Wood v. Lovett/Opinion of the Court

by Owen Josephus Roberts

MR. JUSTICE ROBERTS delivered the opinion of the Court.

This appeal presents the question whether an Arkansas Act of March 17, 1937, as construed and applied, violates Article I, § 10, of the Constitution.

March 20, 1935, an act of the legislature of Arkansas^[1] took effect which provided:

"Whenever the State and County Taxes have not been paid upon any real or personal property within the time provided by law, and publication of the notice of the sale has been given under a valid and proper description, as provided by law, the sale of any real or personal property for the non-payment of said taxes shall not hereafter be set aside by any proceedings at law or in equity because of any irregularity, informality or omission by any officer in the assessment of said property, the levying of said taxes, the making of the assessor's or tax book, [p365] the making or filing of the delinquent list, the recording thereof, or the recording of the list and notice of sale, or the certificate as to the publication of said notice of sale; provided, that this Act shall not apply to any suit now pending seeking to set aside any such sale, or to any suit brought within six months from the effective date of this Act for the purpose of setting aside any such sale."

Certain land in Desha County, Arkansas, was sold to the State in 1933 for nonpayment of 1932 taxes. The land was not redeemed and was certified to the State, as owner. In 1936 the Commissioner of State Lands, on behalf of the State, by deeds reciting his statutory authority so to do, conveyed to the appellants all the right, title, and interest of the State in two parcels of the land.

By an Act of March 17, 1937, the Act of March 20, 1935, was repealed.^[2]

January 10, 1939, the corporation which owned the land when sold for non-payment of taxes conveyed to the appellee and, on January 21, he brought suit against the appellants to cancel the State's deeds, to quiet his title, and for mesne profits or rents. He alleged that there were irregularities in the proceedings prior to the sale to the State which rendered it void. The appellants admitted the irregularities. It was agreed on all hands that though these irregularities would have constituted grounds for avoiding the sale but for the provisions of the Act of 1935, they would not have been available to the appellee if the Act were still in force. The trial court entered a decree in favor of the appellee which the Supreme Court affirmed.^[3]

The appellants contended in the courts below, and contend [p366] here, that if the Act of 1937 be given the effect of divesting them of title confirmed in them by the Act of 1935 the later Act impairs the obligation of their contracts with the State. The Supreme Court of Arkansas held that "the Act [of 1935] does not profess to cure tax sales, but only [provides] that tax sales shall not be set aside by the courts because of certain irregularities and informalities, naming them." It said that the appellants acquired no greater vested interest or title than the State had and the repeal of the Act of 1935 "violated no constitutional right of theirs to a defense" thereunder. We are of opinion that the decision was erroneous.

For present purposes it is unnecessary to recite the statutory procedure for assessment, levy, and collection of real estate taxes in Arkansas. If the taxes levied become delinquent a sale by the Collector is authorized. If no person bids the amount of the delinquent taxes, penalty, and costs, the Collector is to bid in the property in the name of the State.^[4] The State is not required to pay the amount bid in its name.^[5] The Clerk of the County Court is required to make a record of the sale to the State and send a certificate thereof to the Auditor of State.^[6] Lands thus sold to the State may be redeemed within two years of the sale.^[7] After expiration of the period of redemption, the County Clerk executes a certificate of sale and causes the same to be recorded in the County Recorder's office. Thereupon the lands vest in the State. The certificate, after recordation, is sent by the Clerk to the Commissioner of State Lands and thereupon the lands are subject to disposal according to law.^[8] [p367] The Commissioner is authorized to sell them and to make deeds to purchasers.^[9]

As the Supreme Court has indicated in this case, Act 142 of 1935 was one of a series of statutes adopted to prevent the setting aside of tax sales and titles based upon them for informalities and irregularities in the assessment and levy of taxes and the sale of property for delinquent taxes which had seriously impeded the effective collection of taxes and diminished the State's revenue.

In Berry v. Davidson, 199 Ark. 276, 280, 133 S.W.2d 442, 444, the court, after referring to several similar acts, said:

" . . . we now think it apparent that the legislature was endeavoring to find and put into effect a remedy or means to correct the evils growing out of nonpayment of taxes, to prevent tax evasion. For many years it was a recognized proposition that tax forfeitures and sales of land on account thereof were well nigh universally held ineffectual to convey title, and there is perhaps at this time, no doubt, that the idea had grown and there was a general recognition of the futility of taxing laws that it was thought by many that people need not pay taxes if they were willing to meet the worry and expenses of litigation in regard thereto."

