City of Albuquerque v. Middle Rio Grande Conservancy , 45 N.M. 313 ( 1941 )

The majority opinion gives priority to the paving lien over the conservancy lien, resting its conclusion both upon the pertinent paving statute, L. 1923, c. 133, and upon an application of the common law principle that first in time is first in right. In so far as the priority accorded rests upon the statute, it involves an unwarranted definition of the word "incumbrancer". And a proper application of common law principles is denied by an obvious implication of equality arising from the controlling language of the two statutes involved — L. 1923, c. 133, § 1 and L. 1923, c. 140, § 515(1) (c).

The pertinent language of the paving statute reads: "And it shall be the duty of the clerk of said city, town or village within thirty days after the completion and acceptance of the work, or any portion thereof approved by the engineer of the municipality, to make out, sign and attest with the municipal seal and file for record in the office of the County Clerk of the county in which said city, town or village is located, a claim of lien for the amount due and assessed against each lot and parcel of land so assessed and all purchasers, mortgagees or incumbrancers of any such lot or parcel of land shall take the same subject to such lien, which shall be superior to all other liens except the lien for general taxes, but the sale of any such lot or parcel of land for general taxes shall not relieve such lot or parcel of land from such assessment or the lien therefor." L. 1923, c. 133, § 1, (1929 Comp., § 90-1701).

The language most to consider in the Conservancy Act reads:

"(1) All assessments provided for in this Act, together with all interest thereon and all penalties for default in payment of the same, and all costs in collecting the same, shall, from the date of filing:

* * *

"(c) The Maintenance Fund Assessment Record with the Assessor constitute a perpetual lien in amount not in excess of the benefits severally appraised, upon all the lands and other property against which such assessments shall be levied, as provided in this Act, to which only the lien for general or special State, County, City, Town, Village or School taxes shall be paramount, and no sale of such property to enforce any general or special State, County, City, Town, Village, School tax or other lien shall extinguish the perpetual lien of such assessments; provided, however, that assessments levied under this Act shall not in any event be a personal liability against the owner, but shall constitute a lien upon the property only." L. 1923, c. 140, § 515(1) (c). Cf. 1929 Comp., § 30-515.

It is plain from a reading of these two statutes that each purports to give to the respective liens authorized a "superiority", "paramountcy" or "priority", whichever one may choose to call it, over every other kind of lien known to the law except the lien for general or ad valorem taxes. The paving statute declares the paving lien shall be superior to all other liens except the lien for general taxes. The Conservancy Act proclaims the conservancy lien shall be paramount to all other liens except the lien for general taxes. Both the opinion of the majority and of the trial judge seem to agree that on the face of the language employed this suggests equality. I feel that by strong implication, it compels equality.

The legislature in thus giving the same rank to each lien puts both on the same plane. If each is superior to every other kind of lien except the lien for general taxes and if the lien of each will survive a foreclosure of the general tax lien (and each statute so declares), then how can it be denied that by plain mandate of the two statutes they are given equal rank? Things that are equal to the same thing are equal to each other. Having equal rank, with neither made superior to the other, they should share ratably in the proceeds of any sale of the property for the foreclosure of both liens.

The plaintiff is in a court of equity seeking foreclosure of its lien on property seemingly insufficient to pay the same in full and, at the same time, satisfy another lien of equal dignity and rank whose owner it has brought before the court compulsorily in an effort to cut off and extinguish the latter's lien as subordinate and inferior to its own. Under such circumstances, both liens being on an equal footing, the court will or should apply the ancient equitable maxim that equality is equity, or as it is sometimes expressed, that equity delights in equality, and decree a proportionate distribution of the funds arising from a sale under foreclosure of both liens. 21 C.J. 206; 19 Am.Jur. 315.

