^7v;/. p ■ ' '!'±ii.r- A A d 7 HERN REGION 7 6 =^ CD 9 1 = -< 6 CILIT 9 UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY Tax Liens [odem American Law Lecture Blackstone Institute, Chicago TAX LIENS BY PHILIP NICHOLS, A.B., LL.B= One of a Series of Lectwes Especially Preparea for the Blackstone Institute BLACKSTONE INSTITUTE CHICAGO Copyright, 1920. by Blackstone Institute fvl 5"/^'^ t PHILIP NICHOLS PHILIP NICHOLS The author of this Lecture has been a member of the Massachusetts Bar for nearly twenty years. In this long period of practice, principally devoted to Constitutional Law matters, he has acquired a fund of practical knowledge on some of the most intricate problems of the law, which will appeal with unusual force to those interested in Eminent Domain, Taxation and Land Damage cases. Mr. Nichols was born in Boston, July 25, 1875. He received his preliminary education in private schools in Boston, and later entered Harvard Col- lege, from which he received the degree of Bachelor of Arts in 1895. He then entered Harvard Law School, from which he received the degree of Bachelor of Laws in 1898, and was admitted to the Massachusetts Bar the same year. Prom 1898 until 1909 he was in the Law Depart- ment of the City of Boston, first as Assistant City Solicitor, and later as Assistant Corporation Coun- sel. During this period he handled many impor- tant cases involving Constitutional points, which has made him an acknowledged expert in that branch of law. In 1909 Mr. Nichols entered private practice, and in 1910 entered into a partnership with S. H. Hudson, Esq., of the Boston Bar, and has since continued with this firm, which is known as "Hudson and Nichols." Mr. Nichols is the author of "The Law of Land Damages in Massachusetts," which was published in 1907; "The Power of Eminent Domain," pub- lished in 1909; "Taxation in Massachusetts," pub- lished in 1913; and the articles on "Taxation" and "Eminent Domain" in Modern American Law. The reader will find a great deal of valuable practical information on the following pages. TAX LIENS By Philip Nichols, A.B., LL.B. It is a well known historical fact that in all parts of the world and in every age the government has never restricted itself in the means of collecting its revenues to the remedies that individual citizens are permitted to employ for the collection of their private debts. Such methods would be impracticable in the case of a government, the very life of which in time of war or rebellion depends upon the prompt raising of large sums of money; and even in times of peace grave embarrassments would ensue if the political oppo- nents of the party in power, as well as its impecunious and dilatory supporters, were permitted to delay the payment of their taxes until the government had sued them and recovered judgment in an ordinary civil action at law. Accordingly there have grown up in every state and nation special methods for the rapid and effective collection of taxes, and of these, the enforcement of a lien on real estate is now the most often invoked in this country and has given rise to the largest amount of litigation. ORIGIN OF TAX ON REAL ESTATE The system of taxing real estate at its capital or principal value or at a certain proportion of the same, 5 6 MODERN AMERICAN LAW LECTURE now so generally prevalent throughout the United States, was not one of the institutions imported from the mother country at the time of the settlement of the American colonies. In fact the whole modern system of taxation, in distinction to the arbitrary methods of raising money in use during the feudal period, was introduced into England from Holland after the colonial governments in more than one American colony had been established, and the growth and development of a modern taxing system pro- ceeded in England at the same time as in the colonies, in some particulars upon the same, but in others upon quite divergent lines. In 1656 a tax was imposed by Parliament upon the income of real estate, and the method since employed of taxing real estate in Eng- land has been upon its annual return. In Massachu- setts, however, it was provided as early as 1651 that "the lands and estates of all men shall be rated for all town charges .... where the lands and estates shall lie and their persons where they dwell." The principle of assessing land at its capital value at the same rate as personal property was thus estab- lished in early times and was generally adopted throughout the American colonies. It was not for many years, however, that the tax on real estate was made a lien on the land or was enforced by sale. The primary method of collecting taxes in early times, whether on real or personal property, was by distress and sale of goods and chattels. The right to distrain personal property for non-payment of taxes was not TAX LIENS T the same as the right to enforce a lien, because the property owned by an individual at the time of the assessment and on account of which the assessment was made was not subject to distress if it had been sold to another person since the assessment, while on the other hand property belonging to the person assessed might be taken on distress, although it was not the property on account