State v. Burleigh Cnty.

• Decision Date: 02 February 1927
• Docket Number: No. 5045.,5045.
• Citation: 55 N.D. 1,212 N.W. 217
• Parties: STATE et al. v. BURLEIGH COUNTY et al.
• Court: North Dakota Supreme Court

55 N.D. 1

212 N.W. 217

STATE et al.

v.BURLEIGH COUNTY et al.

No. 5045.

Supreme Court of North Dakota.

Jan. 17, 1927.

Rehearing Denied Feb. 2, 1927.

Syllabus by the Court.

Where a statute is susceptible of two constructions, by one of which grave and doubtful constitutional questions arise, and by the other of which such questions are avoided, it is the duty of courts to adopt the latter construction.

Construing section 9, c. 292, Laws of 1923, which directs the cancellation of unpaid taxes upon lands acquired by the state through foreclosure of certain mortgages, the operation of the act, when construed to embrace rights acquired by the county under certificates of tax sale, is considered in the light of section 176 of the state Constitution, which provides that taxes shall be uniform upon the same class of property including franchises within the territorial limits of the authority levying the tax, and of section 175 of the Constitution, which provides that every law imposing a tax shall state distinctly the object of the same, to which only it shall be applied, and it is held that the construction contended for raises doubtful constitutional questions going to the validity of the enactment.

Where property is sold to satisfy delinquent taxes and in the absence of bidders is struck off to the county, the county is not, under sections 2202, 2203, and 2204 of the Compiled Laws of 1913, accountable to the taxing districts for the amount of the taxes until there is a redemption or the tax certificate is assigned, but, as to the tax debtor and the property liable, by operation of law the tax is paid.

Section 9 of chapter 292, Laws of 1923, which directs that upon the issuance of a sheriff's deed in foreclosure proceedings brought to realize upon a farm loan mortgage taken by the state under the provisions of the act or of chapter 147, Laws of 1919, any taxes then remaining unpaid shall be canceled and abated by the board of county commissioners, is construed, and held not to extinguish the rights of the county as the holder of a tax certificate.

Section 176 of the state Constitution, which provides that the property of the state shall be exempt from taxation, is construed in relation to tax liens held by a county at the time of the acquisition of property for other than a public governmental purpose, and it is held that the acquisition of property by the state, or its departments, through the foreclosure of a mortgage taken as security for a loan, does not operate to cancel outstanding liens based upon tax sales.

Under section 176 of the state Constitution, the ownership, and not the use to which property is put, nor the purpose for which it is acquired, affords the test of its immunity from taxation, and property acquired through foreclosure of a mortgage taken as security for a loan is, while held by the state, exempt from taxation.

Where a county holds a tax certificate issued to it after purchase, under section 2191, Compiled Laws of 1913, the property may not be again sold for delinquent taxes, but as taxes become delinquent the lien of the county, evidenced by the certificate, is augmented by operation of law.

Where the county holds a tax certificate representing the lien of taxes for which the property had been sold, or which had become delinquent prior to the time when the state acquired title to the property through mortgage foreclosure, the tax certificate continues to draw the rates of interest prescribed by statute, but the lien of the county is unenforceable, and all remedy upon the tax certificate, including the acquisition of title by tax deed, is suspended during the time the property is owned by the state, but such lien may be asserted and enforced against a subsequent purchaser from the state.

Appeal from District Court, Burleigh County; Fred Jansonius, Judge.

Action by the State, doing business as the Bank of North Dakota, as agent for the State Treasurer, as trustee of the State, and another, against Burleigh County and others, to quiet title. From the judgment below, both parties appeal. Affirmed.

Nuessle, J., dissenting.

O'Hare & Cox and P. H. Butler, all of Bismarck, for appellants.

F. E. McCurdy, State's Atty., of Bismarck, for respondents.

BIRDZELL, C. J.

