Appellees Brief mm — Wood v. Lovett

Supreme Court brief1941

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H. Woon amp J. H. Kxowuron,.

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v. No. 709

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8. Lovrrr, In,

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Statement of the case

| 1, The Construction of Act 142 of 1935 of the General As-

sembly’ of the State of Arkansas Presents a Question

_ Exclusively Within the Power and Jurisdiction of the

Supreme Court of Arkansas i \

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N 5 4 N . :

TABLE OF CASES AND AUTHORITIES CITED

Carle v. Gehle, 193 Ark. 1061

Erie R. R. Co. v. Tompkins, 304 U. S. 64, Sup. Ct. 817,

82 L. Ed. 787

_ Fidelity Union Trust Co. v. Field, 61 Sup. Ct. 176.

Green v. Abraham, 43 Ark. 420

» Kosek v. Walker, 196 Ark. 656

. 3 Trust Co. v. Watts, (decided Feb. 24, 1941)

Ark. Law Reporter Vol. 75 Page 30

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Supreme Court dy the United States

v. No. 709 Boor

BRIEF FOR APPELLEE ~

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STATEMENT OF THE CASE

° ‘tn wai wae bettie by e sgtaeh aagolie

to cancel tax deeds issued by the State of Arkansas to

land involved was forfeited for failure of the then owner

to pay taxes for the year 1932 and was sol/ to the state of

The deeds of the state to appellants appear in the record at

pages 28 to 31. In each deed the state of Arkansas conveyed

Arkansas in and to the said lands“ (R., 29, 31).

ee In the proceedings leading to thé forfeiture of thelende

_ involved for taxes and their subsequent sale to the state

there were irvegularities and defects which, prior to the

C0000 6 Aree ©

a J. H. Woop anv J. H. Kxowzrox, f Appellants,

T. S. Lovert, In. a Appellee

- appellants, conveying the state’s title to the lands involved

in this suit to appellants, and to quiet title in appellee. The

Arkansas. In 1936 the f tate conveyed to appellants (R., 36).

o appellants ‘‘all right, title and interest of the State of

for 1935, would have rendered the sale to the state void.

This was conceded by the parties in the trial in state court.

(See opinion in the Supreme Court of Arkansas, R., 37).

It was also conceded in the state court that if act 142 of +

1935 had been in force at the time of the trial appellee could

not have avoided the forfeiture and sale to the state. (R. 37)

But before the institution and trial of this case in the

state court, Act 142 of 1935 had been repealed by Act 264

of the General Assembly of Arkansas for 1937. Both acts

are printed in the appendix to this brief.

Act 142 of 1935 provided that tax sales to the State of

Arkansas should not thereafter be set aside for certain

irregularities and defects in ‘procedure, naming them. It

was approved on March 20, 1935. Appellants purchased

from the state, in July, 1936 (R., 29, 31). 3

Act 264 of 1937, approved March 17 of that year, re-

_ pealed Act 142 of 1935. Appellee brought the present suit

in the state court in 1939 and obtained a decree in his favor

February 16, 1940 ( 32). Appellants contended in the

state court and now contend here that the effect of Act 142 *

of 1935 was to eure all defective or voidable tax sales to

the state made prior to its repeal; and to vest in purchasers

from the state a title impervious to attack for irregularities a |

or defects in the forfeiture proceedings. Their contention in 5

the state court was, and is here, that the state was power- .

less by the repeal of Act 142 of 1935 to open its courts to oe

attacks upon tax sales made prior to the Act of 1985. The

ground of this argument was that Act 142 of 1935, vested _

_ title in purchasers from the state while this act was in effect

and that the repeal of the act could not, within constitutional”

_ limitations, deprive them of the title vested by the prior |

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5 act. The Supreme Court of Arkansas answered this con-

tention in the following language: ae

1 We think the fallacies in the argument of appel-

lants consist in the false assumptions that said Act

142 cured defects and irregularities in all tax sales

occurring prior to the passage of the repealing Act 264

in 1937, and that appellants acquired vested rights

under said Act 142, having purchased said lands in

1936, prior to its repeal. Said Act 142 provided that

under conditions stated, ‘the sale of any real or personal

property for the non-payment of said taxes shall not

hereafter be set aside by any proceedings at law or in

equity because of any irregularity’, etc, with a pro-

viso the Act should not apply to suits then pending or

to those brought within six months after the effective

date of the Act for the purpose of setting aside such

sales. Under its own terms the Act did not apply to

all sales,—to pending suits and those which might be

brought within six months. The Act does not profess

to cure tax sales, but only that tax sales shall not be set

aside by the courts because of certain irregularities and

informalities, naming them. Prior to the passage of

said Act 142 the courts had been setting aside tax sales

because of the irregularities and informalities named

therein. The Act. was held valid in Carle v. Gehl, 193

Ark. 1061, 104 S. W. (2d) 445. In Kosek v. Walker, 196

Ark. 656, it was held, to quote à headnote, that: ‘Upon :

the passage of Act 264 of 1937, repealing Act 142 of

1935, tax sales became subject to any attack upon them

to which they were open prior to the passage. of Act

142, of 1935, except where the sales were being litigated

the Supreme Court of the State of Arkansas; that one pur-

When the repealing Act 264 of 1937, was passed.

: It is the contention of the appellee that the construe-

tion of Act 142 of 1935 presents a question exclusively for

chasing tax forfeited lands from the state in‘reliance upon

bis interpretation of the Act acquires no right superior to

SPO er.

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wiuee power of the Supreme Court of Arkansas to place an-

: | f other interpretation upon the Act contrary to that made

: by the purchaser. The fact that the Act on which the pur-

chaser relied was later repealed is unimportant because the

repealed act never had the effect ascribed to it by the

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25 The . of Act 142 of 1935 of the Ge Assem-

di of the State of Arkansas. Presents a Question

Exclusively Within the Power and Jurisdiction

of the Supreme Court of Arkansas.

