Northwestern Improvement Co. v. State

• Decision Date: 02 July 1928
• Docket Number: 5478
• Citation: 220 N.W. 436,57 N.D. 1
• Court: North Dakota Supreme Court

220 N.W. 436

57 N.D. 1

NORTHWESTERN IMPROVEMENT COMPANY, a Foreign Corporation, Appellant, v. STATE OF NORTH DAKOTA, C. A. Fisher, as Treasurer of the State of North Dakota, and John Steen, as Auditor of the State of North Dakota, Respondents

No. 5478

Supreme Court of North Dakota

July 2, 1928

Appeal from the District Court of Burleigh County Jansonius, J.

Reversed.

Conmy Young & Burnett, for appellant.

Equity has jurisdiction to prevent a cloud on the title of an illegal tax assessment. Gregg v. Sanford, 65 F. 151; Dean v. Madison, 9 Wis. 402; Moores v. Clackamas County (Or.) 67 P. 662.

An action to quiet title is proper to set aside an ultra vires tax sale. Clark v. Darlington, 11 S.D. 418, 63 N.W 771; Platt v. Parker-Washington Co. (Mo. App.) 144 S.W. 143; Nevada-California Power Co. v. Hamilton, 235 F. 317.

An action to quiet title is properly joined with an action to remove a cloud. Moores v. Clackamas County, 67 P. 662.

"A complaint which contains all the material allegations required in a complaint in a statutory action to determine adverse claims, and in addition thereto sets forth the specific interests claimed therein by the defendant and reasons showing such interests to be invalid, is not demurrable." Bismarck Water Supply Co. v. Burleigh County, 36 N.D. 191, 161 N.W. 1009.

Equity affords relief where payment of the tax is made to the state directly. King County v. Northern P.R. Co. 196 F. 323.

Equity will enjoin the issuance of tax deed. Marsh v. Supervisors, 42 Wis. 502; Wallace v. Hines, 253 U.S. 66 (N.D. Statute involved); Davis v. Wallace, 257 U.S. 478, 42 S.Ct. 164.

A valid assessment is necessary to support a valid tax. Philleo v. Hiles, 42 Wis. 527; Worthington v. Whitman (Iowa) 25 N.W. 124; People v. Hastings, 29 Cal. 449.

"Where no right to a hearing, before the assessment becomes absolute, is afforded by the law to the party assessed, the tax proceeding and law authorizing it, is arbitrary and invalid as contrary to constitutional guaranties against the deprivation of private property without due process of law." State ex rel. Miller v. Leech, 33 N.D. 513, 157 N.W. 492.

The legislature has no power to take away the functions of constitutional officers such as the board of equalization. Ex parte Corliss, 16 N.D. 470, 114 N.W. 962.

"It is a settled rule of law, as applicable to tax matters as to other concerns of government, that legislative classification, to be legitimate, must have regard to differences in character or use of property, character of the business affected or of governmental relationship, and cannot be purely arbitrary." Gamble-Robinson Fruit Co. v. Thorson, 204 N.W. 861.

George F. Shafer, Attorney General, George I. Reimestad, Assistant Attorney General, and T. H. Thoresen, Tax Commissioner, for respondents.

Under the Constitution as it stood prior to the amendment by article 20 adopted in 1914, all property was required to be assessed and taxed uniformly according to its value. This included property of every description. The amendment permitted property to be classified for tax purposes. State v. Wallace, 48 N.D. 803, 187 N.W. 728.

"In taxation there is a broader power of classification than in some other exercise of legislation. . . . The state is not bound by any rigid equality. This is the rule; its limitation is that it must not be exercised in 'clear and hostile discrimination between particular classes.'" Citizens Teleph. Co. v. Fuller, 229 U.S. 322, 57 L. ed. 1206.

Where the legislature itself fixes the amount of the tax and such tax is levied specifically without regard to the value of the property or other matter affecting its amount, notice and hearing are not necessary. Hagar v. Reclamation Dist. 110 U.S. 701, 28 L. ed. 569; Leser v. Wagner, 120 Md. 677, 87 A. 1042.

Burke, J. Nuessle, Ch. J., and Birdzell, and Christianson, JJ., Concur. Burr, J.

OPINION

BURKE

This is an action to set aside certain tax liens claimed by the state on mineral reserves and to quiet title to such property in the plaintiff.

The complaint is in form an action to quiet title, but it also alleges that the law under which the tax lien is claimed is unconstitutional. The state alleges in its answer that it has a valid lien upon the mineral reserves of the plaintiff under chapter 319 of the Laws of 1923. The plaintiff filed a general demurrer to the answer, and from an order overruling the demurrer the plaintiff appeals.

In 1923 the legislature passed an act providing for a tax on mineral reserves. The material portion involved herein is as follows:

"An annual state tax of three cents on each acre is hereby levied upon all deposits of lignite coal and minerals and all titles to coal and mineral underlying any and all lands, the ownership of which coal and minerals has been severed from the ownership of the overlying strata and the surface of the land. . . . The revenue collected from such taxes shall be paid into the general fund of the state for the purpose of defraying the general expenses of the state government."

Section 5 provides:

"On December thirty-first of each year, the state treasurer shall return the tax list of mineral reserves of the previous year to the state auditor and the same shall thereafter remain in his custody and payments of delinquent taxes shall thereafter be made to the state auditor. The state treasurer in returning such list shall certify to the state auditor that all such taxes as have not been marked 'paid' on the tax list, have not been paid. If any such tax shall remain unpaid for the period of three years after the same becomes delinquent, the state auditor shall notify all persons who, according to said lists or the lists of subsequent years appear to be the owners of the reserves upon which the taxes are delinquent, to the effect that such taxes are unpaid, stating the amount thereof and that unless paid within thirty days from the date of such notice, proceedings will be taken to declare the title to said mineral reserve forfeited to the state. On July first of each year, the state auditor shall prepare a second notice of the delinquency of such tax and of intention to declare the title thereto forfeited to the state which shall be in substantially the following form: . . . Such notice shall be mailed by the state auditor to the owner of such mineral reserve who appears to be the owner thereof according to the records contained in the tax list of said year and subsequent years in his office and in the office of the state treasurer. Such notice shall be sent by registered mail.

"Sec. 6. Any mineral reserve upon which the delinquent tax for the year specified in the auditor's notice prescribed by the preceding section, is not paid before the following September first, shall become automatically forfeited to the state without further action on the part of any official, and shall become the absolute property in fee of the state of North Dakota, and the rights of the former owner thereof shall entirely cease and terminate. The auditor shall thereupon refrain from entering such mineral reserves as have been forfeited upon the tax lists of subsequent years.

"Sec. 7. The tax provided by this act shall be in lieu of all other direct property taxes upon mineral reserves.

"Sec. 8. Coal, lignite coal, oil and all other minerals and metals shall be included within the meaning of the terms 'mineral' or 'minerals' as used in this act. A severance of the minerals from the overlying strata and the surface of the land shall be deemed to have occurred when they are owned by different parties or when a conveyance is made of the surface which reserves in the grantor rights to any minerals or when a conveyance is made of minerals which reserves to the grantor the surface of the land."

It is the contention of the plaintiff that chapter 319 of the Session Laws of 1923 violates § 179 of the Constitution in this, viz.: it does not provide for the assessment of the mineral reserves in the county, city, township, village or district in which it is situated in a manner provided for the assessment of the other real property; that it violates § 176 in that it is not a uniform tax, that some of the mineral reserves are of great value, others of little or no value, and a flat tax per acre of the same amount on each tract regardless of the value and without classification violates the constitutional provision requiring uniformity and equality; that there is no uniform assessment of value and, therefore, no valid assessment upon a uniform rule or an ad valorem tax; that it violates § 174 of the Constitution limiting revenue to defray the expenses of the state not to exceed in one year four mills on the dollar of the assessed valuation of all taxable property in the state ascertained by the last assessment for state and county, and sufficient sum to pay the interest on the state debt; that it violates the 14th Amendment to the Constitution of the United States and § 13 of the Constitution of North Dakota in taking property without due process of law.

The first question in the case is raised by the contention of the defendant that the plaintiff has an adequate remedy at law and that he cannot maintain this action to quiet title to the lands in controversy, relying on the case of Bismarck Water Supply Co. v. Barnes, 30 N.D. 555, L.R.A.1916A, 965, 153 N.W. 454. In that case it was conceded that the property was not over valued but that the same was assessed and equalized at approximately the same proportionate rate as the property of the other tax payers. The ground upon which the plaintiff asked for equitable relief was based upon excessive levies. It was conceded that the taxes for county, city and school purposes were regular and valid. The...