of which the tax had been assessed. If the person assessed had not suffi- cient goods which might be distrained to pay the tax, he was subject to arrest and imprisonment until the tax was paid. Arrest and imprisonment for non- pajmient of taxes is still authorized by law in some of the states, although of course the person arrested is released upon taking the poor debtor's oath or otherwise satisfying the authorities that he is unable to pay the tax. ORIGIN OF TAX SALES The collection of taxes on real estate by distress and arrest was a satisfactory method in the primitive conditions which prevailed in earlier times. Real estate was not of great value, and the public expendi- tures were small, so that the sums assessed on real estate were not large, and as the real estate in any towTi w^as generally owned by the people who had set- tled the town and were living on the soil, it was a simple matter, if a tax remained unpaid, to seize and sell the cattle of the delinquent, or otherwise satisfy the tax out of his visible and tangible personal prop- erty. When, however, means of communication be- 8 MODERN AMERICAN LAW LECTURE tween the different towns improved, and, as society became more complex, persons resident in one town began to invest their money and have business rela- tions in other places, difficulties arose in collecting taxes on real estate. One of the earliest statutes, if not the earliest, pro^dding for the collection of a tax on real estate by a sale of the land was enacted in Massachusetts in 1731. This statute applied only to unimproved lands of non-residents, and provided that, if the tax was not paid, three freeholders, to be appointed by the assessors, should "aprize so much of such lands as they judge will be sufficient to pay and satisfy" the taxes and charges, and that, the default continuing, the part thus ap- prized should be sold, and a deed thereof be given to the highest bidder. If the part apprized sold for more than enough to discharge the tax and charges, the surplus was to be paid to the "delinquent pro- prietors." It was not until 1785 that the power to sell land for non-payment of taxes in Massachusetts was extended, and then only to include cases in which the landowner had removed out of the to\\Ti. A lien was at the same time also imposed on the improved land of a non-resident of the state, the power of sale in the latter case being the exclusive remedy. In 1821 taxes on real estate in Boston were made a lien in all cases, and two years later the lien was made general throughout the state. The system of collecting taxes on real estate by lien and sale was adopted generally throughout the United States, and by 1855 was in force in every state and had at various times been employed by the federal government as well. TAX LIENS 9 TAX TITLE A NEW AND PARAMOUNT TITLE Taxes on real estate are not, as a rule, assessed upon real estate regardless of ownership, but are assessed npon individuals by reason of their ownership, and although such taxes constitute a lien upon the land, the primary liability is upon the person to whom they have been assessed. It is not, however, the policy of the law to require the assessors to tax the different estates and interests which may exist in a different parcel of land to the respective owners thereof, as for example, landlord and tenant, mortgagor and mortgagee, owner of an easement and o^Tier of the fee. Instead one person or set of persons is taken as representing all the interests in each parcel of Ian*"", as against the public, and is assessed the entire h on such parcel, and such person must be either t. owner of the fee or the person in possession of ti land. There are some exceptions to this rule ; some- times an easement in gross is assessed to its holder, and, when one estate or interest in a piece of land is exempt from taxation and the others are not, it may be proper to assess the latter estates at their o^ti value and not at the value of the land itself, but ordi- narily the land is assessed at its entire value and not the different estates therein. The tax being then upon the entire undivided own- ership of the land itself, the method of collection by lien and sale follows this rule and even goes beyond it. If the tax is not paid, the collector of taxes sells the land, or part of it, at a public sale and thus is enabled to pay the amount of the tax into the town iO MODERN AMERICAN LAW LECTURE treasury from the purchase price. If the land has been sold by the owner after the tax has been assessed, the sale by the tax collector is none the less valid, for a lien for the amount of the tax attaches to the land. What the tax collector sells is not the estate or inter- est of the person assessed, subject to such flaws and imperfections as it may have, nor even the sum of all the estates or interests in the land, but a new and paramount title created by law, and not affected by mortgages, leases, easements or encumbrances of any kind that existed before the sale. REQUIREMENTS OP LAW MUST BE FOLLOWED STRICTLY The sale of land for non-payment of taxes has been found necessary for the maintenance of our govern- ment and institutions, and is unquestionably a con- stitutional method of