Opinion
No. 15,265.
Decided April 7, 1947. Rehearing denied May 12, 1947.
An action to quiet title to town lots. Judgment for defendant as to his claimed lien under special assessments.
Reversed.
1. TAXES AND TAXATION — Tax Deeds — Title. In the circumstances of the instant case, holders of tax deeds issued pursuant to general levies enjoy title to the property described therein, freed from liens of special improvement tax levies, and certificates of tax sales, if any, issued because of defaulted payment thereof.
2. General and Special Levies — Constitutional Law. General tax levies have genesis in the Constitution; that of special improvement tax levies in statutory enactments; no municipal corporation, the inhabitants thereof, nor the property therein, reads the Constitution, shall be released or discharged from their or its proportionate share of taxes to be levied for state purposes. Through no visitation of special improvement tax, shall general tax levies be impaired.
3. General and Special Levies — Title. So long as title to land remains in the owner or his grantees at the inception of general and special tax levies, liens of both continue in full force, and perpetually, as section 83, chapter 138, '35 C.S.A. provides, and by payment of neither assessment may the owner avoid the effect of the lien of the other; and if he ignores the neglected assessment for a sufficient period of time, loss of his title may result.
4. General and Special Levies — Tax Deeds — Constitutional Law. When a tax deed is issued on defaulted general tax levies, the statute ('35 C.S.A., c. 138, § 83), which makes both levies perpetual and on a par, comes into conflict with provisions of the Constitution (art. X, § 8), and the special improvement lien is as one foreclosed and wholly lost. See, also, § 38, art. V, Constitution.
5. Special Improvement Taxes — Tax Sale Certificates — Assignment. Special tax sale certificates held by a town may be assigned or sold only by the treasurer thereof. Assignments by a town clerk are made without authority.
Error to the District Court of Jefferson County, Hon. Osmer E. Smith, Judge.
Mr. STEVENS PARK KINNEY, for plaintiff in error.
Mr. HOWARD ROEPNACK, for defendant in error.
Mr. GAIL L. IRELAND, Attorney General, Mr. H. LAWRENCE HINKLEY, Deputy, Mr. GEORGE K. THOMAS, Assistant, Mr. MALCOLM LINDSEY, Mr. CHARLES M. ROSE, Mr. RODNEY J. BARDWELL, JR., Mr. ERSKINE R. MYER, Messrs. PERSHING, BOSWORTH, DICK DAWSON, amici curiae.
IN an action to quiet title to certain lots in the Town of Mountain View, Berkeley, Jefferson county, there were numerous defendants, including the town, and, other than defendant in error, all disclaimed or suffered judgment of default. Plaintiff in error relied on tax sale deeds issued to it August 11, 1941, pursuant to tax sale certificates based on unpaid general tax levies for various years, 1929 to 1935, covering the several properties involved in the action. In the first instance, the certificates ran to the county, but March 4, 1941, they were assigned to plaintiff in error. In 1924, Mountain View had subjected the same properties to special sidewalk assessments, which became liens immediately. Those levies also were defaulted, and in 1937 there were tax sales on account thereof and certificates evidencing such sales were issued to the town. Notwithstanding plaintiff in error's tax deeds, predicated on unpaid general levies on the property involved, as noted above, defendant in error, alleging that the town had assigned the special improvement tax sale certificates to him, pleaded them as existing and continuing liens thereon. In addition thereto, defendant in error alleged irregularity in the issuance of the tax deeds of plaintiff in error's reliance, as well as the insufficiency thereof, and otherwise attacked them exhaustively. Other than as to defendant in error's claim of lien, which was sustained, the trial court resolved all issues in favor of plaintiff in error, and quieted its title to the property involved, subject to said lien. Plaintiff in error's specification of points challenges defendant in error's adjudged lien, and since there is absence of cross specifications, the potency of that lien is the sole point for resolution on review.
