Duffy v. Peneguy

SOMMERVILLE, J. Plaintiff sued Harry J. Peneguy, defendant and. appellant, to quiet a certain tax title acquired by him under the provisions of Act 101 of 1898, p. 127. Peneguy claimed to be the owner of the property in question at the time the suit was filed. Plaintiff alleged that the sale hy which he acquired title was made by the sheriff and ex officio tax collector of the parish of St. Bernard for the taxes of the year 1914, assessed in the name of Xeter Realty, Limited; the tax sale having been made on June 26, 1915, and recorded in the conveyance records of St. Bernard parish on July 7, 1915. This suit was instituted more than 12 months after the sale. Defendant answered, setting up the invalidity of the sale made to plaintiff or his author, and contended that the drainage taxes, which formed part of the taxes for which the property had been sold, were illegally levied. This contention was based upon two propositions: (1) That the land in question is marsh, and therefore a tax could not be levied at an election; and (2) want of benefits. * Plaintiff offered in evidence two tax deeds by which he acquired title to the property described in his petition of date July 7, 1915, for the taxes of 1914, including the state, levee district, parish, state good roads, Confederate veterans, road and bridge, Bayou Terre-aux-Bceufs taxes, with interest and costs. He also offered in evidence an act of sale passed before Charles Schneidau, notary public, on July 23, 1914, which showed the purchase of the same property from Xeter Realty, Bimited, by defendant, Peneguy, and two acts of sale by the sheriff and ex officio tax collector for the parish of St. Bernard, showing that the Xeter Realty, Limited, had purchased the property in contest on June 28, 1913, for the taxes of 1912; the taxes being itemized as set forth above in the deeds of both plaintiff and defendant. It would therefore appear that the title of Xeter Realty, Limited, the immediate author of defendant, is based on the same delinquent taxes as the sale to Frank J. Duffy, plaintiff, with the single exception that the sale was made to Xeter Realty, Limited, for the taxes of the year 1912, whereas plaintiff’s title is based on the taxes for the year 1914. On the trial counsel for defendant offered evidence attacking the legality of the drainage taxes, upon which both plaintiff’s and defendant’s titles are partly based, because the property in contest had not received any benefits from the drainage district, which the board of drainage commissioners, duly authorized by the taxpayers and voters of the district, had undertaken to install. To the reception of such evidence counsel for plaintiff interposed the following objections: “Counsel for plaintiff objects to the reception of the evidence for the purpose of proving paragraphs 11, 12, 13, 14, and 15 of the answer (the other paragraphs having been abandoned) for the following reasons: ' “(1) Because the defendant has let go by the utile tempus within which he might have successfully urged defenses against the legality of the drainage taxes, and he cannot now — 411 — set up as a cause for annulling plaintiff’s executed tax title a collateral attack upon the drainage taxes, forming a part of the taxes to satisfy which sale was made. “(2) Because, under no circumstances, is a collateral attack upon a tax levied by a subdivision of the state in strict conformity with the Constitution and laws of the state permissible. A tax so levied can only be contested in a direct proceeding against the authority levying it prior to a sale of the property (against which the tax is assessed) in enforcement of the tax. Where the property owner stands by, and after notice', permits his property to be sold to a third person, an objection to the legality or constitutionality of the tax cannot be entertained in a proceeding to set aside the tax sale, the owner being estopped by his conduct and acquiescence. “(3) Because the defendant purchased said property from Neter Realty, Limited, and Xeter Realty, Limited, acquired the same at a tax sale made in satisfaction of the acreage taxes levied by the Bayou Terre-aux-Bceufs drainage district and other taxes, the said acreage tax, upon which plaintiff’s title is based, having been prior thereto authorized by the same authority and voted at the same election and levied by the same proceeding as was the acreage tax of the Bayou Terre-aux-Bceufs drainage district, upon which defendant’s tax title is based, and defendant is therefore estopped from contesting the legality or constitutionality of the said acreage taxes. ' “(4) Because, in the absence .of a charge of fraud or palpable abuse on the part of the legislative department in creating a taxing district, the judicial department of the government is without jurisdiction to review its finding of benefits to result from the levy of a forced