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"Act 142, above mentioned, while it was still in force was another evidence of the legislature's effort and struggle to correct or cure these well grounded and long established practices illustrating the futility of the law requiring payment of taxes. Out of all this has come Act 119 of the Acts of 1935 construed and upheld in the last cited case. [Fuller v. Wilkinson, 198 Ark. 102, 128 S.W.2d 251.] According to the terms of that statute when it shall have been invoked in regard to such tax sales, we must, and do, hold that the decree of confirmation of a sale to the state 'operates as a complete bar against any and all persons, [p368] firms, corporations, quasicorporations, associations who may claim said property' sold for taxes subject only to the exceptions set forth and stated in the act none of which is applicable to aid the appellant."

It is evident from these statements that the purpose of Act 142 was definitely to assure purchasers from the State that the land bought by them could not be taken away from them on grounds theretofore available to the delinquent taxpayer.

In its opinion in the present case, the court lays stress on the fact that Act 142 was not a curative act although, in earlier decisions, it had repeatedly so designated it.^[10] But we do not deem the name or label of the legislation important. The fact is, as the court below holds, that the purpose and effect of the statute was to render unavailing to the owner whose property had been sold for taxes, as grounds of attack on the title of the purchaser from the State, irregularities and informalities in the performance of acts by State officers in connection with the assessment, levy, and sale which the legislature could, in its discretion have omitted to prescribe as essentials to the passing of a valid title.

The Act of 1935 must be viewed in the setting of the statutory scheme of taxation, sale of forfeited lands to the State, and sale in turn by the State. Its purpose was to assure one willing to purchase from the State a title immune from attack on grounds theretofore available. By its legislation the State said, in effect, to the prospective [p369] purchaser of lands, acquired for delinquent taxes, that if he would purchase he should have the immunity. Under the settled rule of decision in this court the execution of the State's deeds to the appellants constituted the execution or consummation of a contract, the rights arising from which are protected from impairment by Article I, § 10 of the Constitution; and the obligation of the State arising out of such a grant is as much protected by Article I, § 10, as that of an agreement by an individual. Fletcher v. Peck, 6 Cranch 87, 136, 137, 139. The Act of 1935, taken in connection with the other statutes regulating the acquirement by the State, and the disposition by it, of lands sold for delinquent taxes, constituted in effect an offer by the State to those who might become purchasers of such lands, and the protection it afforded to the title acquired by such purchasers necessarily inured to every purchaser acting under it and constituted a contract with him.^[11]

The federal and state courts have held, with practical unanimity, that any substantial alteration by subsequent legislation of the rights of a purchaser at tax sale, accruing to him under laws in force at the time of his purchase, is void as impairing the obligation of contract.^[12]

[p370] Appellee relies upon the circumstance that the State's deed is a quit-claim. From this it is inferred that no contract was made that the terms of the Act of 1935 were to bind the State with respect to the title conveyed. But "the laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms."^[13] This court has held that the terms of a statute according rights and immunities to a vendee of the state are a part of the obligation of the deed made pursuant to it. The grant of the State of Georgia involved in Fletcher v. Peck, supra, was a patent of the public lands of the State and, of course, contained no warranty of title save such as is implied from the fact that the State purports to grant its own lands. In Pennoyer v. McConnaughy, 140 U.S. 1, the rights of the plaintiff held to be protected by Art. 1, § 10, arose out of his application for a patent filed pursuant to a state statute. The impairment was worked by a subsequent statute seeking to destroy the right of the plaintiff to the patent pursuant to his compliance with the earlier act. No warranty was involved. In Appleby v. New York City, 271 U.S. 364, it appeared that the legislature had fixed the shore line of the City of New York along the Hudson River and that the land inside that line had been granted to the city with the consequent right to convey it. The city had conveyed land under water, on the landward side of the line, to Appleby by a quitclaim deed.^[14] By subsequent [p371] statutes the State granted the city authority to use the land in question for municipal purposes and the city proceeded to improve it. This court held that the city's grant, made with full legislative sanction, could not be impaired by the subsequent legislation.

As in the cases cited, so here, the question is whether the State granted a valuable right which it subsequently essayed to take away. The Supreme Court of Arkansas sustained the constitutional validity of Act 142 of 1935 on the obvious ground that a taxpayer has no vested right in any given form of procedure for forfeiture of lands for non-payment of taxes. As that court has held, the extent of his right is that he shall have notice of the sale and a fair opportunity to prevent forfeiture for default. It is suggested that the acts of the State in depriving the taxpayer of the right to set aside a sale for technical procedural defects is of like quality with the State's attempt to restore the taxpayer's rights against the appellants who purchased from the state. But obviously the two acts are not of the same quality. The taxpayer had neither a contract nor any other constitutional right as against the State to insist upon any given form of procedure so long as what was done in forfeiting his lands was not arbitrary or unfair. But the appellants, as purchasers from the State, were given, by the Act of 1935, an important assurance that the State would not itself take away or authorize others to destroy the estate which it had granted, by reason of technical defects in procedure cured by the Act of 1935.