: ‘The highest state court is the final authority upon the

construction and effect of a state statute. The courts of

the United States are not at liberty to undertake the deter-

: mination of such a question where the state court has itself

determined the effect to be given its own statute.

Fidelity Union Trust v. Field, decided by this court

December 9, 1940; ol lsh A Oem

Ct. 176.

Erie Roilroad Co. v. Tompkins, 9040.8. 64, 88 Sup

Ct. 817, 82 L. Ed. 787

et 0

chased from the state in the belief that the effect of Act

142 of 1935 was to make impervious to attack a tax title

conveyed by the state and to vest such title in the state’s

_ Brantees. But even so, appellants purchased at their peril

and under the risk that the Supreme Court of Arkansas

which they relied, and might ‘place upon it another and

8 al hat hasbeen done, inthe eee

gh disagree with them as to the effect of the act upon

bat har be Gone in he reese

case decided June 27, 1938, the court held that the act was

: of no avail to purchasers from the state in litigation over

17 such titles arising after the repeal of the act by Act 264

af of 1937. Kosek v. Walker, 196 Ark. 656. Both of these de-

cisions are cited in the opinion of the Supreme Court of

Arkansas én, the present case. (record 38) |

In the case of Union Trust 8 of Concord, Neu

Hampshire v. Watts, decided February 24, 1941, Ark. Law

He Reporter Vol. 75, at page 30, the court again held that

5 Aet 142 of the acts of 1935 was not a confirmation act and

that it was not effective to cure defective tax titles nor to

vest title during the time it was in force.

aq The appellants take the position here that the act of

1 1935 was effective to eure beyond attack tax sales and for-

| oes feitures made while the act was in force or made prior.to

17 it; that it was effective, therefore, to vest in the state and

6 | its grantees a title which the state was powerless to take

aL away by the repealing act of 1937. This is all very well

a i the effect of the act of 1935 was that ascribed to it by

5 aphpellants. The Supreme Court of Arkansas, however, is

the final authority upon the construction of an act of the

State of Arkansas and it has held otherwise. Before this

litigation was instituted, the Supreme Court of Arkansas

had authoritatively determined the meaning of the act in

question. The fact that this determination was made after

appellants had bought from the state, relying upon another

interpretation of the act, is unimportant. The. important

fact is that the Arkansas court, and not the appellants, are

Bs the final arbiters upon the question of the interpretation of

7) — _.... am act of the State of Arkansas. If the Supreme Court of

- Arkansas had adopted the interpretation of the act f

1 1ᷓ3935 adopted by the appellants, we might have presented

here the — of the power of the state to give to Act |

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797799

2564 of 1937 an effect which would divest appellants of the

title vested prior to its passage. But no title vested in

_ appellants prior to the repealing act and for that reason

the question which they seek to nae ars regarding Act

. 264 of 1937 is not presented.

a The decision of the Supreme Court of Arkansas in this

ease does not impair the obligation of any contract between

the state and appellants. The state merely conveyed to

appellants such title as it had. Its deeds did not go further

than this. The fact that appellants purchased in the hope

that existing laws would be continued in effect did not vest

in them the right to the continuance of such laws nor add

to the state’s contract an obligation to continue those laws

in effect. There is nothing unusual or unconstitutional in

deciding cases in aécordance with the law in effect when

the po is rendered.

Green v. Abraham, 43 Ark. 420

The decision of the Supreme Court of e should

be affirmed. d

„„ Respectfully submitted,

Walen G. R rox,

Counsel for Appellee.

APPENDIX

Aur 142

An Act to Regulate the Sale of Real and Personal Property

for Non-Payment of Tames, and for Other Purposes:

Be it Enacted by the General Assembly of the State of

Arkansas :

Section 1. Whenever the State and County taxes have

not been paid upon any real or personal property within

the time provided by law, and publication of the notice of

the sale has been given under a valid and proper descrip-

tion, as provided by law, the sale of any real or personal

property for the non-payment of said taxes shall not here-

after be set aside by any proceedings at law or in equity

because of any irregularity, informality or omission by any

officer in the assessment of said property, the levying of

said taxes, the making of the assessor’s or tax book, the

making or filing of the delinquent list, the recording thereof,

or the recording Of the list and notire of sale, or the cer- ,

tificate as to the publication of said notice of sale; pro-

vided, that this Act shall not apply to any suit now pending

seeking to set aside any such sale, or to any suit brought

within six months from the effective date of this Act for

the purpose of setting aside any such sale.

Approved: March 20, 1935.

Act 264

An Act to Repeai Act 142 of the Acts of 1935, A

Be it Enacted by the General e of the State of

Arkansas:

Section 4. That Act 142 of the Acts of 1935 "a and the

same is hereby repealed. .

Approved : March 17, 1937.

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_ SUPREME COURT OF THE UNITED STATES.

No. 709.—OcroBEr Trax, 1940.

J. H. Wood and J. H. Knowlton,

Appellants, Appeal from the Supreme

vs. Court of Arkansas,

T. S. Lovett, Jr.

[May 26, 1941.]

Mr. Justice Roperts delivered the opinion of the Court.

This appes! presents the question whether an Arkansas Act of

~ March 17, 1937, as construed and applied, violates Article I, § 10,

of the Constitution.

March 20, 1935, an act of the legislature of Arkansas! took effect

which provided:

Whenever the State and County Taxes have not been paid upon

any real or personal property within the time provided by law, and

publication of the notice of the sale has been given under a valid

and proper description, as provided by law, the sale of any real or

personal property for the non-payment of said taxes shall not here-

after be set aside by any proceedings at law or in equity because

_ of any irregularity, informality or omission by any officer in the

assessment of said property, the levying of said taxes, the making

of the assessor’s or tax book, the making or filing of the delinquent

list, the recording thereof, or the recording of the list and notice of

Sale, or the certificate as to the publication of said notice of sale;

provided, that this Act shall not apply to any suit now pending

| ‘Seeking ie set aside any such sale, or to any suit brought within six

months from the effective date of this Act for the purpose of setting

aside any such sale.

