Source: https://supreme.justia.com/cases/federal/us/313/362/
Timestamp: 2019-04-22 04:07:45+00:00

Document:
Where a State has sold land under a tax title which is valid with the help of a statute curing irregularities in the tax proceeding, but invalid without it, a repeal of the curative statute impairs the obligation of the contract between the State and it vendee, in violation of the contract clause of the Federal Constitution. P. 313 U. S. 371.
201 Ark. 129; 143 S.W.2d 880, reversed.
Appeal from a decree affirming a decree quieting title in Lovett, relying on a deed from a former owner, against Wood et al., relying on a tax title.
This appeal presents the question whether an Arkansas Act of March 17, 1937, as construed and applied, violates Article I, § 10, of the Constitution.
the making or filing of the delinquent list, the recording thereof, or the recording of the list and notice of sale, or the certificate as to the publication of said notice of sale; provided, that this Act shall not apply to any suit now pending seeking to set aside any such sale, or to any suit brought within six months from the effective date of this Act for the purpose of setting aside any such sale."
Certain land in Desha County, Arkansas, was sold to the State in 1933 for nonpayment of 1932 taxes. The land was not redeemed, and was certified to the State, as owner. In 1936, the Commissioner of State Lands, on behalf of the State, by deeds reciting his statutory authority so to do, conveyed to the appellants all the right, title, and interest of the State in two parcels of the land.
"the Act [of 1935] does not profess to cure tax sales, but only [provides] that tax sales shall not be set aside by the courts because of certain irregularities and informalities, naming them."
It said that the appellants acquired no greater vested interest or title than the State had, and the repeal of the Act of 1935 "violated no constitutional right of theirs to a defense" thereunder. We are of opinion that the decision was erroneous.
". . . we now think it apparent that the legislature was endeavoring to find and put into effect a remedy or means to correct the evils growing out of nonpayment of taxes, to prevent tax evasion. For many years, it was a recognized proposition that tax forfeitures and sales of land on account thereof were well nigh universally held ineffectual to convey title, and there is perhaps at this time no doubt that the idea had grown and there was a general recognition of the futility of taxing laws that it was thought by many that people need not pay taxes if they were willing to meet the worry and expenses of litigation in regard thereto."
firms, corporations, quasi-corporations, associations . . . who may . . . claim said property,' sold for taxes subject only to the exceptions set forth and stated in the act, none of which is applicable to aid the appellant."
In its opinion in the present case, the court lays stress on the fact that Act 142 was not a curative act, although, in earlier decisions, it had repeatedly so designated it. [Footnote 10] But we do not deem the name or label of the legislation important. The fact is, as the court below holds, that the purpose and effect of the statute was to render unavailing to the owner whose property had been sold for taxes, as grounds of attack on the title of the purchaser from the State, irregularities and informalities in the performance of acts by State officers in connection with the assessment, levy, and sale which the legislature could, in its discretion have omitted to prescribe as essentials to the passing of a valid title.
"the laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms. [Footnote 13]"
statutes, the State granted the city authority to use the land in question for municipal purposes, and the city proceeded to improve it. This Court held that the city's grant, made with full legislative sanction, could not be impaired by the subsequent legislation.
As in the cases cited, so here the question is whether the State granted a valuable right which it subsequently essayed to take away. The Supreme Court of Arkansas sustained the constitutional validity of Act 142 of 1935 on the obvious ground that a taxpayer has no vested right in any given form of procedure for forfeiture of lands for nonpayment of taxes. As that court has held, the extent of his right is that he shall have notice of the sale and a fair opportunity to prevent forfeiture for default. It is suggested that the acts of the State in depriving the taxpayer of the right to set aside a sale for technical procedural defects is of like quality with the State's attempt to restore the taxpayer's rights against the appellants who purchased from the state. But obviously the two acts are not of the same quality. The taxpayer had neither a contract nor any other constitutional right as against the State to insist upon any given form of procedure so long as what was done in forfeiting his lands was not arbitrary or unfair. But the appellants, as purchasers from the State, were given, by the Act of 1935, an important assurance that the State would not itself take away or authorize others to destroy the estate which it had granted, by reason of technical defects in procedure cured by the Act of 1935.
supra, shows, this is not important, for that suit was between two private parties, as is this, one claiming rights conferred by the earlier state action and the other claiming superseding rights under later legislation.