contribution or special assessment for a public improvement throughout such district, which finding of benefits is to be found in the creation of a taxing district and the authorization to' levy the tax.” It would appear from the record that either plaintiff had a valid title, or that both plaintiff and defendant are without title, because the attack made by the defendant on plaintiff’s title is just as applicable to his own as it is to that of plaintiff. Defendant here urges illegality of the tax by which plaintiff acquired title as a cause for setting aside 'the sale when his own title is based on a sale made for a different installment of the same debt or tax maturing in a different year. It would thus appear that he, as a purchaser of property, who had assumed as a part of the purchase price a series of mortgage notes imposed on the property, and in the face of his assumption, after having acquired the property, sought to repudiate the very debt forming the consideration of his purchase, for causes going to the validity or invalidity of the debt so assumed. Defendant appears to say: “I bought this property for the installment of the bonds falling due in 1912, or for the taxes of that year. Since I purchased it another installment has fallen due which I neglected to pay. Now, because the whole debt, including all installments, is void and invalid, the plaintiff has no title to the property which ho Bought for the nonpayment of the installment which I neglected to pay.” We must hold that defendant cannot attack his own title in such way. He is estopped from doing so by deed, as urged by plaintiff in his objections to the evidence. [1] Counsel for defendant rely upon the' paragraphs of their petition, which, in substance, assert: The tax sale is illegal because a part of the taxes for which it was made, although levied by a subdivision of the state of Louisiana, by authority of the Constitution and laws of the state, is illegal, for two reasons: (1) Because the property has received no benefits from the special acreage tax of 16 cents per acre levied by the board of drainage commissioners of the Bayou Terre-aux-Bceufs drainage district for the year 1914, which tax has been funded into an issue of $500,000 of bonds, issued for the purpose of paying for a general system of drainage provided by said board of drainage commissioners. (2) Because there was no power or authority vested in the board of drainage commissioners to levy a special acreage tax on prop — 413 — erty'situated in the drainage district, where levees and pumps were required to completely drain such property. The attack made by defendant on plaintiff’s tax title is a collateral one; and it is not based on an absolutely void title, the nullity of which is apparent on the face of the title. The proceedings before the sale appear to be entirely regular and in good form. The attacks made in the answer were originally against all the taxes; hut they are now limited to the drainage taxes. The law contemplates that an attack on taxes and tax sales should be by direct action against the tax collector and the subdivision of 'the state levying the tax, and not in an action between individuals to which action the tax collector is not a party; and the judgment therein rendered could not affect the tax itself or the tax collector. “All deeds of sale made, or that may be made, by the collectors of taxes, shall be received by courts in evidence as prima facie valid sales.” Constitution, art. 233. If the taxpayer has the belief that all of the taxes demanded from him are not due or legal, he may go into court and enjoin the tax collector from selling his property; but he cannot stand by and permit the state to sell his property to .a third person without notice of any kind, and subsequently attack the sale collaterally or for other than absolute nullities. [2] Section 56 of the Revenue Act (No. 170 of 189S, p, 374) says; “No injunction restraining the collection of any tax or taxes shall be issued by any court unless a bond shall first be given, by the taxpayer enjoining, with good security for an amount equal to that of all taxes, interest, penalties and costs of the amount of taxes contested, and fifty per cent, additional thereon included, and no injunction shall issue except to enjoin the collection of that portion of the tax which may be in contest and no injunction shall issue against the collection of that part or portion in .contest until the taxpayer shall have produced and filed the tax collector’s receipt showing that the taxpayer has paid that portion of the tax which is not in contest, and which the taxpayer acknowledges to be due." And the Constitution says again in article 233: “No judgment annulling a tax sale shall have effect until the price and all taxes and costs paid, with ten per cent, per annum interest on' the amount of the price and taxes paid from