Schlothan v. Territory of Alaska
| Decision Date | 09 February 1960 |
| Docket Number | No. 15817.,15817. |
| Parties | Lillian SCHLOTHAN, Appellant, v. TERRITORY OF ALASKA, Appellee. TERRITORY OF ALASKA, Appellant, v. Lillian SCHLOTHAN, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
COPYRIGHT MATERIAL OMITTED
Phillip Barnett, San Francisco, Cal., Gore & Jernberg, Ketchikan, Alaska, for appellant.
J. Gerald Williams, Atty. Gen., David J. Pree, Asst. Atty. Gen., Territory of Alaska, for appellee.
Before CHAMBERS, Chief Judge, and STEPHENS, POPE, FEE, BARNES, HAMLEY, HAMLIN and JERTBERG, Circuit Judges.
This mortgage foreclosure case presents questions concerning the priorities as between a statutory lien of the Territory of Alaska for unpaid license taxes and a purchase money mortgage. The trial court determined by summary judgment that the tax lien had priority as to some, but not all, of the unpaid taxes. The mortgagee has appealed, and Alaska has cross-appealed.
The facts are not in dispute. Prior to June 19, 1951, Lillian Schlothan was the owner of certain tideland and dock property in Ketchikan, Alaska. The property was then being used for storage and warehouse purposes and had never been used as a cannery. On the indicated date she sold this property to Sigmund Einstoss, executing a quitclaim deed and taking back a purchase money mortgage for the full purchase price of $25,000. The mortgage was duly recorded on June 28, 1951.
Einstoss was then and for some time had been engaged in the fishing and canning business throughout Alaska. Shortly after acquiring the Schlothan property, he converted it into a cannery and canned salmon there during the remainder of 1951. During this period, as before, he also canned salmon at other places in Alaska.
On November 2, 1953, Alaska filed a notice of tax lien against Einstoss in the office of the recorder for the precinct of Ketchikan. The lien, which is provided for by Sess.Laws Alaska (1949), chapter 82, § 4(h) as amended by Sess.Laws Alaska (1951), chapter 113, was to secure payment of license taxes upon Einstoss' salmon cannery operations throughout Alaska for 1950 and 1951.1 At no time prior to the filing of this notice of tax lien did Lillian Schlothan or her agents know that unpaid cannery license taxes had accrued against Einstoss. Nor did she or her agents, prior to that time, have knowledge of any lien against Einstoss' property for unpaid taxes, or of any claim by Alaska against the property in question.
On March 29, 1954, at a time when $11,000 remained due on the purchase money mortgage, Einstoss defaulted on the terms of the mortgage. Lillian Schlothan then instituted this foreclosure proceeding. Einstoss died and Mildred Hulce was appointed administratrix of his estate.
Alaska intervened because of its claimed interest in the property under the tax lien notice of November 2, 1953. The territory filed a cross-complaint against Einstoss to recover the sum of $83,402.47. Of this sum, $59,582.93 represents unpaid taxes for 1950 and 1951, $14,895.73 represents penalties, and $8,923.81 represents interest to May 1, 1954, and the cost of the lien notice. The territory also sought a decree foreclosing its lien with a declaration that it was prior and superior to any right, title, or interest of Lillian Schlothan in the property in question.
On December 13, 1956, the court, pursuant to a motion of Lillian Schlothan for judgment on the pleadings, entered a judgment in favor of her and against Einstoss in the sum of $14,800.12 and costs. Foreclosure of the mortgage was decreed. It was further provided that "this judgment does not attempt to decide whether the plaintiff's lien or the lien of the Territory is superior, and that question is left for further action by this Court."
On the same day the trial court granted a motion for a summary judgment filed by Alaska on November 26, 1956. In this judgment Alaska was awarded recovery against Einstoss in the amount of $83,402.47. It was also recited therein that Alaska's tax lien is "prior, paramount and superior to any right, title, claim, lien, or interest of the plaintiff in defendant, Sigmund Einstoss', property." It was further provided that the property be foreclosed and sold to satisfy the territory's lien.
This latter judgment establishing the lien priorities in favor of Alaska would appear to be the "further action" concerning priorities referred to in the other judgment of the same date. However, for reasons which are unexplained in the record, the parties and the trial court proceeded thereafter just as if this second judgment of December 13, 1956, had never been entered.
