212 N.W. 217 | N.D. | 1927
Lead Opinion
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *3 In December, 1919, Nestor Rutanen borrowed from the Bank of North Dakota $2,500, securing the loan by a mortgage given on a quarter section of land owned by him in Burleigh county. In regular course the mortgage was assigned to the treasurer of the state of North Dakota as security for bonds of the real estate series issued by the State. Rutanen did not pay the taxes on the land for the years 1920, 1921, 1922, and 1923, and at the tax sale, there being no bidders, the land was struck off to the county and a tax certificate issued. In 1923, Rutanen being in default, the mortgage was foreclosed and the property was bid in by the state treasurer, as trustee. No redemption was made and in October, 1924, a sheriff's deed was issued to the plaintiff, state treasurer, as trustee for the state of North Dakota. Upon obtaining the deed, the plaintiff demanded that the board of county commissioners cancel and abate the taxes for the years 1920 to 1923, both inclusive, for which the land had been sold to the county. In April, 1925, plaintiff repeated this demand and also requested the cancellation of the taxes for the year 1924. Upon the refusal of the commissioners to comply, this action was brought to quiet title. The district court held that the taxes for which the property had been sold at the date of the issuance of the sheriff's deed should not be canceled of record and that the plaintiff was not entitled to the relief demanded; but that the 1924 taxes which were not due at the time of *5 acquisition of title by the plaintiff should be canceled and discharged. Both parties appeal and each assigns error upon that portion of the judgment which is adverse to its contention.
We shall consider first the contention of the plaintiff to the effect that, under, § 9 of chapter 292, Session Laws of 1923, it is the mandatory duty of the board of county commissioners to cancel and abate the taxes which had become delinquent and for which the land had been sold prior to the date of the sheriff's deed. The provision of the statute upon which this contention is based is contained in a comprehensive act governing the loaning of money upon farm mortgage security by the Bank of North Dakota and the issuance of bonds to procure funds to replace those employed by the bank in the enterprise. The statute provides for the assignment of the mortgages by the bank to the State Treasurer in trust as security for the bonds to be issued. It further provides that in case default shall occur in the payments or in the conditions of any mortgage and continue for a period of a year, the mortgage shall be foreclosed or collected; and, in case of foreclosure sale, if no bid is made equal to the amount due at the date of the sale, including costs, disbursements and statutory attorneys' fees, the property shall be bid in in the name of the state treasurer, as trustee for the State. The net proceeds of the sale or of the redemption are required to be turned over to the treasurer to be invested in the bonds issued under the act or in new mortgages substituted for the mortgage foreclosed. In case no redemption is made, the sheriff's deed issues to the state treasurer, as trustee for the state. After outlining this procedure, the statute provides (§ 9) ". . . Any taxes then remaining unpaid thereon shall be cancelled and abated by the board of county commissioners of the county wherein such land is situated. Any land, title to which is acquired through foreclosure, may be sold by the state treasurer, as such trustee, through the Bank of North Dakota acting as his agent, for the best price and terms obtainable, all proceeds of such sales shall accrue to the real estate bond payment fund. Any such sale must be approved in writing by the industrial commission, . . ."
The specific question presented is whether or not the statutory direction to cancel and abate the unpaid taxes applies as to taxes which accrued after the mortgage was given and for which the land had been sold to the county before the sheriff's deed in foreclosure was issued. *6
It is argued that whatever rule might obtain where there is an outstanding tax sale certificate in the hands of an individual (the certificate in such case being a contract. Fisher v. Betts,
The statutes governing tax sales do make a distinction between a tax sale resulting in the issuance of a certificate to a private bidder and one resulting in the issuance of a certificate to the county in the matter of the county's liability to the taxing districts. But does this distinction support the contention of the plaintiff that in the latter case the taxes are "unpaid" within the language of § 9, supra? That is the vital query in this case.