collecting public revenues, but it is such an extreme and drastic interference with private property that the law guards the rights of the owner with the utmost care. There must be as its foundation a tax lawfully assessed by a lawful board of assessors. If the tax was assessed for an illegal or unauthorized purpose or if there was failure on the part of the assessors to comply with all the pro- visions of law which are intended for the security of the citizen, for insuring an equality of taxation, and to enable everyone to know for what property he is taxed and for what all those who are liable \vith him are taxed, there is no lien upon the land and no matter how carefully the sale is conducted no title TAX LIENS 11 passes to the purchaser. Even if the failure to com- ply wdth the law was at the express request of the person assessed, although the tax might be collected from him by other means, there will be no lien upon his land. Many regulations are, however, made by statute which are designed for the information of assessors and other officers and intended to promote method, system and uniformity in the modes of pro- cedure, compliance or non-compliance with which in no respect affects the rights of taxpaying citizens. Such provisions may be considered directory merely, and non-compliance with them does not affect the validity of the tax or of the lien for its payment. Similarly, technical defects in the appointment of the assessors or of the collector do not invalidate a sale ; it is sufficient that they are officers de facto. If they exercised their office unopposed it will be as- sumed that they were duly chosen and sworn. With regard to the actions of the collector in sell- ing the land the law is much more strict. It is hardly necessary to state that to justify the sale of land for non-pajTuent of taxes there must be a statute to au- thorize it; a city or to^^^l which has power to levy taxes on real estate has no lien to enforce such taxes unless it has been given such lien by act of legislature. Furthermore, the statute authorizing the lien and sale must be complied with in every respect ; the due performance of each step in the proceedings even in the most minute particulars is a condition precedent to the validity of the sale. That a deviation from the statutory requirements did not harm the owner in the slightest degree has never been held to be a reason for 12 MODERN AMERICAN LAW LECTURE overlooking it, and the courts have sometimes shown such astuteness in picking flaws in the procedure of a tax sale that it almost seems that the failure to dot an *'i" or cross a '*t" in any of the numerous docu- mentary forms may be fatal. METHODS OF ENFORCING LIEN Although of course the procedure for the enforce- ment of tax liens, being wholly statutory, varies widely in the different states, there are two distinct methods employed, within one of which the method employed by every state seems to fall. The original method, which still prevails in most jurisdictions, con- sists of merely a sale by the collector without the con- firmatory aid of judicial proceedings, leaving the owner a chance to attack the sale or redeem the prop- erty by proceedings which he himself institutes. The other method, which has been adopted in a few states, consists of a sale in the usual manner, followed, how- ever by a foreclosure of the lien by judicial proceed- ings instituted by the purchaser, and while the latter method seems on its face less drastic than the f oi-mer, it is really less favorable to the owner, since it leaves him no opportunity to redeem the property or to attack the validity of the sale once the judgment of foreclosure has been entered. DURATION AND EXTENT OP LIEN The date when the lien begins and ends is of course fixed by statute, but in most states there is no lien until the assessment is made and the extent of the TAX LIENS 13 lien determined. In some states, however, the lien fastens itself on the property upon the first moment of the day as of wlien the taxes are assessed, which is generally, in actual practice, several months before the actual assessment of the tax and even longer be- fore the tax bills are sent out. The lien lasts for a period fixed by law, generally about two years, after the assessment, during which time any purchaser of the land takes it subject to the lien. After the two years it is the usual rule that the lien continues indefinitely while the land remains in the ownership of the person to whom it was assessed, and the land may be sold by the tax collector at any time until the tax is paid; but if the owner sells it after the two- year period has expired and before the collector has instituted proceedings to sell the land or enforce the lien the purchaser gets a clear title. The lien also of course terminates upon the payment of the tax by the person assessed. Several separate parcels of real estate taxable to one person are not an integral subject of taxation, so that one parcel can be sold for taxes on the whole, or on any other parcel than that on which the tax was assessed. Difficult questions sometimes arise in de- termining what constitute separate parcels, but when two parcels were in fact separately valued by the