202 N.W. 286 | S.D. | 1925
Lead Opinion
Two cases are before’us by consolidation; one an original proceeding in mandamus, the other an appeal from the circuit court of Hughes county. We first consider the mandamus proceeding.
By chapter 333, Laws 1917, acting under an amendment to Constitution, art. 13, § 1, adopted by the people at the November, 1916, election, the state embarked in the business of making farm loans. That chapter as amended by chapter 334 of the same session, and as amended at the -Special Legislative Session of 1918 (chapter 58), appears in the Revised Code of 19119 as sections 10150 to 10173. Chapter 304, Laws 1919, is the only amendatory act since the Code. The writ of mandamus was sought by the county of Hughes and Harrold independent consolidated school district, a school district of said county, against the members of the South Dakota Rural -Credit Board, hereinafter called “the board,” to compel the redemption from tax sale of certain premises within said county and school district upon which there is a “rural credit” loan. The facts alleged in the application for the writ, briefly stated, are as follows: A rural credit loan of $10,000 was made on a section of land within said school district on July 1, 1922. The 1922 taxes which became due January 1, 1923, were unpaid, and at the county tax sale on December 10, 1923, the premises were struck off to Hughes county for want of bidders, and a tax sale certificate was issued to Hughes county. Rev. Code 1919, § 6794. The tax represents, among others, a levy for state purposes of 1.9 mills and a school tax of 13.3 mills. The state levy includes a tax for the maintenance of the state government and its public institutions and for the payment of the interest on, and the establishment of a sinking fund to retire, state bonds aggregating $14,900,000; consisting of highway bonds, $6,000,000; soldiers’ compensation bonds, $6,000',000; cement plant -bonds, $2,000,000; and land settlement bonds, $900,000. In addition to the maintenance of the school the school tax is in part for the purpose of paying the interest on, and the establishment of a sinking fund to retire, school district bonds issued upon a loan to
The defendants demurred to the application for the writ, and moved to quash the alternative writ because: (1) No duty rested upon the board to pay the taxes, consequently mandamus will not lie; (2) it is not shown that there is- not an adequate remedy at law; (¡3) it is not shown that the board has or can obtain funds to pay the taxes; (4) if the board has means or authority to pay the taxes, the exercise of such power is discretionary; (5) the lien for taxes is inferior to- the lien of the rural credit mortgage by reason of the provisions of sections 6758 and 6804, Rev. Codef 1919; and (6) the board is without power to pay taxes except such as may be superior to> the lien of such mortgage.
The contentions of plaintiff are: (1) That in the absence of legislation to-the contrary taxes should be held to be superior liens. (2} That the provisions of section 6804, Rev. Code 1919, are not applicable to rural credit mortgages because: (a) At the time of its adoption the use of the credit of the state for the making of farm loans was not conceivable; (b) the application of that section to rural credit mortgages would be inimical to the public interest; (c) the rural credit act does not establish the lien of the mortgage to be superior ft>the lien of taxes; (d) the provisions of said section relate to liens created in favor of the state in its sovereign capacity only and not in its private or business capacity; and (e) that there is no provision whereby the county can take a tax deed on property mortgaged to the state. (3) That the provisions of
The text of the rural credit act does not, in terms, enjoin upon the board the duty of paying taxes in case the mortgagor does not. In terms the authorization is merely permissive. It is as follows:
“Every borrower * * * by express covenant in his mortgage deed shall pay, when due, all taxes, liens, judgments, assessments and insurance which may be lawfully assessed against the mortgaged land. Taxes, liens, judgments, assessments or insurance, not paid when due and paid by the mortgagee, shall become a part of the mortgage debt.” Subdivision 9, § 10159, Rev. Code 1919, as amended by chapter 304, Laws 1919, § 3. .
There is nothing in the act that intimates that the lien of general taxes shall be superior to the lien of the rural credit mortgage, nor that the lien of general taxes shall be inferior to the lien of the rural credit mortgage. It does appear, however, that a loan may be made on lands subject to liens or assessments for drainage, reclamation, or irrigation payable in installments where the installments are not then due. Subdivision 3, § 10159, Rev. Code 1919, as amended by chapter 304, Laws 1919, § 3. The plain inference therefrom is that the mortgage lien in such case is subject to the lien of the assessment, but that for the purpose of definition of what is a first mortgage such a mortgage shall be deemed' a first mortgage. Attention is called to this merely to show that no legislative intent is disclosed in the act to make the lien of the mortgage superior to all other liens.