date of respective payments, be previously paid to the purchaser: Provided, this shall not apply to sales annulled on account of taxes having been paid prior to the date of sale, or dual assessments. * * * No sale of property for taxes shall be set aside for any cause, except on proof of dual assessment, or of payment of the taxes for which the property was sold prior to the date of the sale, unless the proceeding to annul is instituted within six months from service of notice of sale, which notice shall not be served until the time of redemption has expired.” Defendant did not institute suit to set aside the sale of his property at any time, and he has not paid to plaintiff, or offered to pay him the price, taxes, and costs with interest paid hy the plaintiff. That amount paid by plaintiff includes the very taxes which defendant here seeks to contest the validity of. •To the reception of all evidence in support of the allegations contained in defendant’s reconventional demand plaintiff urged the foregoing exceptions. Defendant not only asked that the sales made to plaintiff be declared null, but, “further, that all proceedings had leading up to said sales and said sales be declared null, void, and of no effect”; and this in a suit to which the tax collector is not a party. In a large number of cases this court has held that a tax sale is equivalent to a sheriff’s sale in execution, and that, Where a part of .the taxes for which the sale is ndade, although actually levied by the proper authority, is illegal, and the 'owner of the property allows it to be sold for taxes, hé cannot,. after the sale has bepn consummated, — 415 — set the sale aside for that reason, any more than the owner of property sold under a writ based on a judgment, where part of the debt is not due, can set aside a sheriff’s sale for that reason. Jurey & Gillis v. Allison, 30 La. Ann. 1234; Shannon v. Lane, 33 La. Ann. 489; Giddens v. Mobley, 37 La. Ann. 417; Kent v. Brown & Learned, 38 La. Ann. 802 (810); State ex rel. Gaynor v. Judge, 38 La. Ann. 923; Cooley on Taxation, p. 572; Brackett v. Whidden, 3 N. H. 17. The case of Shannon v. Lane, supra, is analogous to this one: “Defendant was delinquent in the payment of state and parish taxes upon a plantation owned by her, for the years 1872, 1873, 1874, 1875, 1876, and 1877, and was duly entered 'upon the delinquent lists for said years, which were regularly recorded as required by law. In 1878 the tax collector, after advertisement and compliance with all other requirements of law, exposed the same at public sale for payment of said delinquent taxes, and, the highest bid being insufficient to pay the taxes with costs, charges, interest, and expenses, the property was bid in for the state and adjudicated to her. “In February, 1880, plaintiff, a creditor of defendant, with mortgage on the plantation referred to, came forward and redeemed the property by paying the taxes for which the property had been sold and the subsequent taxes thereon. “These amounted to $1,850.58, and he brings this suit to recover the same from the defendant as the owner of the property. “Defendant admits her liability for the amount of -state taxes paid for her account by plaintiff, but disputes the amount of the parish taxes on the grounds that the same -were illegal, excessive, and more than the parish itself could have collected from her, and that plaintiff, as her negotiorum gestor, had no right to pay more than she owed and can collect from her no more than she did so owe. “She relies upon the decision of this court in the case of Lafitte v. Morgans, 29 La. Ann. 1, where it was held that, under the act of 1872, the police jury of the parish had no right to levy a tax in excess of four mills on the dollar and the school tax without first obtaining the sanction of a majority of the -voters at an election held for that purpose. She shows that the parish taxes, levied for the years prior to 1877, and paid by plaintiff, largely exceeded that rate, and claims that, to this extent, the payment by plaintiff did not inure to her benefit and cannot be recovered from her. “We cast no reflection upon the decision in Lafitte v. Morgans, which we think correct, and if, as in that case, defendant was now enjoining the sale of her property by the tax collect- or for the enforcement of these illegal parish taxes, we should grant the relief there awarded. “We think, however, the defendant has let go by the utile temp us within which she might have successfully urged defenses against these excessive taxes, and she cannot now set them up against this plaintiff. “Proceedings for the assessment and collection of taxes are assimilated, in many respects, to judicial proceedings, for which they are regarded as substitutes. The assessment, the record of the delinquent lists, and the tax collector’s sale are the respective equivalents of judgment, seizure, and