Bd. of Cnty. Com'Rs of Woods Cnty. v. State ex rel. Com'Rs of Land Office
| Decision Date | 06 April 1926 |
| Docket Number | Case Number: 16587 |
| Citation | 257 P. 778,1926 OK 302,125 Okla. 287 |
| Parties | BOARD OF COUNTY COM''RS OF WOODS COUNTY et al. v. STATE ex rel. COM''RS OF LAND OFFICE et al. |
| Court | Oklahoma Supreme Court |
¶0 1. Taxation--Unconstitutionality of Statute Making Mortgage Lien of State Prior to Tax Lien. Section 9748, Compiled Oklahoma Statutes, 1921, in effect and in application by judgment, extinguishes the state''s lien for taxes upon real estate. Such effect is unconstitutional as being in contravention of article 10, section 5, of the Constitution of Oklahoma, which provides; "The power of taxation shall never be surrendered, suspended or contracted away. * * *"
2. Same--Priority of Taxes as "Perpetual Lien." In this state the tax lien on real property cannot be made subordinate or stricken down by statutory enactment, or by judgment, to accommodate another lien. And especially is this so in view of section 9724, Compiled Oklahoma Statutes, 1921, which provides: "Taxes on real property are hereby made a perpetual lien."
3. Same--Tax Lien not Divested by Judicial Process. A perpetual tax lien, having attached to land, is not divested by a sale of the land under judicial process, whether upon execution, decree of court, foreclosure of mortgage, or any other proceedings, in view of section 9724, Compiled Oklahoma Statutes, 1921, and article 10, section 5, of the Constitution.
4. Same--Tax Sales and Mortgage Foreclosures by State--Notice to Purchaser of Surviving Lien. A purchaser at a real estate mortgage sale involving the common school fund is presumed to know that the state has another lien upon the real estate for taxes, in that the public record disclosed the same. Such mortgage sale is subject to an existing tax lien, and should the land be sold for taxes with an existing mortgage thereon to the state based upon loans of the common school fund, the purchaser at such sale would take the place of the mortgagor, but the state would not be barred or precluded from the enforcement of its mortgage lien against such real estate so mortgaged.
C. E. Wilhite and L. Z. Lasley, for plaintiffs in error.
George E. Merritt, for defendants in error.
¶1 The state of Oklahoma on the relation of the Commissioners of the Land Office began this action in the district court of Woods county to foreclose a mortgage on certain real estate situated in said county. The Commissioners of the Land Office made a loan of $ 4,500, in 1919, to Pearl Hook and his wife, who executed a mortgage on the real estate involved, to secure the payment of the loan. The mortgagors defaulted in payments due under the terms of the loan, and further failed to pay taxes assessed against the real estate, in the aggregate amount of $ 769.54, for the years 1920 to 1924, inclusive. The county treasurer and county commissioners, claiming a prior lien for taxes due, were made parties defendant. The cause was tried in June, 1925, upon an agreed statement of facts, and upon the issues of law presented a judgment was rendered in favor of the Commissioners of the Land Office, holding that the mortgage lien was superior to the tax lien. The only controversy presented is whether a mortgage lien on behalf of the state, based upon a loan of common school fund money, is superior to a tax lien of the state based upon delinquent taxes.
¶2 The defendants, the county treasurer and the county commissioners, in their appeal contend that the statute upon which the Commissioners of the Land Office base their right of priority is section 9748, Compiled Oklahoma Statutes, 1921, which is as follows:
"Whenever any lands shall be sold for delinquent taxes under the provisions of this article, upon which any mortgage or other lien exists in favor of the state of Oklahoma or the Commissioners of the Land Office or any other commission, board or officer having power to loan public funds, or any funds under the control of the state upon real estate security, such tax shall be secondary at all times to the lien of the state or of the Commissioners of the Land Office, or of such commission, board or officer."