I entertained the same view about the claimed priority between bondholders in a matter before us in State ex rel. Ackerman v. City of Carlsbad, 39 N.M. 352, 47 P.2d 865, as that which I here advance. As pointed out in my specially concurring opinion in that case, there being no express statutory authorization to municipalities to award priority as between bonds but rather a strong implication that equality should prevail and in further view of the equitable maxim mentioned, the court should have declared proper a proportionate distribution of the fund arising from the foreclosures. Such should be the holding here.

The majority, if left to the conclusion to arise from the mere legislative declaration that each of these liens should be superior to all others except that for general taxes, and the omission expressly to declare any priority between the two improvement liens themselves, would seemingly be content, as the trial judge indicated he would be, to deduce a legislative intent that equality was contemplated. But they are able to satisfy themselves that in the use of the word "incumbrancer" in the paving act, the legislature expressly made that lien, when recorded, prior and superior to a subsequently attaching conservancy lien. In my opinion, nothing could be farther from the fact.

The language relied on is that which follows the direction to the city clerk to make and file with the County Clerk of the county in which the city is located a claim of lien for the amount due and assessed against each lot and further providing; "* * * and all purchasers, mortgagees or incumbrancers of any such lot or parcel of land shall take the same subject to such lien, which shall be superior to all other liens except the lien for general taxes, but the sale of any such lot or parcel of land for general taxes shall not relieve such lot or parcel of land from such assessment or the lien therefor." (Italics mine.)

Citing 20 Words Phrases, Perm.Ed., 614, to the proposition that special assessment liens are "incumbrances" and the same authority at page 619 to the point that one who holds an incumbrance is an "incumbrancer", the majority hold that the word "incumbrancer" italicized in the statute quoted above embraces the holder of a subsequently attaching lien of the same kind and rank imposed by public authority for a public purpose. Thus is read from the statute an expressly declared priority of the paving lien over the particular conservancy lien here involved as one attaching subsequent to the recording of the paving lien.

It seems to me the majority are clearly wrong in extending the meaning of "incumbrancer" as here employed to embrace other liens of like kind imposed by governmental authority. The maxim noscitur a sociis applies and confines the word to a meaning kindred to that of the words with which it is associated. See 46 C.J. 496 where many cases applying the maxim are cited. Arroyo Ditch Water Co. v. Superior Court of Los Angeles County,92 Cal. 47, 28 P. 54, 55, 27 Am. St. Rep. 91, will illustrate my point even if it does so somewhat conversely. The California Constitution, art. 6, § 5, declares that the superior court shall have original jurisdiction "in all cases at law which involve the * * * legality of any tax, impost, assessment, toll, or municipal fine". It was held that the term "assessment" does not include installments of "calls" made by a private corporation on its stockholders under Code Civil Proc.Cal., § 838. The Court said: "The term `assessment' used in this provision does not include the installments or `calls' which are sometimes termed `assessments,' made under the provisions of section 315 of the Civil Code, by a private corporation upon its stockholders, in accordance with an agreement on their part, express or implied, to pay into its treasury the amount subscribed by them to its capital stock. It has reference to such assessments as are authorized by those provisions of the constitution which relate to revenue and taxation, and to such as may be made under the authority of a municipal or other public corporation for the purpose of meeting the cost or expense of some public improvement. Taylor v. Palmer, 31 Cal. [240] 241. The other words in the clause, in connection with which the term is associated, serve to illustrate its meaning, and resolve any doubt that might otherwise be raised respecting the sense in which it is to be interpreted. Each of these subjects, viz., tax, impost, toll, municipal fine, of which jurisdiction is thus conferred upon the superior court, implies a charge imposed by public authority for some public purpose, and, under the rules by which the maxim noscitur a sociis is applied, it is clear that the `assessment' referred to is of a kindred nature."

Just as in the California case the word "assessment", from the associated words, was confined in meaning to "a charge imposed by public authority for some public purpose", so here and by like reasoning and by an application of the same maxim, the word "incumbrancer" must be held to exclude from its meaning liens "imposed by public authority for some public purpose."