execution sale. “The law is careful to surround these proceedings with requirements as to notice, delays, and other formalities, intended as safeguards for the taxpayers, and to afford them ample opportunity to protect themselves against unlawful exactions. With these requirements this court has enforced the most rigorous compliance as a condition of the validity of such proceedings. “It is not pretended that there has been in this case-the slightest deficiency of perfect regularity in all the proceedings for the assessment and collection of these taxes, or that, in the whole course thereof, the defendant, though duly notified, made any objection thereto. “These regular proceedings culminated in a sale of the property at public auction, open to all bidders. Had the property been adjudicat-' ed at a price to any third person, the law is clear that the owner could only have redeemed it by paying to the party purchasing the amount of the purchase price with interest.” Again, in the case of Kent v. Brown & Learned, supra, this court refused to countenance an attack upon a consummated tax sale, because a part of the taxes actually levied by the proper authority was illegal. It was said: “The complaint that the tax for general parish purposes for the years 1869, 1870, 1871, and 1872 was in excess of the limit of parochial taxation is met by the defendants by the — 417 — contention that it comes too late after the _ sale. “The same point was presented and discussed in the case of Shannon v. Lane [supra], in which .this court said: * * ’ The point made in that case was that the complaint of excessive tax would have heen good as a ground of injunction against a proposed sale, but that it could not avail as a means of assailing the sale after it had been completed. “The contention derives strength from reason and logic as well as from law and jurisprudence. “Proceedings for the assessment and collec-' tion of taxes are placed on the same footing as matters involving their validity as judicial proceedings. It is elementary that a judicial sale could not be set aside on the ground that the execution was for a larger amount than was actually due by the defendant. It is now settled that a writ of seizure and sale cannot be enjoined in toto, on the ground of an excessive demand; the injunction is restricted to the amount alleged to be in excess of the debt due by the defendant. “We note that a similar complaint was favorably entertained in Rougelot’s Case herein-above referred to, but, as stated, the point of its being too late was not made by the defendant in that case, in which the issue was simply a general denial.” Under these authorities a tax sale may be annulled because of the illegality of a part of the taxes, in the absence of the objection; the reason for this being that the court will not supply a plea of estoppel which is required by law to be specifically pleaded. It was for this reason that the cases of Shannon v. Lane, supra, and Kent v. Brown & Learned, supra, were differentiated from the case of Kougelot v. Quick, 34 La. Ann. 123, and for that same reason the instant case is differentiated from the ease of Rougelot v. Quick, supra, and the other Louisiana cases cited by defendant in his brief. In the cases cited by defendant it appears that on the face of the proceedings leading to the tax sale there was an apparent nullity of part of the tax claimed to be illegal that could be seen by a simple inspection of the proceedings leading up to the tax sale. The law requires as conditions precedent to a tax sale: (1) The levy of the tax; (2) the assessment of the property; (3) the notice to the tax debtor; (4) advertisement of the property; and (5) adjudication. Failure to observe any of these prerequisites to the letter is fatal to the validity of the sale, as was said in the case of Shannon v. Lane, supra, in which the objection that defendant had let go by the utile tempus was maintained. “The law is careful to surround all these proceedings with requirements as to notice, delays, and other formalities, 'intended as safeguards for the taxpayers, and to afford them ample opportunity toi protect themselves against unlawful exactions. With these requirements this court has enforced the most rigorous compliance as a condition of the validity of such proceedings. “It is not pretended that there has been in this case the slightest deficiency of perfect regularity in all the proceedings for the assessment and collection of these taxes, or that, in the whole course thereof, the defendant, though duly notified, made any objection thereto.” The last paragraph sets forth the facts of this case with such accuracy that the language could not be improved upon if it had been used for the purpose of describing the facts and circumstances of this case. It is not pretended that there has been in this case any deficiency in the regularity in