Hughes County v. Henry

• Decision Date: 10 February 1925
• Docket Number: 5828,5843.
• Citation: 202 N.W. 286,48 S.D. 98
• Parties: HUGHES COUNTY et al. v. HENRY et al., South Dakota Rural Credit Board. SAME v. STATE et al.
• Court: South Dakota Supreme Court

202 N.W. 286

48 S.D. 98

HUGHES COUNTY et al. v. HENRY et al., South Dakota Rural Credit Board.

SAME v. STATE et al.

Nos. 5828, 5843.

Supreme Court of South Dakota

February 10, 1925

Appeal from Circuit Court, Hughes County; John F. Hughes, Judge.

Original proceeding by mandamus by Hughes County and Harrold Independent Consolidated School District No. 3 against C. M Henry and others, as members of the South Dakota Rural Credit Board, which was consolidated with an appeal by the above-named plaintiffs from an adverse judgment in a suit brought by them against the State of South Dakota and others. Original writ granted, and judgment appealed from reversed and remanded, with directions.

Fuller & Robinson, of Pierre (Alvan G. Swanson, State's Attorney for Bennett County, of Martin, C. P. Seward, State's Attorney for Butte County, of Bellefourche, Harry R. Wilmsen State's Attorney for Corson County, of McIntosh, George Thwing, State's Attorney for Dewey County, of Timber Lake, Paul Byrne, State's Attorney for Faulk County, of Faulkton, Harry L. Brown, State's Attorney for Haakon County, of Philip, Chas. L. Brady, State's Attorney for Harding County, of Buffalo, Harry R. Horner, State's Attorney for Hughes County, of Pierre, M. Harry O'Brien State's Attorney for Hyde County, of Highmore, Harold P Gilchrist, State's Attorney for Jackson County, of Kadoka, H. L. Bode, State's Attorney for Jones County, of Murdo, A. C. Miller, State's Attorney for Lyman County, of Kennebec, John P. Everett, State's Attorney for Meade County, of Sturgis, R. W. Hutchinson, State's Attorney for Mellette County, of White River, John F. Schrader, State's Attorney for Pennington County, of Rapid City, C. M. Parsons, State's Attorney for Perkins County, of Bison, F. W. Lambert, State's Attorney for Stanley County, of Ft. Pierre, M. H. Quimby, State's Attorney for Sully County, of Onida, and C. E. Talbott, State's Attorney for Tripp County, of Winner, of counsel), for plaintiffs and appellants.

Buell F. Jones, Atty. Gen., and E. D. Roberts and R. F. Drewry, Asst. Attys. Gen., for defendants and respondents.

GATES J.

Two cases are before us by consolidation; one an original proceeding in mandamus, the other an appeal from the circuit court of Hughes county. We first consider the mandamus proceeding.

By chapter 333, Laws 1917, acting under an amendment to Constitution, art. 13, § 1, adopted by the people at the November, 1916, election, the state embarked in the business of making farm loans. That chapter as amended by chapter 334 of the same session, and as amended at the Special Legislative Session of 1918 (chapter 58), appears in the Revised Code of 1919 as sections 10150 to 10173. Chapter 304, Laws 1919, is the only amendatory act since the Code. The writ of mandamus was sought by the county of Hughes and Harrold independent consolidated school district, a school district of said county, against the members of the South Dakota Rural Credit Board, hereinafter called "the board," to compel the redemption from tax sale of certain premises within said county and school district upon which there is a "rural credit" loan. The facts alleged in the application for the writ, briefly stated, are as follows: A rural credit loan of $10,000 was made on a section of land within said school district on July 1, 1922. The 1922 taxes which became due January 1, 1923, were unpaid, and at the county tax sale on December 10, 1923, the premises were struck off to Hughes county for want of bidders, and a tax sale certificate was issued to Hughes county. Rev. Code 1919, § 6794. The tax represents, among others, a levy for state purposes of 1.9 mills and a school tax of 13.3 mills. The state levy includes a tax for the maintenance of the state government and its public institutions and for the payment of the interest on, and the establishment of a sinking fund to retire, state bonds aggregating $14,900,000; consisting of highway bonds, $6,000,000; soldiers' compensation bonds, $6,000,000; cement plant bonds, $2,000,000; and land settlement bonds, $900,000. In addition to the maintenance of the school the school tax is in part for the purpose of paying the interest on, and the establishment of a sinking fund to retire, school district bonds issued upon a loan to the school district of a portion of the permanent school fund of the state. In addition thereto the total tax levy includes a sum to provide for the payment of the premium for hail insurance under the state Hail Insurance Law (chapter 244, Laws 1919, and amendments). It is also alleged that none of the 1923 taxes have been paid, and that there was no purchaser therefor at the tax sale for the taxes of that year. It is common knowledge that many of the counties of the state are seriously crippled by the nonpayment of taxes on lands upon which there are rural credit mortgages. The state's attorneys of 18 counties other than plaintiff are joined as "of counsel" for plaintiff in this case. It is stated in plaintiff's brief, although not alleged as a fact in the application for the writ, that the unpaid taxes on lands covered by rural credit mortgages exclusive of the taxes of 1924 in Perkins county alone amounts to more than $82,000.