Certain land in Desha County, Arkansas, was sold to the State

in 1938 for non-payment of 1932 taxes. The land was not redeemed

and was certified to the State, as owner. In 1936 the Commissioner

of State Lands, on behalf of the State, by deeds reciting his statu-

tory authority so to do, conveyed to the appellants all the right,

title, and interest of the State in two parcels of the land.

1 Act 142 of 1935.

N *

2 2 Wood et al. vs. Lovett, Ir.

By an Act of March 17, 19387, the Act of March 20, 1935, was

repealed.? ©

January 10, 1939, the corporation which owned the land when

sold for non-payment of taxes conveyed to the appellee and, on

January 21, he brought suit against the appellants to cancel the

State’s deeds, to quiet his title, and for mesne profits or rents. He

alleged that there were irregularities in the proeeedings prior to the

sale to the State which rendered it void. The appellants admitted

the irregularities. It was agreed on all hands that though these

irregularities would have constituted grounds for avoiding the sale

but for the provisions of the Act of 1935, they would not have been

available to the appellee if the Act were still in force. The trial

court entered a decree in favor of the appellee which a Supreme

Court affirmed.“

The appellants contended in the courts below, and . here,

that if the Act of 1937 be given the effect of divesting them of title

confirmed in them by the Act of 1935 the later Act impairs the

obligation of their contracts with the State. The Supreme Court of

Arkansas held that ‘‘the Act [of 1935] does not profess to cure tax

gales, but only [provides] that tax sales shall not be set aside by the

courts because of certain irregularities and informalities, naming

them. It said that the appellants acquired no greater vested in-

Feten or title than the State had and the repeal of the Act of 1935

‘¢violated no constitutional right of theirs to a defense’’ thereunder.

We are of opinion that the decision was erroneous.

For present purposes it is unnecessary to recite the statutory pro-

cedure for assessment, levy, and collection of real estate taxes in

Arkansas, If the taxes levied become delinquent a sale by the Col-

lector is authorized. If no person bids the amount of the delin-

quent taxes, penalty, and costs, the Collector is to bid in the prop-

erty in the name of the State.“ The State is not required to pay

the amount bid in its name. The Clerk of the County Court is re-

quired to make a record of the sale to the State and send a certificate

2 Act 264 of 1987.

The words of the Act are: nt At 208 Of ths Ate of 1008 to'unt

same is hereby repealed.’’

S— Ark. -; 143 8. W. (2d) 880.

4 Pope s Digest 1937, § 13849.

5Id., § 13853.

Fy Q Ten ey ey rr

Wood et al. vs. Lovett, Jr. 3

thereof to the Auditor of State.“ Lands thus sold to the State may

be redeemed within two years of the sale.” After expiration of the

period of redemption, the County Clerk executes a certificate of sale

and causes the same to be recorded in the County Recorder’s office.

Thereupon the lands vest in the State. The certificate, after

recordation, is sent by the Clerk to the Commissioner of State

Lands and thereupor: the lands are subject to disposal aceording to

law.? The Commissioner is authorized to sell them and to make

deeds to purchasers.“

As the Supreme Court has indicated in this case, Act 142 of 1935

was one of a series of statutes adopted to prevent the setting aside

of tax sales and titles based upon them for informalities and irregu-

larities in the assessment and levy of taxes and the sale of property

for delinquent taxes which had seriously impeded the effective col-

lection of taxes and diminished the State’s revenue.

In Berry v. Davidson, 199 Ark. 276, 280, the court, after refer-

ring to several similar acts, said: J

„ we now think it a nt that the legislature was

endeavoring to find and put into’ effect a remedy or means to

correct the evils growing out of nonpayment of taxes, to prevent

tax evasion. For many years it was a recognized proposition that

tax forfeitures and sales of land on account thereof were well nigh |

universally held ineffectual to convey title, and there is perhaps at

this time, no doubt, that there was a general recognition of the

futility of taxing laws; that it was thought by many that people

need not pay taxes if they were willing to meet the worry and ex-

penses of litigation in regard thereto.

„Aet 142, above mentioned, while it was still in foree, was

another evidence of the legislature’s effort and struggle to correct

or eure these well grounded and long established practices illus-

trating the futility of the law requiring payment of taxes. Out of

all this has come Act 119 of the Acts of 1935 construed and upheld

in the last cited case. [Fuller v. Wilkinson, et al., 198 Ark. 102,

| 128 8. Der! According to the terms of that statute, when

8 ve n invoked in regard to such tax sales, we must, and

Nrn....

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do, hold that the decree of confirmation of a sale to the state

6 Id., $ 13855,

d., 6 18868.

6 Id., 6 18876,

® Id., $$ 8610, 8620.

4 Wood et al. vs. Lovett, Jr.

‘operates as a complete bar against any and all persons, firms, cor-

porations, quasi-corporations, associations who may claim said

property’ sold for taxes subject only to the exceptions set forth and

stated in the act, none of which is applicable to aid the appellant.“

It is evident from these statements that the purpose of Act 142

was definitely to assure purchasers from the State that the land

bought by them could not be taken away from them on grounds

theretofore available to the delinquent taxpayer. j

In its opinion in the present case, the court lays stress on the

fact that Act 142 was not a curative act although, in earlier de-

cisions, it had repeatedly so designated it.” But we do not deem

the name or label of the legislation important. The fact is, as the

court below holds, that the purpose and effect of the statute was

to render unavailing to the owner whose property had been sold

for taxes, as grounds of attack on the title of the purchaser from

the State, irregularities and informalities in the performance of

acts by State officers in connection with the assessment, levy, and

sale which the legislature could, in its discretion have omitted to

prescribe as essentials to the passing of a valid title.