Under the statutes the county may retain the certificate, it may assign it to one who pays the amount of its bid, or, if title is later completed, it may sell the property, and upon the assignment of the certificate or upon resale it must credit the proportionate shares of the proceeds, to the extent of the taxes, to the respective taxing districts. Comp. Laws 1913, §§ 2202-2204. But where the property upon tax sale is bid in by another, the amount of the tax, being immediately paid for the property, is at once credited; and the tax sale certificate which is issued is a contract the obligation of which can not be impaired. Fisher v. Betts, supra. A result which could only be obviated by regarding the mortgage as superior to the tax lien from the beginning, and it is not contended that it has been made so. In view of the disastrous effect upon tax sales, there should be a clear legislative expression to warrant such a holding. See Hughes County v. Henry,
When the legislature upon another occasion desired to qualify the rights of the county under tax certificates, it used terminology entirely appropriate to that end, as appears in chapter 210, Session Laws of *8 1925. There it was desired to give to redemptioners the benefit of a lower rate of interest in case they should exercise the right of redemption within a given time. The legislators did not speak of abating the taxes or the penalty and interest, but they provided that the real estate which had been sold to the county for the taxes for a given year or any prior year, which was still held by the county, might be redeemed from the sale upon the payment of the amount for which it had been sold, together with interest at 6 per cent, plus the subsequent taxes with interest at 6 per cent. They further extended the right by authorizing the redemption of property which was held by the county at the time the act took effect but which might have been sold or assigned subsequently. If the contention of the plaintiff be correct in the instant case, the county could assign its tax certificates under the statute the day before the sheriff's deed would issue in the foreclosure proceedings and the land would remain subject to the right of the assignee under the certificate, and the various taxing districts would reap the benefit of the assignment. For it must be conceded that the taxes would be "paid" within the statute by such an assignment and, consequently, the direction to cancel would not be applicable. Furthermore, there is no attempt to distinguish between a tax certificate evidencing the holder's original purchase and one evidencing his right as an assignee. The test for cancellation under the statute is whether the tax is paid or unpaid. It could not be successfully contended that the right of a private holder of a tax sale certificate evidencing his original purchase would be in the least affected by subsequent abatement or cancellation of the tax for which the property had been sold. This would impair the obligation of his contract and a law that would purport to authorize it would be void. Yet the tax is no more paid through the original private purchase at the tax sale than it is through a subsequent assignment by the county to a private individual who pays the amount of the county's bid. If, perchance, on the other hand, the certificate were not assigned prior to the issuance of the sheriff's deed in foreclosure, the rights of the county and the various subdivisions are, according to the plaintiff's contentions, ipso facto wiped out and transferred automatically over to the bond payment fund in the hands of the state treasurer. If, following the direction of the statute in question, the treasurer should immediately re-sell the land for an amount sufficient to redeem from the tax sale and to pay the principal, interest and costs in the foreclosure *9 proceeding, the plaintiff contends that the taxes for which the property was sold must be canceled and the money turned into the bond payment fund. And this, even though the land were resold to the original mortgagor who would have been compelled to pay the taxes had he redeemed. It is indeed singular that a statute designed to have such a peculiar effect would not contain stronger evidence of a legislative intention than a mere direction to cancel unpaid taxes. Ordinarily, unpaid taxes would include only those of the current year, or those which had accrued during the period of redemption from the mortgage foreclosure sale and which, consequently, had been assessed and levied during a time when the State held a defeasible title. It is one thing to direct that such a tax be canceled and quite a different matter to direct the cancellation of tax certificates substantially representing the ownership of the property.
There is so little difference between a diversion of local revenues to a purpose other than that for which they were originally levied and a taking of the property, which is the sole security for those revenues, or which stands in lieu of them, for a different purpose that a construction of the act such as contended for by the plaintiff raises serious constitutional questions. It is contended that the incidental loss of local revenue in a locality where the patronage of the farm loan department has been liberal and the ability to pay taxes limited through a period of several years, is offset through the gain to the bond payment fund, without which it would sustain losses to be met by taxation. The obvious answer is that the direction to cancel applies even though there be no loss to the bond payment fund, in which event the tax moneys are indirectly used to the profit of those patronizing the department; for, theoretically, the loan service is to be supplied at cost. It is difficult to understand the persistency with which the discussion centers on the event of loss when it is so apparent that the statute applies without regard to loss in the particular transaction and even in the face of assured profit. The further answer is that if there be a loss it is a loss which must ultimately be borne by taxpayers generally and not by taxpayers in a locality where the experience has been especially unfortunate. The enterprise is general; not local. Under the Constitution taxation must be uniform within the territorial limits of the authority levying the tax. It can not be distributed over different areas *10
according to the varying degrees of success or failure within them of a general enterprise. The procedure contended for might visit extreme inequality of tax burden upon different properties or taxpayers in the same district by compelling those not patronizing the state farm loan department or those paying their obligations to make up the shortage in revenues incident to the cancellation of tax certificates which stand in lieu thereof. It would scarcely be contended that the State could originally favor the farm loan department or its patrons by exempting the land mortgaged to it from taxation while taxing the remainder, and it is difficult to see how a like result may be achieved after defaults have occurred, consistent with the constitutional requirements of uniformity. This requirement may be violated by cancellation or abatement as well as by assessment and levy. 26 R.C.L. 252; Wilson v. Sutter County,
It should also be observed that at the time of the mortgage foreclosure sale the property is offered to bidders subject to the rights of the county under the tax certificates. Bids are not solicited on the basis of the worth of the property free of the liens of the tax certificates. It should be assumed that the property which is offered at judicial sale is offered to bidders standing upon an equality (see Sletten v. First Nat. Bank,
