I.

..

Honorable George H. Sheppard Comptroller ofPublic Accounts Austin, Texas Dear Sir: Opinion No. O-501 3 Re: Authority of Tax Collector to issue certificate showing all taxes paid on’property which is in receivership and taxes are delinquent after sale of such property by receiver “free and clear ofall encumbrances and claims of any person norparty ofany na**ture** whatever,” under order of court. The facts reflected by your letter of December 8, 1942, supplemented by your letter of January 26, 1943, and the enclosures therkwith, may be stated as follows:In 1925, areceiver was appointed to take charge of, and operate certain oil leases. The appointmentwas made at the instance ofplaintiffs who owned certain interests inthe oil lease. The receivership is still pending and the operation ofthe property has shown a loss during each year ofthe receivership.

At the time ofthe appointment ofthe receiver State and county ad valorem t.axes against this property were delinquent for the years 1923 and 1924, and same was assessable for such taxes for the year 1925. The State intervened inthe receivership proceeding, and in 1931, the court rendered Judgment in favor ofthe State against all other parties to the proceeding (including the receiver) for state and **county** taxes inthe sum of $6464.65, said stim representing state an.dcounty taxes, penalties and interest for the years 1923 to 1929, inclusive, and foreclosed the tax lien on the property inthe hands ofthe receiver.

No further action appears to have been taken by the State. No part of such judgment has been paid, and none of the state and **county** taxes which have accrued during the period from 1930 to,thepresent time have beeti paid., .

Honorable George H. Sheppard, Page 2, O-5013

On July 25, 1940 the Court ordered the receiver to sell all ofthe property onwhich the State’s lien for taxes had been foreclosed, and on which taxes had accrued each year during the receivership, “free and clear of all encumbrances and claims ofany person or party ofany nature whatever”. Under this order ofthe **court** the property was sold, the receiver undertaking to convey same free of such encumbrances, and s’uch sale **was** by the **Court** confirmed. The proceeds ofthe sale ofthe property were later disbursed inpayment of receiver’s fees and operating costs under order ofthe Court.

The purchaser at receiver’s sale now desires atax certificate, certifyi.ng that all state and county taxes have been paid through the year 1940.

You request the opinion ofthis department advising whether the county tax collector is authorized to issue cancellation certificates and thereafter certify that all state and county taxes on said property for such years have been paid.

The precise question here involved has never been passed upon by the **courts** ofthis state. Upon the general question of subordination ofpreviously existing liens tothe costs of receivership, the **courts** have passed many times. The leading case is that ofCraver v. Greer, 107 Tex. 356, 179S. W. 862, inwhich.the Supreme Court said:

“Where alienholder procures the appointment ofa receiver with the power **to** operate the property, which is subject tohis lien, in a continuance of the business towhich itis devoted, itis only just that~the consequent expenses should take precedence **over** his lien, since it**must** be anticipated that such operation will be attended with cost, and possibly inexcess of income. Heisen v. Bins, 147Ind. 284, 45N. E. 104. The same **rule** should be applied toaparty who, while not directly the applicant upon whose petition the received is appointed is privy to the action which results inthe appointment. But the indebtedness ofthe receiver has no right ofpriority over the vested lien ofa creditor who neither applied for the receivership nor was aparty to its procurement, merely because he is aparty to the suit.” (Emphasis ours) The rule announced by the Supreme **Court** inCraver V. Greer has been consistently followed by the courts of this State. Mayotown Lumber Co. v. Nacogdoches Grocery Co., (Com. App.) 236 S. W. 704; Wagner Supply Go. v.Honorable George H. Sheppard, Page 3, O-5013

Bateman, 260 S.W. 672; Hayes v. Gardner, 40 S.W. (2d) 917; Lynch Davidson Co. v. Hinnant, 93S. W. (2d) 532; Texas Steel Co. v. Huey &Phiip Hardware Co., 110S. W. (2d) 9674. Itis true that the general rule is qualified to the extent that the court has the power, in the exercise ofa sound judicial discretion, to charge the liabilities ofthe receiver against the corpus ofthe receivership estate where such.estate is “affected with apublic interest” and 

### the public has an interest inthe continued operation of the property and such expenses‘are necessary in such continued operation. Craver v. Greer, supra; Ellis v. Water Co., 86 Tex. 109, 23S. W. 858; Clint v. Houston Ice & ,Brewing Co., 106Tex. 508; 169S. W. 411.

