No. 149.

130 U.S. 177 (1889)


Supreme Court of United States.

Decided April 1, 1889.

Attorney(s) appearing for the Case

Mr. Henry E. Davis for appellant.

Mr. H.H. Wells for appellee.

MR. JUSTICE LAMAR delivered the opinion of the court.

The court below held —

(1) That the act of the common council of November 2, 1869, levying a tax for the paving and curbing of P Street in front of the lots involved in this controversy, created an inchoate lien upon them which would have been complete had the assessment been made by the proper officer in conformity with the law and the ordinances upon the subject;

(2) That inasmuch as the omission of this lot from the assessment roll was not made by mistake, or through ignorance or negligence, but intentionally and at the request of the party then owning the lots, and as Kilbourn, before purchasing the lots, exercised proper diligence in examining the records, and found no claim or lien of any kind existing against them, he should be considered as a bona fide purchaser, without notice of the lien imposed by the tax, and therefore as having taken his title free and clear of the tax in question; and,

(3) That as Kilbourn took the lots discharged of any lien imposed by the tax under consideration, any subsequent purchaser from him would acquire the same sort of title — that is, a title not affected by the tax certificates involved in this case. It, therefore, granted Alley's prayer for a removal of the cloud upon his title occasioned by such tax sale.

To the correctness of these rulings the appellant's counsel have raised several objections, which it is necessary to consider. It is contended that the requirements of the statute, which were not complied with, were mandatory only so far that it was necessary they should be substantially observed; and that unless some injustice has been done, or some inequality occasioned, equity will disregard a mere failure to follow the law. This proposition presents the question whether the failure of the commissioner to deposit with the register a statement of the taxes upon the lots, the failure of the register to place without delay in the hands of the collector a list of the persons taxed, and the failure of the collector to give the required notice to such persons, constituted such a non-observance of the requirements of the statute as to render invalid, as against the appellee, the tax sale and the certificates thereof issued to the appellant.

In view of the specific and imperative language of these provisions, and more especially of their nature and obvious purpose, we cannot doubt that they were intended as conditions precedent, a strict compliance with which was necessary in order to make the tax chargeable as a lien upon the lots. This question was directly presented and distinctly settled in the case of French v. Edwards, 13 Wall. 506, in which the rule was laid down with regard to directory and mandatory provisions of tax laws, which has been since approved by the Federal and state courts.

In that case the defendant asserted a title to the land in dispute under a deed executed by the sheriff of Sacramento County, California, upon a sale on a judgment rendered for unpaid taxes on the property described, and the whole case turned on the validity of this tax deed. It was a case of non-compliance with the requirements of the statute, the main question being whether the departure of the officer from such requirements rendered the sale invalid. The court said:

"There are undoubtedly many statutory requisitions intended for the guide of officers in the conduct of business devolved upon them, which do not limit their power or render its exercise in disregard of the requisitions ineffectual. Such generally are regulations designed to secure order, system and despatch in proceedings, and by a disregard of which the rights of parties interested cannot be injuriously affected. Provisions of this character are not usually regarded as mandatory unless accompanied by negative words importing that the acts required shall not be done in any other manner or time than that designated. But when the requisitions prescribed are intended for the protection of the citizen, and to prevent a sacrifice of his property, and by a disregard of which his rights might be and generally would be injuriously affected, they are not directory but mandatory. They must be followed or the acts done will be invalid. The power of the officer in all such cases is limited by the manner and conditions prescribed for its exercise."

Judge Cooley in his work on taxation refers to this case, and says: "The doctrine therein stated seems a sound and just rule, and may be reasonably believed to be in accord with the legislative will in the cases to which it is applied." Chief Justice Shaw in the earlier case of Torrey v. Millbury, 21 Pick. 64, lays down the same rule in nearly the same terms.

The rule thus stated applies unquestionably to the case before us, which is a much stronger one in the number and character of the prerequisites to the tax sale which were disregarded. The provisions of statutes as to the form and mode of assessments, as to tax lists, and the place where the tax lists are to be deposited, are, according to the highest authority, designed for the benefit of the taxpayers, and the protection of their property from sacrifice. Sandwich v. Fish, 2 Gray, 298, 301; Cooley, Taxation, 216, 217, 218. When, therefore, Kilbourn, from whom the appellee derived title, purchased the lots in question, there was, so far as we can learn from the record in this case, nothing in the register's office or in the collector's office, or in the hands of the latter, to put a bona fide purchaser upon notice either actual or constructive.

We cannot concur with the counsel for appellant in the proposition that the requirements of the statute were substantially complied with. The erasure and interlineation in the assessment roll, made nearly twelve months after it was completed and deposited in the register's office, and after the lots not assessed had passed into the ownership of a bona fide purchaser, cannot be considered in any sense as a re-assessment, or an amendment of the original assessment. It was simply an unauthorized and improper alteration, by a person with not even the semblance of authority, of an official document in the assessor's office, where the law required it to be. Its only effect, if it has any, is to show, in connection with other facts upon the record, that the withholding of the assessment of these lots was not a mere mistake of the officers, but the result of an agreement between the then owner of the lot and the contractor, whereby the former promised to pay, and the latter to accept, 90 per cent of the contract price for the improvements in lieu of the certificates of indebtedness otherwise to be issued by the mayor, and that, in pursuance of this agreement, the assessment of the lots was omitted by the officer at the request of the owner, and those certificates of indebtedness were not issued until more than twelve months after the certificates for the other improvements were issued, and until after the lands had been sold to Kilbourn. We are of opinion that Kilbourn obtained a title to the lots in question free from the lien of the alleged assessment, and that Alley acquired the same title alike unencumbered.

