Opinion
Hearing Granted Dec. 26, 1940.
Petition by Richard Garvey, Jr., and the County of Los Angeles, for writ of mandate against H.L. Byram, Tax Collector, Collector of the County of Los Angeles, to require issuance of deed to property purchased by petitioner Garvey. On respondent’s demurrer.
Peremptory writ granted.
COUNSEL
J.H. O’Connor, Co. Counsel, A. Curtis Smith, Deputy Co. Counsel, and Richard Garvey, Jr., in pro. per., all of Los Angeles, for petitioners.
Landels, Weigel & Crocker, of San Francisco, and Walter S. Home, of Los Angeles, for respondent.
OPINION
MOORE, Presiding Justice.
Respondent files his general demurrer to the original pleading of petitioner who seeks a writ of mandate to require respondent to issue a deed to certain property purchased by petitioner Garvey. In substance, it is alleged that Garvey was at all times since the first Monday of March, 1933, the owner of and in possession of a small parcel of land, about one-sixth of an acre, situated in Los Angeles county, hereinafter referred to as the Garvey lot, free and clear of all encumbrances except the lien for taxes and the deed issued to the state of California hereinafter mentioned.
On September 1, 1933, the board of supervisors fixed the rate for county taxes, which, when applied to said Garvey lot and extended on the roll, amounted to $2.91. Said sum having been assessed against Garvey and his lot, and having remained unpaid, the lot was "sold to the state" on June 30, 1934, pursuant to section 3771 of the Political Code. Subsequent to the sale to the state, taxes were levied for succeeding fiscal years, including 1938-1939, which when applied to said lot and extended upon the roll amounted in the aggregate of $17.20 exclusive of penalties, interests and costs, no part of which was ever paid.
Thereafter, on the first day of July, 1939, the owner not having redeemed, the property was deeded to the state, for the amount of all taxes, penalties and costs, for which the lot was sold to the state at the tax sale on June 30, 1934.
On February 26, 1940, respondent notified the board of supervisors in writing of his intention to sell the lot pursuant to the provisions of new sections 3834.20 to 3834.25 of the Political Code, St.1939, p. 1920. The notice contained a description of the lot and the minimum price of $10 for which it was to be offered. On the following day, the board, by resolution, approved the proposed sale and transmitted a certified copy of the resolution to the tax collector within five days after its action. Further, in pursuance of said statutes, on March 5, 1940, respondent forwarded a copy of the resolution to the state controller for his authorization. On the 6th day of March, the controller authorized the sale and pursuant thereto and in compliance with section 3834 of the Political Code, St.1939, p. 1918, the tax collector gave written notice of the intended sale. At that time no other taxing agencies had levied taxes or assessments upon said lot. At the time and place fixed in the notice of sale, the lot was offered for sale at public auction. Petitioner Garvey offered the sum of $18, the highest bid made, which exceeded the minimum price proposed and approved by the tax collector, the board of supervisors and the state controller, although it was less than the amount of all delinquent taxes. Following the sale, respondent refused to execute a deed to Garvey on the ground that the new sections (Pol.Code, 3834.20 et seq.) do not contemplate the purchase of lands acquired by the state as the result of a tax sale, by a person who was the record owner at the time the delinquent taxes involved became a lien upon the land and he continued as the "record" owner and in possession at all times thereafter. He contended then, as he does now in support of his demurrer, that to permit the sale to Garvey would violate public policy, also would violate article IV, section 31, and article XIII, section 1 of the Constitution.
Respondent has continued in his refusal to deliver such deed to Garvey after demands made upon him by petitioners. Other appropriate facts are alleged to warrant an original consideration by this court of the issues presented.