The words of the Act are: "That Act 142 of the Acts of 1935 be, and the same is, hereby repealed."
Pope's Digest 1937, § 13849.
Carle v. Gehl, 193 Ark. 1061, 104 S.W.2d 445; Deaner v. Gwaltney, 194 Ark. 332, 108 S.W.2d 600; Lambert v. Reeves, 194 Ark. 1109, 110 S.W.2d 503, 112 S.W.2d 33; Gilley v. Southern Corporation, 194 Ark. 1134, 110 S.W.2d 509; Foster v. Reynolds, 195 Ark. 5, 110 S.W.2d 689; Wallace v. Todd, 195 Ark. 134, 111 S.W.2d 472; Burbridge v. Crawford, 195 Ark.191, 112 S.W.2d 423; Kansas City Life Ins. Co. v. Moss, 196 Ark. 553, 118 S.W.2d 873; Sanderson v. Walls, 200 Ark. 534, 140 S.W.2d 117.
Woodruff v. Trapnall, 10 How. 190, 51 U. S. 205.
Corbin v. Commissioners, 3 F. 356; Marx v. Hanthorn, 30 F. 579 (see id,. 148 U. S. 148 U.S. 172, 148 U. S. 182); Tracy v. Reed, 38 F. 69; Walker v. Ferguson, 176 Ark. 625, 3 S.W.2d 694; Chapman v. Jocelyn, 182 Cal. 294, 187 P. 962; Hull v. Florida, 29 Fla. 79, 11 So. 97; State Adjustment Co. v. Winslow, 114 Fla. 609, 154 So. 325; Morris v. Interstate Bond Co., 180 Ga. 689, 180 S.E. 819; Bruce v. Schuyler, 9 Ill. 221; Solis v. Williams, 205 Mass. 350, 91 N.E. 148; Curry v. Backus, 156 Mich. 342, 120 N.W. 796; Rott v. Steffens, 229 Mich. 241, 201 N.W. 227; State v. McDonald, 26 Minn. 145, 1 N.W. 832; Blakeley v. L. M. Mann Land Co., 153 Minn. 415, 190 N.W. 797; Price v. Harley, 142 Miss. 584, 107 So. 673; State v. Osten, 91 Mont. 76, 5 P.2d 562; Pace v. Wight, 25 N.M. 276, 181 P. 430; Dikeman v. Dikeman, 11 Paige, N.Y. 484; State v. Stephens, 182 Wash. 444, 47 P.2d 837; Milkint v. McNeeley, 113 W.Va. 804, 169 S.E. 790; State v. Gether Co., 203 Wis. 311, 234 N.W. 331. Compare McNee v. Wall, 4 F.Supp. 496; Moore v. Branch, 5 F.Supp. 1011.
Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, 290 U. S. 429.
"And it is hereby further agreed by and between the parties to these presents, and the true intent and meaning hereof is, that this present grant and every word or thing in the same contained shall not be construed or taken to be a covenant or covenants of warranty or of seizen of said parties of the first part or their successors or to operate further than to pass the estate right, title or interest they may have or may lawfully claim in the premises hereby conveyed by virtue of their several charters and the various acts of the Legislature of the the State of New York."
Indiana ex rel. Anderson v. Brand, 303 U. S. 95.
There is far more involved here than a mere litigation between rival claimants to a few hundred acres of Arkansas land. In my view, the statute here stricken down is but one of many acts adopted both by Congress and by state legislatures in an effort to meet the baffling economic and sociological problems growing out of a nationwide depression. These problems -- among them the owners' loss of homes and farms, chiefly through mortgage sales and tax forfeitures and the states' concomitant loss of tax revenues -- challenged the wisdom and capacity of the nation's legislators.
the State incident thereto into doubt and confusion. . . ."