The Act of 1935 must be viewed in the setting of the statutory

scheme of taxation, sale of forfeited lands to the State, and sale in

turn by the State. Its purpose was to assure one willing to pur-

chase from the State a title immune from attack on grounds there-

tofore available. By its legislation the State said, in effect, to the

prospective purchaser of lands acquired for delinquent taxes, that

if he would purchase he should have the immunity. Under the

settled rule of decision.in this court the execution of the State’s

deeds to the appellants constituted the execution or consummation

of a contract, the rights arising from which are protected from

impairment by Article I, f 10 of the Constitution; and the obliga-

tion of the State arising out of such a grant is as much protected by

Article I, § 10, as that of an agreement by an individual. Fletcher

v. Peck, 6 Cranch, 87, 136, 137, 189. The Act of 1935, taken in con-

nection with the other statutes regulating the acquirement by the

State, and the disposition by it, of lands sold for delinquent taxes,

constituted in effect an offer by the State to those who might be-

10 Carle v. Gehl, 193 Ark. 1061; Deaner v. Gwaltney, 194 Ark, 332; Lambert

v. Reeves, 194 Ark. 1109; Gilley v. Southern Corporation, 194 Ark. 1134;

Foster v. Reynolds, 195 Ark. 5; Wallace v. Todd, 195 Ark. 134; Burbridge v.

Crawford, 195 Ark. 191; Kansas City Life Ins. Co. v. Moss, 196 Ark. 553;

Sanderson v. Walls, 200 Ark. 534. p

. s

Wood et al. vs. Lovett, Jr. 5

come purchasers of such lands, and the protection it afforded to

the title aequired by such purchasers necessarily inured to every

purchaser acting under it and constituted a contract with him. 11

The federal and state courts have held, with practical unanimity,

that any substantial alteration by subsequent legislation of the

rights of a purchaser at tax sale, accruing to him under laws in

force at the time of his purchase, is void as impairing the obliga-

tion of ogntract.

Appellee relies upon the circumstance that the State’s deed is a

quit-claim. From this it is inferred that no contract was made that

the terms of the Act of 1935 were to bind the State with respect to

the title conveyed. But the laws which subsist at the time and

place of the making of a contract, and where it is to be performed,

enter into and form a part of it, as if they were expressly referred

to or incorporated in its terms.’’* This court has held that the

terms of a statute according rights and immunities to a vendee of

the state are a part of the obligation of the deed made pursuant to

it. The grant of the State of Georgia involved in Fletcher v.

Peck, supra, was a patent of the public lands of the State and, of

course, contained no warranty of title save such as is implied from

the fact that the State purports to grant its own lands. In

; oners, v.

148 U. 8. 172, 182); Tracy u. Reed, 88 Fed. 69; Walker . 176

625; Chapman v. yn, 182 Cal, 204, 187 P. 962; Hall u. Florida,

| Fis. 79, 11 So. 97; State Adjustment Oo. v. Winslow, 114 Fla. 609, 154 So.

; Morris v. Interstate Bond Co,., 180 Ga. 689, 1 „ .

HI. 221; Solis u Wiliams, 205 Mase, 21 91 N. 78

6 Wood et al. vB. Lovett, Jr.

271 U. S. 364, it appeared that the legislature had fixed the shore

line of the City of New York along the Hudson River and that the

land inside that line had been granted to the city with the conse-

quent right to convey it. The city had conveyed land under

water, on the landward side of the line, to Appleby by a quit-

claim deed.* By subsequent statutes the State granted the city

authority to use the land in question for municipal purposes and

the city proceeded to improve it. This court held that the city,’s

grant, made with full legislative sanction, could not be impaired by .

the subsequent legislation.

As in the cases cited, so here, the question is whether the State

granted a valuable right which it subsequently essuyed to take away,

The Supreme Court of Arkansas sustained the constitutional

validity of Act 142 of 1935 on the obvious ground that a taxpayer

has no vested right in any given form of procedure for forfeiture

of lands for nonpayment of taxes, As that court has held, the

extent of his right is that he shall have notice of the sale and a

fair opportunity to prevent forfeiture for default, It is sug-

gested that the acts of the State in depriving the taxpayer of the

right to set aside a sale for technical procedural defects is of like

quality with the State’s attempt to restore the taxpayer’s rights

against the appellants who purchased from the state, But ob-

viously the two acts are not of the same quality, The taxpayer

had neither a contract nor any other constitutional right as against

343

441

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Wood at al. vs. Lovett, Jr. 7

The appellee suggests that it is significant that the State was not

a party to this suit, and was not, therefore, seeking to take back

what it had granted. But, as Fletcher v. Peck, swpra, shows, this

is not important for that suit was between two private parties, as

is this, one claiming rights conferred by the earlier state action and

the other claiming superseding rights under later legislation.

It begs the question to say that the State may not abdicate its

police power. In the exercise of the policy committed to the legis-

lature it is competent for the state to enter into a contract which

it intends as an assurance of protection to its grantee. is This we

think the State has plainly done in the present instance. The

judgment is

Reversed.

A true copy.

Test:

Clerk, Supreme Court, U. 8.

15 State ex rel. Anderson „ Brand, 303 U. 8. 95.

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No. 709.—-Octosme Term, 1940.

J. H. Wood and J. H. Knowlton,

Mr. Justice Buck, dissenting.