The appellee suggests that it is significant that the State was not a party to this suit, and was not, therefore, seeking to take back what it had granted. But, as Fletcher v. Peck, [p372] supra, shows, this is not important; for that suit was between two private parties, as is this, one claiming rights conferred by the earlier state action and the other claiming superseding rights under later legislation.

It begs the question to say that the State may not abdicate its police power. In the exercise of the policy committed to the legislature it is competent for the state to enter into a contract which it intends as an assurance of protection to its grantee.^[15] This we think the State has plainly done in the present instance. The judgment is

Reversed.

Notes

1. Act 142 of 1935.
    
2. Act 264 of 1937.
    
   The words of the Act are: "That Act 142 of the Acts of 1935 be and the same is hereby repealed."
    
3. 201 Ark. 129; 143 S.W.2d 880.
    
4. Pope's Digest 1937, § 13849.
    
5. Id., § 13853.
    
6. Id., § 13855.
    
7. Id., § 13868.
    
8. Id., § 13876.
    
9. Id., §§ 8610, 8620.
    
10. Carle v. Gehl, 193 Ark. 1061; 104 S.W.2d 445; Deaner v. Gwaltney, 194 Ark. 332; 108 S.W.2d 600; Lambert v. Reeves, 194 Ark. 1109; 110 S.W.2d 503; 112 S.W.2d 33; Gilley v. Southern Corporation, 194 Ark. 1134; 110 S.W.2d 509; Foster v. Reynolds, 195 Ark. 5, 110 S.W.2d 689; Wallace v. Todd, 195 Ark. 134; 111 S.W.2d 472; Burbridge v. Crawford, 195 Ark. 191, 112 S.W.2d 423; Kansas City Life Ins. Co. v. Moss, 196 Ark. 553; 118 S.W.2d 873; Sanderson v. Walls, 200 Ark. 534; 140 S.W.2d 117.
     
11. Woodruff v. Trapnall, 10 How. 190, 205.
     
12. Corbin v. Commissioners, 3 F. 356; Marx v. Hanthorn, 30 F. 579 (see 148 U.S. 172, 182); Tracy v. Reed, 38 F. 69; Walker v. Ferguson, 176 Ark. 625, 3 S.W.2d 694; Chapman v. Jocelyn, 182 Cal. 294, 187 P. 962; Hull v. Florida, 29 Fla. 79, 11 So. 97; State Adjustment Co. v. Winslow, 114 Fla. 609, 154 So. 325; Morris v. Interstate Bond Co., 180 Ga. 689, 180 S.E. 819; Bruce v. Schuyler, 9 Ill. 221; Solis v. Williams, 205 Mass. 350, 91 N.E. 148; Curry v. Backus, 156 Mich. 342, 120 N.W. 796; Rott v. Steffens, 229 Mich. 241, 201 N.W. 227; State v. McDonald, 26 Minn. 145, 1 N.W. 832; Blakeley v. L. M. Mann Land Co., 153 Minn. 415, 190 N.W. 797; Price v. Harley, 142 Miss. 584, 107 So. 673; State v. Osten, 91 Mont. 76, 5 P.2d 562; Pace v. Wight, 25 N.M. 276, 181 P. 430; Dikeman v. Dikeman, 11 Paige (N.Y.), 484; State v. Stephens, 182 Wash. 444, 47 P.2d 837; [p370] Milkint v. McNeeley, 113 W. Va. 804, 169 S.E. 790; State v. Gether Co., 203 Wis. 311, 234 N.W. 331. Compare McNee v. Wall, 4 F. Supp. 496; Moore v. Branch, 5 F. Supp. 1011.
     
13. Home Building & L. Assn. v. Blaisdell, 290 U.S. 398, 429.
     
14. The phraseology of the deed is: "And it is hereby further agreed by and between the parties to these presents, and the true intent and meaning hereof, is that this present grant and every word or thing in the same contained shall not be construed or taken to be a covenant [p371] or covenants of warranty or of seizen, of said parties of the first part or their successors or to operate further than to pass the estate right, title or interest they may have or may lawfully claim in the premises hereby conveyed by virtue of their several charters and the various acts of the Legislature of the People of the State of New York."
     
15. Indiana ex rel. Anderson v. Brand, 303 U.S. 95.