Bussen Realty Co. v. Benson , 349 Mo. 58 ( 1942 )

DISSENTING OPINION. I am unable to agree that the facts of this case call for, or in anywise warrant, the application of the rule upon which the principal opinion is grounded. I think the judgment should be affirmed, and so I respectfully dissent, for reasons following:

[10, 11] I. Before reaching and deciding the single question put to us by plaintiff, i.e., "whether relief should be granted because of the inadequate consideration," it is incumbent on us to notice the state of the record upon which that question is said to arise. As forecast in the principal opinion, the equities of the case are not heavily with plaintiff. It is a corporation whose function is to act as a holding company for family real estate, and which is otherwise "not very active." It must be conceded that one of the first obligations and primary duties of such a corporation relates to the matter of discharging, or, if so disposed, to protect itself against foreclosure of, the state's tax liens. It was remiss in that duty, for which it does not pretend to offer an excuse. In this situation it is entitled to "cold law — no more, no less." We are confronted with its solemn admission made in open court, near the close of the entire case, in language as follows: "If our stipulation doesn't cover it, I will let the record show at this time that we make no attack on the validity of the sale or the regularity of the proceedings leading up to the sale." It is on such a record that the principal opinion holds the tax sale void, not for actual fraud, but upon the highly artificial doctrine of fraud in law. This, I think, untenable because plaintiff, by the stipulation above set forth, has admitted itself out of court; but I do not want to be understood as urging this as the principal ground of my dissent.

[12] II. As to the merits of the question, it is my thought that in applying to the facts of this record the rule of decision in cases of execution sales involving inadequacy of consideration, so gross as to amount in itself to evidence of fraud, the majority opinion falls into fundamental error. It fails to give effect to pertinent provisions of the act which prescribes our present statutory system for the collection of delinquent real estate taxes, popularly known as the Jones-Munger Act. [Laws 1933, pp. 425-449, sec. 9945 et seq., p. 7980 et seq., sec. 11117 et seq. R.S. '39. Note: In the course of this opinion, reference will [820] be to section numbers as shown by the 1939 revision except as otherwise noted.] In my judgment, the effect of the holding will be to hamper and impede, if not to utterly destroy, the workability of that act by writing into it a requirement not placed therein, either expressly or by fair implication, by the lawmakers; and, indeed, I think directly contrary to the plain provisions thereof.

We may judicially notice the distressed state of affairs as respects the stagnated condition of tax collections at the time the Legislature in 1933 put an end to the former method of foreclosure by suit and special execution, and enacted the present scheme of sale by the collector upon published notice without resort to judicial proceedings. The act itself contains a legislative recognition thereof, and what amounts to a declaration of the purpose of the new system, from which no divining power is necessary to appreciate the evils sought to be remedied. Section 9963(e) [Laws, 1933, p. 449, not carried in the 1939 revision] provides: "Public welfare and necessity demand that legislation be enacted to encourage the payment of delinquent and unpaid taxes, to promote the payment thereof and to protect the property owners of this state from foreclosure of their homes and property for delinquent taxes in order that the economic and industrial life of the state may be preserved. . . ."

Sales under execution, culminating in the foreclosure of tax liens, and tax sales under the statute we are considering are marked by wholly different characteristics. The effect of the former is to pass at once all the right, title and interest of the owner, and he cannot thereafter assert any further claim to the property. However, no such drastic effect flows from the tax sale itself under the present statute (except in those instances provided by Sec. 11130). Under Sec. 11133 the purchaser receives a mere certificate of purchase, one of the incidents of which is to transfer to him the tax lien. As broadly stated in Cooley on Taxation (1924), sec. 1452, and quoted approvingly in State ex rel. City of St. Louis v. Baumann, 348 Mo. 164, 153 S.W.2d 31, the holder thereof is recognized as the "owner of an inchoate title which would become complete if the time for redemption expired without its being made." But whatever may be the exact nature of the right or interest thus acquired, it is subject to be divested at any time during the two years next ensuing, by the exercise of the absolute right of the "owner or occupant . . . or any other person having an interest" to redeem "by paying . . . the full sum of the purchase money . . . and all the costs . . . with interest," etc. as provided by Sec. 11145.

This right to redeem, accorded by the statute is, of course, for the benefit, protection and security of the landowner. By virtue of it and other applicable sections, it will be seen that the earliest possible time at which a landowner may lose his property for failure to pay the taxes thereon is approximately four years from their due date, computed as follows: They may be paid during the year in which due, plus the delinquency period of approximately a year before being liable to sale, plus the redemption period of two full years, or, in the aggregate, nearly five years from the date of assessment. This fact, coupled with certain mandatory provisions of the act presently to be noticed, makes it clear to me that a sale for the full amount of taxes, interest, penalties and costs (as in the case at bar) may not be set aside on the mere ground of inadequacy of consideration where (the owner not being under any of the disabilities mentioned in Sec. 11146) no effort was made to redeem, nor any excuse offered for failure so to do, during the statutory two-year period. The statute does not contemplate or require that the land shall bring a sum bearing any relation either to its assessed value, or its market value, if there is such a difference. I think it is sufficient, and the letter and spirit of the statute have been complied with, if and when the state is made whole. Witness the statute in that behalf: "On the day mentioned in the notice, the county collector shall commence the sale of such [delinquent] lands, and shall continue the same from day to day until so much of each parcel assessed or belonging to each person assessed,shall be sold as will pay the taxes, interest and chargesthereon, or chargeable to such person in said county. The person offering at said sale to pay the required sum for the least quantity of any tract shall be considered the purchaser," etc. [Sec. 11127.]