That this is the correct view may be easily demonstrated. If the word "incumbrancer" as employed has the meaning claimed for it by the majority, then the state as the holder of a lien for general taxes is an incumbrancer. It is well established that the lien held by the state for general taxes is an "incumbrance", 20 Words Phrases, Perm.Ed. 617, and that a covenant against incumbrances is breached by the existence of a lien for such taxes. Patterson v. Cappon, 125 Wis. 198, 102 N.W. 1083; Maddocks v. Stevens, 89 Me. 336, 36 A. 398. Therefore, under the definition adopted by the majority, but for the express declaration of priority contained in the exception following the use of the word "incumbrancer", the paving lien would have priority over general tax liens attaching subsequent to the recording of the paving lien. Now, I do not think the majority would contend for a moment that the excepted priority in favor of general taxes was at all necessary to give them priority over the paving lien. Certainly, it could not be successfully so contended.

But assuming for the moment that the exception in favor of priority for general taxes is necessary in order to preserve same against priority for the paving lien, then what will the majority say when there shall come before this court for decision a question of priority as between a mechanic's lien and the lien for general taxes where the statute contains no such exception? 1929 Comp., § 82-205, relating to mechanic's liens, provides: "The liens provided for in this article are preferred to any lien, mortgage or other incumbrance which may have attached subsequent to the time when the building, improvement or structure was commenced, work done, or materials were commenced to be furnished."

Here the word "incumbrance" obviously cannot be held to accord priority to the mechanic's lien over the lien for general taxes or, as for that matter, over the lien of a public improvement assessment. Yet, is there any more reason for holding the word as employed in the paving statute includes public improvement assessment liens than to accord it the same meaning here? I think not. It should not be given that meaning in either statute. In both, it should be so confined as to exclude the lien of "a charge imposed by public authority for some public purpose". The meaning of the word must be determined from its context. In Crabb v. Young, 92 N.Y. 56, 69, it was held that to call a tax an "incumbrance" within a provision in a will requiring investments to be made in mortgages on unincumbered real estate, "would give it an unreasonable and impracticable construction". So, it seems, does the broad definition given the word "incumbrancer" by the majority in the case at bar. But without that definition, the majority have indeed a slender reed to support their conclusion of priority for the paving lien over the conservancy lien.

The view I advance on the meaning of "incumbrancer" as employed in the paving statute is sustained by the construction given the word "lien" by the Supreme Court of California in Thompson v. Clark, 6 Cal. 2d 285, 57 P.2d 490, 493. The court said: "Not only did section 66 fail to expressly regulate the ranking of conflicting liens arising under the same statute, that is, the act of 1911, but it did not determine the ranking of assessment liens arising under said statute with general tax liens and assessment liens arising under other statutes. The declaration in the section, that the lien therein referred to shall be a first lien, cannot be construed as giving said lien priority over all general tax liens and other assessment liens whether imposed previously or subsequently. The provision should be construed asreferring to private liens, rather than to those existing infavor of a public agency or created for a public purpose." (Citations omitted — italics mine.)

Three different rules are employed where this same question of priority between public improvement liens of the same rank has arisen. As noted by the prevailing opinion, some courts give priority to the first attaching lien in an application of the common law principle that first in time is first in right. Others, through analogy to the rule employed to determine priority between general tax liens for successive years, give priority to the latest attaching lien in an application of the familiar doctrine that last in time is first in right. And as to each of these, the courts adopting the one or the other, advance reasons peculiar to public improvement assessment liens which seem quite apart from any consideration which must have prompted adoption of the rule applied, to support the justness and fairness of the rule being favored.