assessors, it conclusively appears that no such diffi- culty existed. Even if the assessors make an entire valuation, if the lands are in fact separated by the use or purpose to which they are devoted or by their mode of occupation, or are disconnected in location, a tax laid generally cannot be made a lien upon each 14 MODERN AMERICAN LAW LECTURE separate parcel, even when they are all owned or occupied by the same i:)erson. THE NOTICE OF SALE The proceedings for the enforcement of a tax lien by sale of the property are generally begun by a demand on the person assessed, and if the demand is not served in the manner provided by law the whole proceedings are invalid, even if the demand was actually received by the person assessed. If the tax is not paid within a certain time after demand, the collector proceeds to advertise the property for sale. The statutory requirements in regard to the advertis- ing are very strictly enforced. If a newspaper is the medium of advertisement, the notice of sale should be printed in English, in a newspaper printed in English, and published or circulating in the town or county in which the land is situated. The object of the notice is to inform the owner, as well as the pub- lic generally, that the land is to be sold. The notice should be sufficiently definite to enable the o^^aler and those who attend the sale as prospective purchasers to identify the premises, so that the owner, if he wishes, may prevent the sale by the payment of the tax, or, if a sale takes place, bidders will be attracted and will compete for the purchase of the land. The formalities of a technical survey are not required, and a slight misdescription will not invalidate the sale, but the purpose of requiring a notice to be printed plainly is that the taxpayer and the bidder alike, with the description as published in hand, can from its contents substantially locate the land which TAX LIENS 15 it is proposed to sell. A description in the notice which fails to comply with these requirements renders the whole proceedings void. Similarly sales have been invalidated for such errors in the notice as fail- ing to state correctly the year for which the tax was assessed, or the amount of the tax. On the other hand it has been held that if a notice states incor- rectly something it is not required to state at all, if it is otherwise not misleading, the error does not invali- date the sale. If the notice advertises that the sale will be conducted in a manner not authorized by law, but in fact the sale is carried out in full compliance with the statutes, the sale is none the less invalid; for a valid notice is a condition precedent to the validity of the sale. It is generally required, in addi- tion to publication in a newspaper, that notice of the sale be posted in some public place in the city or town, and in such a case it must affirmatively appear not only that the notice was posted, but that it was posted in a public place. METHODS OF DISPOSING OF SURPLUS As the tax, if it has been fairly assessed, in the nature of things amounts to but a small proportion of the value of the land, various methods have been employed in the attempt to secure pa\incnt of the tax without the unnecessary hardship upon the delin- quent landowner which forfeiture of the land would involve. One method is to sell the whole land, and return any surplus over the amount of the tax and charges to the landowner. This method, however, presupposes a genuine; sale with spirited bidding 16 MODERN AMERICAN LAW LECTURE reaching eventually the full S^alue of the land, which rarely is the case in tax sales; it raises intolerable complications in determining who is entitled to the surplus, since one of the most frequent causes of failure to pay taxes on real estate is uncertainty as to the title or the existence of encumbrances to such an extent that the nominal owner has no sufficient in- terest in the property to make it worth his while to pay the taxes on it. Another old-fashioned method was to set off in advance of the sale the smallest por- tion of the land that would cover the tax and charges ; but the land might not be capable of convenient sub- division, and the portion set off might prove too small or too large. If too small no sale would take place, and the advertising w^ould have to be done all over again ; if too large, all the complications over return- ing the surplus would arise. Another method was to strike off. the land to the bidder who would take the smallest undivided interest in it, so that the bidding instead of going up in figures of dollars and cents, goes down in fractional interests in the land. The drawback to such a method is that it complicates land titles and leaves estates divided in such a way that they are left almost unmarketable, if it is carried out in the manner contemplated by law, and, in its prac- tical operation, it often happens that no one bids for less than the whole. REAL NATURE OF TAX TITLE It has already been explained that the title that passes at a tax sale is a new and paramount title; but if a person who is bound to pay the tax purchases TAX LIENS 17 the land at the sale, his act amounts to no more than the pajTxient of the tax and his title is no more