State v. Hofer

2008 SD 109, 757 N.W.2d 790, 2008 S.D. LEXIS 151, 2008 WL 4886706
CourtSouth Dakota Supreme Court
DecidedNovember 12, 2008
Docket24718
StatusPublished
Cited by5 cases

This text of 2008 SD 109 (State v. Hofer) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State v. Hofer, 2008 SD 109, 757 N.W.2d 790, 2008 S.D. LEXIS 151, 2008 WL 4886706 (S.D. 2008).

Opinion

GILBERTSON, Chief Justice.

[¶ 1.] On April 9, 2007, James Ray Hofer and Karla Kristine Hofer (hereinafter individually, “Jim” and “Karla,” or collectively, the “Hofers”) were indicted by a Hutchinson County Grand Jury on 10 counts of grand theft by deception in violation of SDCL 22-30A-1, 1 SDCL 22-30A- *792 3(4) 2 and SDCL 22-30A-17. 3 Under the terms of plea agreements, on August 13, 2007, the Hofers entered guilty pleas to Count 1 of the indictment while the remaining counts were dismissed.

[¶ 2.] The circuit court entered a judgment of conviction and suspended execution of a ten-year prison sentence on Jim and a suspended imposition of sentence on Karla. The court entered these sentences on condition that, among other requirements, the Hofers pay restitution and each serve forty-eight days in the Hutchinson County Jail. The Hofers appeal the imposition of restitution and confinement orders. We affirm in part and reverse and remand in part.

FACTS AND PROCEDURE

[¶ 3.] The Hofers operated a used car dealership in Mitchell, South Dakota. 4 The business was financed through a longstanding arrangement with the Farmers State Bank of Parkston, South Dakota (the “Bank”). Originally, the Hofers secured a lump-sum inventory loan from the Bank, upon which monthly payments were made from cash generated from used car sales. Initially, the Bank did not have a security agreement with the Hofers for each specific vehicle in their inventory, but rather, the Bank filed a blanket UCC-1, on all of the inventory, fixtures, and other assets of the car dealership, including the vehicle inventory and proceeds thereof.

[¶ 4.] The Hofers’ used car inventory sustained substantial damage during a hail storm in 2003. Thereafter, they secured another lump-sum inventory loan from the Bank. In or around March 2005, the Bank decided that it needed to track the Hofers’ used car inventory on a more individualized basis. Although it did not file a lien, the Bank required the Hofers to enter into separate security agreements for each vehicle in inventory.

[¶ 5.] Unbeknownst to the Bank, the Hofers began arranging financing through Dealer Services Corporation (DSC) and Automotive Finance Corporation (AFC), two Indiana based corporations specializing in dealer inventory finance. Using DSC and AFC financing, the Hofers “floorplanned” 5 their inventory and pledged individual vehicles as collateral for the loans. DSC and AFC perfected a purchase-money security interest in the individual vehicles, and the corresponding titles then identified DSC or AFC as the lien holder. Before the titles could be so marked, Hofers made copies of the origi *793 nal, clear, title to provide to the Bank along with their monthly inventory list, from which, the Bank then required Hof-ers to sign individual security agreements for the newly acquired inventory items. This scheme is known in the trade as a “double floor plan” (DFP).

[¶ 6.] At a September 24, 2007 sentencing and restitution hearing, following the circuit court’s acceptance of the Hofers’ guilty pleas to Count 1 of the indictment, a letter to the Bank from DSC dated September 12, 2005 was received as an exhibit. It was from this letter that testifying Bank officials indicated they learned that DSC “[had] or expect[ed] to acquire a purchase-money security interest” in the Hofers’ “Inventory” and “the identifiable proceeds” thereof. The letter stated as follows:

All Debtor’s [Hofers’] assets and properties wherever located, including without limitation all equipment of any kind or nature, all vehicles, vehicle parts and inventory now owned or hereafter acquired, without limitation, purchase money inventory, the purchase of which was financed or floorplanned by [DSC] for Debtor of whatever kind or nature, and all returns, repossessions, exchanges, substitutions, attachments, additions, accessions, accessories, replacements, and proceeds thereof; all accounts receivable, chattel paper, and general intangibles now owned or hereafter acquired by Debtor together with the proceeds thereof; all of Debtor’s documents, books and records relating to the forgoing [sic].

[¶ 7.] Upon receiving this letter, a loan officer with the Bank, Paul Bormann, telephoned Jim. Jim told Bormann that DSC was financing government auction vehicles or repossessions for them, that the Bank did not need to worry, and that Hofers probably would not use DSC anyway because “it was just a formality.” Thereafter, the Bank decided to conduct an inspection of the inventory. The inspection took place at the Hofers’ used car lot on November 1, 2005. A DSC representative was also present for the inspection. At that time, Bank officials discovered that the inventory listings that the Hofers had been providing, which the Bank used to determine how much collateral was securing the loans, included vehicles pledged to DSC. Bank officials also discovered that 25 vehicles that the Hofers had previously provided on inventory lists were not on the lot.

[¶ 8.] Following the discovery of the irregularities in the Hofers’ business practices, Jim was indicted on a federal charge of wire fraud for illicitly obtaining money for the purchase of vehicles by wire transfer. The Hofers went out of business and filed for Chapter 7 bankruptcy relief. On December 12, 2006, Jim pleaded guilty to the federal charge in the United States District Court, District of South Dakota. As part of his sentence, Jim was required to pay restitution to DSC in the amount of $40,468.83 and to the Bank in the amount of $108,470.00.

[¶ 9.] Preliminary to the 2007 State proceedings against the Hofers, the South Dakota Department of Revenue and Regulation (the “DRR”) conducted an investigation to determine the amount of restitution that the State would seek on the Bank’s behalf. The DRR’s review was based on the individual vehicle security agreements that the Hofers had entered into with the Bank. The inventory lists that the Hofers provided to the Bank included the purchase price or value of the respective vehicles at the time the Hofers acquired them. From this information, the DRR determined that the Bank had suffered a loss of $294,163.36. At the conclusion of the September 24, 2007 hearing, the circuit court *794 ordered the Hofers to pay restitution to the Bank in that amount as a condition of Jim’s probation and suspended ten-year prison sentence and Karla’s suspended imposition of sentence.

[¶ 10.] As a further condition of these sentences, Jim and Karla were each ordered to serve two days per month in the Hutchinson County Jail, for twenty-four months.

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Cite This Page — Counsel Stack

Bluebook (online)
2008 SD 109, 757 N.W.2d 790, 2008 S.D. LEXIS 151, 2008 WL 4886706, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-v-hofer-sd-2008.