In the circumstances appearing, our decisions are to the effect that holders of tax deeds issued pursuant to general levies enjoy title to the property described therein, freed from liens of special improvement tax levies, and certificates of tax sales, if any, issued because of defaulted payment thereof. Fishel v. Denver, 105 Colo. 120, 95 P.2d 1; Boulder v. Plains Co., 75 Colo. 86, 224 Pac. 233; Whitehead v. Desserich, 71 Colo. 327, 206 Pac. 384; Bennett v. Denver, 70 Colo. 77, 197 Pac. 768. But notwithstanding the foregoing decisions, two statutory enactments are called to our attention, one of which is emphasized, in justification of the trial court's determination. In order of enactment, the statutes are section 3, chapter 142, '35 C.S.A. (S.L. 1911, p. 565, § 1), and section 83, chapter 138, '35 C.S.A. (S.L. 1923, c. 180, § 19). The 1911 act, a part of which we italicize, reads as follows: "All taxes shall be levied for the fiscal year which shall end with November thirtieth. Taxes levied upon any real estate shall be a perpetual lien upon such real estate, until such taxes and any penalty, charges and interest which may accrue thereon shall be paid, and such liens shall have priority over all other liens except such liens as then exist which have been created by special assessments for public improvements; and any property, real, personal or mixed, which has, by mistake or oversight, been omitted from the tax list for any year or years shall be subject to assessment for all back taxes properly chargeable thereon." Other than as to the italicized language, incorporated therein by the 1911 act, the statute dates from 1902 (S.L. 1902, p. 43, § 3). The 1923 act, an original conception, entitled, "Relating to local improvements in cities and towns," provided that special improvement assessments made pursuant thereto, shall "constitute a perpetual lien on a parity with the tax lien for general state, city, town or school taxes, and no sale of such property to enforce any general state, county, town or school tax or other lien shall extinguish the perpetual lien of such assessments." § 19. The 1911 act was in force, and considered at the time of the several pronouncements in the cases cited above, and tax deeds based on general tax levies were held to have primacy over special improvement tax certificates notwithstanding; and the 1923 act was in force, but not mentioned, when opinions in the two last cases were promulgated.
General tax levies have genesis in the Constitution; that of special improvement tax levies in statutory enactments. "The general assembly," reads the Constitution, "shall provide by law for an annual tax sufficient, with other resources, to defray the estimated expenses of the state government for each fiscal year." Const. art. X, § 2. "No county, city, town or other municipal corporation, the inhabitants thereof, nor the property therein," continues the Constitution, "shall be released or discharged from their or its proportionate share of taxes to be levied for state purposes." Ibid. § 8. The General Assembly in enacting the original statutory provision (the 1902 portion of section 3, chapter 142, '35 C.S.A., already quoted), conforming to the constitutional conception, made general tax levies a "perpetual lien" on real estate, "until such taxes and any penalty," etc., "shall be paid," and said nothing of special improvement levies. By the 1911 amendment to the 1902 act, italicized in the above quotation, there was legislative attempt to place special tax liens on equality with general tax liens. Proceeding on the theory that the general assembly had such power, holders of tax certificates issued pursuant to tax sales for defaulted special improvement levies, sought in the several cases cited, supra, to maintain such levies as against tax deeds regularly issued for general levy defaults. What must have been the legal principle that moved us to hold adversely to that claim? The legislative amendment, its context considered, justified the faith of those relying thereon. Why, then, were they unsuccessful? The controlling reason, although not specifically stated in our opinions, necessarily had basis in the constitutional provisions set forth above, that is to say, that through no visitation of special improvement tax shall general tax levies be impaired. The Constitution contemplates the levy of an annual general tax, to cover "expenses * * * for each fiscal year." Also, the Organic Law, section 8, supra, makes clear that no county, or city, or town, or the "inhabitants thereof, nor the property therein, shall be released or discharged from their or its proportionate share of taxes to be levied for state purposes" from year to year. Statutes familiar to tax levying and tax collecting public officials, as well as to the legal profession, provide that real property on which general taxes, levied in the spirit of the Constitution, have not been paid, is subject to tax sale, potentially, in the absence of redemption, to eventuate into tax deeds. The situation here instances the procedure. After we had announced the equivalent of the foregoing in Bennett v. Denver and Whitehead v. Desserich, supra, and on authority thereof, we stated in Boulder v. Plains Co., supra, that the doctrine in this state had become "stare decisis," and in Fishel v. Denver, supra, again adverting to the matter, that it had become a "rule of property."