There is far more involved here than a mere litigation between

view, the statute here stricken down is but one of many acts adopted

both by Congress and by state legislatures in an effort to meet the

baffling economic and sociological problems growing out of a nation-

wide depression. These problems—among them the owners’ loss

of homes and farms, chiefly through mortgage sales and tax for-

feitures and the states’ concomitant loss of tax revenues—chal-

lenged the wisdom and capacity of the nation’s legislators. _

Among the efforts of Arkansas’ legislators to meet these problems

was the legislation adopted by Act 142 of 1935 and repealed by

Act 264 of 1937—the repealing act being the statute here held in-

valid. It is quite apparent that considerations of public policy in-

duced the Arkansas legislature to pass the 1935 act whereby Ar-

kansas courts were prohibited from setting aside certain types of

defective tax sales by any proceedings at law or in equity. At

the time that act was passed, more than 25% of the real property

in the state was tax delinquent. Loss of revenue from so substan-

tial a portion of the state’s total acreage was a serious matter. In

the eyes of some people, the land could be sold and the lost reve-

nues recouped if some of the formal grounds on which tax titles

1 Ark, Acts 1935, No. 119, §12. In Desha County, where the lands here in-

volved are located, tax delinquency as of December 31, 1933, amounted to

57.5%. This was the highest figure reported for any county in the state.

ealty Tax Delinquency (Bureau of the Census, 1934) Vol. I, part II, Ar-

kansas, pp. 3-4. And see Brannen, Tax Delinquent Rural Lands in Arkansas

(University of Arkansas, College of Agriculture, Bulletin No. 311, 1934)

SUPREME COURT OF THE UNITED STATES,

Appellants, . Appeal from the Supreme

vs. ; . Court of Arkansas.

T. S. Lovett, Jr. N

[May 26, 1941.] :

rival claimants to a few hundred acres of, Arkansas land. In my

E RET

2 Wood et al. vs. Lovett, Jr.

could be invalidated were rendered unavailing? It seems clear

that the 1935 legislature was persuaded of the wisdom of such a

step. But it also seems clear that the 1935 act was repealed in

1937 because the legislature became convinced that the law had

worked directly contrary to the state’s policy of obtaining the bene-

fits believed to flow from continuity of possession by home owners

and farmers, that it had accomplished inequitable results, that it

had thereby operated injuriously to the interests of the State, and

that sound policy dictated its repeal.. This is apparent from

reading that part of-section 2 of the repealing act of 1937 which

declared that ‘‘said Act 142, Acts 1935, ignores jurisdictional pre-

requisites to effect valid sales of tax delinquent land, as prescribed

by law, and has brought the laws-ofthe State incident thereto into

doubt and confusion . . . .”’

Both the 1935 act and the 1937 act tepealing it touch on Ar-

kansas’ policy as to taxation, tax forfeiture, and land ownership—

matters of public policy which are of vital interest to the state and

all its eitizens. It was a matter of serious moment to Arkansas that

25% of the state’s privately owned land—homes, farms, and other

property—was in jeopardy of being taken from its owners because

of inability to pay taxes. If only 50% of the forfeitures were

homes ‘and farms, simultaneous ouster of so many citizens could

result iff forced migrations and discontents disastrous in their

consequences. The manifestations of financial distress revealed by

the widespread delinquency.spotlighted conditions which called for

the best in legislative statesmanship, To seek a rational and fair

solution to the problem was not only within the power of Arkansas’

lawmakers, but was also their imperative duty. Without attempt-

ing to judge the wisdom or equities of either act, it is easy to see

that both the 1935 and the 1937 act represented rational and under-

standable attempts to achieve such a solution. To hold that the

contract clause of the federal Constitution is a barrier to the 1937

2 Brannen, Tax Delinquency in Arkansas, 15 Southwestern Social Science

Quarterly 201, 206-207 (1934); Brannen, Tax Delinquent Rural Lands in Ar-

kansas, supra, p. 385. And see Berry v. Davidson, 199 Ark. 276, 280.

8 Arkansas has expressed its continuing solicitude in this regard by numerous

acts of its legislature. For example, by such an act Arkansas taxpayers

were permitted to retain title to their real property for three years by paying

taxes for only one year. See Third Biennial Report, Arkansas State Tax

Commission (1931- 320 p. 6.

4 Ochiltree v. Railroad Co., 21 Wall, 249, 251.

Wood et al. vs. Lovett, Jr. 3

attempt to restore to the distressed landowners the remedy partly

taken away by the 1935 act is, in my view, wholly inconsistent with

the spirit and the language of that Constitution.

As already stated, Arkansas was not faced with a e pe- 1

euliar to that state alone. At the depth of the depression, over 5 4

20% of all real property in the United States was tax delinqnent.5

Nor was Arkansas alone in seeking to do something about the situa-

tion. Since 1928 nearly every state in the Union has enacted

legislation dealing with the problem of delinquent taxes and a num-

ber of states have completely remodeled their systems of ‘tax de-

linquency laws. This legislative activity has been called forth by

the unprecedented increase just before and during the depression

in the amount of unpaid property taxes and by the consequent

threat both to the financial stability of state and local governments

and to the security of private property. By acts passed in the

single year of 1933, twelve states extended the time for paying taxes '

already due, eleven states postponed sales for taxes, twenty-six

states (among them Arkansas) waived or reduced penalties and +

interest on taxes already delinquent or for which property had al-

ready been sold, nine states (among them Arkansas) lengthened

the period of redemption on property already sold, and sixteen 4

states permitted payment of already delinquent taxes in install-

ments spread over a period of years.” |

The states, and the federal government also, were faced with

a ‘‘financial crisis [which had] the same results as if it were caused 1

~ by flood, earthquake, or disturbance in nature.“ The federal

government greatly expanded facilities for farm loans; set up the

Home Owners Loan Corporation; practically underwrote the na-

tion’s banking system; passed the Frazier-Lemke Act; widened

5 Realty Tax Delinquency (Bureau of the Census, 1934) Vol 1, pp. 6-7. By

states, tax delinquency varied from a low of 6% in Massachusetts to a high i

of 40.5% in Michigan. North Dakota (37.5%), Illinois (37%) and Florida

(36%) followed close after Michigan.