Both the 1935 act and the 1937 act repealing it touch on Arkansas' policy as to taxation, tax forfeiture, and land ownership -- matters of public policy which are of vital interest to the state and all its citizens. It was a matter of serious moment to Arkansas that 25% of the state's privately owned land -- homes, farms, and other property -- was in jeopardy of being taken from its owners because of inability to pay taxes. If only 50% of the forfeitures were homes and farms, simultaneous ouster of so many citizens could result in forced migrations and discontents disastrous in their consequences. The manifestations of financial distress revealed by the widespread delinquency spotlighted conditions which called for the best in legislative statesmanship. To seek a rational and fair solution to the problem was not only within the power of Arkansas' lawmakers, but was also their imperative duty. Without attempting to judge the wisdom or equities of either act, it is easy to see that both the 1935 and the 1937 acts represented rational and understandable attempts to achieve such a solution. To hold that the contract clause of the Federal Constitution is a barrier to the 1937 attempt to restore to the distressed landowners the remedy partly taken away by the 1935 act is, in my view, wholly inconsistent with the spirit and the language of that Constitution.
As already stated, Arkansas was not faced with a problem peculiar to that state alone. At the depth of the depression, over 20% of all real property in the United States was tax delinquent. [Footnote 2/5] Nor was Arkansas alone in seeking to do something about the situation.
nearly every state in the Union has enacted legislation dealing with the problem of delinquent taxes, and a number of states have completely remodeled their systems of tax delinquency laws. This legislative activity has been called forth by the unprecedented increase, just before and during the depression, in the amount of unpaid property taxes, and by the consequent threat both to the financial stability of state and local governments and to the security of private property. [Footnote 2/6]"
"'Tax delinquencies were alarmingly great, rising as high as 78% in one county of the state. In seven counties of the state, the tax delinquency was over 50%. Because of these delinquencies, many towns, school districts, villages and cities were practically bankrupt,' . . . [and] serious breaches of the peace had occurred. [Footnote 2/9]"
read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. [Footnote 2/11]"
(2) In case they could not hold on to the land, such purchasers were afforded the protection of a judicially enforceable right to be reimbursed by the landowner for the amount paid out for purchase price and subsequent taxes, with interest, as well as for improvements -- all in the event that the former owners of the land should for any reason be able to prove that the lands had never been validly forfeited. Ark.Dig.Stats. (Pope, 1937) §§ 4663-4665, 13881.
The Arkansas legislature, by Act 264 of 1937, narrowed the circumstances under which purchasers might hold on to the land. But the second alternative assurance remained intact.
(2) The 1937 Arkansas statute was enacted well within the state's general legislative powers, and is in no way inconsistent with the true intent and fair interpretation of the federal constitutional prohibition which commands that "No State shall . . . pass any . . .Law impairing the Obligation of Contracts. . . ." Article 1, § 10.
First. The state, by quitclaim deeds, without any express warranty whatever, conveyed the lands in question to appellants. It is appellants' claim that an "obligation of the contract created by the grant of the State" has been impaired by the Arkansas statute. Stripped of surplus verbiage, appellants' naked contention is that Arkansas, by its quitclaim sale and conveyance, obligated itself to refrain from thereafter passing a general legislative enactment if such enactment would affect in any manner any of the legal means provided to protect tax sale purchasers against loss. We need not here consider whether, under the Arkansas Constitution, the legislature could have thus bargained away the state's legislative power in setting up a scheme for the sale of tax-forfeited land. For there was no attempt on the part of the state officials who made the sale to exercise any such extraordinary authority.
"A contract executed, as well as one which is executory, contains obligations binding on the parties. A grant, in its own nature, amounts to an extinguishment of the right of the grantor, and implies a contract not to reassert that right. A party is therefore always estopped by his own grant. [Footnote 2/13]"
the state's conveyance of all the title the state possessed. As pointed out above, Fletcher v. Peck rested upon the assumption that there was a continuing obligation on the part of the state, as on the part of any other grantor, not to repudiate a valid conveyance and attempt to reassert a claim to property which had been sold. Such a ruling offers no support to the contention that Arkansas, in quitclaiming all its interest to appellants, thereby assumed a continuing contractual obligation that its legislative department would in no way alter the procedural rules to be followed by the Arkansas courts in adjudicating controversies between the state's grantees and the original owners whom the state had attempted to divest of their property by the drastic method of forfeiture.
"The trouble at the bottom of the . . . case is that the supposed promise . . . on which it is founded does not exist. If such a promise had been intended, it was far too important to be left to implication."