From the beginning of the foreclosure proceeding to the end, no one is given an opportunity to purchase the land at a price which will pay the mortgage, interest and costs in full and a portion of the tax lien. Hence, the proceeding does not result in a determination that the land *11
is not worth more than enough to discharge the mortgage lien. The sale not having eliminated purchasers willing to pay the mortgage lien and a substantial portion of the tax lien, a legislative direction to cancel outstanding tax certificates could not be justified solely on the basis of necessity to protect the bond payment fund from loss. So, even conceding that it might be permissible for the state to protect the bond payment fund in preference to the revenue funds in which the subdivisions are interested, an attempt to do so through arbitrary cancellation of tax certificates, without regard to the value of the property chargeable with both liens, is open to the usual objections against arbitrary action. If the tax lien may be canceled without regard to the adequacy of the security for both the tax lien and the mortgage lien, or for the entire mortgage lien and a portion of the tax lien, it could as well be declared in advance that the lien for taxes should never attach to property mortgaged to the state as security for a loan, and the tax in this event would be noncollectible. Real estate taxes are obligations in rem and the constitution declares "Taxes" — not merely assessments — "shall be uniform upon the same class of property, including franchises, within the territorial limits of the authority levying the tax." Section 176. "Uniformity in taxing, implies equality in the burden of taxation." Exchange Bank v. Hines,
The argument is advanced that the legislature was confronted by a condition which had arisen out of numerous foreclosures that had ripened or were ripening into sheriff's deeds to lands upon which there were outstanding tax certificates and that it was reasonably to be inferred that the bond payment fund or the Bank of North Dakota, as an agency for conducting the farm loan business, would sustain losses if the tax certificates were not canceled. It is said that this condition presented to the legislature the alternative of appropriating moneys to take up the tax certificates or of canceling taxes and that, as a practical proposition, the legislature was free to choose either alternative. Having chosen the latter, it is argued that the legislative judgment is not subject to judicial review unless in making it effective the constitution has been infringed. Such argument depends largely for its validity upon its accuracy as a statement of the condition and of the alternatives which called forth the legislation in question. It does not appear that there had been any appraisal of prospective losses due to these foreclosures, nor, as previously remarked, does it appear that the cancellation of the tax certificate on a particular tract (if such be the direction) is made to depend upon whether the amount due on the certificate measures the loss upon the particular transaction. The security may be ample to satisfy both the certificate and the loan. Neither is it apparent to us that there was any impelling necessity for appropriating money to take up the tax certificates as an alternative to their cancellation, as will more fully appear in the later discussion with reference to the status of the lien of the tax certificates while title is in the state treasurer as trustee. The power to enforce the lien while the property is in public ownership may be suspended without affecting its validity or the right of the certificate holder to realize upon it against a subsequent purchaser of the property. Perhaps the best index by which to determine the true condition confronting the legislature at the time of the enactment of the statute in question is the scheme of operation contained in the legislation governing the state loan business.
Section 182 of the Constitution provides that the state may issue bonds but that bonds in excess of two million dollars shall be secured by first mortgage upon real estate in amounts not to exceed one-half *13 its value, etc. Chapter 154 of the Laws of 1919 authorizes the issuance of bonds of the real estate series and provides for assigning real estate mortgages to the state treasurer so that they may secure such bonds. The credit of the state is pledged in the issuance of these bonds, but they are required to be secured in the manner stated. The loans which are authorized by this same chapter are on the amortization plan and the payments into the hands of the treasurer are required to be credited to the real estate bond payment fund. It appears that the legislature in the beginning contemplated that situations might arise where the bond payment fund would be insufficient to meet the payments of interest or principal upon the bonds as they should mature, for in § 13 of the act it was made the duty of the state board of equalization "to include in the annual tax levy, such tax as in its judgment shall be necessary to meet the indicated deficiency," and the proceeds of such tax were required to be placed in the fund. The legislature also provided what should be done with a surplus in case the payments into the bond payment fund, together with mortgage securities on hand, would be more than sufficient to provide for the payment of bonds; it required (§ 14) that the excess of such funds requisite for that purpose should, at the direction of the industrial commission, be paid by the state treasurer to the Bank of North Dakota. This act, therefore, contains explicit directions for the determination each year of the amount of any loss to the fund which shall render it insufficient to meet its required obligations during the year and by authorizing a tax levy it supplies the means by which such loss is to be compensated. The act nowhere requires either the Bank of North Dakota or the state treasurer, as trustee, to take up delinquent tax certificates upon land to which title is acquired through foreclosure, and it is indeed difficult to understand how the fund is prospectively depleted through the existence of such liens, except as the value of the security is depreciated through the failure of the mortgagor to have met the proportionate burden of taxation which, under the constitution, must rest upon his land. Whether or not a loss will ultimately result is uncertain. The deficiencies in the fund which reduce it to the point where it cannot meet its annual burden of principal and interest are due to inadequate amortization payments, and such deficiencies would exist during periods of stress though the security of the mortgages for the loans should remain *14 ample at all times. Under the plan outlined in the legislation referred to, it is difficult to see how the condition calling for legislation can be defined in the manner stated. There are cogent reasons why the local taxing districts would be desirous of having the lands redeemed where the certificates are in the hands of the county, but there is no apparent reason why the state (including the Bank of North Dakota and the state treasurer, as trustee), or any disinterested individual would desire the cancellation of the certificates so long as the security may be ample for both the loan and the certificate. On the other hand, if the security be inadequate for these purposes and a loss is inevitable in a particular case, if the plan of the original act be followed, it will be met by general tax levy. If such a loss can not be absorbed by a corresponding profit, it is open to grave question whether it may be made up at the expense of one or more local taxing districts, as would be the case if the outstanding tax certificates were canceled.