But, says defendant in error, and in this he is ably supported by some of amici curiae, the 1923 act provides not only that a special improvement assessment shall "constitute a perpetual lien on a parity with the tax lien for general * * * taxes," but that "no sale of such property to enforce any general * * * tax * * * shall extinguish the perpetual lien of such assessments," and, therefore, plaintiff in error's tax title continues to be burdened with the special assessment levy. We doubt the soundness of that statement. It is to be observed that the statute of defendant in error's dependence does not provide there shall not be sales for unpaid general taxes, but only that no such sale shall extinguish the perpetual lien of special improvements. Other statutes, however, as we have seen, do provide for tax sales in aid of the enforcement of general levies constitutionally contemplated, and if there shall not be redemption from such sales, tax deeds will issue in due course. So long as the title to the land involved remains in the owner at the inception of the two different assessments, or in grantees through mesne conveyances, both liens continue in full force, and perpetually, as the 1923 statute provides, and by the payment of neither assessment may the owner avoid the effect of the lien of the other assessment; and if he ignores the neglected assessment sufficiently long, loss of his title may well result. But we are not here concerned with the status of the fee owner, for he paid neither assessment. As a consequence, and as we have seen, there was a tax sale as to each of the defaults, at neither of which were there bidders. In further consequence, tax sale certificates of purchase based on the defaulted general levies were issued to the county, and like certificates based on the defaulted special levies, were issued to the town. Subsequently, the county assigned the certificates it held to plaintiff in error, upon which tax deeds were issued, as already stated, while the town assigned its certificates to defendant in error, who has interposed them as liens on plaintiff in error's tax title to the property involved.
As already we have indicated, only so long as title continues in the owner of the property or his assigns, could contest of the nature here arise to plague. Likewise, as is simple, payment of both levies would eliminate the possibility of such a controversy. Also, if the taxpayer discharges one of the levies, but omits payment of the other, still there would be an absence of conflicting interests predicated as here. Only when the taxpayer has defaulted as to both assessments, as here, and one of them has progressed to tax title state, also as here, does the relative dignity of the two levies become an issue and require determination. At any time prior to issuance of tax deed, parties interested in the other levy, as seems reasonable, would be entitled to redeem from the one on account of which tax deed execution has become imminent. Until such deed, the statutory equality of the two levies, and their perpetual life, as liens, continues. But when tax deed has issued, and particularly when it is based on defaulted general levies, all as here, we think the statute which makes both levies perpetual and on a par, comes into conflict with provisions of the Constitution, quoted above, and the special improvement lien is as one "foreclosed" and wholly lost. Abundant statutory authority, all enacted in the spirit of the Constitution, attends the steps taken which culminated in plaintiff in error's tax deed based on defaulted general levies. There was regularity throughout, as adjudged below, and not challenged on review, and in such circumstances plaintiff in error's status is that of owner of a "new title" to the property involved. Henrylyn Irrigation District v. Patterson, 65 Colo. 385, 176 Pac. 493. The title on which defendant in error had a lien no longer exists. It yielded its life simultaneously with the passing of the fee of its dependence.