¶3 The defendants contend that a literal application of the act quoted would be to make the state''s mortgage lien superior to the tax lien and thereby permit all lands mortgaged to the state to be relieved of their proportionate burden of taxes, and thus the power of the state to levy and collect taxes would be seriously and materially impaired. It is said that this effect given the act makes it violative of article 5, section 57, of the Constitution, because the said section, being a part of the General Revenue Act, thus is made to cover a subject not embraced in the title. It is further contended that the effect given the act is violative of article 5, section 50, of the Constitution, which says:
"The Legislature shall pass no law exempting any property within this state from taxation, except as otherwise provided in this Constitution."
¶4 Also, that it is violative of article 10, section 5, of the Constitution, which says:
¶5 Also, that it is violative of article 5, section 46, of the Constitution, in that its effect partakes of the nature of special and local legislation.
¶6 Likewise is the assertion that the application of the act is in violation of article 5, section 51, of the Constitution, which says:
"The Legislature shall pass no law granting to any association, corporation or individual any exclusive rights, privileges or immunities within this state."
¶7 And that it violates article 5, section 53, of the Constitution, which says:
"The Legislature shall have no power to release or extinguish, or to authorize the releasing or extinguishing, in whole or in part, the indebtedness, liabilities or obligations of any corporation, or individual, to this state, or any county, or other municipal corporation thereof."
¶8 Briefs have been filed on behalf of numerous county attorneys, who appear amici curiae, joining in support of the theory of plaintiffs in error. Under a strict construction of the rules of procedure it might be held that the constitutionality of section 9748, supra, is not in this case, and the matter disposed of without passing upon the question of the superiority of the liens, for the reason that said section is applicable only where lands have been sold for delinquent taxes, and since the record does not show the lands to have been so sold, the condition precedent to the enforcement of the priority of the mortgage lien does not exist, and that the court erred in applying said section in the absence of the condition precedent to the right of the superiority of the mortgage lien. However, the case was tried upon the theory of the superiority of the respective liens, and the judgment of the trial court was evidently based upon the theory that the state had power to make a mortgage lien in the name of the state, to secure the payments of moneys loaned from the common school funds, superior to the state''s lien for taxes, and it is evident that the trial court based its judgment on said section 9748, supra, there being no other act of the Legislature or constitutional provision of this state dealing with the priority of the liens herein considered. We think it necessary to pass upon the question submitted, particularly in view of the public concern, and for the additional reason that the funds involved in the loan were a part of the common school fund held in trust by the state.
¶9 There is a distinction between right accruing to the state in handling revenues belonging to it and the rights of the state arising from control of the common school fund, held in trust by the state. The revenues belonging to the state in its sovereign capacity are a part of its property, and so long as the state keeps within constitutional limitations, it may deal with its property as it sees fit. On the other hand, the common school fund does not belong to the state, but the state merely holds such fund in trust under the conditions of the federal grant contained in the Enabling Act. The school funds were merely entrusted for the benefit of the common school, and the state pledged itself to hold such trust inviolate for the benefit of the schools.
¶10 By the Constitution, article 11, section 1, the state accepted "all grants of land and donations of money made by the United States under the provisions of the Enabling Act * * * for the uses and purposes and upon the conditions and under the limitations for which the same are granted or donated," and pledged the faith of the state to preserve such lands and moneys as a sacred trust, and to keep the same for the uses and purposes for which they were granted or donated. Section 7 of the Enabling Act provided for two separate grants, one a grant of land in Oklahoma Territory, and the other a grant of $ 5,000,000 in lieu of corresponding land in Indian Territory. Both grants were made in trust and accompanied by inviolable conditions, which trust and conditions were accepted by the state. The state cannot violate these conditions nor dissipate such funds. To do so would constitute grounds for a termination of the trusteeship and a withdrawal of the funds by the federal government.
¶11 Article 11, section 6, Constitution of Oklahoma, provides:
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