STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

October 8, 1968

C. J. Nagel
State's Attorney, McCook County
Salem, South Dakota 57058

OFFICIAL OPINION NO. 68-33

A financing statement required by Uniform Commercial Code, which must be recorded in order to affect real estate may be recorded notwithstanding it only complies with the UCC and docs not contain either an acknowledgment or witness. (Chapters 191 and 192 of Session Laws of 1968)

Dear Mr. Nagel:

You have advised that you and your Register of Deeds are not in agreement with the following question and you ask me to issue an official opinion in answer thereto. The question submitted is:

"Is the County Register of Deeds required to record a financing statement under the Uniform Commercial Code, which complies with the UCC and is consistent with Chapters 191 and 192 of the Session Laws of 1968, even though such instrument is neither acknowledged nor witnessed pursuant to SDC 51.16?"

It is my opinion this question must be answered YES.

Chapters 191 and 192 of the Session Laws of 1968 are companion measures which were required by certain abusive practices developing under the filing of financing statements under the Uniform Commercial Code. Such Uniform Act permits certain claimed security interests upon fixtures to affect real property. The requirements for filing of such financing statements require only a description of the property subject to such security interest and the signatures and the addresses of both parties to the transaction. The language as to a description of real property affected thereby was vague.

In this situation many instruments alleging to affect real property were filed which contained no legal description of such property, but generally described such real property to be located "five miles west and three miles north of a described municipality," and the like.

To remedy this abusive practice, the Legislature by Chapter 191 of the Laws of 1968 amended the Uniform Commercial Code by requiring a legal description of the property to be included in the financing statement in order to affect any real property. Chapter 192 of the 1968 Laws then provides that in order to affect real property, such financing statement must not only be filed-

" ... but is also recorded in the county where such real estate is located in compliance with the requirements to be observed with respect to the filing and recording of instruments affecting real property under the laws of this state.

"In the event the security interest is not intended to affix to any real estate but the security instrument does describe a tract of real estate the statement 'this instrument is not to be recorded' may be recited at the top of said security instrument and that recitation shall relieve the register of deeds of the duty to record said security instrument and no security interest or lien shall then affix to the real estate described therein."

It is settled law that neither the witnessing nor the acknowledgment of an instrument affecting real property is any part of the instrument either conveying or affecting real property. (See Hall v. Rice, 117 Neb. 765, 223 NW 8 and Kerschensteiner v. Northern Mich. Land Co., 244 Mich. 403, 221 NW 322. Mach v. Blanchard, 15 SD 432, 90 NW 1042, 58 LRA 811, 91 Am. St. Rep. 698.) At common law there was no requirement that instruments affecting real estate should be recorded (Magnuson v. Breher, 59 ND 197, 284 NW 853; Epps v. McCallum Realty Co., 139 SC 481, 138 SD 297). All statutes requiring recordation of instruments and prescribing the effects thereof are creatures of the Legislature and are subject to their enactments thereof. The purposes of such recording is well known in the law and it is to give "constructive" notice to the world of an interest claimed against real estate.

It is also settled law in South Dakota (Cannon v. Deming, 3 SD 421, 53 NW 421 and Phillips v. Gross, 32 SD 438, 143 NW 438), that when an instrument affecting real property contains no witnesses, nor an acknowledgment, or a defective acknowledgment is in fact recorded, there is no constructive notice given thereby. However, in view of SDC 51.1622 (which provides that an unrecorded instrument affecting real property is valid as between the parties thereto and those who have actual notice thereof) that any person inspecting the records who actually saw such recorded instrument has actual notice thereof, and such instrument is valid as to him.

The quoted portions of Chapter 192 at best must be considered confusing if such is interpreted as to require either an acknowledgment or witnessing for recording (in the portion of the first paragraph quoted), while the second paragraph relieves the Register of Deeds from recording the instrument only when the security instrument has affixed to its top "THIS INSTRUMENT IS NOT TO BE RECORDED" and within the body of such instruments a description of real property is included.

However, in following the general rule of statutory construction that the Legislature in enacting any measure intends all parts of such statute to be effective, no confusion can exist if that part of the quoted phrase "in compliance, etc." in the first paragraph is interpreted to refer to the place of filing and recording of such financing statement, rather than to the form of the instrument itself, and essential conditions for recording.

With such an interpretation that any financing statement which complies with the Uniform Commercial Code, which is intended to affect real property (which is legally described in such instrument), must be filed and also recorded with the Register of Deeds wherein any other instrument affecting such real estate must be filed, the apparent confusion in the statute disappears. Under such an interpretation all of such financing statements wherein real property is described are subject to recordation unless at the top of the instrument notice is given from the phrase "THIS INSTRUMENT IS NOT TO BE RECORDED" that such instrument does not in fact affect any real property, and therefore should not be recorded.

It may be seen that under this interpretation of the statute that the Legislature in Chapter 192, Session Laws of 1968 has not required that financing statements must be acknowledged or witnessed to be entitled to recording. Do the general statutes (SDC 51.16) require such acknowledgment or witnessing in order to be recorded so as to give constructive notice to the world of an apparent claim of interest in and to real property?

It is a fundamental principle of statutory construction that when two statutes, seemingly repugnant to each other, if one of such statutes refers to a particular subject matter, and the other statute refers to such subject matter generally, then there is in fact no such repugnancy which requires a finding of a repeal of the earlier statute by enactment of the latter, but rather the statute dealing with the particular subject matter creates an exception to the general statute irrespective of the time of adoption of such statutes.

It is my opinion that this rule of statutory construction is particularly applicable to the situation presented. Chapter 192 of the Session Laws of 1968 deals with the recording of a specific form of instrument affecting real property-financing statements under the Uniform Commercial Code-SDC 51.16 deals generally with the subject of recording all types of instruments affecting real property. Chapter 192 of the Session Laws of 1968 is an exception to the general rule, and requires only compliance with the provisions of the Uniform Commercial Code and does not require compliance with SDC 51.16 as a condition to being recorded.

Respectfully submitted,

Frank L. Farrar
Attorney General