para- mount than it was before the sale. A mortgagor can- not wipe out the mortgage by failing to pay the tax on the land and then buying it in at the tax sale; neither can the mortgagee in possession by similar tactics deprive the mortgager of his right to redeem. A life tenant cannot acquire any adverse rights against the remainderman by a tax sale, nor can a right of way be wiped out by a like simple device on the part of the owner of the servient tenement. After the property has been struck off, the tax collector must give the purchaser a deed ; and many are the pitfalls which must be avoided in preparing a valid tax deed. The deed must correctly recite that the various necessary conditions precedent to a valid sale have been complied with, and it must describe the land sold with accuracy, and the land sold must be the land assessed, no more and no less. If the deed for any reason proves invalid, the purchaser has no redress against the tax collector who made the sale, or against the city or town, unless a statute specifically gives such redress. The OTVTier of the land is almost invariably given a certain period in which he may redeem the land from the tax title upon pajTuent of the purchase price and certain fees and charges of the purchaser and interest, usually at a high rate. The real purpose of a tax sale is to enable the city or town to collect quickly the money needed to perform its many public functions and to throw upon the purchaser the duty, accompanied by suitable pecuniary rewards, of mak- 18 MODERN AMERICAN LAW LECTURE ing the unwilling and delinquent taxpayer eventually yield up the amount of the tax by the imposition of increasing pecuniary penalties finally amounting to forfeiture only as a last resort ; in other words, a tax title in spite of its paramount nature is, until the right of redemption is finally lost, in reality a lien, and the holder of the right of redemption is still, in reality, the owner of the land. As early as 1813 the highest court of one of the states referred to a "collector's title" as proverbially expressing a case of doubt and difficulty, and it is certainly true that a tax title is extremely precarious. It may be attacked for the omission of or an error in any one of dozens of formal steps, and, even if there is no such error and the purchaser takes possession, he cannot be certain of his title for many years, since there is a long period in which the land may be re- deemed, sometimes running from the time when the owner had actual notice of the sale, a matter often difficult of proof. All these possibilities make a tax title almost unmarketable except for the tax and charges upon w^hich it was based. The true nature of a tax sale, notwithstanding the letter of the statutes, is the transfer of the lien. The courts will generally protect the purchaser in recovering from the owner the amount he has paid, before the land is redeemed, but a purchaser who buys land at a tax sale intending to retain and enjoy it as his own finds himself frowned upon and thwarted by the courts, which will almost always manage to find a way to give the owner back his land if he has allowed his rights to lapse through no serious fault of his o\\ti. TAX LIENS 19 REDEMPTION The title to land, subject to a tax sale, is dealt in as real estate subject to an encumbrance merely, and the right of redemption runs with the land. It is treated by the law as an interest in land which may be conveyed or devised, and which descends in the same manner as other real property. The right of- redemption is not confined to the owner of the fee, but inures to anyone having an interest in the prop- erty, such as a mortgagee or even an attaching cred- itor. The effect of payment or tender by the o^^Tier to the purchaser of the amount due, within the time allowed by law for redemption, is to defeat the legal estate of the purchaser and to leave the title and right of possession where they would have been if the sale for taxes had never taken place. The owner may at once proceed at law to regain possession. If the purchaser secretes himself so that the owner is unable to tender to him the amount due, actual tender is excused ; and the eif ect upon the title is the same as if tender had been made. A tax title is not merged with other clauns on the land, and if a person having an interest in the land buys the tax title, he does not lose his original interest upon the redemption of the tax title. If a person who has no right to redeem the property goes through the form of redemption, the transaction is void ; he cannot treat it as a purchase of the tax title. When the property is assessed to the owner in pos- session, as it is his duty to look after the pa^^nent of taxes, his right of redemption runs for a fixed 20 MODERN AIMERICAN LAW LECTURE period after the sale, of whicli he is presumed to have notice. Provision is often made by statute for re- demption by persons interested in the property who might well have no actual knowledge of the sale and upon whom no demand for payment would naturally be made, such as mortgagees not in possession, or the actual owner when the land was assessed to an occu- pant not the owner, or when it was assessed to ''per- sons