It is also suggested that the situation is somewhat analogous to a legislative permission granted to the owners of property to take up tax certificates in the hands of the county by paying within a given time the amount of the tax plus a rate of interest less than the interest and penalty, in lieu of the full amount of the tax, interest and penalty, as an inducement to redemption from tax liens. State ex rel. Atkins v. Lawler,
There is embraced within every tax levy in this state taxes levied in pursuance of laws providing flat rates and specifying particularly the purpose or object for which the levy is made. If while such a tax remains collectible and while the original object continues unchanged and unaccomplished the lien representing the tax may be canceled and *15 its value be made to enhance a different fund, the spirit, if not the letter, of § 175 of the Constitution is flagrantly violated. This section plainly requires that no tax shall be levied except in pursuance of law, and that every law imposing a tax shall state distinctly the object of the same to which only it shall be applied.
What has been said above is not to be considered as an affirmative declaration that the act in question, construed in conformity with the plaintiff's contentions, is unconstitutional. We are of the opinion, however, that the analysis of the contentions advanced on behalf of the plaintiff and the logical results attendant upon their adoption raise serious question of the constitutionality of the act so construed. It is a sound rule of statutory construction, said to be elementary, that where a statute is susceptible of two constructions by one of which grave and doubtful constitutional questions arise and by the other of which such questions are avoided it is the duty of courts to adopt the latter construction. Harriman v. Interstate Commerce Commission,
Considering the inadequacy of the expression used in § 9, chapter 292, Session Laws of 1923, to express the rights claimed by the plaintiff in this case and the inaptitude of the terms employed to affect rights acquired under certificates of tax sale, as well as the incongruous, if not unconstitutional, operation of the statute, construed as the plaintiff construes it, we are of the opinion that the act is not to be construed as affecting rights acquired under outstanding tax certificates.
In construing § 9 of chapter 292; Laws of 1923, as above, we have not been unmindful of the fact that the entire act apparently had for its purpose the authorizing of a series of bonds independent of that authorized by chapter 154, Laws of 1919, and that it is not merely an *16 amendment of the earlier statute. Mortgages taken under the 1919 act, therefore, would be governed by its provisions instead of by the provisions of the 1923 law, and the 1919 act contains no direction to cancel any taxes. However, the section in controversy (Sess. Laws 1923, § 9, chap. 292) purports to apply to mortgages taken under the former act, as well as to those taken under the 1923 act. It directs the foreclosure "in case default shall occur in the payments or conditions of any mortgage, heretofore or hereafter taken. . . ."
However, it is earnestly argued that the statute in question should be given the broader construction contended for, in order to make it conform to the further mandate of § 176 of the Constitution that the property of the state shall be exempt from taxation. It is pointed out that, upon the acquisition of the property in question by sheriff's deed in forclosure, it becomes the property of the state and as such is freed from all obligation to contribute to the tax burden, either past or prospective. Authorities are cited holding that property which is acquired by the state or by any of its political subdivisions for a public or governmental purpose is exempt from taxation either on common law principles, according to which a sovereign does not tax itself and its revenue laws are construed to apply to private property only, or in obedience to constitutional provisions expressly so declaring. A careful examination of these authorities will disclose that they proceed upon the principle that the functions of government should not be interrupted on account of the possible failure of officers to safeguard the title to property acquired for the purpose of facilitating a given governmental activity. The futility of levying a tax to pay a tax is also frequently commented upon. But it is our conclusion based upon a careful examination of all of the authorities cited that none goes so far as to declare the interest of the state in property which is acquired as a mere incident to the pursuit of a governmental function to be superior to claims of third parties based upon anterior tax liens. The ability with which these authorities are analyzed and the commendable zeal with which they are urged upon us, as well as the importance of the question involved, seem to us to justify the inclusion in this opinion of a brief abstract showing the holdings therein. We think that a careful consideration will demonstrate that the question involved here was present in none of the cases and that this case is sui generis. *17
Santa Monica v. Los Angeles County,
In Smith v. Santa Monica, 162, Cal. 221,
In Webster v. University of California,
At the time of the assessment of the taxes, there was in force in California a constitutional provision segregating the interests of the mortgagor and mortgagee for purposes of taxation. Under this provision the mortgage interest of the regents could not be taxed for the taxes of 1896, because this interest belonged to the state and was exempt by virtue of that provision in the Constitution exempting property belonging to the state. Therefore, the tax sale carried to the purchaser only the interest of the mortgagor, and the title conveyed by the tax deed was a title subject to the mortgage.
In Reid v. State,
In Flanagan v. Land Development Co.
Foster v. Duluth,
Laurel v. Weems,
Public Schools v. Trenton,
State v. Locke,
In the case of Hughes County v. Henry,
In a concurring opinion in the above case, Mr. Justice Sherwood expressed somewhat stronger views than those embodied in the opinion of the court. He presented the issue as a challenge to the most important sovereign power of the state, that to tax and to collect taxes, saying at page 290:
"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.
. . . When the state engaged in the business of making rural credit loans, it was clearly not acting in its sovereign capacity, but was engaged in the business of loaning money in competition with other citizens of the state."
He then proceeded to quote the statement of Chief Justice Marshall in Bank of United States v. Planters' Bank, 9 Wheat. 904, 6 L. ed. 244, as follows:
"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 privileges 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 repects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never *23 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 power or privilege which is not derived from the charter." (Citing cases.)