This view is fortified upon a consideration of Sec. 11129, supra, which provides that if at the first offering "no person shall [821] bid therefor a sum equal to the then delinquenttaxes thereon with interest, penalty and costs" the lands shall be reoffered the next year, with a like provision as to reoffering the second year. Then it is provided by Sec. 11130, "Whenever any lands have been . . . offered for sale for delinquent taxes, interest, penalty and costs . . . for any two successive years and no person shall have bid therefor a sum equal to the delinquent taxes thereon, interest, penalty andcosts provided by law, then" the same "shall at the next regular tax sale" be sold "to the highest bidder, and there shall be no period of redemption from such sales." I pause to inquire whether this section, too, is not rendered nugatory under the principal opinion, holding the sale in question void because the bid at which it was sold was not a sufficient percentage of the value of the property to constitute an adequate consideration.

The purpose of the tax sale is to collect taxes, and we judicially know that taxes levied on property generally bear a very slight proportion to its value. The result is that the buyer, under either the old or the new system, receives property of greater value, potentially or actually, than the taxes. The likelihood thereof is one of the incentives for bidding. The California view seems to be apposite: "The sale is for the benefit of the taxing body and it is expected that the price will bring it out whole. This is the first concern in tax sales andnot that the owner may receive the reasonable value of hisproperty. If this were required there would be few bidders at tax sales . . ." (Italics mine.) [R.C.A. Photophone, Inc. v. Huffman (Cal.App.), 42 P.2d 1059.]

Contrasting the holding of the principal opinion with that of a number of the courts in states having similar statutory schemes, it is paradoxical that in the latter it is not infrequently held that if the sale is "for the amount exceeding the aggregate of taxes, costs, penalties and charges for which the land is legally and actually liable the sale is entirely void and passes no title." [61 C.J., p. 1192, citing thirty or forty cases from Ark., Cal., Ill., Kan., Ky., Minn., N.H., N.J., Tex., Utah, Wis. and Canadian Provinces.] Of course, our statute contemplates that bids for more than the amount of taxes, interest and costs may, in some instances, be offered, for it expressly provides that the amount of the surplus, if any, shall be noted in the certificate of purchase [Sec. 11133], and be paid by the collector "to the person entitled thereto" — the [former] owner or owners, agent or agents. [Sec. 11159.] Of course, a small bid is distinctly favorable to the landowner in the ordinary transaction, for in order to redeem he must pay interest not only on the items giving rise to the sale, but in addition thereto, interest at not more than 10% per annum on the surplus refundable to him. I do not think, when the provisions for redemption are considered, that the lawmakers intended that the bidders are required, in addition to making the state whole, to bid some fair percentage of the value of the property as a consideration, thus affording the alternatives of redemption or outright sale, at the landowner's election.

The cases giving rise to the rule applied by the principal opinion show that the bids at the sales were insufficient to pay even the amount of the taxes, of which Mangold v. Bacon,237 Mo. 496, 141 S.W. 650, and Ellis v. Powell (Mo.), 117 S.W.2d 225, are examples.

It is expressly admitted that the sale in the case at bar was held in strict conformity with the statute. The statute is plain and unambiguous, the legislative intent is clear, and it should be given effect. If this be true, it follows that it was not only the right, but the mandatory duty of the collector, to sell at the bid made by the purchaser in question; and, accordingly, the sale should be upheld.

I am quite strongly of the opinion that it simply will not do to say that a real estate holding corporation, or, for that matter, any person sui juris, may neglect to pay taxes on its real estate for a period of eight years (1928-1936), and in the meantime suffer the property to be sold in strict conformity with the statute, neglect to exercise the right of redemption, wait months (seven in this instance) after the lapse of the redemption period, and then, admitting the regularity and validity of thesale, invoke the jurisdiction of a court of equity for relief on the sole ground of inadequacy of consideration. If this may be done seven months after the redemption period, then there is no reason why it may not be done seven years thereafter, and so upset our whole system of delinquent tax collection. I deny that in such instances the landowner may elect so to wait, and at his convenience, bring his suit, and be restored [822] to ownership on the sole showing of inadequacy of consideration, where the bid was sufficient to make the state whole, and satisfied the requirements of the statute. We have often said that a court of conscience does not sit to correct the evils of negligence.Ellison, J., concurs.