Respondent contends that a literal construction of section 3834.25 of the Political Code is contrary to public policy. That section is as follows: "If the property is not redeemed before the sale, the tax collector shall sell the property at public auction to the highest bidder at the time and place fixed in the notice of intended sale; but no bid shall be accepted for a sum less than the minimum price fixed in the resolution of the board of supervisors." Added by Stats.1939, ch. 529, pp. 1917, 1920, sec. 2. He argues that the consequences to flow from such literal construction would not serve the public welfare; that the issuance of the writ would tend to discourage the payment of taxes, put a premium on tax delinquencies and discourage redemption; and that by reason of the too frequently defective tax titles, strangers are discouraged from purchasing at tax sales and for that reason owners attend with greater assurance that their properties will be "sold" to them while strangers stand in doubt. But at the time of enacting the new sections, section 3817 had for many years been a part of the Political Code and it was the only method whereby an owner could directly procure a release of his lands from the lien of delinquent taxes. The degree of success or failure of the entire scheme of taxation and tax collection was familiar to the legislature in 1939 when the new sections were added to allow the record owner of tax deeded land to bid for and to purchase such land at an auction sale by the state. It follows that the enacting of the new sections must perforce have been purposed as a declaration of public policy and to promote the public welfare rather than to aid a delinquent tax debtor to evade his duty of paying or redeeming.
Because the new statutes might assauge the asperities of tax lien foreclosures, the public interest was none the less served. At the time of the enactment of the new sections the entire world had witnessed an economic collapse. After October, 1929, the entire nation suffered from an extraordinary financial depression. Income was reduced by more than 40 per cent and realty values suffered amazing diminution. Not only did the cost of government continue but taxes were levied to furnish relief to the less fortunate. In this calamitous situation, literally thousands of land owners found themselves unable to meet their obligations to the numerous tax levying entities. As a consequence of this economic convulsion and depression, there are now about 100,000 parcels of realty in Los Angeles county alone that have been deeded to the state for delinquent taxes. In the entire state, 2,500,000 acres and 300,000 parcels passed to the state upon default in payments of accrued taxes. This condition precipitated another. Not only did the various tax-levying entities fail to collect the delinquent taxes, but, because those parcels vested in the state ceased to be revenue producing, other lands had to be taxed more to raise required revenue. This, of course, increased the burdens of government for such other owners.
Also, as long as tax deeded properties continue to be held by the state they remain unimproved. This retards the development of communities where lie these tax deeded lands, making them a two-fold liability. Hence, it is clearly to be seen that a restoration of all lands held by the state for delinquent taxes to the active tax rolls is a "consummation devoutly to be wished" for such would without doubt multiply state revenues from land tax levies.
The argument made by respondent that strangers will hesitate while owners will purchase at tax sales with greater assurance is predicated upon the assumption that the owner will be dishonest; that he will prefer to take his chances at a sale rather than to enjoy the certainty of redemption prior to a sale, which can be done pursuant to section 3817 of the Political Code by paying all taxes, interest, penalties and costs. Young v. Patterson, 9 Cal.App. 469, 99 P. 552. We cannot act upon such assumption. We must presume that a landowner will be honest rather than dishonest; that he will meet his obligations rather than default; that if financially able, he will avoid the accumulation of penalties and interest, and minimize the chances of losing his lands at a sale by the state, which can be done by a redemption. The presumption is that he will pay taxes on his land if he has the money.
Since the expiration of moratory statutes (Stats.1939, ch. 154, § 3817d of the Political Code) the ease of selling these tax deeded lands to the "owner" or permitting him to redeem by the route of repurchasing will be increased. Because of his faith in or attachment to the deeded land, and because his purchase from the state would secure his title against attack the "owner" is the most readily available market. While he has already appraised the land and would probably improve it, the public would be slow to buy and tardy to develop lands purchased suddenly from the state in view of the traditionally defective tax titles. The enormous list of deeded lands held by the state has resulted largely from the moratory statutes of § § 3817b to 3817b5, Political Code. To restore them to the tax rolls will tend to reduce taxes for others. The hardship imposed upon other taxpayers by allowing an owner to redeem his land by a "purchase" at the sale under the new sections, as presented by State v. Graham, 17 Neb. 43, 22 N.W. 114, is more apparent than real. The delinquencies of some taxpayers has been an ever-present evil since the founding of the state.