The property here involved is private property. The receivership proceeding was instituted by its owners. Itis neither public nor quasi-public in its **nature** and could not be said tobe “affected with apublic interest.” The State had no part in procuring the appointment ofthe receiver.

The fact remains, however, that in 1928, some three years after the appointment ofthe receiver, the State intervened in the proceeding, bringing suit for some taxes which had accrued and constituted alien on the property at the time ofthe appointment and for some taxes which had accrued subsequent to the appointment ofthe receiver. The court thereafter rendered judgment for the State as against all other parties tothe suit which judgment is regular on its face establishing the State’s claim as alien “superior and prior” to “all other claims, interests; rights, titles and liens ofwhatsoever kind orecharacter held, claimed or owned by any person or persons whatsoever” on the property here involved, and foreclosed the lien as against the receiver and a11other parties tothe suit. No objection has been raised tothe judgment. This judgment ofthe court did not create the right of precedence of the State’s lien for taxes, but simply established the existence ofthe right. Mayotown Lumber Co. v. Nacogdoches Grocery Co., supra. The legality of the taxes and the existence ofthe lien have thus been adjudicated by the court. Likewise the priority of that lien has been adjudicated.

No claim appears to have been made by the State for taxes which have accrued on the property since the year 1930. As tosuch taxes itcannot be said that the State has sought to invoke the aid ofthe receivership proceeding intheir collection, and as to these taxes the State has not become aparty to the receivership proceeding.

The question tobe answered here is whether the order ofthe court directing the receiver to sell the property here involved, free and clear ofall encumbrances, is sufficient .tofree the property so sold from the State’s lien for taxes previously adjudicated and established by the same court as well as tofree it from the State’s lien for taxes which accrued subsequent to such judgment., .

‘

. Honorable George H. Sheppard, Page 4, O-5013

Many Jurisdictions hold that the court is authorized to subordinate the lien for taxes tothe receiver’s costs and the cost of operation of the property. We find no such case decided by any court of a state having constitutional and statutory provisions with reference to tax liens similar to our own. Both our constitution and our statutes are explicit indefining the character 

### ofthe tax lien and the dura,tion of its existence.

Pertinent constitutional and statutory provisions are the following: Section 55ofArticle 3of our constitution reads: “The Legislature shall have no power to release or extinguish, or toauthorize the releasing or extinguishing, inwhole or inpart, the indebtedness, liability or obligation ofany corporation or individual, tothis State or to any county or defined subdivision thereof, or other municipal corporation therein, except delinquent taxes which have been due for aperiod of at least ten years.” (Emphasis ours). Section 1ofArticle 8ofthe constitution provides, inpart that: “Taxat,ion shall be equal and uniform. All property inthis State, whether owned by natural persons or corporations, other than municipal, shall be taxed inproportion to its value, which shall be ascertained as provided by law.

... .” (Emphasis ours) Section 10ofArticle 8ofthe Constitution provides that: “The Legislature shall have no power to release the inhabitants of, or property in, any county, city or town from the payment of taxes levied for State or county purposes. ...” Section 11ofthe same Article provides that: “All property, whether owned by persons or corporations shall be assessed for taxation, .... And all lands and other property not rendered for taxati,on by the owner thereof shall be assessed at its ‘fair value by the proper officer.”. .

. -

Honorable George H. Sheppard, Page 5, O&5013

By Section 15ofArticle 8,the Constitution provides that: “The annual assessment made upon landed property shall be a special lien thereon; and all property, both real and personal, belonging to any delinquent taxpayer shall be liable to seizure and sale for the payment ofall the taxes and penalties due by such delinquent; and such property may be sold for the payment ofthe taxes and penalties due by such delinquent, under such regulations as the Legislature may provide.” (Emphasis ours) Arficle 7145, R. C. S., provides that all property, not expressly exempted bv the statutes shall be subject to taxation. Article 7146 defines “real property” asrthe land itself and all improvements and fixtures thereon, including all mines, minerals’, etc., in and under the same. Article 7172, R. C. S., provides that:

“All taxes upon real property shall be a lien upon such property until the same shall have been paid. And should the assessor fail to assess any~real estate for any one or more years, the lien shall be goodyfor every year that he should fail to assess for;

....” (Emphasis ours)

,’ Article 7336f, V.A.C.S., bars the collection **of**ad valorem taxes which became due before December 31, 1919. The Legislature has not seen fit tobar the collection ofany such taxes which have accrued since that date.