unknown" or when there was a substantial or misleading error in the name of the person taxed. In such a case the right of redemption generally runs from the time such person receives notice of the sale, and actual knowledge by such person or a duly accred- ited agent must be shown. Knowledge of circum- stances sufficient to put him on inquiry is not enough. The right to redeem after actual notice is, like the right to redeem within a fixed period after the sale, an interest in the land which passes with any at- tempted conveyance of the land itself. PAYMENT TO THE TAX COLLECTOR The practice of some tax title buyers of secreting themselves until after the time of redemption has expired, so that no tender can be made to them, has led to the adoption in some states of statutes provid- ing that pa^Tnent may be made by the o\vner to the collector of taxes, who keeps the money so paid in readiness to turn it over to the holder of the tax title, upon demand. The collector gives the owner a cer- tificate showing the payment, which may be recorded in the registry of deeds. Although such statutes have some merit, there are distinct limitations upon the TAX LIENS 21 effectiveness of the remedy furnished by them. Com- pliance with the terms of the statute would still leave the tax deed outstanding upon the record, and al- though its legal effect would be neutralized by the certificate provided for in the statute, it might con- stitute a practical impairment of the ease of trans- ferring title. Moreover, it might be impossible to ascertain the precise amount due without conferring in person with the purchaser, and the owner could protect himself with certainty only by depositing with the tax collector the largest amount which could under any circumstances be required. Hence it re- mains highly desirable that an owner seeking to redeem his property from a tax title should be able to find the purchaser and get from him a correct state- ment of the amount necessary for redemption. Although, as already stated, in the absence of statute one x^urchases a tax title at his own risk, and if it proves defective is not entitled to any redress, in many states provision is made by statute for the surrender of a tax title that proves invalid, and the re- payment to the purchaser of the sum advanced by him, with interest. Such statutes are not regarded as indi- cating the policy of the law, and to get the benefit of the statute a purchaser must bring himself within its precise teims. EQUITABLE REMEDIES The redemption of land from a valid sale for non- payment of taxes within or without the period allowed b^ statute for redemption is not within the 22 MODERN AMERICAN LAW LECTURE general powers of a court of equity. After the statu- tory period has expired an owner who w^as prevented by the fraud and deception of the purchaser from redeeming the property could have no relief in equity, and if he desired to redeem before the period expired he had an adequate remedy at law. Modern legisla- tion has, however, in many states given courts of equity jurisdiction over the redemption of land from tax sales, even after the statutory period of redemp- tion at law has expired. The effect of such a statute is two-fold. In the first place it permits an owner who is entitled by law to redeem the land, the statu- tory period not having expired, instead of pursuing his remedy of writ of entry or other proceeding upon the law side of the court, to effect the redemption by proceedings in equity, and to this extent it is merely a change in remedy. In the second place it gives an owner, whose right to redeem at law has been lost by the expiration of the statutory period, the privi- lege of redeeming the land in equity during a subse- quent term of years, provided the circumstances make it just and equitable that he be allowed to do so ; and to this extent it is a change in substantive rights. It would be unwise to attempt an inclusive definition of the circumstances which would render it just and equitable that an owner should be allowed to redeem after the period for redemption at law has expired ; but deception or evasion by the purchaser, excusable mistake or ignorance of facts by the owner, the minor- ity of the owner or his absence from the state would present grounds which the courts would be inclined to look upon with favor. If the bill to redeem is TAX LIENS 23 maintained, the court will order the purchaser to execute a quitclaim deed to the owner upon payment of the amount found to be due. When land is sold for non-payment of taxes, but, by reason of some flaw in the proceedings, the sale is void and conveys no title, but the purchaser causes the deed to be recorded and refuses to release his title to the owner, and the owner is in possession and can- not try his title by writ of entry, he may maintain a bill in equity to remove the cloud upon his title and to compel the purchaser to give him a deed of release. Such a bill may be maintained whether the invalidity of the sale is due to a flaw in the proceedings, or to the unconstitutionality of the statute under which the tax was assessed. The right to maintain a bill in equity under such circumstances is not derived from a statute such as