Under the reasoning of this opinion, the exercise of the sovereign power of txation is dignified above the action of the state when engaged in a business not directly involving sovereign prerogatives. To concede priority to the mortgage over the tax has an effect on sound government under well defined constitutional principles similar to effects produced in the physical realm by inverting a pyramid.
In Gasaway v. Seattle,
In State v. Snohomish County,
In our opinion, the considerations that support the title and right of the state or public corporations in the above cases as against claims based upon prior taxes are not present in the instant case. The property acquired by the state treasurer in trust in the instant case is not *25
acquired for a public purpose. The constitutional exemption was clearly intended to protect property that was acquired for a public purpose. It was placed in the Constitution at a time when restrictions were imposed upon governmental activities in the direction of private enterprise. See § 185 of the state Constitution, 1889. When the state engaged in the farm loan business, it was not in contemplation that any real property should be acquired to facilitate the operation of the department. A state reformatory, a school, a waterworks or an incinerator can not be operated apart from the land upon which it is located, but the more successfully a farm loan business is operated, the less the likelihood that any real property will ever be acquired. And when property is acquired in the manner directed by the statute, it is to be held temporarily only. The direction is to dispose of it in order to realize its worth as security. Clearly, the underlying public policy which protects public property from the hazards of tax proceedings is not present to any appreciable extent where the property is held temporarily for such a limited purpose. The State, in the end, is not embarrassed to any greater extent than private lenders in realizing the full value of the property. The loan was originally made on the basis of the property continuing to be subject to taxation, and there is no just reason why the position of the lender should later be arbitrarily improved, especially when this is done at the expense of a limited group of taxpayers as distinguished from the taxpayers in general. So far as the danger of loss of the property through tax proceedings is concerned, it might well be protected during the period of state ownership by considering the lien dormant; or the possibility of such loss might well be considered as an incidental hazard and within legislative contemplation when the state was directed to engage in the business of loaning money upon terms that made the adequacy of its security at all times subject to human judgment, business acumen and foresight. (But we are not called upon to determine which of these alternatives was contemplated.) We are unable to harmonize the high conception of sovereignty, which lies back of the protective doctrine of immunity, with a departmental activity in a business enterprise where success is so largely dependent upon administrative discretion and judgment. Why should the attribute of sovereignty be invoked to avoid a loss (or to make a profit; for it may so result) under a law that outlines many *26
situations requiring official and quasi-official action in connection with the same business that are fraught with the possibilities of losses (or profits?) many times as great as usually attach to a mere tax matter on individual tracts? The state and its agencies and departments are not always synonymous where questions of sovereign attributes are concerned. Sargent County v. State,
While it is argued that § 176 of the state Constitution, declaring that the property of the state shall be exempt from taxation, so operates to remove automatically all tax liens existing at the time the property is acquired, we find no substantial support in the authorities for such a construction. Its language is prospective. It does not purport to control the effect of the acquisition of title upon existing liens, and it is only upon the principles heretofore in this opinion stated that existing liens have been held to be extinguished or rendered dormant. We are of the opinion that this section does not have the force contended for as to existing liens. In this connection may be noted also that other provision of the Constitution (§ 22) which declares "Suits may be brought against the state in such manner, in such courts, and in such cases, as the legislative assembly may, by law, direct" and § 8175 of the Compiled Laws of 1913, which authorizes suits against the state "respecting the title to property, or arising upon contract. . . ." We do not hold that suits may be instituted upon the tax certificates held by the county. We hold only that the prior taxes should not be abated or canceled.
It is suggested that the legislature when amending and re-enacting the statute under consideration in 1925 (see chapter 100, Session Laws of 1925) refused to so amend § 9 as to strike therefrom the clause providing for the abatement and cancellation of unpaid taxes (House Bill 185 — indefinitely postponed) and further refused to pass a bill providing for the payment of existing tax liens (Senate Bill 149, 1925 session), it evidenced a purpose to have all tax liens wiped out. Such legislative action is at most equivocal as an expression of legislative intent. On the one hand, it is wholly consistent with our construction of the 1923 act, in that the subsequent legislature might well have considered the previous legislation an adequate direction to cancel the unpaid *27 taxes for which the property had not been sold and which were not included in the certificates; and, on the other hand, it might further have been unwilling either to embarrass the Bank of North Dakota by requiring taxes to be paid, or the certificates to be taken up, or to, at that time, increase the general tax burden by appropriation for that purpose. In any event it is but an equivocal expression or lack of expression by a subsequent legislature.
It may be remarked in this connection too that had there been any doubt, prior to 1925, as to the authority of the Bank of North Dakota to pay delinquent taxes upon lands upon which it had negotiated loans, that doubt was removed by the amendment to § 9. See chapter 100, Laws of 1925. By the amendment the bank was authorized to include in the foreclosure "all legal costs and disbursements incurred, including all taxes paid by said bank." This is not a direction to pay but a clear recognition of the right of the bank to pay and to recover the amount paid in the foreclosure proceedings. If, in the event of sheriff's deed in foreclosure issuing, all outstanding tax liens are arbitrarily canceled, it is somewhat singular that the bank would be authorized to pay taxes which could never jeopardize the security for its loan. The 1925 amendment, as we view it, is rather an indication that the direction to cancel unpaid taxes was limited to those accruing after the foreclosure of the mortgage.