It is urged by plaintiffs that permission to pay taxes, liens, judgments, assessments and insurance makes the duty imperative.The rule is thus stated in 25 R. C. L. 767:
“Although the words of a statute are merely permissive, directory or enabling, they may nevertheless have the force of words of command where the power or duty to- which they relate is for the advancement of public justice or the security and protection of public or private rights.”
While we might be inclined to assent to that doctrine except as to items that are clearly subordinate to the lien of the miort
But it is urged that sections 6758 and 6804, Rev. Code 1919, make the lien of taxes subordinate to the lien of rural credit mortgages. . Section 6758 says:
That clause makes the lien of taxes on real estate superior to other liens except as against the United States and this state. Miller v. Anderson, 1 S. D. 539, 543, 57 N. W. 957, 11 L. R. A. 317. But that language does not make the tax lien subordinate to the state’s mortgage lien. It merely provides that the tax lien is not superior to the mortgage lien.
Nor does section 6804 attempt to place the lien of the real estate tax subordinate in rank to the lien of the rural credit mortgage. That section provides for the giving of notice of the expiration of the time of redemption from tax sale and for the execution of the tax deed, and further provides:
“Such deed shall vest in the grantee an absolute estate in fee simple in such real property, subject, however, to all claims which the state may have therein for taxes, liens or incumbrances.”
That sentence appeared in our laws in territorial times. It existed before a notice of the expiration of the time of redemption from- tax sale was required tO' be given (chapter 151, Laws 1890), and also before the county treasurer was authorized to strike off land at tax sale to the county for want of other bidders (chapter 131, Laws 1885), and it was not until the enactment of chapter 291, Laws 1915, that notice of the expiration of time of redemption from tax sale was required to be given to mortgagees. Even then and since then there has been no provision made for the service of such notice upon 'the state because no person or officer has' been designated upon whom service may be made. There being no possibility of the county or any other tax certificate holder acquiring a tax deed on real property on which the state holds a mortgage, said section 6804 has no application to such a state of facts. But,, even if there were no requirement for the service of notice of expiration of the time of redemption from tax sale upon mortgagees, the result would still be the same. The quoted clause of said section 6804 up to the time that a county could take a tax deed clearly contemplated that the applicant for tax deed was a private person or corporation, and therefore of necessity contemplated that all taxes evidenced by the tax sale certificate had been paid. In other words, the state, county,
The question as to whether by its rural credit operations the state is engaged in its private or business capacity as distinguished from its sovereign or governmental capacity, is a serious one, but the disposition we have made of’the case renders unnecessary the consideration of that question.
The assertion by the board that it is not alleged that it has funds available to pay taxes is not worthy of serious consideration. The payment of taxes is an incident h> the making of a loan. The 'board has the power to pay taxes from any funds it can use in the making of loans.
There is another feature of the case to which attention should be called. By section 10163, Rev. Code 1919, the Attorney General is made the legal adviser of the board. On December 26, 1922 (A. G. Op. ’24, p. 336), Attorney General Payne advised the board that because of said section 6804 the lien of rural credit mortgages was superior to taxes, but he also said:
We think the rural credit board should have followed the advice of the Attorney General and not have permitted the present unfortunate condition of public affairs to have arisen.
All of the grounds of the demurrer and' of the motion to quash are deemed to be without merit. Our conclusion is that the alternative writ should be made peremptory. A stipulation having been filed that defendants waive the right to answer, the writ will be made peremptory, but before it is signed and filed it is expected that the parties will agree upon a date on or before which the board will obey the peremptory writ. In default of such agreement application may be made to the court to fix such period.
Upon the appeal which was consolidated with the mandamus proceeding we need only say that the judgment of the trial court based upon a conclusion of law that the lien of the rural credit mortgage was superior to the lien of the taxes should be reversed. Inasmuch as the mandamus preceding will dispose of that case, it will be remanded, with directions to dismiss without costs to either party.
In this court costs will be taxed for plaintiffs and appellants.