Section 3817 allows redemption at any time before sale by the state. The fact that, in the past, tax debtors defaulted one, two, three or four years and could redeem by paying some penalties and interest, with the unpaid taxes, did not avoid hardship upon the state and the people. Such custom and the statute providing for it were not deemed to be violative of public welfare. Because a new method was devised to meet a crisis does not alter the quality of relief accorded by the old redemption statute (sec. 3817). If, under the new sections, the owner can clear his title of tax liens, by paying less than all accrued taxes he does so by paying at least the price fixed by the board of supervisors and the tax collector, with the approval of the state controller. We see no difference in character between the new sections and the moratory statutes that for six years allowed taxes to remain unpaid without penalty. In either case, the individual received a special benefit from the state. In both cases the public weal is promoted by conferring such special benefit.
Prior to the enactment of the new sections, an owner was not permitted to purchase his land from the state or from the state’s vendee to the detriment of junior lienors. Kelsey v. Abbott, 13 Cal. 609; Moss v. Shear, 25 Cal. 38, 85 Am.Dec. 94; McMinn v. Whelan, 27 Cal. 300; Coppinger v. Rice, 33 Cal. 408; Bernal v. Lynch, 36 Cal. 135; Barrett v. Amerein, 36 Cal. 322; Garwood v. Hastings, 38 Cal. 216; Reily v. Lancaster, 39 Cal. 354. "It is well settled that one who is under a moral or legal obligation to pay the taxes is not in a position to become a purchaser at a sale made for such taxes. If such person permits the property to be sold for taxes, and buys it in, either in person or indirectly through the agency of another, he does not thereby acquire any right or title to the property, but his purchase is deemed one mode of paying the taxes." Christy v. Fisher, 58 Cal. 256, at page 258. Blackwell on Tax Titles, 4th Edition, page 443, thus declared the rule formerly prevailing: "Any person who owes a positive duty to the state to pay the taxes on a particular tract of land cannot become a purchaser at a sale of the property for such taxes; or, if he does in form buy at such sale, he does not thereby acquire any right or title to the property better or stronger than what he had before, but his purchase is deemed merely a mode of paying the taxes, and leaves the title in precisely the position it would have occupied if the payment had been made before, instead of after, the land was put up for sale. This rule rests on such obvious principles as to require no justification." But even then, a "delinquent" was not wholly forbidden to purchase from the state. In McMinn v. Whelan, supra, it was held that purchase by the owner would only amount to the payment of the tax which it was his duty to have paid. Such is substantially the holding of all the cited cases whose primary aim was to protect the mortgagee against the stealthy purchase from the state by the tax-debtor-mortgagor. The new sections contain no provision whereby the private incumbrance is to be imperiled. If Garvey had mortgaged his lot to John Doe prior to the purchase from the state the mortgage would have all the validity and effect after delivery of the deed to Garvey as before. While it is the rule that a deed from the state to a purchaser of the tax title, if valid, wipes out all liens (Griggs v. Hartzoke, concurring opinion, 13 Cal.App. 429, 434, 109 P. 1104), yet it is also true that equity will protect a lienor who, in good faith, has loaned his money to the tax debtor.
Under the administration of the new sections, the owner may enjoy an easy way out of the tax lien, but his burdens are not otherwise lightened. The aim of the legislature was that the delinquent relieved of the unpaid taxes would, under an improved public economy, develop his land and pay future levies. The new sections were added to meet an unusual condition which had become chronic. There is nothing in the new sections essentially contradictory of section 3817 which provides the mode of redemption. The latter is more advantageous. In the one case, he is certain of retaining his title, while in the other he may lose it to a stranger. As a redemptioner he must pay the taxes originally assessed against him with approval of the board of supervisors; as a purchaser, he must, in competition with other bidders, pay no less than a minimum price fixed by that board in the light of six years’ developments. He may pay even much more than the cost of redemption would have been. If, at the sale, he is able to "buy" his land from the state, we must presume that he has gained wealth rather than that he has waited for the legislature to enact a statute whereby he can "evade" his taxes. After he has re-established his title by the purchase, we must presume that he will act as an ordinarily prudent and honest man (Code Civ.Proc., sec. 1963, subd. 4; subd. 20) that he will pay debts that are liens upon his lands; that he will avoid penalties, costs and interest; and that he will not run the risk of forfeiture by allowing his land to be sold at auction to the highest bidder. Thus, we conclude that the new sections do not contravene the public policy of this state as expressed in older decisions but rather are they the result of a wise and thoughtful judgment of the legislature in meeting a crisis in public economy. To whatever extent the taxes of Garvey were "remitted" by his purchase from the state, it must be held that the legislature calculated greater benefits to the commonwealth.
