18 N.W.2d 442 | Minn. | 1945
For convenience on this appeal, we shall summarize the facts, a more complete statement of which may be found in our former opinion. On May 26, 1939, the petitioner, as vendee, entered into an executory sales contract with the United States, as vendor, for *496 the purchase of the old post-office building in St. Paul for $121,101, to be paid, in addition to a down payment, in annual installments of $9,500 each during the succeeding nine years, and upon the making of the final payment on May 26, 1949, the United States agreed to convey a marketable title to said premises to the petitioner by quitclaim deed. Upon execution of the contract, the petitioner took full possession, razed the old building, erected a new one for commercial rental, and otherwise entered into the full beneficial use of the premises. On May 1, 1940, Ramsey county assessed the premises upon the same basis as other like property, listing it for taxation as being owned by S. R. A. Inc. "subject to fee title remaining inthe United States of America." Instead of paying the taxes so levied, petitioner brought these proceedings. The issue as to the full and true valuation of said premises was determined by stipulation.
The decision of United States v. County of Allegheny,
Other decisions cited by the petitioner are hereinafter distinguished in our consideration of the land-grant doctrine.
1. Petitioner contends that the instant case is controlled by the decision of Irwin v. Wright,
An examination of the land-grant acts in general reveals that the equitable title was purposely withheld from the entryman until he had complied with all conditions necessary for obtaining a patent, and this was done as a matter of congressional intent to insure that the public domain would be given only to stable citizens who had actually demonstrated that they were desirous and capable of establishing permanent homes. Similar considerations governed grants for the construction of railroads. In other words, we have a special statutory creation designed for developing the public domain. Obviously, the disposal of public lands was not a matter of sale at all but rather of a gift on condition, and this gift on condition was not according to the common-law concept, but according to certain statutory conditions designed to satisfy a special need. Missouri, Kansas, and Texas Ry. Co. v. Kansas Pacific Ry. Co.
An examination of the Homestead Act in particular (see,
In Hall v. Russell,
"The opening words of sect. 4 are 'that there shall be, and hereby is, granted.' This is appropriate language in which to express a present grant, but as was well remarked by Mr. Justice Field for the court in Missouri, Kansas, and Texas Railway Company v. Kansas Pacific Railway Company (
"Coming then to the present case we find that the grantee designated was any qualified 'settler or occupant of the public lands * * * who shall have resided upon and cultivated the same for four consecutive years, and shall otherwise conform to the provisions of the act.' The grant was not to a settler only,but to a settler who had completed the four years of residence,and had otherwise conformed to the act. Whenever a settler qualified himself to become a grantee, he took the grant and his right to a transfer of the legal title from the United States became vested. But until he was qualified to take, therewas no actual grant of the soil. The act of Congress made the transfer only when the settler brought himself within the description of those designated as grantees. A present right tooccupy and maintain possession, so as to acquire a complete title to the soil, was granted to every white person in the Territory having the other requisite qualifications, but beyondthis nothing passed until all was done that was necessary toentitle the occupant to a grant of the land. Whether the fee passed out of the United States before the claim was 'proved up,' it is not necessary now to consider. For the purposes of the present suit it is enough to show that the occupant got notitle himself, beyond that of a mere right of possession, untilhe had completed his four years of continued residence andcultivation.
* * * * *
"Another provision is equally significant: 'All future contracts by any person entitled to the benefit of this act, for the sale of the land to which he may be entitled under this act before he or they have received a patent therefor, shall be void.' This must refer to sales after the necessary residence and cultivation were complete, because the grant was only to asettler 'who shall have resided upon and cultivated the samefor four consecutive years.' * * * *502
* * * * *
"We conclude, therefore, that under sect. 4 there was nogrant of the land to a settler until he had qualified himselfto take as grantee by completing his four years of residenceand cultivation, and performing such other acts in the meantime as the statute required in order to protect his claim andkeep it alive. Down to that time he was an authorized settleron the public lands, but not a grantee. His rights in the landwere statutory only, and cannot be extended beyond the justinterpretation of the language Congress has used to make knownits will." (Italics supplied.)
