Dunn v. Dunn

• Decision Date: 23 October 1897
• Citation: 42 S.W. 259,99 Tenn. 598
• Parties: DUNN v. DUNN et ux. JARVIS et al. v. McCONNELL et al.
• Court: Tennessee Supreme Court

42 S.W. 259

99 Tenn. 598

DUNN v. DUNN et ux.

JARVIS et al. v. McCONNELL et al.

Supreme Court of Tennessee.

October 23, 1897

Appeal from chancery court, Hamilton county; T. M. McConnell Chancellor.

Appeal from chancery court, Knox county; H. B. Lindsay, Chancellor.

Separate bills by John I. Dunn against S. J. Dunn and wife and by S M. Jarvis and others against Mary F. McConnell and others for the foreclosure of mortgages. Both suits were taken to the court of chancery appeals on the question of the priority of tax liens; the judgment in the first suit making the tax lien superior to the mortgage, and the judgment in the second suit making it inferior. The court of chancery appeals decided that in both suits the tax liens were superior to the mortgages, and the suits were then appealed to the supreme court. The decisions of the court of chancery appeals are affirmed.

F. S Yager and Spurlock & Latimore, for defendants Dunn and others.

Atty. Gen. G. W. Pickle and R. B. Cooke, for the State.

C. R. Evans, for the County.

J. N. Cantrell and J. W. Caldwell, for other defendants.

WILKES J.

These two distinct cases involve the same questions of law, and are heard together in this court, though originating in the chancery courts of different counties. The question presented is the relative rights and priorities of tax liens and the liens of mortgagees whose mortgages were in existence before the taxes were assessed and levied. The bill in each case was filed by a mortgagee to foreclose a mortgage and apply the proceeds to the payment of the debt secured thereby. In each case there was a reference under the statute, and a report by the master showing unpaid taxes upon the real estate involved. In the case first named the master reported unpaid taxes for 1892, 1893, 1895, and 1896 due to the state, the county of Hamilton, and city of Chattanooga in the aggregate amount of $357.07, and that they were a lien upon the property. Complainant mortgagee excepted to this report because the master did not report that his lien was superior to that for taxes. This was overruled by the chancellor. In the case last named, taxes were reported as delinquent to the state, county of Knox, and city of Knoxville for the years 1893, 1894, 1895, and 1896, and the tax lien was reported as inferior to that of the mortgagee. This was excepted to, and the exception overruled by the chancellor. In the case first named the mortgage was executed in 1890, proceedings to foreclose were instituted in 1894, and decree of sale made in 1896. In the latter case the mortgage was executed in 1889, proceedings to foreclose were begun in _____, and decree of sale was had in 1896. In each case the proceeds of sale were insufficient to pay the mortgage debts. Both causes have been before the court of chancery appeals; the only real question being whether the tax lien is superior to that of the mortgagee, and whether the taxes shall be paid first out of the proceeds of sale under control of the court. In the first case named the court of chancery appeals held that the lien of the mortgagee was superior. In the case last named, which was heard afterwards, they held that the tax lien was superior, and state in their opinion that, upon a further hearing and more mature consideration, they are of opinion that the latter holding is the correct one in both cases, and that the tax liens are superior, and should be first paid out of the proceeds. Both cases are before us on appeal, and the same question is presented as was involved in the courts below.

In the case last mentioned the proceedings and appeal are altogether regular. In the first case they are somewhat irregular, and especially as to the manner in which the appeal is taken and prosecuted from the court of chancery appeals. In the case last mentioned the mortgagee appeals and assigns error. In the first-named case the appeal is prayed by the defendants, but they have assigned no errors, and do not manifest any interest in the result. Only the state, county of Hamilton, and city of Chattanooga appear, but neither of these was formally made a party in the court below or in the court of chancery appeals, and they have not appealed to this court, but seek to work out their rights under the appeal prayed by the defendants. It appears also that in that case neither the state, county, nor city filed any brief in the court of chancery appeals raising the question now presented. It appears that in the Hamilton county case the mortgagor, after executing his mortgage, sold his rights in the premises, and his vendee is before the court. The note secured by the mortgage was made to the Lombard Investment Company, a foreign corporation, but afterwards assigned to Mrs. Keithly, a nonresident. Passing by much that is said as to the magnitude of the interests involved, and the great danger to the state and counties and municipalities that would accrue in the event the holding of this court should be adverse to the superiority of the taxes, as being matters which cannot control the action of this court, we come to the single question involved in the case, which is the priorities between liens for taxes and liens of mortgagees, or, in other words, where the taxes have been assessed and levied after the execution of the mortgage, and where the proceeds of sale of the mortgaged property are under control of court, and not sufficient to satisfy both liens, which shall be first paid out of such proceeds?

Chapter 68, Acts 1871 (Mill. & V. Code, § 806; Shannon's Code, § 969), provides: "Whenever real estate is sold under the decree of any court in the state it shall be the duty of the judge of said court before sale is confirmed to the purchaser to have a reference made to the clerk or clerk and master to ascertain if upon the day of sale there were any taxes due and unpaid which were a lien upon said real estate, and if it is found that there were taxes which were a lien upon the real estate upon the day of sale, a decree shall be entered in the cause stating the amount of taxes and directing the clerk and master or clerk to pay said taxes out of the first money collected from the sale of the said real estate." The argument is that the force and effect of this statute is to create and fix a first lien upon all lands, superior to all other liens, from the time taxes are assessed, and to provide that when the lands are sold the proceeds shall first he applied to the satisfaction of such taxes; that such is not only the plain provision of this statute, but is the spirit and effect of all our tax laws before and since that date, so far as they relate to the lien and priority of taxes; that such has been the common understanding of the financial and other officers of the state and of the legal profession, and is in accord with the previous rulings of this court, when properly understood and applied. On the other hand, it is insisted that this act does not make taxes a lien prior and superior to all other liens, when such other liens arise before the assessment and levy of the taxes, and that it does not attempt to settle the priorities between tax and other liens, but leaves each to its own status and order and the direction to pay taxes out of the proceeds of sale applies only to such taxes as are a prior claim upon such lands or their proceeds, in their order, as, for instance, when they were fastened upon such lands prior to, or at the time of, the mortgage. Both contentions are supported by short extracts and expressions from our reported cases, taken out of their proper connection, and presenting only partial views of the real holdings of the court. Section 27, c. 96, Acts 1889, provides as follows: "That the assessed taxes on all real estate, including the taxes on polls, and all damages and costs accruing thereon, shall be and remain a lien upon such real estate from the 10th of January of each and every year." Section 76 of the same act provides that "no assessment shall be invalid, because the number of acres, or the size and dimensions of any tract, lot or parcel of land has not been precisely named, or the amount or valuation or tax not precisely given, nor because the property has been assessed in the name of a person who did not own the same, nor because the same was assessed to unknown owners, nor on account of any objection or informality merely technical, but all such assessments shall be good and valid." Substantially the same provisions were contained in the Code of 1858, and have been continued in various acts since then, and were brought into the compilation of Milliken & Vertrees in 1884, and are repeated in the acts of 1871 and 1895, except that in the latter act it is provided in addition, by section 84, that "hereafter the proceedings against any delinquent corporation, shall be an action in rem purely; and it shall not be necessary, in order to make a good and valid title, to proceed personally against the parties owning the same," etc. Under these and similar statutes, it has been uniformly held that mere irregularities in the assessment of taxes will not release their lien,-as, for instance, if the property is assessed to a wrong person as owner, or to a part only of several owners. It is conceded that the laws make...