Knoxville Water Co. v. Knoxville, 189 U. S. 434, 189 U. S. 436.
"The patent [here, the quitclaim deed] contains no covenant to do, or not to do, any further act in relation to the land, and we do not, in this case, feel at liberty to create one by implication."
Jackson v. Lamphire, 3 Pet. 280, 28 U. S. 289.
"A contract binding the state is only created by clear language, and is not to be extended by implication beyond the terms of the statute. . . . In the case at bar . . . , the act . . . operated in no manner as a restraint upon the legislature or as a contract upon its part that the state would not act whenever in its judgment it perceived the necessity for an additional ferry. . . . No promise made by the legislature by the first act is broken by the second."
Williams v. Wingo, 177 U. S. 601, 177 U. S. 603-604.
and we think it well settled that no such implication arises."
Wilson v. Standefer, 184 U. S. 399, 184 U. S. 410.
In this case, Arkansas has fully complied with the express terms of its contract. For there was certainly no express obligation on the part of Arkansas that its general laws concerning forfeiture of property and sale of land should remain static. Nor do I believe that any such obligation can properly be implied. Arkansas did not agree with the appellants that it would keep on its statute books legislation which, in effect, forfeited its citizens' lands in a way and manner which was directly in the teeth of what had been the Arkansas law at the time the alleged forfeitures occurred. And I do not believe that we should compel the accomplishment of such a result by what I conceive to be a stretching of the contract clause of the Federal Constitution.
Second. Measured either by the constitutional provision itself or by that provision as construed by prior decisions of this Court, I am of opinion that the Arkansas statute is consistent with what was referred to in Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, 290 U. S. 438-439, as the true intent and fair interpretation of the contract clause.
"There is not, perhaps, in the constitution any article of more ambiguous import, or which has occasioned, and will continue to occasion, more discussion and disagreement, . . . or the application of which to the cases which occur will be attended with more perplexity and embarrassment . . . , and it will not be surprising if, in the discharge of it, great diversity of opinion should arise."
"But to assign to contracts universally a literal purport and to exact for them a rigid literal fulfillment could not have been the intent of the Constitution. It is repelled by a hundred examples. Societies exercise a positive control as well over the inception, construction, and fulfillment of contracts as over the form and measure of the remedy to enforce them."
The accuracy of this statement cannot be questioned by one who reflects upon the extent to which contracts and agreements are a part of the daily activities of our society. For so nearly universal are contractual relationships that it is difficult, if not impossible, to conceive of laws which do not have either direct or indirect bearing upon contractual obligations. Therefore it would go far towards paralyzing the legislative arm of state governments to say that no legislative body could ever pass a law which would impair in any manner any contractual obligation of any kind. Upon a recognition of this basic truth rests the decision in the Blaisdell case. Such recognition was made clear by the use of the following expressions, either quoted and implicitly approved or used for the first time: "the prohibition is not an absolute one, and is not to be read with literal exactness like a mathematical formula;"
"No attempt has been made to fix definitely the line between alterations of the remedy, which are to be deemed legitimate, and those which, under the form of modifying the remedy, impair substantial rights. Every case must be determined upon its own circumstances;"
"In all such cases, the question becomes, therefore, one of reasonableness, and of that the legislature is primarily the judge;"
whether the legislation is addressed to a legitimate end and the measures taken are reasonable and appropriate to that end;"
"If it be determined, as it must be, that the contract clause is not an absolute an utterly unqualified restriction of the state's protective power, this legislation is clearly so reasonable as to be within the legislative competency."
adopt a liberal policy in order to protect property owners from tax forfeiture. And even granting that we could enter into questions of policy, I would be unable to reach the conclusion that Arkansas, by repealing its 1935 statute, acted "without . . . reason or in a spirit of oppression." W. B. Worthen Co. v. Kavanaugh, 295 U. S. 56, 295 U. S. 60. It would seem to me to be difficult to support an argument that Arkansas was acting either unreasonably, unjustly, oppressively, or counter to sound public policy in adopting a law which, without depriving purchasers of the right to recover their money outlay, with interest, sought to make the way easy for former home owners and property owners of all types to reacquire possession and ownership of forfeited property. If, under the contract clause, it is justifiable to seek to find "a rational compromise between individual rights and public welfare," Home Building & Loan Association v. Blaisdell, supra, at 290 U. S. 442, then it seems to me that this is a case for the application of that principle. I do not believe that the Arkansas legislature is prohibited by the Federal Constitution from adopting the public policy which the decision of the Arkansas Supreme Court has upheld in this case.