On December 20, 1956, counsel for Alaska appeared ex parte before the trial court and objected to the form of the judgment of December 13, 1956, which had been entered in favor of Lillian Schlothan. No reference was made to the other judgment of the same date in which the lien priorities were established in favor of Alaska. As a result of this hearing an order was entered on December 20, 1956, staying enforcement of the judgment in favor of Lillian Schlothan "pending the final determination of the interest of the Territory of Alaska in relation to all claims in this cause * * *."
On January 25, 1957, a stipulation of facts pertinent to the question of lien priorities was filed. On the same day Alaska's motion for summary judgment filed on November 26, 1956, came on for argument just as if it had not already been granted on December 13, 1956. No appearance was made or brief filed on behalf of Lillian Schlothan. The matter was taken under advisement and on June 21, 1957, an extensive but unreported written opinion was handed down by the trial court.
It was held that the lien for taxes which became due after Einstoss acquired the Schlothan property, computed on the basis of cannery operations anywhere in Alaska, had priority over the purchase money mortgage. It was further held that the purchase money mortgage had priority over the lien for taxes which became due before Einstoss acquired this property. This latter ruling was based on the trial court's view that it was not the intention of the legislature to impose a lien upon after-acquired property beyond the interest of the taxpayer therein.2
On October 31, 1957, a judgment was entered effectuating the decision announced in the written opinion. With regard to lien priorities it was provided that the tax lien had priority over the purchase money mortgage for all cannery license taxes accruing on Einstoss' Alaskan operations in 1951. These taxes, together with penalties and interest to October 15, 1957, totaled $59,628.46. Of this sum, $26,316.20 represented cannery operations at Ketchikan, but there was no allocation as between Einstoss' operations on the Schlothan property and his other operations in Ketchikan during that year. Of the remaining sum, $32,971.82 represented 1951 cannery operations in Peterberg, Alaska, and $340.44 represented similar activities at Sitka, Alaska.
The judgment further provided that with regard to cannery licenses taxes accruing on Einstoss' 1950 operations the Schlothan purchase money mortgage had priority over the tax lien. The 1950 taxes, penalties, and interest (to October 15, 1957) thus subordinated to the mortgage aggregated $36,128.23.
In considering the appeal and cross-appeal we will assume that the second judgment of December 13, 1956, giving Alaska tax lien priority over the mortgage as to both 1950 and 1951 was improvidently entered and in effect vacated. We thus adopt the course which both parties and the trial court have followed in regarding the judgment and decree of October 31, 1957, as the only judgment establishing lien priorities.
Lillian Schlothan appeals from that part of this judgment which subordinates her mortgage to the tax lien for 1951 taxes. She presents a number of constitutional questions. She also contests the construction which the trial court placed upon the lien statute and the propriety of deciding the matter of lien priorities by summary judgment.
Turning to the constitutional questions, appellant points out that on June 19, 1951, when she sold the property to Einstoss, no tax returns had been filed by Einstoss and none were filed for him until the after her foreclosure action was begun. As she also notes, it was not until November 2, 1953, nearly two years after she had recorded her mortgage, that Alaska filed notice of its tax lien. It is her contention that lack of notice of such lien prior to June 19, 1951, when she dealt with the property, constitutes a violation of the due process clauses of the Fifth and Fourteenth Amendments.3
Chapter 82 does not refer to a specific date on which the lien for taxes resulting from cannery operations in a particular year is deemed to attach. However, in section 4 of that chapter it is stated that "all taxes levied or provided or accruing under the provisions of this Act * * * are hereby declared to be a lien * * *."
Chapter 82 taxes for 1951 did not accrue until January 15, 1952, when they were first reportable and owing. It may be that they were not levied until then or the later date of November 2, 1952, when the notice of lien for 1951 was filed.4
Such taxes, however, were "provided" for as of the first day of 1951 in which Einstoss engaged in cannery operations. He was required to obtain a license before beginning such activity, conditioned upon the payment of a tax measured by the value of raw fish obtained for canning "during the year." See section 1 of chapter 82. Thus, as Einstoss began acquiring raw fish in 1951 for use in his cannery operations that year he became liable for a tax which was reportable and became due at a later date.
It is therefore our view that an inchoate lien for 1951 taxes under chapter 82 attached to all property owned by Einstoss as of the first day of that year in which he engaged in the business of salmon canning. With regard to the property here in question,...
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