We are not a little concerned by the provisions of section 38, article V, of the Constitution, which, although not called to our attention by counsel, also seems to operate adversely to the lien claimed by defendant in error. It reads: "No obligation or liability of any person, association or corporation, held or owned by the state, or any municipal corporation therein, shall ever be exchanged, transferred, remitted, released or postponed, or in any way diminished by the general assembly, nor shall such liability or obligation be extinguished except by payment thereof into the proper treasury." See, discussion by Justice Burke in Burton v. Denver; 99 Colo. 207, 61 P.2d 856. Justice Burke also in that case adverts to the "foreclosure of a superior tax lien," and the effect thereof, and cites Bennett v. Denver, supra. In Oklahoma the Supreme Court has held that a similarly worded provision of its Constitution comprehends the protection of general tax levies from legislation calculated to make such levies secondary liens. Board of Com'rs v. Commissioners of Land Office, 125 Okla. 287, 257 Pac. 778; Nelson v. Pitts, Treas., 126 Okla. 191, 259 Pac. 533.
The general views on the subject of the relativity of the two assessments are learnedly stated in the authorities, from a few of which we quote, as follows: "A general ad valorem tax upon real property lies, generally speaking, at the foundation of the tax structure, and its paramount rank is in concept well near traditional." 51 Am. Jur., p. 887, § 1016. "It is a recognized principle of law that taxes for general governmental purposes, lawfully imposed by the state, are paramount to all other demands against the taxpayer, although the statute imposing the tax does not expressly declare such priority. This rule rests upon public policy and necessity. Civil government cannot exist or be maintained without revenues, and taxes levied by the state for its support are founded upon a higher obligation than other demands. It is essential to the dignity and power of the sovereign state that taxes levied by it be promptly collected without fail." Robinson v. Hanson, 75 Utah 30, 282 Pac. 782. "It must be conceded that a general tax which has primarily for its object the support of the government whereby the government may exist, and lives and property may be protected and the pursuit of happiness guaranteed, is of great dignity and more importance than a tax bill issued for public improvements. * * * We can subsist without the special tax, but no civilized government could be organized and maintained without the general tax. So we conclude that the general tax being first in vital importance should be allowed first place in the means of payment." Missouri Real Estate Loan Co. v. Burri, 202 Mo. App. 242, 216 S.W. 570. "As a corollary to the above proposition," says the Supreme Court of California, "it may be stated that every presumption is against the legislative intent to prefer the lien of special assessments to those of general taxes. In re Dancy Drainage Dist., 199 Wis. 85 [225 N.W. 873-876], the court says: `We shall not attempt to review the authorities bearing upon this question, because in our view the lien for general taxes is of a distinctly higher order than the lien of any special assessment, and we should not construe any statute as giving precedence to the lien of any special assessment over the lien of general taxes in the absence of a plain legislative command.' It may also be noted that in the absence of clear statutory provisions to the contrary a general tax lien is not only superior to an assessment lien but a deed executed in the enforcement of the general tax lien will destroy the assessment lien and, conversely, a deed executed in the enforcement of an assessment lien will not extinguish a general tax lien." La Mesa, Lemon Grove Spring Valley Irr. Dist. v. Hornbeck, 216 Cal. 730, 17 P.2d 143. "Tax liens may, however, in the very nature of things, be extinguished in other ways than by actual payment thereof in cash into the treasury; such, for instance, as the foreclosure of a superior tax lien, and this is a species of payment." Burton v. Denver, supra.