"Especial respect should be had to such decisions when the dispute arises out of general laws of a state, regulating its exercise of the taxing power, or relating to the state's disposition of its public lands. [Footnote 2/16]"
Ark. Acts 1935, No. 119, § 12. In Desha County, where the lands here involved are located, tax delinquency as of December 31, 1933, amounted to 57.5%. This was the highest figure reported for any county in the state. Realty Tax Delinquency (Bureau of the Census, 1934) Vol. I, part II, Arkansas, pp. 3, 4. And see Brannen, Tax Delinquent Rural Lands in Arkansas (University of Arkansas, College of Agriculture, Bulletin No. 311, 1934) passim.
Brannen, Tax Delinquency in Arkansas, 15 Southwestern Social Science Quarterly 201, 206, 207 (1934); Brannen, Tax Delinquent Rural Lands in Arkansas, supra, p. 35. And see Berry v. Davidson, 199 Ark. 276, 280, 133 S.W.2d 442.
Arkansas has expressed its continuing solicitude in this regard by numerous acts of its legislature. For example, by such an act, Arkansas taxpayers were permitted to retain title to their real property for three years by paying taxes for only one year. See Third Biennial Report, Arkansas State Tax Commission (1931-32) p. 6.
Ochiltree v. Railroad Co., 21 Wall. 249, 88 U. S. 251.
Realty Tax Delinquency (Bureau of the Census, 1934) Vol. 1, pp. 6-7. By states, tax delinquency varied from a low of 6% in Massachusetts to a high of 40.5% in Michigan. North Dakota (37.5%), Illinois (37%), and Florida (36%) followed close after Michigan.
Putney, Tax Delinquency in the United States, in Editorial Research Reports (Vol. II, 1935) 327. And see Fairchild, The Problem of Tax Delinquency (1934), 24 American Economic Review 140, 144.
Proceedings of the National Tax Association (1933) 28-30; cf. id., (1934) 30-31. For a complete list of changes in tax collection procedure made during the 1930-1934 period, see Realty Tax Delinquency (Bureau of the Census, 1934) Vol. 1, pp. Ia-IIi.
Justice Olsen of the Minnesota Supreme Court, as quoted in Home Building & Loan Association v. Blaisdell, 290 U. S. 398, 290 U. S. 423.
Home Building & Loan Association v. Blaisdell, supra, at 290 U. S. 424.
Cf. The Farm Debt Problem, Letter from the Secretary of Agriculture (73rd Cong., 1st Sess., House Doc. No. 9) pp. 26-29.
Home Building & Loan Assn. v. Blaisdell, supra, 290 U.S. at 290 U. S. 434, 435.
10 U. S. 6 Cranch 87, 10 U. S. 137. In that case, Mr. Justice Johnson denied that the impairment of contract clause was intended to apply to contracts already fully executed. Id. at 10 U. S. 145. That question, however, is not material to the point here under discussion.
"the laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as if they were expressly referred to or incorporated in its terms."
"But this broad language cannot be taken without qualification. Chief Justice Marshall pointed out the distinction between obligation and remedy. Sturges v. Crowninshield, supra, [4 Wheat. 122], p. 17 U. S. 200. Said he:"
"The distinction between the obligation of a contract, and the remedy given by the legislature to enforce that obligation has been taken at the bar, and exists in the nature of things. Without impairing the obligation of the contract, the remedy may certainly be modified as the wisdom of the nation shall direct."
"We have, then, no hesitation in saying that, however law may act upon contracts, it does not enter into them and become a part of the agreement. The effect of such a principle would be a mischievous abridgment of legislative power over subjects within the proper jurisdiction of states, by arresting their power to repeal or modify such laws with respect to existing contracts. . . . We think that obligation and remedy are distinguishable from each other. That the first is created by the act of the parties, the last is afforded by government."
Wilson v. Standefer, 184 U. S. 399, 184 U. S. 412.

References: § 10
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