But it is contended that even if we adopt the conclusion reached by the court below, as to the illegality of the tax sale and the nullity of the certificate issued to the appellee, still the case made by the appellee does not show such a cloud upon his title as calls for relief from a court of equity. In other words, that when the illegality of a tax sale is patent upon the face of the proceedings, as is the case as to the sale here complained of, the jurisdiction of a court of equity to remove a cloud does not attach. The case of Hannewinkle v. Georgetown, 15 Wall. 547, cited by counsel, fails to support the contention that such is the law of this court. That case was not a suit to remove a cloud from a title. The complainant filed a bill to enjoin the collection of a tax, alleged to be illegal, and the court decided that there was no remedy in equity to enjoin the collection of a tax, upon the sole ground of its illegality.

It is a well settled doctrine of this court that equity will not interpose to arrest the proceedings for the collection of a tax, upon the sole ground of its illegality. It is equally well settled by the decisions of this court and the state courts, that after the land has been sold, and a conveyance of some sort made to the purchaser, courts of equity have inherent jurisdiction to give relief to the owner against vexatious litigation and threatened injury to the market value of the land, by removing the cloud which such illegal sale, and the illegal claim arising from it, may cast upon the title. And in such case of damage, either existing or apprehended, equity will interpose for relief, even during the progress of the proceedings before the sale.

In the Union Pacific Railway Co. v. Cheyenne, 113 U.S. 516, 525, this court thus presents the whole law on this point:

"It cannot be denied that bills in equity to restrain the collection of taxes illegally imposed have frequently been sustained. But it is well settled that there ought to be some equitable ground for relief besides the mere illegality of the tax; for it must be presumed that the law furnishes a remedy for illegal taxation. It often happens, however, that the case is such that the person illegally taxed would suffer irremediable damage, or be subject to vexatious litigation, if he were compelled to resort to his legal remedy alone. For example, if the legal remedy consisted only of an action to recover back the money after it had been collected by distress and sale of the taxpayer's lands, the loss of his freehold by means of a tax sale would be a mischief hard to be remedied. Even the cloud cast upon his title by a tax under which such a sale could be made would be a grievance which would entitle him to go into a court of equity for relief."

It may be proper to observe that in the present case the illegality does not appear wholly on the face of the record, but that it is shown in part by evidence outside, to wit, the fact that the title to the land sought to be charged was acquired by a bona fide purchaser without notice. We think, therefore, that the allegations of the bill and the facts proved in this case bring it fully within the equity jurisdiction of the court.

Another ground upon which we are asked to reverse the decision of the court below is, that apart from the tax sale certificates, the act, itself a notice to all purchasers, in terms levied the tax directly upon the lots in question, and thereby a lien attached at once, and, the lien never having been removed, the decree should have required the appellee to pay to the defendant the amount of the tax due before granting the relief prayed for.

It is clear that the act does not in so many words create an express lien, and that the acts of Congress do not expressly confer upon the corporation the authority to create such liens. The statement, therefore, must be taken as true, only in the sense that every municipal tax, in cases of local improvement, paving, etc., involves a lien upon the particular real estate on which it is imposed. The error of the argument of counsel, we think, lies in the assumption that the lien attaches at the date of the passage of the act. The general rule is, that when no time is expressly fixed by the statute for the lien to take effect, it accrues upon the assessment of the tax. Now, the act of the common council imposed and levied a tax to defray the cost of the improvement, but it also declared that the tax should be assessed and collected in conformity with the provisions of certain acts which prescribed in detail, the mode, manner, and time of assessment, and the different steps to be taken preliminary to such assessment and collection. If any lien was created by the terms of the statute, it must have existed and attached according to such terms and conditions as were prescribed by the law creating it.

In the case of Heine v. The Levee Commissioners, 19 Wall. 655, 659, the court said:

"Nor need we decide whether taxes once lawfully levied are, until paid, a lien on the property against which they are assessed, though it is laid down in the very careful work of Judge Dillon, that taxes are not liens upon the property against which they are assessed, unless made so by the charter, or unless the corporation is authorized by the legislature to declare them to be liens. But here no taxes have been assessed except those which have been released by the bondholders accepting new bonds for the interest of the year so assessed. And it is too clear for argument that taxes not assessed are no liens, and that the obligation to assess taxes is not a lien on the property on which they ought to be assessed."

From the record before us, we think the decision of the court below, that no lawful assessment of the tax had been made; that no lien upon the lots in question exists; and that the appellant is not entitled to the relief prayed for in his cross-bill, accords fully with the decisions of this court, above referred to.

As the points disposed of are decisive of the case, we deem it unnecessary to discuss the effect of the temporary restraining order upon the validity of the collector's sale. The decree of the Supreme Court is



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