{ putney, Tax Delinquency in the United States, in Editorial Research Re-

ports (Vol, II, 1935) 327. And see Fairchild, The Problem of Tax Delin-

quency (1934) 24 American Kconomic Review 140, 144,

7 Proceedings of the National Tax Association (1933) 28-30; ef. id. (1934)

30-31. For a complete list of changes in tax collection procedure made during

the 1930-1934 period, see Realty Tax Delinquency (Bureau of the Census, 1934)

Vol. 1, pp. Ia-Hi.

8 Justice Olsen of the Minnesota Supreme Court, as quoted in Home Build- 5

ing & Loan Association v. Blaisdell, 290 U. §. 398, 423.

}

His

an bh

4 Wood et al. vs. Lovett, Jr.

the scope of bankruptcy jurisdiction; and embarked on a system

of nationwide relief. In the states, part of the effort to meet the

crisis took the form of mortgage and tax moratoria; part took other

forms, including that of the legislation now before us. All may

well be considered parts of the larger and over-all effort to avert

eatyclysmic changes which were thought to threaten the equilibrium

and tranquility of our society. This Court, in its notable decision

in Home Building & Loan Association v. Blaisdell, 290 U. S. 398,

upheld that phase of the Minnesota effort which took the form of

a mortgage moratorium. In the course of the opinion, the Court

quoted the state Attorney General, who in his argument here had

stated: ‘Tax “delinquencies were alarmingly great, rising as high

as 78% in one county of the state. In seven counties of the state the

tax delinquency was over 50%. Because of these delinquencies

many towns, school districts, villages and eities were practically

bankrupt’ . . . [and] serious breaches of the peace had oc-

curred. The policy behind mortgage moratoria and the policy

behind tax leniency to landowners are inextricably intertwined.’

The basic philosophy of, the two types of legislation is identical.

For encouragement of home and farm ownership has always been

treated as a major objective of our social and governmental policy.

And therefore what was said in the Blaisdell case with reference

to the contract clause is equally applicable here: ‘‘Not only is the

constitutional provision qualified by the measure of control which

the State retains over remedial processes, but the State also continues

to possess authority to safeguard the vital interests of its people. It

does not matter that legislation appropriate to that end ‘has the re-

sult of modifying or abrogating contracts already in effect.’

_ Stephenson v. Binford, 287 U. S. 251, 276. Not only are existing

K laws read into contracts in order to fix obligations as between the

parties, but the reservation of essential attributes of sovereign power

is also read into contracts as a postulate of the legal order. 1

So much for the general setting which gave rise to the law here

held invalid. In order better to understand the effect that law had

on the appellants and the appellee, it is necessary to consider other

provisions of Arkansas law.

9 Home Building & Loan Association v. Blaisdell, supra, at 424.

10 Cf. The Farm Debt Problem, Letter from the Secretary of Agriculture

(73rd Cong., Ist Sess., House Doc. No. 9) pp. 26-29.

11 Home Building & Loan Association v. Blaisdell, supra, at 434-435.

Wood et al. vs. Lovett, Jr. 3 5

At the time appellants secured from the state a quit claim deed

to the lands here in question, the law provided two alternative

means of assuring purchasers of tax forfeited lands against loss:

(1) Such purchasers, under certain circumstances, could hold

on to the land through the protection afforded by the remedial

processes of the eourts;

(2) In ease they could not hold on to the land, such purchasers

were afforded the protection. of a judicially enforceable right to be

reimbursed by the landowner for the amount paid out for purchase

price and subsequent taxes, with interest, as well as for improve-

ments—all in the event that the former owners of the land should

for any reason be able to prove that the lands had never been

validly forfeited. Ark Dig. Stats. (Pope, 1937) §§4663-4665, 13881.

The Arkansas legislature, by Act 264 of 1937, narrowed the

circumstances under which purchasers might hold on to the land.

But the second alternative assurance remained intact.

From my study of the case I am of opinion that:

(1) The 1937 Arkansas statute here attacked neither impaired

nor sought to repudiate any contractual agreement or obligation

expressly or impliedly assumed by the state; 7

(2) The 1937 Arkansas statute was enacted well within the

state’s general legislative powers and is in no way inconsistent

with the true intent and fair interpretation of the federal consti-

tutional prohibition which commands that No State shall!

pass any Law impairing the Obligation of Contracts

First. The state, by quit claim deeds, without any express war-

ranty whatever, conveyed the lands in question to appellants. It is

appellants’ claim that an obligation of the contract created by the

grant of the State’’ has been impaired by the Arkansas statute.

Stripped of surplus verbiage, appellants’ naked contention is that

Arkansas, by its quit claim sale and conveyance, obligated itself to

12 There were three principal ways by which purchasers of tax titles could

hold on to the land: .

(1) By acquiring a valid tax deed. (The tax deeds here were admittedly

invalid under the laws existing at the time of forfeiture.)

(2) By two years open and adverse possession. (Though over two years

had elapsed between the date of purchase and the beginning of this litigation,

the courts below found that the purchasers had not availed themselves of this

remedy.) d

(3) By failure of the former landowner to compensate the purchaser for his

* (The order of the court below provided that such compensation

paid.) Pee

6 f wie d Losen Ye.

refrain from thereafter passing a general legislative enactment if

such enactment would affect in any manner any of the legal means

provided to protect tax sale purchasers against loss. We need not

here consider whether under the Arkansas Constitution the legis-

lature could have thus bargained away the state’s legislative power

in setting up a scheme for the sale of tax forfeited land. For there

was no attempt on the part of the state officials who made the sale

to exercise any such extraordinary authority.