the proceedings for the assessment and collection of these taxes, or that, in the courts thereof, the defendant, though duly notified, made any objection thereto. And, now, having stood by and let his property go to sale, it is too late for him to be heard to attack the sale because of the illegality of a part of the taxes for which the sale was made, for latent, nonapparent causes that possibly might have afforded him grounds for an injunction as to such alleged illegal part, if urged prior to the sale. — 419 — [3] Another objection was: “Because defendant purchased said property from Xeter Realty, Limited, and Xeter Realty, Limited, acquired the same at a tax sale made in satisfaction of the acreage taxes levied by the Bayou Terre-aux-Boeufs drainage district and other taxes, the said acreage tax upon which plaintiff’s title is based having been, prior thereto', authorized by the same authority and voted at the same election and levied by the same proceeding as was the acreage tax of the Bayou Terre-aux-Boeufs drainage district, upon which plaintiff’s title is based, defendant is therefore estopped from contesting the legality or constitutionality of the said acreage taxes.” The deed by which the defendant acquired his title to the property from Xeter Realty, Limited, recites that the title of Xeter Realty, Limited, had been acquired at a sale made by the sheriff and ex officio tax collector of the parish of St. Bernard for the taxes of 1932, assessed in the name of I-Iopedale Development Company, per the recitals of the tax deed dated June 30, 1913, recorded in Booh 24, folio 19 et seq., of the conveyance records of the parish of St. Bernard. An examination of the two tax deeds by which Xeter Realty, Limited, the author in title of defendant, acquired the two pieces of property involved in this case, shows that the taxes for which the property was sold were identically the same taxes for which the property was sold to plaintiff, except that different years were involved. Both sales were based largely on the drainage tax, and therefore both plaintiff and defendant, so far as the titles to the property in contest are concerned, stand upon the same base. At the time defendant purchased the property in contest the Bayou Terre-aux-Boeufs drainage district was legally organized. Three issues of bonds, based on three sets of taxes, authorized to be levied by vote of the property taxpayers in the district, aggregating more than $700,000, had been issued, and this fact had been duly promulgated, and the proceedings were of record in the parish of St. Bernard, in which the property was situated. Defendant bought the property freely and voluntarily, and with full knowledge of existing conditions by the recitals of the act of sale by which he acquired and the legal promulgation of all the proceedings in connection with the bonds. Therefore it would seem that, having bought land in the district with full knowledge of conditions that had been brought about by the owners of property within the district, he would be estopped from questioning existing conditions at the time he became purchaser of the property. If it be conceded that he has, at most, the right that his author in title — who owned the lands by virtue of the tax sale, based on the drainage, taxes now claimed by the defendant to be illegal — would have had to contest the validity of the taxes upon the ground that the lands would receive no benefit from the drainage, and had been illegally assessed for said tax, we answer that his author in title could not have attacked the validity of the drainage tax, because to have done so would have been to attack his own title. Defendant’s position is analogous to that of a stockholder in a corporation who seeks to complain of ultra vires acts of the corporation prior to the time when he became a stockholder. In such case the stockholder has no right to complain of the status quo ante. “The shareholder must be such at the time of the transaction of which he complains. One who was not a shareholder or a judgment creditor of the corporation at the time of the transfer of its business to a new corporation has no standing in equity to complain that such transfer was ultra vires, as being in violation of the prohibition against transfers in insolvency.” 10 Cyc. 974. See, also, Gordon v. Business Men’s Racing Ass’n, 141 La. 819, 75 South. 735, L. R. A. 1917F, 700..... — 421 — Having come to the conclusion that defendant is estopped to deny the validity of the tax sale under which he had acquired title, and that his attack on plaintiff’s title has therefore failed, it becomes unnecessary to discuss the. other points raised in the suit. The judgment appealed from is affirmed. O’NIELL, J., dissents from the foregoing opinion, without expressing an opinion regarding the issues not decided. PROVO STY, J., dissents. DAWKINS, J., concurs in the decree.