The defendants demurred to the application for the writ, and moved to quash the alternative writ because: (1) No duty rested upon the board to pay the taxes, consequently mandamus will not lie; (2) it is not shown that there is not an adequate remedy at law; (3) it is not shown that the board has or can obtain funds to pay the taxes; (4) if the board has means or authority to pay the taxes, the exercise of such power is discretionary; (5) the lien for taxes is inferior to the lien of the rural credit mortgage by reason of the provisions of sections 6758 and 6804 Rev. Code 1919; and (6) the board is without power to pay taxes except such as may be superior to the lien of such mortgage.

The contentions of plaintiff are: (1) That in the absence of legislation to the contrary taxes should be held to be superior liens. (2) That the provisions of section 6804, Rev. Code 1919, are not applicable to rural credit mortgages because: (a) At the time of its adoption the use of the credit of the state for the making of farm loans was not conceivable; (b) the application of that section to rural credit mortgages would be inimical to the public interest; (c) the rural credit act does not establish the lien of the mortgage to be superior to the lien of taxes; (d) the provisions of said section relate to liens created in favor of the state in its sovereign capacity only and not in its private or business capacity; and (e) that there is no provision whereby the county can take a tax deed on property mortgaged to the state. (3) That the provisions of said section 6804 relate to tax deeds taken by private individuals only. (4) That the tax lien is superior to the mortgage lien. (5) That permission to pay taxes amounts to a duty under the circumstances of this case.

The text of the rural credit act does not, in terms, enjoin upon the board the duty of paying taxes in case the mortgagor does not. In terms the authorization is merely permissive. It is as follows:

"Every borrower *** by express covenant in his mortgage deed shall pay, when due, all taxes, liens, judgments, assessments and insurance which may be lawfully assessed against the mortgaged land. Taxes, liens, judgments, assessments or insurance, not paid when due and paid by the mortgagee, shall become a part of the mortgage debt." Subdivision 9, § 10159, Rev. Code 1919, as amended by chapter 304, Laws 1919, § 3.

There is nothing in the act that intimates that the lien of general taxes shall be superior to the lien of the rural credit mortgage, nor that the lien of general taxes shall be inferior to the lien of the rural credit mortgage. It does appear, however, that a loan may be made on lands subject to liens or assessments for drainage, reclamation, or irrigation payable in installments where the installments are not then due. Subdivision 3, § 10159, Rev. Code 1919, as amended by chapter 304, Laws 1919, § 3. The plain inference therefrom is that the mortgage lien in such case is subject to the lien of the assessment, but that for the purpose of definition of what is a first mortgage such a mortgage shall be deemed a first mortgage. Attention is called to this merely to show that no legislative intent is disclosed in the act to make the lien of the mortgage superior to all other liens.

It is urged by plaintiffs that permission to pay taxes, liens, judgment, assessments and insurance makes the duty imperative. The rule is thus stated in 25 R. C. L. 767:

"Although the

words of a statute are merely permissive, directory or enabling, they may nevertheless have the force of words of command where the power or duty to which they relate is for the advancement of public justice or the security and protection of public or private rights."

While we might be inclined to assent to that doctrine except as to items that are clearly subordinate to the lien of the mortgage or in which the interest of the public is not involved, yet we think it unnecessary in the present case to decide that the lien of the taxes is superior to the lien of the mortgage. We think the duty of the board to pay taxes permission being given, may safely rest upon the broad ground of the right of self-preservation of the state and of its governmental subdivisions, the county, township, and school district. Without the collection of revenue neither the state nor its governmental subdivisions can function. If the police power of the state is such and its power of eminent domain is such that the state cannot divest itself of them (Contributors to Penn. Hospital v. City of...