Petitioners contend that the new sections are repugnant to the Constitution. Art. IV, sec. 31, and art. XIII, sec. 1. Article IV restricts the legislature from making "any gift or authorizing any public money" to any individual. But the new sections do not make a gift of anything. The state has by foreclosure acquired title to Garvey’s land. It must sell it. The proper agencies have fixed a minimum price upon it. Some one must pay that price or more. Garvey paid more. If the state takes less than Garvey’s bid, the public treasury will be deprived of the difference. If a stranger bid less than Garvey, it was Garvey who made a gift of his excess and not the state which made a gift to Garvey. In the state’s possession, the land is worthless; in Garvey’s possession, the land may be developed thereby increasing the taxes upon it and upon neighboring lands as well, another "gift" from Garvey to the state.
Respondent quotes the Estate of Stanford, 126 Cal. 112, 54 P. 259, 58 P. 462, 45 L.R.A. 788, as authority that the state made a gift to Garvey by selling the lot for less than the cost of redemption. The case is not in point. There the state had by law become entitled to the payment of a specific sum as an inheritance tax upon the estate of decedent. The state’s right to receive from Leland Stanford’s estate the amount of inheritance taxes vested promptly upon the decease of Mr. Stanford. The money was not immediately paid to the treasurer. More than a year after the entry of the order to pay the taxes, the legislature amended the inheritance tax statute, which amendment was specifically intended to exempt certain heirs and the university from the obligation to pay the taxes theretofore ordered by the court. That amendment was held to be discriminatory, retroactive and violative of said section 31 of article IV. But the new sections present an entirely different question. They add to the power of the state to get money from a delinquent tax debtor if more money cannot be had from one who is a stranger to the tax title.
A consideration of section 1 of article XIII discloses that this section, likewise, is not violated by the new sections. The principle embodied in section 1 is familiar to all taxation schemes. Every state aims at assessing taxes against every citizen on a common basis, not to "make fish of one and fowl of another". It is the aim of both the states of the union and the federal government to levy uniform taxes upon the people. But, notwithstanding the universal purpose to exact of all citizens the same toll in proportion to the values of their properties and the amounts of their incomes, it is a fact of universal cognizance that the practical administration of the tax gathering power in some cases is thwarted in its attempt to apply the law with uniformity. When legal actions were instituted under the old statute (Stats.1895, p. 339) to collect in personam, often did the state receive far less than the demand and sometimes nothing. It was not contended then that the failure to collect the total due violated the clause requiring proportionate taxation. Of course, neither was a legislature then or now empowered to remit a tax that had been levied, as exemplified in the case of Wilson v. Supervisors, 47 Cal. 91. Neither then nor now was counsel for the tax collector authorized to accept less than the amount of levy as illustrated by the County of Sacramento v. Central Pacific R. Co., 61 Cal. 250. The right to the tax money having vested, no agency or department of the state was empowered to alienate that right. But with this constitutional safeguard thus supported by the Supreme Court, it frequently occurs that tax collections fail, lands are forfeited to the state and taxpayers generally are ultimately required to pay more than their "proportionate share". It was to lighten the additional burden thus cast upon the class of steady taxpayers that the Code sections under attack were enacted. The application of these provisions will of necessity increase the spread of tax collections when the enormous list of tax deeded lands shall have been returned to the rolls by "sales" to the record owners, if not to strangers, by the succeeding successful levies and by the substantial collections that will result from such "sales".
In view of the foregoing, it appears clear to us that section 3834.25 means exactly what it says, that the tax collector shall sell the property held under tax deeds to the highest bidder so long as the bid is not less than the minimum price fixed by the tax collector and approved by the board of supervisors; that the record owner may bid and purchase; and that upon his receiving a deed from the state, his land is cleared of all tax liens.
It is, therefore, ordered that a peremptory writ of mandate issue requiring respondent, by good and sufficient deed, to convey the said Garvey lot to petitioner Richard Garvey, Jr.; petitioners to recover their costs.
We concur: WOOD, J.; McCOMB, J.