Then, there is the third rule which claims support in the maxim that equality is equity. Citizens' Trust Savings Bank v. Fletcher American Company, 207 Ind. 328, 190 N.E. 868,192 N.E. 451, 99 A.L.R. 1474; Hollenbeck v. Seattle, 136 Wash. 508,240 P. 916; Central Savings Bank Trust Co. v. Tucker, 182 La. 289,161 So. 759; Stiers v. Vrooman, 234 Mo. App. 161, 115 S.W.2d 84; City of St. Louis v. Wall, Mo. App., 124 S.W.2d 616; Powell v. City of Amarillo, 127 Tex. 294, 93 S.W.2d 144, and Willard v. Morton,50 Wyo. 72, 59 P.2d 338, where an extensive review of the authorities is to be found. See, also, annotations in 5 A.L.R. 1301, supplemented in 99 A.L.R. 1478. The conclusion of the Supreme Court of Texas in Powell v. City of Amarillo, supra, is peculiarly applicable to our own statutes. It said [127 Tex. 294,93 S.W.2d 146]: "The language of both the statute and charter authorizing the levy of the special assessment liens indicate[s] they are dealt with as a class, and that this class of liens is given priority as such over all other liens except general tax liens referred to as `lawful ad valorem taxes.' The language according priority in each instance to the special assessments authorized being the same, is fairly susceptible of the construction that it is the class of assessments rather than any particular assessment that is given priority. In our opinion it was the legislative intent to place the successive liens to be fixed against the property improved by special assessment, upon a parity. This construction obviates holding that the city council by using in its assessing ordinances substantially the language of the statute fixed a first lien (except for general taxes) against the lot to secure the cost of paving one of the two streets upon which it abuts, and twenty-eight days later fixed against it a lien of a different status as to priority to secure the cost of paving the other. Such intention should not be imputed unless it clearly appears from the language used, especially in view of the fact that each certificate recites that the cost of each paving improvement thus secured is not in excess of `the special benefit * * * such property received in enhanced value by reason of such improvements.' Brownell Improvement Co. v. Nixon, 48 Ind. App. 195, 92 N.E. 693, 95 N.E. 585."

In Central Savings Bank Trust Co. v. Tucker, supra, the supreme court of Louisiana, after reviewing the authorities on all sides of the proposition, said [182 La. 289, 161 So. 761]: "The best reasoning on this subject is in the decisions maintaining that liens arising from assessments for street improvement, in a case like this, are of equal rank, regardless of the relative dates of assessment or of registry of the liens. Mortgages, either conventional or judicial mortgages, take rank in the order in which they are recorded; but liens, unlike mortgages, are ranked in the order fixed by the statutes creating them. It is declared in article 3273 of the Civil Code that privileges (meaning liens) are valid against third persons from the date of the recording of the act, or evidence of indebtedness, as provided by law. That means merely that a lien shall not affect the rights of third persons unless it is recorded in the method provided by law. It does not mean that when two or more liens have been recorded as provided by law they shall take rank in the order of date or time in which they were recorded."

As already stated, it is to this rule that I subscribe. Certainly neither of the other rules can lay as much claim to the quality of justness and fairness. And, in my opinion, it more nearly reflects the true intention of the legislature than either of the other rules. Because in many instances the legislative theory that the benefits equal the cost of the improvement proves false, the majority feel warranted in ignoring such theory on the question of priority, to test the rights of the parties by the realities. This, I challenge the right to do.

The legislature, on the assumption that the benefits would equal the cost, authorized the improvement and the issuance of paving certificates and bonds to anticipate payment of the assessments. There would be no constitutional warrant for imposition of the assessments but for this assumption. It would be to convict the legislature of a fraud to say payment in full of the certificates or bonds was not within legislative contemplation. State v. Little River Drainage District,334 Mo. 753, 68 S.W.2d 671; State v. Duncan, 334 Mo. 733, 68 S.W.2d 679; and specially concurring opinion of Mr. Justice Hudspeth in State ex rel. Ackerman v. City of Carlsbad, supra. If, in enacting the law, the legislature thought the benefits would equal the cost; if, in authorizing bonds not exceeding benefits appraised, it believed assessments sufficient in amount would be realized to retire the bonds; then, clearly the legislature outlined a plan necessarily bottomed on equality since everybody was to be paid in full. Later, when it develops that the legislative theory of equality, which assumes success for the plan, is to abort and fail, are we justified in casting aside the theory as fictional and determining priorities in utter disregard of same? I do not think so. On the contrary, I believe that when the legislature assures equality in the successful working out of the plan authorized, by necessary implication, it compels it in its partial failure, where there is no express declaration to the contrary, and there is none.