Concerning the cancellation of the taxes which were not due at the time the property was transferred to the state treasurer, as trustee, under the sheriff's deed in foreclosure, we are of the opinion that this question is controlled by § 176 of the state Constitution which exempts the property of the state from taxation. Under such a provision the ownership and not the use to which property is put, nor even the purpose for which it is acquired, affords the test of its immunity. San Francisco v. McGovern,
There is yet another class of taxes involved in this case, namely, taxes which were delinquent and for which the property had not been sold. Under the law governing tax sales (Comp. Laws 1913, § 2191), when property is once bid in by the county it is not again offered for sale for subsequent taxes unless the county has made an assignment of the certificate. This statute and the sections governing redemption clearly have the effect of including in the tax certificate held by the county at the date of delinquency all subsequent taxes on the property. In other words, the county as a certificate holder draws to itself the lien of the subsequent unpaid taxes without the formality of a sale. Since its right to hold the property for this amount subject to redemption is included in the certificate, and since there has been no apparent attempt to qualify its rights as a certificate holder, the taxes which became delinquent before the sheriff's deed was issued should not be canceled.
For the foregoing reasons, we are of the opinion that the judgment of the trial court is correct and it is affirmed.
BURKE, BURR, and CHRISTIANSON, JJ., concur.
Dissenting Opinion
I am unable to agree with the conclusion reached in the majority opinion in this case. I am reluctant to continue a discussion already somewhat extended but the case is of such importance that I deem it my duty to set forth as briefly as possible some of the reasons for my disagreement.
The plaintiff contends that under § 9, chapter 292, Sess. Laws 1923 and § 176 of the Constitution of the state of North Dakota, the lien of Burleigh county for taxes is discharged as against real property acquired by the state treasurer as trustee on foreclosure under the provisions of said chapter 292 regardless of the time when such tax liens attached. On the other hand, the defendant contends that the exemption of State property from taxation under § 176 of the Constitution does not apply to property thus acquired and that the provisions of chapter 292, supra, relied upon by the plaintiff are unconstitutional and void; that if the exemption of § 176 does apply to such property it does so apply only as to taxes, the lien of which had not attached at *29 the time the state treasurer acquired title, and as to all other taxes this provision of chapter 292 is unconstitutional and void in that it is in contravention of the first clause of § 176 of the Constitution providing that taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax.
Section 176 of the Constitution, as amended, reads as follows:
"Taxes shall be uniform upon the same class of property including franchises within the territorial limits of the authority levying the tax. The legislature may by law exempt any or all classes of personal property from taxation and within the meaning of this section, fixtures, buildings and improvements of every character, whatsoever, upon land shall be deemed personal property. The property of the United States and of the state, county, and municipal corporations and property used exclusively for school, religious, cemetery, charitable, or other public purposes shall be exempt from taxation. Except as restricted by this article, the legislature may provide for raising revenues and fixing the situs of all property for the purpose of taxation. Provided, that all taxes and exemptions in force when this amendment is adopted shall remain in force until otherwise provided by statute."
See chapter 90, Sess. Laws 1919. That portion of § 9, chapter 292, Sess. Laws 1923, which especially requires consideration in this case, reads as follows:
". . . In case no redemption is made from such foreclosure sale (by the manager of the Bank of North Dakota as agent of the state treasurer as trustee for the state of North Dakota on default of the mortgagor) in a manner provided for by law, a sheriff's deed shall he issued to the `state treasurer as trustee of the state of North Dakota.' Any taxes then remaining unpaid thereon shall be cancelled and abated by the board of county commissioners of the county wherein such land is situated."
Section 185 of the Constitution as amended provides:
"The state, any county or city may make internal improvements and may engage in any industry, enterprise, or business, not prohibited by article 20 of the Constitution, but neither the state nor any political subdivision thereof shall otherwise loan or give its credit or make donations to or any aid to any individual, association or corporation *30 except for reasonable support of the poor, nor subscribe to or become the owner of capital stock in any association or corporation."