In Irwin v. Wright,
"* * * We think, therefore, that the reason for the rule, making the acquisition of the equitable title the line between non-taxability and taxability, is stronger in case of reclamation homestead entrymen than in the instances where, before the Reclamation Act, it always applied. Moreover, the confusion caused in the past by the taxation, when specifically permitted, of indefinite and inchoate interests of the beneficiaries of government land grants, should prevent an inference of the congressional intention to depart from the rule requiring an equitable title in the entryman before state taxation, unless a purpose to permit earlier taxation is express or strongly implied."
Obviously, the congressional intent as expressed in the land-grant statutes is that the equitable title shall pass to the entryman only upon full compliance with all conditions necessary for obtaining a patent, and that the equitable title and the right to a patent shall be inseparable twins in their passage from the government to the entryman. It is difficult to understand how the principle of this special statutory creation ever came to be applied to the vendor-vendee relationship in cases involving the right of a state to tax the interest of the vendee under a contract where the federal government is the vendor. Typical of these cases are United States v. *503
City of Milwaukee (7 Cir.) 100 F. 828; Lincoln County v. Pacific Spruce Corp. (9 Cir.)
2. From the making of his entry until he satisfies the conditions requisite for obtaining a patent, the entryman has no vested equitable right by way of title, but only a right of possession as against trespassers and all others except the United States. His right to remain on the land in order to perform the conditions requisite for obtaining a patent may be regarded as an inceptive or inchoate title from the standpoint that only his own failure to qualify will prevent him from obtaining a vested equitable title accompanied by the right to a patent. See, Knapp v. Alexander-Edgar Lbr. Co.
3. Further confusion resulted from the plausible though erroneous theory, adopted by some courts, that the entryman acquired an equitable title piecemeal, or on the installment plan, until he earned a perfect or complete title by having complied with all the conditions prerequisite to obtaining a patent. The entryman in fact acquired nothing until the instant he was entitled to everything. If his compliance with the statutory conditions fell short in any essential he had nothing, but the instant he had fully complied with them the equitable estate burst into full blossom as his property, and simultaneously therewith he acquired the right to a patent. Later, this anomalous doctrine of acquiring a complete
equitable title on the installment plan was applied to the interest of the vendee under a contract for deed for the sale of land by the *505
sovereign. In Lincoln County v. Pacific Spruce Corp. (9 Cir.)
Aside from the fundamental difference between the interest of an entryman under a land grant and the interest of a vendee in a contract for deed, there is a further distinction between the instant *506
case and the land-grant cases based on the fact that entirely different governmental policies and objectives are involved. The settlement and development of the public domain entailed the exercise of a major federal function that is not for a moment to be confused with the humdrum task of disposing of useless postoffice property, useless in the sense that it no longer serves any governmental function. In Irwin v. Wright,supra, Mr. Chief Justice Taft called specific attention to the importance of the land-grant policies when he said (
4. It is well established by Minnesota decisions that a contract for the sale of land, part of the purchase price being paid, vests in the vendee an equitable title in fee with the bare legal title remaining in the vendor as security, and upon payment the vendor holds it in trust for the vendee. First
American Nat. Bank v. Whiteside,
It is likewise the federal rule that a contract for the sale of land, part of the purchase price being paid, vests in the vendee the equitable title with the bare legal title remaining in the vendor for security. In Lenman v. Jones,
"* * * As she in popular legal language became the equitable owner by her contract, she made the appellee the equitable owner by her contract with him — that is she gave him the right to insist *508 in her place that the legal owner should give up the legal estate upon fulfillment of the conditions agreed."
In Bissell v. Heyward,
"* * * The execution of the contract (with the partial payment thereon) was a transfer in equity of the title of the land to Bissell; leaving in the representatives of William C. Heyward simply a naked title as trustee for Bissell, to be conveyed upon performance on his part."