In practical effect, although in each instance declaring a priority for general taxes, the two statutes place the public improvement liens on a virtual parity with the lien of general taxes where upon a joint foreclosure of the two liens, there is not enough money realized to pay both. That this is true is abundantly reflected by L. 1939, c. 86, where procedure is set up for enforcing the parity upon a sale of the property discharged of both liens and a division of the proceeds pro rata. It is to be noted that the 1939 act does not confine its operation to assessment liens which previously have been declared expressly to be on a parity with general taxes. This legislation merely recognizes a parity virtually already existing as between the general tax and these special assessment liens, resulting from the fact that each survives a foreclosure of the other.

I do not think the trial court had power to order the property sold freed of the conservancy lien. The statute expressly declares that any sale of the property for general taxes shall not extinguish the perpetual lien of the conservancy assessments. It seems somewhat illogical to hold, as the statute requires, that both the paving and conservancy liens shall survive a sale for general taxes (the lien of which ordinarily has the highest rank and dignity known to the law and even with parity is not inferior to assessment liens); and at the same time to hold that foreclosure of a special assessment lien (normally inferior in rank and with parity not superior), shall extinguish the lien of another special assessment of equal rank with it. It just doesn't sound logical to me.

It is to be remembered that the city came in asking the foreclosure of its paving lien, making the Conservancy District a defendant. The latter without asking foreclosure of the conservancy lien, as I understand its answer, asserted priority for its lien over the paving lien and prayed that the proceeds of the sale under plaintiff's foreclosure be first applied to the conservancy lien to the extent of any existing delinquencies. It expressly prayed that any sale of the property in foreclosure of the paving lien be made subject to the conservancy lien. There also was a prayer for general relief. The trial court having denied priority to the conservancy lien and having given priority instead to the paving lien, the defendant still contending here for priority of the conservancy lien, argues that if it be wrong in this contention, parity with the paving lien is the lowest rank that should have been accorded it by the trial court.

Within the defendant's prayer for general relief, and particularly in view of its specific prayer for priority and for application of the proceeds of any sale under the paving lien to the payment or satisfaction, as the case might be, of existing delinquencies under the conservancy lien, the trial court may have been authorized to order sequestered in the hands of the special master any proceeds of the sale under the paving lien in excess of the amount required to satisfy it, for application toward the satisfaction of delinquencies existing on the conservancy lien. Such an order would seem proper and just since, if defendant's answer is to be correctly understood as not asking for foreclosure of its lien, the purchaser at the sale would properly take subject to it. Such excess thus would be used to discharge delinquencies constituting a charge against the land purchased.

It is to be emphasized again that the conservancy district did not ask foreclosure of its lien and that the city as holder of the paving lien did ask such foreclosure. This circumstance, in my opinion, is significant. All that I have said about equality in the distribution of funds upon a sale of the property and the denial of priority to either lien holder as against the other presupposes a case where both the paving and conservancy liens are being foreclosed in the same proceeding on property of insufficient value to pay both liens in full. If the property is of sufficient value to pay both liens no question of priority arises. If only one of the liens is being foreclosed, as in the case at bar, no question of priority is presented if the court properly orders the sale made subject to the other lien. And upon a single foreclosure the plaintiff in foreclosure should receive the entire proceeds of sale up to the amount of its lien plus costs.

The majority opinion winds up its discussion of the legislative intent in the use of the word "perpetual" found in the conservancy act (and by intendment in the paving act) with this language: "In other words, it is reasonable to conclude that all the legislature intended by employing the phrase `perpetual lien', in view of the context, was that the assessment lien shall be perpetual as against current and future recurring ad valorem tax liens."