A deed to property without warranty is an agreement to transfer

whatever title the grantor has. And even without express language

to that effect in the conveyance, it is reasonable to say that a valid

quit claim conveyance carries along with it an implied obligation

that the grantor will not repudiate the grant and attempt to re-

assert title in himself, for such a reassertion of title would be

contrary to the express purpose which actuated the parties in

reaching the agreement which ended in the conveyance. The im-

plied obligation not to reassert title was the basis of the decision in

Fletcher v. Peck, 6 Cranch 87, a decision which this Court relies

on in the case at bar. Cf. Satterlee v. Matthewson, 2 Pet. 380, 414

415. In Fletcher v. Peck, the court said: A contract executed,

as well as one which is executory, contains obligations hinding on

the parties. A grant, in its own nature, amounts to an extinguish-

ment of the right of the grantor, and implies a contract, not to

reassert that right. A party is, therefore, always estopped by its

own grant. What the State of Georgia did in that case was to

seek to reassert title to land which the court found it had conveyed

for a consideration under what the court deemed to be a valid

contract. True, Georgia was not a party to the actual litigation,

but by purporting to convey to one purchaser land which had al-

ready been conveyed by it to another purchaser the state clearly

attempted to assert that it still had title to the land. Here the

State of Arkansas has not repudiated any implied obligation by

attempting to reassert title in the lands whose ownership is now

in issue. There is no litigation here between the state and its

grantees, and none, as in Fletcher v. Peck, between rival grantees

13 6 Cranch 87, 137. In that case Mr. Jestice Johnson denied that the in

of contract clause was intended to apply to contracts already fully

executed. Id., at 145. That question, however, is not material to the point

here under discussion.

Wood et al. vs. Lovett, Jr. 7

of the state, Appellees clainy title through an owner whose es-

tate Arkansas had purportedly forfeited for unpaid taxes. Neither

in the facts of this ease nor in the legislation attacked is there

any kind of challenge to the validity of the state’s conveyance

of all the title the state possessed. As pointed out above,

Fletcher v, Peck rested upon the assumption that there was a con-

tinuing obligation on the part of the state, as on the part of any

other grantor, not to repudiate a valid conveyance and attempt to

reassert a claim to property which had been sold. Such a ruling

offers no support to the contention that Arkansas, in quit claiming

all its interest to appellants, thereby assumed a continuing con-

tractual obligation that its legislative department would in no way

alter the procedural rules to be followed by the Arkansas courts

in adjudicating controversies between the state’s grantees and the

original owners whom the state had attempted to divest of their

property by the drastic method of: forfeiture. ‘‘The trouble at

the bottom of the . . . case is that the supposed promise on

which it is founded . . does not exist. If such a promise had

been intended it was far too important to be left to implication.’’

Knozville Water Co. v. Knoxville, 189 U. S. 434, 436. The

patent [here, the quit claim deed] contains no covenant to do or

not to do any further act in relation to the land; and we do not, in

this case, feel at liberty to create one by implieation. Jackson

v. Lamphire, 3 Pet. 280, 289. A contract binding the State is

only created by clear language, and is not to be extended by impli-

cation beyond the terms of the statute. . . . In the case at bar

. . the act . operated in no manner as a restraint on

the legislature or as a contract upon its part that the State would

not act whenever in its judgment it perceived the necessity for an

additional ferry. . . . No promise made by the legislature by

U. S. 601, 603, 604. There is no undertaking on the part of the

State with the purchaser that the remedy prescribed in this statute,

and no other, shal] be pursued, unless it is to be implied from the

mere presence of the provision in the statute, and we think it is

well settled that no such implication arises. Wilson v. Standefer,

184 U. S. 399, 410,

of its contract. For there was certainly no express obligation on the

the first act is broken by the second. Williams v. Wingo, 177

In this ease Arkansas has fully complied with the express terme

8 Wood et al. vs. Lovett, Jr.

part of Arkansas that its general laws concerning forfeiture of

property and sale of land should remain static. Nor do I believe

_ that any such obligation can properly be implied. Arkansas did not

agree with the appellants that it would keep on its statute books leg ·

islation which in effect forfeited its citizens’ lands in a way and

manner which was directly in the teeth of what had been the

Arkansas law at the time the alleged forfeitures occurred. And I

do not believe that we should compel the accomplishment of such |

a result by what I conceive to be a stretching of the contract

clause of the Federal Constitution.

Second. Measured either by the constitutional provision itself

or by that provision as construed by prior decisions of this Court,

I am of opinion that the Arkansas statute is consistent with what

was referred to in Home Building & Loan Association v. Blaisdell,

290 U. S. 398, 438-439, as the true intent and fair interpretation

of the contract clause. .

Writing in 1817, Judge Livingston, of the Federal Circuit Court

of New York, had this to say of the contract clause: There is not,

perhaps, in the Constitution any article of more ambiguous im-

port, or which has occasioned, and will continue to occasion, more

discussion and disagreement, . . . or the application of which to

the cases which occur will be attended with more perplexity and em-

barraasment. . and it will not be surprising if, in the discharge

of it, great diversity of opinion should arise. Adam v. Storey, 1

Paines Rep. 79, 88-89. In Homé Building & Loan Association v.

Blaisdell, supra, written in 1933,-appears a resumé of previous de-

cisions which substantiate the accuracy of Judge Livingston’s prop-

heey. And in the Blaisdell case this Court quoted a statement origi-

nally made by Justice Johnson in Ogden v. Saunders, 12 Wheat.