See Chapter 89, Sess. Laws 1919. Pursuant to § 185 of the Constitution as above quoted, the legislature enacted chapter 147, Sess. Laws 1919, establishing a bank under the name of the "Bank of North Dakota," to be operated by the state, and authorizing it to make loans to be secured by first mortgage on land. Chapter 154, Sess. Laws 1919, provides for the issuance, by the state of North Dakota, of bonds in a sum not exceeding $10,000,000, to be known as "Bonds of North Dakota, Real Estate Series," for the purpose of raising money to enable the Bank of North Dakota to make loans upon real estate mortgages as authorized by chapter 147, supra. Both chapter 147 and chapter 154 were considered by this court in the case of Green v. Frazier,
The Bank of North Dakota is merely the agency of the state, created for the purpose of carrying out the objects sought to be accomplished by the state. See Sargent County v. State,
The question presented on this appeal, however, involves taxes which had attached to the land prior to the time when the trustee acquired title thereto as well as those which thereafter became due and delinquent. The contention is raised, and the majority opinion so holds, that the legislature by the enactment of the particular portion of § 9, chapter 292, Sess. Laws 1923, heretofore quoted, had in mind only taxes the lien of which had not attached at the time the trustee acquired title to the property sought to be charged. I think, however, that there is no foundation for this contention. The statute reads "Any taxes then remaining unpaid thereon shall be cancelled and abated." It seems plain that the legislature intended thereby to clear the record of all unpaid taxes without reference to the dates when the same might have been levied or might have become due. The fact that in the process of collection of taxes land charged therewith is sold to the county at tax sale does not change the character of the lien. Purchase by the county at tax sale does not result in payment of the tax. It is simply a step in the process of collection. See State ex rel. Atkins v. Lawler,
When the State of North Dakota took title to the land involved in October, 1924, the taxes for 1924 had been levied and assessed. They were spread against the property. The amount thereof was determined. The tax was then a lien against the land to the extent that the land was, under the circumstances, subject to tax. The 1923 taxes were in a similar case in October, 1923, when the land was sold on foreclosure and bid in by the State. These 1923 taxes became due on December 1st, 1923. They became delinquent on March 1st, 1924. The land would not have been subject to sale on account of such taxes until the first Monday in December, 1924. Now these 1923 taxes were a lien on the land when the state acquired its foreclosure certificate of sale just as much as when it acquired its deed, but no more so than the 1924 taxes were a lien on the land at the time the state acquired its deed. Yet, the majority opinion reasons that in the one case — that of the taxes of 1923 — such taxes were, in the contemplation of the legislature as expressed in § 9 of chapter 292, Sess. Laws 1919, paid at that time, but that the taxes for 1924 which were just as much a lien, were not paid, and that therefore the legislative intent was that only those taxes which were levied and assessed during the year of redemption should be cancelled and abated. Surely if the legislature intended such a remarkable distinction it would have expressed that intention in appropriate language and not have left it to tenuous inference. The whole purpose of statutory construction is to discover and apply the legislative intent. It is to be presumed that in enacting a statute the legislature acted with deliberation and intended to attain only reasonable results; that it did not intend its action should be futile or result in absurdities. It seems to me that this presumption alone justifies the construction that I am contending for. This construction is further warranted by the action of the legislature in 1925. The legislature then re-enacted the statute here under consideration. See chapter 100, Sess. Laws 1925. That same legislature refused to amend the statute (Sess. Laws 1923, § 9, chap. 292), by striking therefrom the clause providing for the abatement and cancellation of unpaid taxes. House Bill 185 — indefinitely postponed. It also refused to pass an act providing that where title is acquired by foreclosure, in cases identical with the instant case, the tax liens existing at the time when title was so acquired should be paid and discharged by the state. (Senate Bill 149 — withdrawn by its *34 author with the consent of the Senate). I know that ordinarily the refusal of the legislature to enact a bill into law is not entitled to great consideration in the construction of statutes which are enacted, but I think that the circumstances in this particular case are such as to give the action of the legislature in these respects considerable significance. So it seems to me to be beyond question that § 9, chapter 292, Sess. Laws 1923, here in question, was enacted and re-enacted for the purpose of clearing the record of tax liens imposed on real property to which the state later acquired title by mortgage foreclosure in those cases where such tax liens were held by the state itself.
The defendant contends that so construed the statute is unconstitutional and void in that it is in contravention of the first clause of § 176 of the Constitution, heretofore quoted, providing that taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax. This contention so impresses the majority of the court that they on that account shrink from giving the statute an interpretation which to me seems obvious. It is urged that under the requirement that taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax, such uniformity must be determined as of the date of assessment and levy; that at the time the taxes here involved were assessed and levied this property was owned by Rutanen, and that such taxes were required to be assessed and levied against the property uniformly with those assessed and levied against real estate owned by other individuals in the same taxing district; that to now cancel and abate these taxes because subsequently the state acquired title to the land has the effect of increasing the tax burden imposed as of that time on real estate held by other individuals, and absolving that of Rutanen from all tax burden; that the revenues required to be raised by taxation as of that time were necessary for the conduct of the affairs of the various governmental units sharing therein, and that the same have been, though not collected, anticipated and spent in reliance upon the assessment and levy, and the machinery provided for the collection thereof; that to cancel and abate such taxes will disrupt the whole scheme of uniformity of taxation; that it will hamper the collection of taxes on real estate through and by means of tax sale.
When analyzed these contentions appear to be aimed at the wisdom *35 of the legislature in enacting rather than at the power of the legislature to enact. The question here is not a question of legislative wisdom but one of legislative power. If the power exist this court may not hold the statute unconstitutional, even though it deem the statute unwise and inexpedient. This court must as a matter of duty sustain the statute unless it is clearly unconstitutional. While the court must, if reasonably possible, give it that construction which will render it constitutional, yet there is no obligation to distort the statute in order to avoid passing upon its constitutionality. Given that construction which it seems to me the legislature plainly intended should be given to it, I can see no sufficient reason for holding that the statute violates the uniformity clause of § 176 of the Constitution.