I am able to accept this conclusion with additions. Of course, the meaning of the word "perpetual" cannot be accepted with all its implications. If so, it would endure throughout eternity, regardless of payment, voluntary relinquishment or waiver by the holder. We know the word cannot have this meaning. I agree with the prevailing opinion that it means "that the assessment lien shall be perpetual as against current and future recurring ad valorem tax liens"; but to this I would add "and also as against other liens `existing in favor of a public agency or created for a public purpose', and as against existing statutory restrictions as to time, if any, upon the right to enforce the same".

Payment, all agree, will discharge these so called "perpetual" liens. Unquestionably, the holder of such a lien could voluntarily relinquish it. And, as I view the matter, whenever the owner of either a paving or a conservancy lien comes into court and voluntarily asks the foreclosure of his lien, he thereby consents that the property may be sold discharged of such lien. But he cannot consent that the property also shall be sold discharged of another public improvement lien of equal rank whose owner, although compulsorily before the court at the instance of the other lien holder, not only has failed to ask for foreclosure thereof but on the contrary specifically has prayed that it be preserved against the foreclosure of the other lien.

It may be said that so to hold will present insurmountable difficulties; that, where the property is of doubtful value, the holder of one lien would only move to foreclose when confronted by some controlling statute of limitations, if there be one in New Mexico, and so forth. Arguments of greater convenience under a different holding also may be advanced. But, if there be difficulties attending a declaration of the law as the legislature has left it, they are not of our making. I feel it is the sensing of these difficulties that has driven the majority to the conclusion they reach. The solution of such difficulties, however, should rest with the legislature where they originated. The problem of clearing the tangled situation is legislative, not judicial. Such was the view of the supreme court of Indiana in Citizens' Trust Savings Bank v. Fletcher American Company, supra, where, on rehearing, it said: "But, since the liens are of equal right, the land may not be sold for the sole benefit of appellees, nor can there be judgment that appellees' liens are superior to appellant's. The foreclosure procedure is statutory, and if it presents difficulties or is inadequate, the remedy must come through legislation."

Our legislature already has taken note of these difficulties in so far as they relate to the parity existing between the lien of general taxes and the two public improvement liens here involved. See L. 1939, c. 86, to which reference heretofore has been made. Perhaps the next or a succeeding session of the legislature, particularly in view of the public notice thereof likely to result from this proceeding, will take up the solution of the difficulties attendant on the parity existing between public improvement liens. This court should not anticipate such legislative action.

The slight difference in the language of the paving and conservancy acts in ranking the two liens is mentioned in the closing lines of the prevailing opinion. This difference deserves notice but, of course, cannot alter the obvious fact that the legislature in the language employed, in each instance, sought to give each lien an expressed superiority over every other lien known to the law, except the lien for general taxes. And, then, in the same legislative breath, by declaring that each should survive a foreclosure of the general tax lien, reduced them to a virtual parity with that lien. The fact that the learned trial judge in his written opinion filed below and that able and interested counsel, neither in their written briefs filed here nor in oral argument, have seen fit even so much as to mention this slightly different language of the two acts, is rather convincing that the assumption of the majority is true to legislative intent.

As already indicated, I think the trial court was in error in failing to order foreclosure of the paving lien subject to the conservancy lien. This view rests on the assumption that the defendant's answer, properly understood, does not seek foreclosure of the conservancy lien. The assumption is supported by the fact that the trial court interpreted defendant's answer as not seeking foreclosure of its lien, since none was ordered. But if this assumption be unwarranted and defendant's answer is to be correctly understood as praying for foreclosure of its own lien; then each party, by seeking foreclosure of its lien, has waived any right under the statute to have the same survive a foreclosure of the other. The proper order, in that event, would be to direct a sale in foreclosure of both liens, the proceeds to be distributed pro rata between the respective lien holders. In order to accomplish this result, the judgment of the trial court should be reversed. Because of a contrary conclusion by the majority, and for the reasons given, I dissent.