement.  In this case the property owner had a contract with the owner of the building and he could have required in that contract that the owner pay taxes and, to insure this fact, could have filed the contract with the register of deeds.

It has been settled law in this state since 1883, when first in the case of  Myrick v. Bill, et al., 3 Dak. 284, 17 N.W. 268, 269, and as continually referred to by our court, see Curran v. Curran, 289 N.W. 418, that 'the parties concerned may, by agreement in due form, give to fixtures the legal  character of realty or personality at their option, and the law will respect and enforce their understanding whenever the rights of third parties will not be prejudiced.'  (Emphasis supplied.)

It is my feeling here that the fact that the landowner allowed a building on his property and now requests that it be considered as a building on a leased site cannot stand since certainly the rights of the county in and to this property or the taxes which have been paid on it have been prejudiced by the failure of the property owner to take positive action in 1980.  In my view there was no error made in the identifying entry or description of the property as there is nothing in the evidence to show that the assessor was advised of any reason to classify it other than real property.  Further, there is nothing to indicate that the complainant did not have taxable interest in the property.

ANSWER:

The answer to your question is that the county commission is without authority under SDCL 10-18-1 to refund the tax for the years 1981 to 1985.

Respectfully submitted,

Mark V. Meierhenry
Attorney General