Concurrence Opinion
(concurring specially). It is with much reluctance and hesitation I am expressing views differing from my associates in this case.
But the right of the state, its subdivisions, and municipalities to levy and collect without delay or hindrance the taxes necessary to' their existence should, I think, be decided when squarely presented as they are in this case.
Nor should the state as mortgagee be subjected to a burden
It is conceded as a fact in this case that the state through its rural credits board, which is admittedly a department of the state government, has loaned about $40,000,000 and taken mortgages therefor on abount 12,000 quarter sections of land within the state. The Attorney General, the head of another branch of the state government, has expressed the view that the lien of such mortgage is superior to the lien of the state for taxes levied subsequent to the recording of these mortgages.
The doubt so raised as to whether the lien of a general tax levied for the support of the state government, its subdivisions, and municipalities was superior or inferior to a rural credits mortgage has prevented people from purchasing at tax sale practically all lands on which rural credit loans have been made, and the state, its subdivisions, and municipalities have not only been hindered and delayed, but in counties where many rural credit loans were made, absolutely prevented from the collection of taxes necessary to the very existence of the state and its subdivisions.
In my view, this directly challenges the most important sovereign power of the state which is not only to tax but to collect such tax speedily without hindrance or delay.
It was said by Mr. Justice Miller in Savings & Loan Association v. Topeka, 20- Wall. 655, 22 L. ed. 455:
“The power tO' tax is, therefore, the strongest, the most pervading of all the powers of government.”
It was said by Chief Justice Marshall in McCulloch v. Maryland, 4 Wheat. 431, 4 L. ed. 579:
“The power to tax involves the power to destroy.”
“The superiority of the lien for general taxes must be asserted, even to the point of destroying the lien of the local assessment.” Maryland Realty Co. v. City of Tacoma, 121 Wash. 230, 209 P. 1; McMillan v. Tacoma, 26 Wash. 308, 67 P. 68.
“In all governments of constitutional limitations, sovereign power manifests itself in but three ways: By exercising the right of taxation; the right of eminent domain; and through its police power. * * * The right of taxation is one of the most striking
In an action involving the right of eminent domain it was held that the right was so inherently governmental and essential to the public welfare that it could not be abridged by agreement. Penn. Hospital v. Philadelphia, 245 U. S. 20, 38 S. Ct. 35, 62 L. ed. 124.
The conflict here is plainly between the state in its general sovereign taxing’ power and a mortgage made by a minor subdivision of the same state, and it seems clear that the power and lien created by the state must be greater than that created by such subdivision.
There is another reason why the lien of this tax should be superior to the lien of a rural credit mortgage. When the state engaged in the- business of making rural credit loans, it was certainly not acting in its sovereign capacity, but was engaged in the business of loaning money in competition with other citizens of the state. Stavg v. Van Camp, 46 S. D. 472, 193 N. W. 731.
As was said by Chief Justice Marshall in U. S. v. Planters’ Bank of Georgia, 9 Wheat. 904, 6 L. ed. 244:
“It is, we think, a sound principle, that when a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to- the company its privilegies and its prerogatives, it descends to' a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business' which is to be transacted. Thus many states of this Union, who have an interest in banks, are not suable even in their own courts; yet they never exempt the corporation from being sued. The state of Georgia, by giving to the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign character, so far as respects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never exercises its sovereignty. * * * The government, by becoming a corporator, lays down its sovereignty, so far as respects the transactions of the corporation, and exercises no
The court will take judicial notice that the state of South Dakota is not going, but has already gone, extensively into various lines of business heretofore occupied by private citizens.
It is also clear that the mere assertion that the state was acting in its sovereign capacity in loaning money, and therefore the lien of its mortgages was not only superior to the lien of the mortgage of its competitors but also superior to the state’s lien for taxes, has been sufficient to practically paralyze the ordinary functions of government in at least 16 counties of the state.
I think many of these grave questions will not arise in this or other relations of the state, in private industry, if we base this opinion on the superiority of the state’s tax lien over the lien of its mortgages and the proposition that when it enters into private business in competition with its citizens it is not acting in its sovereign capacity.
It follows- that the lien of the tax was superior to the lien of the rural credit mortgage; that the writ of mandamus should be granted on the grounds above set forth and the judgment of the low'er court reversed.