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Timestamp: 2019-04-22 19:37:44+00:00

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Appeal from the Supreme Court of Arkansas.
Mr. J. G. Burke, of Helena, Ark., for appellants. [313 U.S. 362, 363] Mr. Walter G. Riddick, of Little Rock, Ark., for appellee.
This appeal presents the question whether an Arkansas Act of March 17, 1937, as construed and applied, violates Article I, 10, of the Constitution.
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, con eyed to the appellants all the right, title, and interest of the State in two parcels of the land.
The appellants contended in the courts below, and con- [313 U.S. 362, 366] tend here, that if the Act of 1937 be given the effect of divesting them of title confirmed in them by the Act of 1935 the later Act impairs the obligation of their contracts with the State. The Supreme Court of Arkansas held that '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.
As the Supreme Court has indicated in this case, Act 142 of 1935 was one of a series of statutes adopted to prevent the setting aside of tax sales and titles based upon them for informalities and irregularities in the assessment and levy of taxes and the sale of property for delinquent taxes which had seriously impeded the effective collection of taxes and diminished the State's revenue.
'... 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 r cognition 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.
It is evident from these statements that the purpose of Act 142 was definitely to assure purchasers from the State that the land bought by them could not be taken away from them on grounds theretofore available to the delinquent taxpayer.
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. 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 federal and state courts have held, with practical unanimity, that any substanti l alteration by subsequent legislation of the rights of a purchaser at tax sale, accruing to him under laws in force at the time of his purchase, is void as impairing the obligation of contract. 12 [313 U.S. 362, 370] Appellee relies upon the circumstance that the State's deed is a quit- claim. From this it is inferred that no contract was made that the terms of the Act of 1935 were to bind the State with respect to the title conveyed. But '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.' 13 This court has held that the terms of a statute according rights and immunities to a vendee of the state are a part of the obligation of the deed made pursuant to it. The grant of the State of Georgia involved in Fletcher v. Peck, supra, was a patent of the public lands of the State and, of course, contained no warranty of title save such as is implied from the fact that the State purports to grant its own lands. In Pennoyer v. McConnaughy, 140 U.S. 1 , 11 S.Ct. 699, the rights of the plaintiff held to be protected by Art. 1, Sec. 10, arose out of his application for a patent filed pursuant to a state statute. The impairment was worked by a subsequent statute seeking to destroy the right of the plaintiff to the patent pursuant to his compliance with the earlier act. No warranty was involved. In Appleby v. New York, 271 U.S. 364 , 46 S.Ct. 569, it appeared that the legislature had fixed the shore line of the City of New York along the Hudson River and that the land inside that line had been granted to the city with the consequent right to convey it. The city had conveyed land under water, on the landward side of the line, to Appleby by a quit-claim deed. 14 By subsequent [313 U.S. 362, 371] 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.
The appellee suggests that it is significant that the State was not a party to this suit, and was not, therefore, seeking to take back what it had granted. But, as Fletcher v. Peck, [313 U.S. 362, 372] 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.
It begs the question to say that the State may not abdicate its police power. In the exercise of the policy committed to the legislature it is competent for the state to enter into a contract which it intends as an assurance of protection to its grantee. 15 This we think the State has plainly done in the present instance. The judgment is reversed.
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 nation-wide 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.
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 act 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.
So much for the general setting which gave rise to the law here held invalid. In order better to understand the effect that law had on the appellants and the appellee, it is necessary to consider other provisions of Arkansas law.
(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. [313 U.S. 362, 378] 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 quit claim 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 quit claim 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 deed to property without warranty is an agreement to transfer whatever title the grantor has. And even without express language to that effect in the conveyance, it is reasonable to say that a valid quit claim con- [313 U.S. 362, 379] veyance carries along with it an implied obligation that the grantor will not repudiate the grant and attempt to reassert title in himself, for such a reassertion of title would be contrary to the express purpose which actuated the parties in reaching the agreement which ended in the conveyance. The implied obligation not to reassert title was th basis of the decision in Fletcher v. Peck, 6 Cranch 87, a decision which this Court relies on in the case at bar. Cf. Satterlee v. Matthewson, 2 Pet. 380, 414, 415. In Fletcher v. Peck, the court said: '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.' 13 What the State of Georgia did in that case was to seek to reassert title to land which the court found it had conveyed for a consideration under what the court deemed to be a valid contract. True, Georgia was not a party to the actual litigation, but by purporting to convey to one purchaser land which had already been conveyed by it to another purchaser the state clearly attempted to assert that it still had title to the land. Here the State of Arkansas has not repudiated any implied obligation by attempting to reassert title in the lands whose ownership is now in issue. There is no litigation here between the state and its grantees, and none, as in Fletcher v. Peck, between rival grantees of the state. Appellee claims title through an owner whose estate Arkansas had purportedly forfeited for unpaid taxes. Neither in the facts of this case nor in the legislation attacked is there any kind of challenge to the validity of [313 U.S. 362, 380] 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 quit claiming 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, 436 , 23 S.Ct. 531, 532. 'The patent ( here, the quit claim 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, 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, 603 , 604 S., 20 S.Ct. 793, 794. 'There is no undertaking on the part of the state with the purchaser that the remedy prescribed in this statute, and no other, shall be pursued, unless it is to be implied from the mere presence of the provision in the statute, [313 U.S. 362, 381] and we think it well settled that no such implication arises.' Wilson v. Standefer, 184 U.S. 399, 410 , 22 S.Ct. 384, 388.