The~quoted constitutional and **statutory** provisions clearly evidence thejealous care’with which the framers ofthe constitution and the makers of **our** laws have sought to safeguard the revenues ofthe State. They speak, most emphatically, not only the intent that taxes should, constitute a lien upon the land against which they were assessed (Const., Art.‘3, Sec. 55; Art. 8,Sets. 1, 10and 15), but that such a Iien should continue inforce and effect until the taxes secured thereby have been paid, or by act of the Legislature have been released, after they have been due for more than ten years. (Const., **Art. 8,**  **Sec. 15;** **Art. 7172,**  R. C.‘S.)

The State ofOklahoma ha’s constitutional and **statutory** provisions with respect to tax liens, very similar to ours. Inthe case of Edwards v. Pratt, 42 Pac. (2d) 506, the Supreme Court .ofthat State had before itthe identical question here presented tous. The **court** stated the question thus:. .

Honorable George H.~Sheppard, Page 6, O-5013 “Does a court ofequity inOklahoma in ageneral receivership proceedings have jurisdiction to order and sell property in its custody free and clear ofall delinquent taxes,” The Oklahoma constitutional provision was’ identical with our Constitution, Art. 8,Sec. 10, insofar as the latter is applicable to this fact situation. The Oklahoma statute provided~that taxes upon real property should be a “perpetual lien.” Our statute (Art. 7145, R.C.S.) provides that taxes upon real property “shall be a lien upon such property until the same shall have been paid.” The Oklahoma Constitution provided that the Legislature should pass no law “exempting any property from taxation,” except as provided in the Constitution. Our Constitution provides (Art. 8,, Sec. 1)that “all property in this State
....shall be taxed.”

In holding that the court order authorizing the receiver to sell property free and clear of “all taxes” was void the Oklahoma Supreme Court inEdwards v. Pratt, said:

“Taxes are a perpetual lien, and having attached tothe land, this lien cannot be directed by a sale under judicial process whether upon execution, decree ofcourt, or foreclosure of mortgage. “The third syllabus in the case ofBoard ofCommissioners ofWoods County et al v. State ex rel. Commissions of Land Office, 125 Okl. 287, 257 Pac. 778, 53A.L.R. 1128. says: ‘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 ofmortgage, or any other proceedings in view of section 9724, compiled Oklahoma Statutes 1921, and art~icle 10, 55, ofthe Constitution.’

‘“Inthe body ofthe opinion, the case ofBloxham v. Consumers’ Electric Light &Street Railroad Company, 36Fla. 519, 18So. 444, 29 L.R.A. 507, 51Am. St. Rep. 44 is quoted: ‘The state’s lien for taxes, having attached by the assessment ofthe property, could not be divested by a subsequent judicial sale, even though the decree under which the sale was made should have directed that the property should be sold free from all incumbrances.

.. .Mesker v. Koch, 76Ind. 68.’ “.
. .. “The judgment ofthe receivership court is void. This appears upon the face ofthe record, and itis subject to attack any time and. . .,

.-

Honorable George H. Sheppard, Page 7. O-5013 any way, and the unpaid taxes were avalid outstanding lien at the time Edwards conveyed to Pratt and the covenant of warranty in the deed was breached.” The fact situation, the statutes and the constitutional provisions before the Oklahoma Supreme Court are almost identical with those confronting us here. We think that case correctly disposed ofthe question and that the same reasoning applies and controls here. We are, therefore, ofthe opinion that in so far as the order of the court undertakes to free the land here involved from the state and county tax liens itis void upon the face of the record. Consequently, we advise you that the tax collector is without authority to issue tax cancellation certificates cancelling such taxes, and further advise that he is without authority to issue tax certificates showing that such taxes have been paid until such time as they have, in fact, been paid.

Trusting that the foregoing fully answers your inquiry, we are Very truly yours

FIRST ASSISTANT .ATTORNEY GENERAL

FR :ff F.owler Roberts Assistant

APPROVED OPINION