was referred to in the preceding paragraph, but rests upon the general equity juris- diction of the court, and is consequently not subject to the limitations imposed by such a statute, and may be enjoyed in jurisdictions in which no such statute has been enacted. If a collector of taxes was about to sell land for a tax which the owner contended to be invalid, or for which he contended no lien rested upon his land, it was formerly the rule that the ovmer could not main- tain a bill in equity to enjoin the collector from making the sale. The prompt and unembarrassed collection of taxes w^as considered to be of so much importance to the public that the o^^^Tier was left under such circumstances to his remedy at law to prevent the sale, by paying the tax under protest 24 MODERN AMERICAN LAW LECTURE and suing to recover it back. If he was unable or unwilling to pay the tax, and the sale took place, he might then avoid its effect, if the tax was illegal, by- bringing a bill in equity to remove the cloud upon his title, or if he had been evicted from the premises by the purchaser, by a wTit of entry to recover possession. This rule has, however, been broken in on so much in many jurisdictions that it may fairly be said to be more honored in the breach than in the observance, and while it is strictly enforced in a few states, in most of the others so many excep- tions and qualifications have been introduced that the rule itself is to all intents and purposes obsolete, and a bill in equity to enjoin the sale appears to be the normal method of testing the validity of a tax on real estate. The owTier of land sold for non-payment of taxes who makes the proper tender or pajnnent to the pur- chaser within the time prescribed by statute thereby defeats the purchaser's legal estate and becomes again the legal owner himself. If the owner has remained in possession and the purchaser refuses to give him a deed of release the owner's only remedy is in equity, but if the purchaser took possession and refuses to give it up, the owner may maintain a writ of entry. The owner of land which a tax collector has purported to sell for non-pa}Tnent of taxes, but the sale of which is in fact invalid, is in the same position as an owner who has made lawful tender to redeem from a valid sale. If his possession has been disturbed he may maintain a writ of entry ; if it has not been disturbed he cannot. TAX LIENS 25 FORECLOSUBE In several of the states an attempt has been made by statute to provide a system of giving greater security to a tax title and of extinguishing the right of redemption, by means of a bill in equity for fore- closure. Tliis proceeding cannot be instituted until after the expiration of the time allowed by law for voluntary redemption. The plaintiff in the suit is the holder of the tax title, that is, the person who pur- chased at the tax sale or his assignee, and the defend- ant is the owner of the property subject to the tax title if he is known or could have been discovered by reasonable diligence, otherwise the person or persons to whom the land was assessed, even if it is neces- sary to follow the tax list by designating the defend- ants as ^* unknown owners." Service in such case has to be made by publication. All persons having such interest in the property as would entitle them to redeem should also be made parties defendant. The defendants may either attack the validity of the as- sessment or sale, or tender the amount due, and in such case will be allowed to redeem. If the judgment directs foreclosure it will cut off all pre-existing liens and other interests in the property, and will be conclusive as to all matters in issue and will not be subject to collateral attack. TAX LIEN AS ENCUMBRANCE If a deed containing a covenant against encum- brances is delivered after the date when the lien for taxes upon the property for the current year com- 26 MODERN AMERICAN LAW LECTURE mences, even if the taxes have not been actually assessed, if such taxes have not been paid, the cove- nant is broken as soon as it is made and the purchaser can sue on it at once ; but he can recover only nominal damages if his possession has not been disturbed and he has not paid the tax at the time of the trial. If he has paid the tax, he is entitled to recover the full amount of it, without apportionment, and, in addi- tion, such other necessary expenses as he has been put to in removing the encumbrance. Of course, if the taxes of the previous years have not been paid, even if not assessed to the vendor who has given the covenant, and the lien has not expired by lapse of time, or if the land has been sold for non-payment of such taxes, the covenant against encumbrances is broken. It is incumbent upon the purchaser, in an action at common law for breach of the covenant, to show that there was a real encumbrance, and if it appears that the tax had been improperly assessed upon the property, or that the lien had been lost by invalid proceedings for its enforcement, there is no encumbrance and consequently no liability. A mere error in the assessment which, though it invalidates the tax may be corrected by reassessment, is a defense in an action of this kind, for it is usually provided that there is no lien on the land if there is an aliena- tion before reassessment. LIEN FOR SPECIAL ASSESSMENT AS ENCUMBRANCE When real estate is conveyed with a covenant against encimibrances, the existence of a lien on the property for a special assessment or betterment is of TAX LIENS •'! 