Opinion ID: 2090964
Heading Depth: 1
Heading Rank: 1

Heading: Did the tax sale extinguish the mortgage lien?

Text: This is the most important question. Revised Code of 1935, § 3351, 25 Del.C. § 2901 et seq., provides in part: All taxes laid and imposed by the Levy Court of a County, or by the State for its own purposes, or by any school district united or consolidated or incorporated school district or incorporated town or city in this State except as in their charters otherwise provided, shall be and constitute a lien upon all the real estate of the taxable against or upon whom such taxes are laid or imposed, of which such taxable was seised at any time after such taxes shall have been levied and imposed, situate in the County in which such taxes are assessed and collectible, and such lien shall have preference and priority to all other liens on such real estate created or suffered by the said taxable, although such other lien or liens be of a date prior to the time of the attaching of such lien for taxes. This statute on its face is clear enough. The county tax lien is made senior to prior liens created by the taxable. It derives from an act of 1877 (15 Del.L. c. 476) and is a general statute, applying throughout the State. It does not, however, expressly deal with the question whether, upon a sale of land for nonpayment of such taxes, the prior liens are extinguished. Two statutes applicable only to Sussex County have considerable bearing upon this question. Revised Code of 1935, § 1445, 9 Del.C. §§ 8773-8775, provides in part: Every sale of lands and tenements shall be returned by the Receiver of Taxes and County Treasurer to the Superior Court, in and for Sussex County, at the next term thereof, and the Court shall inquire into the circumstances, and either approve said sale or set it aside. If it be approved, the Receiver of Taxes and County Treasurer making the sale shall make a deed to the purchaser which shall convey the title of the taxable, or of his alienee, as the case may be;   . Revised Code of 1935, § 1450, 9 Del.C. § 8779, provides: After satisfying the tax due and the costs and expenses of sale from the proceeds of sale, the amount remaining shall be paid at once to the owner of the land, or upon the refusal of said owner to accept the same, or if the owner is unknown or cannot be found, the amount remaining shall be deposited in some bank in the county either to the credit of the owner, or in a manner by which the fund may be identified. The first quoted statute can be traced back to the Code of 1829, p. 380. The phrase title of the taxable appears in § 214 of the 1852 Code. We note that the Sussex County statutes not only provide for a deed conveying the title of the taxable, but also fail to provide for payment from the proceeds of sale of any liens against the land; the amount remaining after satisfying the tax and paying the costs is to be paid to the owner of the land. It is of some interest to note that the comparable county tax statute relating to New Castle County contains a provision for payment to lien-holders served with notice of the sale. Revised Code of 1935, § 1355, 9 Del.C. § 8757. Now, if the matter stood there, the question of the construction of § 3351 of the 1935 Code might not be free from difficulty. But the court below found as a fact that from time immemorial the phrase title of the taxable in § 1445 and its forerunners has been construed in Sussex County to mean that the Sheriff sells and conveys only the interest of the taxable at the time of the sale, that is, if the land is encumbered by a lien the purchaser takes title subject to the lien. The court below said (128 A.2d 796): This has been the accepted law and practice in Sussex County for more than a century and it has become a recognized rule of property affecting land transactions and land titles. The court referred to various circumstances supporting this conclusion. First, the bid of $50 for 300 acres of land assessed at $2460 reflected the prevailing practice. To this we may add the circumstance that on the mortgage foreclosure sale 238 acres of that land brought $3100. Second, the provisions of 9 Del.C. § 8704, and the revisers' note thereto, expressly recognize the accepted practice. That section provides: Liens or encumbrances against lands and tenements sold for taxes by the Receiver of Taxes and County Treasurer of any county under the provisions of this chapter which were valid and subsisting liens or encumbrances at the time of the sale for taxes (other than the lien for the taxes for the collection of which such sale is made), shall not be discharged or anywise affected by such sale, and such sale shall be subject to such liens or encumbrances. The revisers' note to this section reads: The provisions as originally enacted, while technically applicable to Kent County only, are by this revised section, made applicable in all counties to conform with accepted law and practice. Thus, the accepted practice in Sussex County has been codified as the law of the State. The tax lien retains its priority (25 Del.C. § 2901), but a sale to enforce that lien does not extinguish other liens. Third, the court below relied on the unreported case of Derrickson v. Baylis, et al., No. 4, Oct.T., 1935, Sussex County. In that case it appeared that land had been sold under a tax sale to Benjamin Ableman. Subsequently, Addie T. Derrickson foreclosed a mortgage on the land given prior to the tax sale, and bought the property at the mortgage foreclosure sale. She sought to have the records of the County Board of Assessment changed to reflect her title. That Board having refused her request, she brought mandamus. In awarding the writ, Chief Justice Layton included the following recital in his order:    and argument of counsel having been heard, and the Court being of the opinion that by Ch. 82, Vol. 28, Laws of Delaware, as amended, a purchaser of lands and tenements at a tax sale conducted by the Receiver of Taxes and County Treasurer, acquires the title of the taxable and subject to the liens of record against the property sold. This express recognition of the accepted construction of the statutes governing tax sales in Sussex County is convincing evidence of the correctness of the holding in this case. Defendants insist that there was no evidence before the court below that such a construction has existed for a long period of time. It is evident to us that the court took judicial notice of a construction of the statutes by the bar of Sussex County and by purchasers at tax sales that had existed for a long period of time. Such a construction was reflected in the court's own records. As the court found, it had crystallized into a rule of property. It was confirmed by the Superior Court in the Derrickson case. Such a generally accepted construction by the bench and bar of Sussex County constitutes a sound basis for the holding below. Crawford, Statutory Construction, § 222, and cases cited. Its application here is particularly appropriate because titles to land, as the court below observed, have come to depend upon it. Defendants build a series of arguments on what they insist is the clear and unambiguous wording of the priority statute (Revised Code of 1935, § 3351, first above quoted). Many authorities from other jurisdictions are cited to the effect that a sale under such a statute not only divests the owner of all his title but grants to the purchaser a new title, derived from the sovereign, and extinguishes all liens and encumbrances on the land. It is unnecessary to consider these cases. If their correctness be granted, our conclusion is not changed. Defendants also insist that Derrickson v. Baylis has been overruled by Pottock v. Mellott, 2 Terry 361, 41 Del. 361, 22 A.2d 843, which holds that a tax sale under the Monition Tax Statute relating to the City of Wilmington passes the fee of the land and not merely the estate of the former owner. We think not. The opinion in the Pollock case was written by the same judge who made the order in the Derrickson case. The Wilmington Monition Tax Statute differs from the Sussex County statutes in important particulars. The monition is addressed not only to the taxable, but to lienholders; and the statute contemplates that the Sheriff shall apply the surplus proceeds of the sale to the payment of liens. See 36 Del.L. pp. 412, 416. Moreover (and this is the important distinction), the Pollock case presented no question of a settled rule of construction that had ripened into a rule of property. Some subsidiary arguments are also advanced. It is unnecessary to consider them in detail, for they are all answered by the settled construction of the Sussex County statutes. We hold that the tax sale in this case did not extinguish the mortgage lien. The second question is: