Court Opinion

ID: 3840342
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:09:28.896153+00
Date Added: 2024-06-11T07:40:31.255111
License: Public Domain

A petition for rehearing has been filed, supported by briefs of counsel for the petitioners and counsel appearing amici curiae
pursuant to leave of court.
Emphasis is laid upon the case of State ex rel. Barton v.Hopkins, 14 Wash. 59, 44 P. 134 (cited in our former opinion), which this court expressly declined to follow in MunicipalSecurity Company v. Baker County, 33 Or. 338, 54 P. 174. The reasoning of the Washington court is as follows: Taxes of the current year have been treated by the courts as a part of the cash assets of the county for the reason that in legal contemplation their collection is certain; this is because the property is liable for the tax and can be sold if the tax is not paid. But the same thing is true of delinquent taxes, which are a lien against the property until it is sold. Hence, the dryly logical conclusion that delinquent taxes, no matter in what amount or for how many years past due or what the character of the proposed expenditure, are to be deemed assets of the county in determining whether a constitutional limitation on indebtedness has been passed. *Page 141 
The Washington court thereafter found it necessary to abandon the logic of its own decision, for in Seymour v. Ellensburg,81 Wash. 365, 142 P. 875, it declined to follow the sweeping doctrine of the Hopkins case. In the Ellensburg case, taxes of the city, delinquent more than twenty years, were attempted to be treated as assets. The court had shortly before held, in a suit by a taxpayer to restrain the collection of alleged delinquent personal property taxes, that there is a presumption of fact that after six years personal property taxes have been paid: Gravesv. Stone, 76 Wash. 88, 135 P. 810 Ann. Cas. 1915 D, 182. Apparently to avoid reductio ad absurdum the court decided that this same rule applied to real property taxes, the payment of which must be presumed after six years, and consequently that such taxes may not be deemed assets of the municipality. If we are to follow the general doctrine of the Washington court on this subject we assume that we should also follow the exception to that doctrine which that court has announced. In that event we should hold that of the delinquent taxes involved in this case an unknown portion of them, which are shown by the allegations of the writ to be more than six years past due, are presumed to have been paid and are therefore not available for the intended purpose.
But to us, the practical wisdom and sound common sense of the opinion of Mr. Justice WOLVERTON in Municipal Security Companyv. Baker County, supra, from which we quoted in our former opinion, seems to be more in accord with the spirit and intent of the constitutional limitation.
Our attention is called to certain statutes recently enacted which it is claimed have some bearing on the question. Among these is Ch. 321, Laws of Oregon, *Page 142 
1937, which is an act authorizing counties to borrow money upon their tax anticipation notes for the purpose of meeting current expenses, retiring outstanding warrants, or for any other lawful purpose, in an aggregate amount which shall not exceed at any time 50 per cent of the uncollected taxes upon real and personal property heretofore levied and in process of collection for such county for the tax year in which said notes are issued and for the two years next preceding. Section 4 of the act is substantially to the effect that the notes are payable solely from the tax anticipation note sinking fund, the creation of which is authorized by the terms of the act.
Chapter 51, Oregon Laws 1935 Special Session, authorizes the issuance by incorporated cities and towns of tax anticipation warrants for the purpose of paying bonds and bond interest coupons. It is provided that such warrants shall not exceed in the aggregate the difference between the amount in the funds against which they are drawn and 75 per cent of the amount of unpaid taxes levied and in process of collection for the year in which said warrants are issued and the preceding two years, and, further, that the taxes against which they are drawn "shall be credited to said funds upon collection thereof". In both statutes the creation of a fund out of current and delinquent taxes is provided for. In the former the notes to be issued are not general obligations of the municipality, while in the latter the warrants are authorized only for the purpose of refunding an already existing indebtedness — not to create a new indebtedness.
We are also cited to § 35-1330, Oregon Code Supplement 1935, which authorizes the board of directors of a school district to contract indebtedness in the *Page 143 
operation of the schools by the issue of warrants or contracting short term loans to the extent of all taxes levied and remaining uncollected.
These statutes shed little, if any, light on the present question. The briefs of counsel do not specifically inform us what effect should be given them here. If they are to be taken as a legislative declaration that delinquent taxes have value, that fact may readily be conceded. Only the 1937 act affects counties, and, if that act is to be regarded as in some fashion a practical interpretation of the meaning of the constitutional limitation on the creation of debt, it is far from sustaining the petitioners' position — both because under the terms of the act the aggregate amount of the warrants authorized may be only 50 per cent of the uncollected taxes and because the warrants are not to become general obligations of the county but are payable only out of the sinking fund. This is a very different thing from the asserted right to issue warrants as general obligations of the county, limited in amount only by the amount of all delinquent taxes outstanding. The legislature, in adopting the statute, would seem to have had a clear purpose in mind to stay within the confines of the constitution. If the proposal here were to create a sinking fund out of the collections of delinquent taxes and to limit the obligation of the county on the warrants to such fund, we would have a situation comparable to that provided for by the statute.
Additional authorities on this subject are collected and analyzed in case notes in 35 Mich. Law Review, 676, and 25 Georgetown Law Journal, 1045. Among these is Ward v. City ofPittsburgh, 321 Pa. 414, 184 A. 240, 105 A.L.R. 682. The Pennsylvania constitution limits the amount which a municipality may borrow, *Page 144 
without a vote of the electors, to two per cent of the assessed value of its taxable property. At the first session of the legislature, after the adoption of the constitution, an act was passed which defined the word indebtedness as including "all and all manner of debt, as well floating as funded, of the said municipality; and the net amount of such indebtedness shall be ascertained by deducting from the gross amount thereof the moneys in the treasury, all outstanding solvent debts, and all revenues applicable within one year to the payment of the same." Under this statute, which previously had been held constitutional, the court decided that where the proof affirmatively showed that two-thirds of all delinquent taxes of the City of Pittsburgh would be promptly collected they could be used as an asset deductible in computing borrowing power. The case is not authority here. We have no such statute, and there is no showing as to the probability of the prompt collection of $144,800 of delinquent taxes of the county for the years in question. Existing legislation in this state, as pointed out in our previous opinion, tends to encourage a leisurely liquidation of delinquent tax indebtedness.
We reiterate what was said in our former opinion, that "we have no intention in this case of announcing a departure from past decisions". The scope of the decision is limited by the question made by the facts stated in the alternative writ and admitted by the demurrer, and our holding is, that where a county proposes to incur an expenditure for an extraordinary purpose, such as that of building a courthouse, it may not treat delinquent taxes as an asset in the treasury for the purpose of determining whether or not it will thereby create a debt or liability in excess of $5,000 *Page 145 
and so evade the limitation expressed in Article XI, § 10, of the State Constitution. To this we may add that this is certainly true where there is no showing that such delinquent taxes will be promptly collected. Nothing heretofore said by this court as to the use of current taxes as assets is affected, and we leave for future consideration other aspects of the subject as they may be presented.
We are fully aware of the public importance of this decision. Whether it will have the disastrous consequences upon municipal corporations in their ability to function properly, pictured by counsel, we have no means of knowing. If so, the remedy must be sought at the hands of the people, who, thus far, have deemed it wise to limit the borrowing powers of counties.
The petition for rehearing is denied. *Page 146