In December, 1919, Nestor Rutanen borrowed from the Bank of North Dakota $2,500, securing the loan by a mortgage given on a quarter section of land owned by him in Burleigh county. In regular course the mortgage was assigned to the treasurer of the state of North Dakota as security for bonds of the real estate series issued by the state. Rutanen did not pay the taxes on the land for the years 1920, 1921, 1922, and 1923, and at the tax sale, there being no bidders the land was struck off to the county and a tax certificate issued. In 1923, Rutanen being in default, the mortgage was foreclosed and the property was bid in by the state treasurer, as trustee. No redemption was made and in October, 1924, a sheriff's deed was issued to the plaintiff state treasurer, as trustee for the state of North Dakota. Upon obtaining the deed, the plaintiff demanded that the board of county commissioners cancel and abate the taxes for the years 1920 to 1923, both inclusive for which the land had been sold to the county. In April, 1925, plaintiff repeated this demand, and also requested the cancellation of the taxes for the year 1924. Upon the refusal of the commissioners to comply, this action was brought to quiet title. The district court held that the taxes for which the property had been sold at the date of the issuance of the sheriff's deed should not be canceled of record, and that the plaintiff was not entitled to the relief demanded, but that the 1924 taxes which were not due at the time of acquisition of title by the plaintiff should be canceled and discharged. Both parties appeal and each assigns error upon that portion of the judgment which is adverse to its contention.

[2] We shall consider, first, the contention of the plaintiff to the effect that, under section 9 of chapter 292, Session Laws of 1923, it is the mandatory duty of the board of county commissioners to cancel and abate the taxes which had become delinquent and for which the land had been sold prior to the date of the sheriff's deed. The provision of the statute upon which this contention is based is contained in a comprehensive act governing the loaning of money upon farm mortgage security by the Bank of North Dakota and the issuance of bonds to procure funds to replace those employed by the bank in the enterprise. The statute provides for the assignment of the mortgages by the bank to the state treasurer in trust as security for the bonds to be issued. It further provides that, in case default shall occur in the payments or in the conditions of any mortgage, and continue for a period of a year, the mortgage shall be foreclosed or collected; and, in case of foreclosure sale, if no bid is made equal to the amount due at the date of the sale, including costs, disbursements, and statutory attorney's fees, the property shall be bid in in the name of the state treasurer, as trustee for the state. The net proceeds of the sale or of the redemption are required to be turned over to the treasurer to be invested in the bonds issued under the act or in new mortgages substituted for the mortgage foreclosed. In case no redemption is made, the sheriff's deed issues to the state treasurer, as trustee for the state. After outlining this procedure, the statute provides (section 9):

“* * * Any taxes then remaining unpaid thereon shall be canceled and abated by the board of county commissioners of the county wherein such land is situated. Any land, title to which is acquired through foreclosure, may be sold by the state treasurer as such trustee, through the Bank of North Dakota acting as his agent, for the best price and terms obtainable, all proceeds of such sales shall accrue to the real estate bond payment fund. Any such sale must be approved in writing by the Industrial Commission. * * *”

The specific question presented is whether or not the statutory direction to cancel and abate the unpaid taxes applies as to taxes which accrued after the mortgage was given and for which the land had been sold to the county before the sheriff's deed in foreclosure was issued. It is argued that whatever rule might obtain where there is an outstanding tax sale certificate in the hands of an individual (the certificate in such case being a contract; Fisher v. Betts et al., 12 N. D. 197, 96 N. W. 132;Beggs v. Paine, 15 N. D. 436, 109 N. W. 322), the taxes have not been paid through a sale of the property to the county and that the statutory direction to cancel applies. The argument, in substance, is that the statutory direction to cancel and abate unpaid taxes amounts to a direction to cancel tax certificates, though the latter are not referred to in the act.

The statutes governing tax sales do make a distinction between a tax sale resulting in the issuance of a certificate to a private bidder and one resulting in the issuance of a certificate to the county in the matter of the county's liability to the taxing districts. But does this distinction support the contention of the plaintiff that in the latter case the taxes are “unpaid” within the language of section 9, supra? That is the vital query in this case.

[3][4] Under the statutes the county may retain the certificate, it may assign it to one who pays the amount of its bid, or, if title is later completed, it may sell the property, and upon the assignment of the certificate or upon resale it must credit the proportionate shares of the proceeds, to the extent of the taxes, to the respective taxing districts. Sections 2202, 2203, and 2204, Compiled Laws of 1913. But where the property upon tax sale is bid in by another, the amount of the tax, being immediately paid for the property, is at once credited; and the tax sale certificate which is...