27 course a breach of the covenant, and the right of the purchaser or his assigns to sue for the breach is the same as when the encumbrance consists of a lien for the general tax. When the covenant is not against encumbrances generally but refers in terms to *' taxes" as a subject of exclusion or inclusion, *' taxes" will or will not be held to signify special as- sessments according as the intent of the parties is indicated by the context. The encumbrance begins upon the date of the order for the establishment of the public improvement upon which the assessment is based, even if the assessment is not actually made until later, and consequently a vendor is liable upon his covenant if there has been such an order prior to his conveyance, even if he knew nothing about it, no land of his was taken, and no assessment was in exist- ence at the time of the conveyance. It is the liability to an assessment that constitutes the encumbrance; and the liability is an encumbrance upon the land when it accrues, even though its amount may not be known and the present right of enforcement may not come into existence until the assessment is afterward made. Accordingly if the first assessment is invalid on account of some technical error, but the proper officers could correct the error by proceedings in due form, and re-assess the same amount upon the land and sell the land if the re-assessment was not paid, such error in an assessment is no defense in an action on a covenant against encumbrances. If, however, the only statute under which an assessment could have been made at the time of the conveyance was uncon- stitutional, or the improvement was constructed in 28 MODERN AMERICAN LAW LECTURE such a manner that under the exiisting statutes no valid assessment could have been levied, a valid as- sessment, authorized by a statute enacted after the conveyance, is not a breach of the covenant, because when the deed was given there was no liability to assessment and consequently no encumbrance. CLAIM FOR REIMBURSEMENT When one is obliged to pay taxes assessed on an- other to save his own property from levy and sale, under some circumstances he will be subrogated to the tax collector's right against the land itself, and his claim for reimbursement will constitute a lien on the land which a court of equity will enforce ; but the mere fact that the property is assessed to another and that as between the tax collector and the parties the other party is the one primarily liable for the tax is not sufficient. One who buys, by quitclaim deed with- out covenants, property upon which a tax has been assessed to the vendor, and pays the tax to avoid a sale by the tax collector, cannot call upon the vendor to reimburse him. When, however, the parties have agreed between themselves that one of them is to pay the tax on the property, and the one who has agreed to pay the tax fails to pay it, and the other party is obliged to pay the tax to save his interest in the prop- erty from being wiped out by the sale of the land for the non-payment of the tax, he is entitled to reim- bursement, either in an action at law or, by subro- gation to the tax collector's lien, in equity. When there are different estates or interests in a parcel of real estate and there is no express agree- TAX LIENS 29 ment among the holders of the different estates or interests in regard to the payment or apportionment of the tax, and the general owner or the occupant to whom the tax on the property is assessed does not pay the tax, and the tax collector is about to levy on the land, the holder of one of the other estates or in- terests may be obliged to pay the tax to prevent his interest from being wiped out. In such a case he should in justice be allowed to call upon the holders of the other interests for reimbursement or contribu- tion, and, as the failure to pay the tax would fre- quently indicate insolvency on the part of the person thus delinquent, in most cases the rights of the person paying the tax w^ould not be fully protected without some greater security than a mere personal right of action against the delinquent. The matter is largely regulated by statute; a tenant obliged to pay the tax may deduct the amount paid from his rent and a mortgagee may add the sum paid to his mortgage, but even in the absence of statute, on general equi- table principles, the courts are inclined to recognize the existence of a lien in all cases of the payment of a tax upon real estate by the holder of an interest other than the fee. Even when a tax is paid by one having no interest in the land, there is some authority for allowing him a lien for reimbursement. fla^^dA Ljaulord 1 GAYlAMOUNTIi) ' PAM PHLET BINDER ' '^■~' Syrocuse, NY. J^SS Stockton, Colif. iTHrM'i W r,|firjAI I W'MUWi 'A' "..V jil II HI Iml linlllll llllllli llni 1 in I III I AA 000 776 916 9 A UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. JUL 2 4 1975 Form L9-Series 4939