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 Association v. Blaisdell, 290 U.S. 398, 438 , 439 S., 54 S.Ct. 231, 240, 88 A.L.R. 1481, as the true intent and fair interpretation of the contract clause.
Writing in 1817, Judge Livingston, of the Federal Circuit Court of New York, had this to say 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.' Adams v. Storey, Fed.Cas. No.66, 1 Paine 79, 88, 89. In Home Building & Loan Association v. Blaisdell, supra, written in 1933, appears a re sume of previous decisions which [313 U.S. 362, 382] substantiate the accuracy of Judge Livingston's prophecy. And in the Blaisdell case this Court quoted a statement originally made by Justice Johnson in Ogden v. Saunders, 12 Wheat. 213, 286: 'But to assign to contracts, universally, a literal purport, and to exact for them a rigid literal fulfilment, 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 fulfilment 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'; 'The question is not whether the legislative action affects contracts incidentally, or directly or indirectly, but [313 U.S. 362, 383] 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'.
[ Footnote 1 ] Act 142 of 1935.
[ Footnote 2 ] Act 264 of 1937.
[ Footnote 3 ] Ark., 143 S.W.2d 880.
[ Footnote 4 ] Pope's Digest 1937, 13849.
[ Footnote 5 ] Id., 13853.
[ Footnote 6 ] Id., 13855.
[ Footnote 7 ] Id., 13868.
[ Footnote 8 ] Id., 13876.
[ Footnote 9 ] Id., 8610, 8620.
[ Footnote 10 ] 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.
[ Footnote 11 ] Woodruff v. Trapnall, 10 How. 190, 205.
[ Footnote 12 ] Corbin v. Commissioners, C.C., 3 F. 356; Marx v. Hanthorn, C.C., 30 F. 579 (see Id., 148 U.S. 172, 182 , 13 S.Ct. 508, 510); Tracy v. Reed, C.C., 38 F. 69, 2 L.R.A. 773; 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, 16 L.R.A. 308, 30 Am.St.Rep. 95; State Adjustment Co. v. Winslow, 114 Fla. 609, 154 So. 325; Morris v. Interstate Bond Co., 180 Ga. 689, 180 S.E. 819, 100 A.L.R. 415; Bruce v. Schuyler, 9 Ill. 221, 46 Am.Dec. 447; 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, 38 A.L.R. 224; 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, 4m 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, D.C., 4 F.Supp. 496; Moore v. Branch, D.C., 5 F.Supp. 1011.
[ Footnote 13 ] Home Building & L. Association v. Blaisdell, 290 U.S. 398, 429 , 54 S.Ct. 231, 236, 88 A.L.R. 1481.
[ Footnote 15 ] State of Indiana ex rel. Anderson v. Brand, 303 U.S. 95 , 59 S.Ct. 443, 113 A.L.R. 1482.
[ Footnote 1 ] 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.
[ Footnote 2 ] 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.
[ Footnote 3 ] 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.
[ Footnote 4 ] Ochiltree v. Railroad Co., 21 Wall. 249, 251.
[ Footnote 5 ] 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.
[ Footnote 6 ] 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.
[ Footnote 7 ] 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.
[ Footnote 8 ] Justice Olsen of the Minnesota Supreme Court, as quoted in Home Building & Loan Association v. Blaisdell, 290 U.S. 398, 423 , 54 S.Ct. 231, 234, 88 A.L.R. 1481.
[ Footnote 9 ] Home Building & Loan Association v. Blaisdell, supra, 290 U.S. at page 424, 54 S.Ct. at pages 234, 235, 88 A.L.R. 1481.
[ Footnote 10 ] Cf. The Farm Debt Problem, Letter from the Secretary of Agriculture (73rd Cong., 1st Sess., House Doc. No. 9) pp. 26-29.
[ Footnote 11 ] Home Building & Lo n Association v. Blaisdell, supra, 290 U.S. at pages 434, 435, 54 S.Ct. at pages 238, 239, 88 A.L.R. 1481.
[ Footnote 13 ] 6 Cranch 87, 137. In that case Mr. Justice Johnson denied that the impairment of contract clause was intended to apply to contracts already fully executed. Id., 6 Cranch at page 145. That question, however, is not material to the point here under discussion.
[ Footnote 16 ] Wilson v. Standefer, 184 U.S. 399, 412 , 22 S.Ct. 384, 389.

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