Court Opinion

ID: 6691033
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:37:52.453791+00
Date Added: 2024-06-11T16:01:06.588069
License: Public Domain

SHERWOOD, J.
(concurring specially). It is with much reluctance and hesitation I am expressing views differing from my associates in this case.
But the right of the state, its subdivisions, and municipalities to levy and collect without delay or hindrance the taxes necessary to' their existence should, I think, be decided when squarely presented as they are in this case.
Nor should the state as mortgagee be subjected to a burden *108not imposed on other mortgagees, based on a clause found in practically all mortgages in the state, providing in substance that unpaid taxes, liens and judgments when paid by the mortgagee should become a part of the mortgage debt.
It is conceded as a fact in this case that the state through its rural credits board, which is admittedly a department of the state government, has loaned about $40,000,000 and taken mortgages therefor on abount 12,000 quarter sections of land within the state. The Attorney General, the head of another branch of the state government, has expressed the view that the lien of such mortgage is superior to the lien of the state for taxes levied subsequent to the recording of these mortgages.
The doubt so raised as to whether the lien of a general tax levied for the support of the state government, its subdivisions, and municipalities was superior or inferior to a rural credits mortgage has prevented people from purchasing at tax sale practically all lands on which rural credit loans have been made, and the state, its subdivisions, and municipalities have not only been hindered and delayed, but in counties where many rural credit loans were made, absolutely prevented from the collection of taxes necessary to the very existence of the state and its subdivisions.
In my view, this directly challenges the most important sovereign power of the state which is not only to tax but to collect such tax speedily without hindrance or delay.
It was said by Mr. Justice Miller in Savings & Loan Association v. Topeka, 20- Wall. 655, 22 L. ed. 455:
“The power tO' tax is, therefore, the strongest, the most pervading of all the powers of government.”
It was said by Chief Justice Marshall in McCulloch v. Maryland, 4 Wheat. 431, 4 L. ed. 579:
“The power to tax involves the power to destroy.”
“The superiority of the lien for general taxes must be asserted, even to the point of destroying the lien of the local assessment.” Maryland Realty Co. v. City of Tacoma, 121 Wash. 230, 209 P. 1; McMillan v. Tacoma, 26 Wash. 308, 67 P. 68.
“In all governments of constitutional limitations, sovereign power manifests itself in but three ways: By exercising the right of taxation; the right of eminent domain; and through its police power. * * * The right of taxation is one of the most striking *109attributes of sovereignty. In this field government approaches the absolute.” United States v. Douglas Willan Sartoris Co., 3 Wyo. 297, 22 P. 912; State of Georgia v. City of Chattanooga, 264 U. S. 472, 44 S. Ct. 369, 68 L. ed. 796.
In an action involving the right of eminent domain it was held that the right was so inherently governmental and essential to the public welfare that it could not be abridged by agreement. Penn. Hospital v. Philadelphia, 245 U. S. 20, 38 S. Ct. 35, 62 L. ed. 124.
The conflict here is plainly between the state in its general sovereign taxing’ power and a mortgage made by a minor subdivision of the same state, and it seems clear that the power and lien created by the state must be greater than that created by such subdivision.
There is another reason why the lien of this tax should be superior to the lien of a rural credit mortgage. When the state engaged in the- business of making rural credit loans, it was certainly not acting in its sovereign capacity, but was engaged in the business of loaning money in competition with other citizens of the state. Stavg v. Van Camp, 46 S. D. 472, 193 N. W. 731.
As was said by Chief Justice Marshall in U. S. v. Planters’ Bank of Georgia, 9 Wheat. 904, 6 L. ed. 244:
“It is, we think, a sound principle, that when a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to- the company its privilegies and its prerogatives, it descends to' a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business' which is to be transacted. Thus many states of this Union, who have an interest in banks, are not suable even in their own courts; yet they never exempt the corporation from being sued. The state of Georgia, by giving to the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign character, so far as respects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never exercises its sovereignty. * * * The government, by becoming a corporator, lays down its sovereignty, so far as respects the transactions of the corporation, and exercises no *110power or privilege which is not derived from the charter.” Bank of Tennessee v. Dibrell, 3 Sneed (35 Tenn.) 379; South Carolina v. U. S., 199 U. S. 437, 26 S. Ct. 110, 50 L. ed. 261, Ann. Cas. 737; Lloyd v. New York, 5 N. Y. 569, 55 Am. Dec. 347; Georgia v. Chattanooga, supra; Maryland Casualty Co. v. McConnell, 148 Tenn. 656, 257 S. W. 410.
The court will take judicial notice that the state of South Dakota is not going, but has already gone, extensively into various lines of business heretofore occupied by private citizens.
It is also clear that the mere assertion that the state was acting in its sovereign capacity in loaning money, and therefore the lien of its mortgages was not only superior to the lien of the mortgage of its competitors but also superior to the state’s lien for taxes, has been sufficient to practically paralyze the ordinary functions of government in at least 16 counties of the state.
I think many of these grave questions will not arise in this or other relations of the state, in private industry, if we base this opinion on the superiority of the state’s tax lien over the lien of its mortgages and the proposition that when it enters into private business in competition with its citizens it is not acting in its sovereign capacity.
It follows- that the lien of the tax was superior to the lien of the rural credit mortgage; that the writ of mandamus should be granted on the grounds above set forth and the judgment of the low'er court reversed.