It is recognized that this is the general rule (First State Bank v. United States [9 Cir.]
The same court which originated the piecemeal doctrine of equitable conversion in Ken Realty Co. Inc. v. Johnson (5 Cir.)
No basis exists for making an exception to the general rule where the government is the vendor. We respectfully submit that there is no federal authority holding that the equitable title fails to vest immediately in the vendee under an executory contract for sale of land, part of the purchase price being paid, merely because *509
the sovereign is the vendor, except those decisions of the lower federal courts erroneously based on the land-grant doctrine and of which United States v. Milwaukee (7 Cir.) 100 F. 828, is typical. Although the government is the vendor, the general rule must control. In the absence of pertinent federal decisions or statutory provisions to the contrary, contracts between the United States and a citizen or private corporation are controlled by the same legal principles that govern contracts between private individuals. "The United States, when they contract with their citizens, are controlled by the same laws that govern the citizen in that behalf. All obligations which would be implied against citizens under the same circumstances will be implied against them." United States v. Bostwick,
5. In the former S. R. A. opinion,
"3. Although the legal title was in Oliver on May 1, 1941, the association was the owner of the property within the meaning of the tax exemption provisions of the constitution and the statute. While an executory contract for a sale or conveyance of land conveys in law no legal title, * * * in equity the purchaser is regarded, for purposes of taxation as well as for others, as the owner, subject to liability for the unpaid price, and the vendor as holding the legal title in trust for him."
Another significant decision, in reverse of the instant case, and with the United States as the vendee, illustrating that the equitable title passes under an executory contract even though the sovereign is a party, and further illustrating that the tax status of the vendor, as to liability or nonliability for taxes, does not pass to the vendee with the passage of the equitable title, is the case of Calvin v. Custer County,
"In the case of Town of Cascade v. County of Cascade,
* * * * *
"* * * We think that in determining in whom the equitable interest vested we must treat the United States as if it were a private person or corporation, amenable to suit."
6. Summarizing to this point, we hold that the doctrine of the land-grant cases, a statutory creation designed to meet a special need, has no application to the vendor-vendee relationship under an executory contract for the sale of land by the sovereign. The general rule that a contract for the sale of land, part of the purchase price being paid, vests in the vendee the equitable title with the bare legal title remaining in the vendor as security for payment of the purchase price, applies to contracts where the vendor is the federal government as well as to contracts between citizens. Neither the vendor's liability for nor immunity from taxation passes with the equitable title to the vendee. The character or status of the owner of the equitable title and not that of the holder of the legal title determines whether the equitable estate is subject to taxation. A tax levy upon the vendee's equitable interest is not, directly or indirectly, a tax upon the vendor's legal estate.
7. Although we here find that no state tax has been imposed on any federal property, and that no immunity from taxation possessed by the vendor passed to the vendee as an incident to its acquirement of the equitable title, does the levy of a tax on the vendee's equitable title, by indirection or otherwise, interfere with the exercise of a governmental function? We think not. We have already pointed out that the sale of an old post-office property *512
which is no longer of use is merely for the dual purpose of salvaging its investment value and for returning it to the state tax rolls. The exercise of the state's taxing power in a uniform and nondiscriminatory manner so as to impose no greater burden upon the buyers of government property than upon other buyers is not in violation of the implied tax-immunity doctrine. All that is required is that the sovereign, state or federal, be assured a fair and nondiscriminatory sale market in competing with other vendors. We shall, however, assume that property might bring a higher price if it were known in advance that the purchaser's equity would not be subject to taxation. The United States Supreme Court, in Group No. 1 Oil Corp. v. Bass,
"But the remote and indirect effects upon the one government of such a non-discriminatory tax by the other have never been considered adequate grounds for thus aiding the one at the expense of the taxing power of the other. See Willcuts v. Bunn,
"Property which has thus passed from either the national or a state government to private ownership becomes a part of the common mass of property and subject to its common burdens. Denial to either government of the power to tax it, or income derived from it, in order to insure some remote and indirect antecedent benefit to the other, would be an encroachment on the sovereign power to *513 tax, not justified by the implied constitutional restriction." (Italics supplied.)
Mr. Justice Stone, who wrote the opinion in the foregoing case, later in Helvering v. Gerhardt (1938)
8. Does the taxation of S. R. A.'s equitable interest impair the security value of the federal government's legal title? Clearly not. Petitioner's contention that the state cannot hold a tax sale of vendee's equitable interest without having such sale confer a title paramount to all others so as to destroy the lien of the United States is without foundation, as pointed out in our former S. R. A. opinion,
Mr. Justice Holmes in Baltimore Shipbuilding Dry Dock Co. v. Baltimore,
In New Brunswick v. United States,
"* * * although the City should not be enjoined from collecting the taxes assessed to the purchasers by sales of their interests in the lots, as equitable owners, it should be enjoined from selling the lots for the collection of such taxes unless all rights, liens and interests in the lots, retained and held by the Corporation as security for the unpaid purchase moneys, are expressly excluded from such sales, and they are made, by express terms, subject to all such prior rights, liens and interests. This, we think, will * * * fully protect the paramount right of the United States."
The New Brunswick and the Baltimore Shipbuilding Company cases, as well as that of United States v. Canyon County (Idaho) (D.C.) 232 F. 985 (the principle of this latter case allowing state taxation subject to a security lien in favor of the United States was approved in Irwin v. Wright,
9. Any difference between a security right obtained under a mortgage and that provided for by the retention of the legal title under an executory sales contract is a matter of form only and *516
not of substance. See, former S. R. A. opinion,
All other issues raised by this appeal are fully determined by our prior S. R. A. opinion in
The judgment appealed from is affirmed.
"Sec. 5. * * * That to all white male citizens of the United States * * * emigrating to and settling in said Territory between the first day of December, eighteen hundred and fifty, and the first day of December, eighteen hundred and fifty-three; * * * who shall * * * comply with the foregoingsection and the provisions of this law, there shall be, andhereby is, granted the quantity of one quarter section, * * * if a single man; or if married, * * * the quantity of one half section, * * *."
"Sec. 7. * * * That within twelve months after the surveys have been made, or, where the survey has been made before the settlement, then within twelve months from the time the settlement was commenced, each person claiming a donation right under this act shall prove to the * * * surveyor-general, * * * that the settlement and cultivation * * * had been commenced, specifying the time of the commencement; and at any timeafter the expiration of four years from the date of suchsettlement, * * * shall prove in like manner, * * * the fact ofcontinued residence and cultivation required by the fourth section of this act; and upon such proof being made, * * * patents shall issue for the land * * *.
"Sec. 8. * * * That upon the death of any settler before the expiration of the four years' continued possession required by this act, all the rights of the deceased under this act shall descend to the heirs at law of such settler, including the widow, where one is left, in equal parts; and proof of compliance with the conditions of this act up to the time of the death of such settler shall be sufficient to entitle them to the patent." (Italics supplied.)
"* * * It is true that commonly taxes on land create a lien paramount to all interests, and that a tax sale often has been said to extinguish all titles and to start a new one. Hefner v. Northwestern Life Ins. Co.,
"In the next place, as to the interest of the United States in the land. This is a mere condition subsequent. There is no easement or present right in rem. The obligation to keep up the dock and to allow the United States to use it carries active duties and is purely personal. The property is subject to forfeiture, it is true, if the obligation is not fulfilled. But it is only by forfeiture that the rights of the United States can be enforced against the res. It would be a very harsh doctrine that would deny the right of the States to tax lands because of a mere possibility that they might lapse to the United States. The contrary is the law. The condition cannot be extinguished by the State, but the fee is in the Dock Company, and that can be taxed, and, if necessary, sold, subject to the condition." *517