The legislature is the agency of the people. To it is delegated the power of taxation. It has, as such agency, the right and power to do as it will respecting matters of taxation, excepting only as it is restrained by constitutional inhibition. It is otherwise supreme. It may impose taxes or it may exempt from taxation, subject only to such restraint. In the exercise of the power thus delegated the legislature enacted the statute here challenged. It must be borne in mind that all the taxes here involved were assessed, levied, and became liens on the land subsequent to the time when the Bank of North Dakota made and assigned the Rutanen loan. The legislature, unquestionably, has the power to charge real property with a lien for the taxes imposed thereupon superior to that of any pre-existing lien, whether by mortgage or otherwise. But, on the other hand, it is equally competent for the legislature to subordinate such tax lien to pre-existing liens. See Cooley, Taxn. § 1240, and cases cited; 27 Cyc. 1176, and cases cited.
I have heretofore made reference to that part of § 176 of the the Constitution exempting from taxation property of the United States and of the state, county, and municipal corporations. As hereinbefore shown, under this broad exemption, enacted into the statute in § 2078, Comp. Laws 1913, as amended, all property of the State is exempt without distinction based on the use to which it may be put. This constitutional exemption from taxation is not peculiar to our Constitution, but is common to nearly all the state constitutions. Under it, whether reinforced by statutory enactment or not, it has generally been held that the exemption is so broad as to apply to property acquired by the state *36
or its agencies even after the tax lien has passed into private ownership. See Smith v. Santa Monica,
It is urged that in the cases cited, the purposes for which the property was acquired and used were purposes distinctly public and necessary to the carrying on of the proper functions of the state. However, if that be material, the loaning of money on real estate to its citizens has been declared to be a public purpose by the people of the state of North Dakota. That it is a proper public purpose is no longer open to question. Green v. Frazier,
There is no ground for distinction between one public purpose and another; between the loaning of money and the furnishing of light or water, or the performance of any other of those functions which have come to be recognized as public and governmental. Furthermore, it seems to me that the majority opinion somewhat misconceives the situation. When the State of North Dakota received the Rutanen mortgage by assignment from the Bank of North Dakota that mortgage became a part of the bond payment fund, as much the property of the state as were any other mortgages in which any other of the state's sinking funds were invested. The loan to Rutanen was made by the Bank of North Dakota. Whether that bank was or was not synonymous with the state of North Dakota in so far as questions of sovereign attributes are concerned, is here immaterial. When that mortgage was assigned to the state treasurer as trustee it became the property of the *37
state regardless of its source or origin. That same section of the Constitution, § 176, which provides that taxes shall be uniform upon the same class of property, provides for the exemption from taxation of state property. The different taxing subdivisions are merely agencies of the state erected and clothed with their various powers to effectuate the purposes of the state. I can conceive of no ground for holding that the legislature may not constitutionally provide that tax liens, subsequently created and belonging to the state, through its agencies, shall be subordinate to other liens which it has directly acquired and holds upon the same property. Indeed, it has been held under constitutional provisions almost identical with our own that such is the result independently and in the absence of legislative enactment. See Public School v. Trenton,
Surely an enactment providing that mortgage liens on real property, owned by the state should be superior to the liens of subsequent taxes would be wholly consistent with the constitutional exemption of state property from taxation and supported by the same underlying reasons. While property on which the state has liens by way of mortgage is in private ownership it is subject uniformly with other like property to taxes imposed by and through governmental agencies, though the law may subordinate such taxes to the state's other liens thereon. And so, when such mortgage liens owned by the state are foreclosed and ripen into title in the state, we can see no reason for holding that there is any violation of the uniformity clause because the legislature enacts that the title thus acquired is superior to the tax liens held by the state. Such enactment attains exactly the same end after the state acquires title as might have been insured before when the state had only a lien by mortgage.
Much is said in the majority opinion about profit and loss to the bond fund should one construction or the other be given to the statute here under consideration. It seems to me that whether or not the operation of this statute will result in profit or loss to the fund has nothing to do with the question to be determined. Such an inquiry might be pertinent and proper in ascertaining the purposes actuating the enactment, but it is not in passing upon its constitutional propriety. *38
I think that the complaint was in all respects sufficient and the demurrer should have been overruled.
Addendum
In a petition for rehearing counsel call attention to those portions of the opinion wherein it is stated, in substance, that the power to enforce the lien represented by the tax certificate owned by the county may be suspended during the period that the property is owned by the state without affecting the validity of the lien or the right of the county to realize upon it against a subsequent purchaser of the property. It is suggested that the rights of the county as the holder of the tax certificate should be more definitely determined and stated. In view of the fact that the action is one to quiet title, we deem it proper to fully define the rights of the county as a lien holder. We are of the opinion that the lien of the county is unenforceable during the time the property is owned by the state and all remedy, including the acquisition of title by tax deed, is suspended. We are further of the opinion that the certificate of tax sale, in the absence of any subsequent legislation affecting it, continues to draw interest at the existing statutory rates. The rights of the county as thus defined may be asserted against a purchaser of the property from the state. The reasons supporting these conclusions having already been sufficiently stated in the original opinion, repetition is unnecessary. Rehearing denied.
CHRISTIANSON, BURKE, and BURR, JJ., concur.