213, 286: ‘‘But to assign to contracts, universally, a literal

and to exact for them a rigid literal fulfilment, could n

the intent of the constitution. It is repelled by a hun

Societies exercise a positive control as well over the

re 5 1

— — tae ahead te yn 4

. I AN ttt aR OD i etre ee P aa heat eet ne eee eee

* 1 — — 7 — — — * 2 ie — — * N >

ure of the remedy to enforce it.“ The accuracy: of this statement

cannot be questioned by one who reflects upon the extent to which

contracts and agreements are a part of the daily activities of our

society. For so nearly universal are contractual relationships that it

is difficult if not impossible to conceive of laws which do not have

Wood et al. vs. Lovett, Jr. 9

either direct or indirect bearing upon contractual obligations.

Therefore, it would go far towards paralyzing the legislative arm of

state governments to say that no legislative body could ever pass a

law which would impair in any manner any contractual obligation

of any kind. Upon a recognition of this basic truth rests the decision

in the Blaisdell case. Such recognition was made clear by the use

of the following expressions, either quoted and implicitly approved,

or used for the first time: ‘‘the prohibition is not an absolute one

and is not to be read with literal cattle mathemati

formula; No attempt has been made to definitely the line

between alterations of the remedy, which are to be deemed legiti-

mate, and those which under the form of modifying the remedy,

impair substantial rights. Every case must be determined upon

its own circumstances; In all such cases the question becomes

therefore one of reasonableness, and of that the legislature is pri-

marily the judge; The question is not whether the legislative

action affects contracts incidentally, or directly or indirectly, but

whether the legislation is addressed to a legitimate end and the

measures taken are reasonable and appropriate to that end’’; If

it be determined, as it must be, that the contract clause is not. an

absolute and utterly qualified restriction’ of the state’s protective

power, this legislation is clearly so reasonable as to be within the

legislative domain“.

The Blaisdell decision represented a realistic appreciation of the

fact that ours is an evolving society and that the general words of

the contract clause were not intended to reduce the legislative

branch of government to helpless impotency. See Veir v. ' Siath

Ward Building d Loan Association, 310 U. S. 32, 38. Whether the

contract clause had been given too broad a construction in judicial

opinions prior to the Blaisdell decision is not now material. And

whether I believe’ that the language quoted from the Blaisdell

opinion constit the ultimate criteria upon which legislation

should be measured I need not now discuss. For I am of opinion

that the Arkansas statute, passed in pursuance of a general public

policy of that state, comes well within the permissible area of state

legislation as that area is defined by the Blaisdell case and the

decisions upon which that case rests.’

14 The only part of the Blaisdell decision mentioned by the Court in the case

at bar is a passage quoting a statement which in Blaisdell the Chief Justice

quoted from Von Hoffman v. City of Quiney, 4 Wall. 535, 550, 552: the

}

10 Wood ęt al. vs. Lovett, Ir.

ated—by the 1935 act. As has also beeh pointed out, experience

evidently demonstrated to the legislature that the best interest of

175

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Wood et al. vs. Lovett, Jr. 11

rder that he may not suffer pecuniary loss, whatever may be the

ensequences of a suit for the land. And the whole course of leg-

dation in Arkansas shows a desire to be fair both to the pur-

haser of tax forfeited land and to the former owners whose land ~

s about to be lost by reason of the drastic deviee of forfeiture. }

K. Curtis v. Whitney, 13 Wall. 68, 71. I cannot believe that g

he true intent and interpretation of the contract clause pro-

bits Arkansas from making such an effort to preserve the rights of

wth the landowner and the one who claims the landowner’s for-

sited property. Arkansas has not here taken away

‘entire remedy but has done so ‘‘in part only. Mason v. Haile,

2 Wheat. 370, 378. I am willing to concede that there may be 4

‘vast disproportion between the value of the land and the sum for ae 7

shich it is usually bid off at such sales. Curtis v. Whitney, supra, | .

70. But assuming that the tax forfeited land here was obtained :

it such a bargain, I am still of the opinion that these appellants

who have the right to their money, with interest—have been ’

jenied no right guaranteed by the contract clause. And in this con- .

nection it is not to be forgotten that appellants could have obtained

a perfect title by openly and adversely holding possession of the

land for two years—a privilege which the state courts finally and

suthoritatively found had not been exercised. Tax sold prop- {

erties are undoubtedly bought with the knowledge on the part

of those who speculate® in them that states ordinarily adopt a

liberal policy in order to protect property owners from tax for- k

feiture. And even granting that we could enter into questions of :

policy, I would be unable to reach the conclusion that Arkansas,

by repealing its 1935 statute, acted without reason or in a

spirit of oppression. W. B. Worthen Co. v. Kavanaugh, 295 U. S.

56, 60. It would seem to me to be difficult to support an argument ;

that Arkansas was acting either unreasonably, unjustly, oppres-

sively, or counter to sound public policy in adopting a law which,

without depriving purchasers of the right to recover their money .

outlay, with interest, sought to make the way easy for former home

15 Treat v. Orono, 26 Me. 217; Lisso & Bro. v. Natchitoches, 127 La.

283; Lynde v. Melrose, 10 Allen (Mass.) 49. e 608, 506.

ment Finance in the Depression, 24 National M Review 503, 506.

Den

;

te '¢

12 - Wood et al. vs. Lovett, Jr.

owners and property owners of all types to reacquire possession —

and ownership of forfeited property. If under th contract clause

it is justifiable to seek to find ‘‘a rational compromise between indi-

viduai rights and public welfare“, Home Building d Loan Associa-

tion v. Blaisdell, supra, at 442, then it seems to me that this is a

ease for the application of that principle. I do not believe that the

Arkansas legislature is prohibited by the federal Constitution from

adopting the public policy which the decision of the Arkansas

Supreme Court has upheld in this case. Especial respect should

be had to such decisions when the dispute arises out of general laws

of a State, regulating its exercise of the taxing gt or ere

to the State’s disposition of its publie lands. 10

Mr. Justice Dovanas and Mr. Justice Mont concur in this

opinion. | .

4 : a

16Wilson v. Standefer, 184 U. 8. 399, 412.

=] :

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