As already we have emphasized, so long as the fee title to the lands involved continued as when the levies were made, neither lien outranked the other. In other words, such owner, and his grantees as well, was bound by one quite as effectively as by the other; only by the payment of both could he be relieved from the visitation thereof; and continued nonpayment of either, or both, potentially would entail loss of title. Here, the taxpayer paid neither assessment, and there were tax sales as to each thereof, that for general levies in due course, and for the special levies thirteen years after the time of default. Bondholders interested in the special tax levies could have, but did not, redeem from the tax sales conducted in the interest of the general levies. In the meantime — and years intervened — the state, the county, the town, the school district, all dependent on the collection of general levies, constitutionally to be imposed on all properties, not excluding those involved here, suffered the impairment necessarily resulting. In 1941, the county, holding the tax sales certificates of purchase issued because of the defaulted general levies, despairing of redemption by the owner or the bondholders, proceeding in accordance with statutory enactment, sold and assigned the certificates to plaintiff in error, which, likewise proceeding according to statutory authority, applied for tax deeds, caused requisite notice to be given, and at the time fixed by law therefor, the owner of the property and the bondholders still omitting to make redemption, obtained tax deeds in legal course. By the steps indicated, and only so, were the responsible public authorities enabled to restore the property to the assessable basis required by the Constitution. Out of the process, as we have seen, there came a new title. Henrylyn Irrigation District v. Patterson, supra. But the bondholders (defendant in error in his evidence, but not in his pleadings, claims to be acting in their behalf) say that by virtue of the special tax levy made in their interest in 1924, and which they have not protected by redemption from sales made because of defaulted subsequent general levies, their lien continues notwithstanding. Thus one animal, if the illustration may be allowed, which cannot eat the hay, by lying thereon prevents the animal which would eat it from doing so. We cannot think legal justification attends. So long as it is legally possible to do so, both liens should be protected, but when in the interest of making every unit of real property bear its constitutional proportion of general tax burdens, and which, in the circumstances here the special tax liens invoked, if sustained, would effectually thwart, then, as we think, the Constitution operates adversely thereto.
We are constrained to add, and are comforted therein, that the situation here is not of frequent occurrence. In most instances the owners of the various properties pay both assessments. The underlying difficulty in this controversy, as is fairly inferable from the record, is, that, the value of the several lots involved does not warrant the tax burden born of the two levies. Otherwise, firstly, the owner would not have defaulted in relation thereto; secondly, the bondholders would have been moved to redeem from the general tax sales; thirdly, wise gentlemen who speculate in delinquent tax operations would have moved to the solution in the manner characteristic of their calling. We strongly suspect, and the record supplies hints thereof, that the whole sidewalk district was over appraised by the bond purchasers, and the taxpayers, not being liable other than as to the extent of the property upon which the assessments were made, elected to forfeit it. In any event, and whatever error of judgment there was, if any, and by whom, the steps taken by the proper officials to restore the lands involved to the general tax roll are in consonance with the purpose of the Constitution, and those whose dependence is upon the special improvement levies may not circumvent it.
Finally, defendant in error is not competent to appear here in opposition to plaintiff in error. The basis of his claimed right to contest plaintiff in error's suit is that he is the assignee of certain special improvement tax sale certificates which originally ran to the town responsible for their issuance. The purported assignments are by the town clerk, clearly without authority in the premises. The statute providing for assignment of special tax sale certificates held by a town, as here, is that the town treasurer make sale and assignment thereof, and he may do so only "at their face value, with all interest and penalties accrued, * * * and the proceeds credited to the fund created by ordinance for the payment of such assessments." '35 C.S.A., c. 138, § 101. That section is the "only authority for disposition of the certificates held by the town." McMillan v. Commissioners, 113 Colo. 387, 157 P.2d 146. Moreover, defendant in error did not allege that he paid for the certificates according to the requirements of the statutes, nor that he paid anything for them. There was no testimony to that effect. In consequence, he was, and is, without material interest in the controversy.
In so far as the judgment decreed a lien on the property involved in behalf of defendant in error, let it be reversed. The trial court will amend its former judgment so as to include defendant in error among those against whom plaintiff in error's title is quieted.
MR. CHIEF JUSTICE BURKE, MR. JUSTICE ALTER and MR. JUSTICE LUXFORD concur. MR. JUSTICE HAYS concurs specially. MR. JUSTICE JACKSON and MR. JUSTICE STONE dissent.