1.
Wolsey v. Chapman, supra, p.
101 U. S. 755,
reaffirmed.
2. This Court adhering to the construction given by the Supreme
Court of Iowa to the revenue laws of that state touching the time
when lands located or entered under the laws of the United States
or purchased from the state, become taxable, holds that the lands,
the title whereto by the joint resolution of Congress approved
March 2, 1861, 12 Stat. 251, passed to
bona fide
purchasers of that state, were not subject to taxation prior to the
year 1862.
3. Where the state claimed adversely to the true owner a part of
said lands, and there was a controversy whether the title to the
remainder had passed from the United States, and, on that account,
the proper authorities of the state gave notice to the parties in
interest that no legal steps would be taken to enforce the
collection of the taxes until the title should be adjusted,
held that the statutory interest, which is in the nature
of a penalty, cannot be exacted for nonpayment of them within the
time prescribed by law where the owner, on the adjustment of the
title, offered to pay so much of them as was actually due, with
interest thereon at the rate allowed by law for delay in the
payment of ordinary debts, and his offer was refused.
4. A court of equity has, under such circumstances, the power to
grant relief by enjoining the collection of such statutory
interest.
Litchfield filed, Sept. 29, 1873, his bill of complaint against
the County of Webster, Iowa, and Hutchinson, its treasurer, seeking
to enjoin the collection of the taxes levied for 1859, 1860, 1861,
1862, 1863, 1864, 1865, and 1866 on lands whereof he claimed to be
the owner. They amount to 32,602 92/100 acres, and are situate in
that county in the alternate odd-numbered sections, within five
miles of that part of the Des Moines River which is above the
Raccoon Fork.
The principal of the taxes, when the case was submitted to the
court below, was $10,174.76, and the penalty claimed for the
nonpayment of them, $64,235.41, making a total of $74,410.17.
These lands are a portion of those which gave rise to a long
protracted controversy of which
Wolsey v. Chapman, supra,
p.
101 U. S. 755,
furnishes a complete history.
The facts which this suit involves are stated with sufficient
fullness in the opinion of the Court.
Page 101 U. S. 774
The court below, considering the penalties prescribed by the
revenue laws of Iowa, as in the nature of interest rather than as
statutory penalties proper, held that the complainant, by reason of
the acts of the state and its officers, was entitled to relief upon
his paying the full amount of taxes from 1862 to 1866 inclusive,
with annual interest thereon at the rate of six percent, and that
the lands were not subject to taxation for the preceding years. A
decree was entered accordingly, and each party appealed.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
The primary question to be decided in this case is as to the
time when the lands which passed to the
bona fide
purchasers from the State of Iowa under the joint resolution of
Congress approved March 2, 1861, 12 Stat. 251, became taxable by
the laws of the state. The controversy is about taxes assessed for
the years 1859, 1860, 1861, 1862, 1863, 1864, 1865, and 1866.
The facts affecting the title are fully stated in
Wolsey v.
Chapman, supra, p.
101 U. S. 755,
where we held, following the principles settled in
Dubuque
& Pacific Railroad Co. v. Litchfield, 23 How.
66,
Wolcott v. Des Moines
Company, 5 Wall. 681,
Riley v. Wells, not
reported,
Williams v.
Baker, 17 Wall. 144, and
Homestead
Company v. Valley Railroad, 17 Wall. 153, that the
United States continued to own the lands until the adoption of the
joint resolution. No lands were included in the original river
grant of 1846 except those below the Raccoon Fork. While on account
of the action of the Executive Department of the general government
those above the Fork were reserved from sale and did not pass to
the state when selected as school lands under the act of 1841, or
as railroad lands by the grant of 1856, and were not open to
preemption entry, they were not actually donated by the United
States to the state or to the purchasers from her until the joint
resolution was adopted. The grant made by that resolution was just
as much an original grant as if the act of 1846 had never
Page 101 U. S. 775
been passed. The order of the Executive Department reserving
them from sale neither transferred any title to nor created any
interest in the state. It simply retained the ownership in the
United States. While the subsequent gift was undoubtedly induced by
what had happened before, the United States, until it was made,
continued to be the proprietor of the lands both in law and in
equity. Such being the case, they were not taxable before March 2,
1861. They, down to that time, actually belonged to the United
States, and no one else had any interest whatever in them.
This disposes of the taxes for the years 1859 and 1860, but
another question arises as to those of 1861. Under the revenue laws
of Iowa in force at that time, government lands entered or located,
or lands purchased from the state, could not be taxed for the year
in which the entry, location, or purchase was made. Laws of Iowa,
Rev. 1860, p. 110, sec. 711, par. 7. In
The McGregor & M.
Railroad Co. v. Brown, 39 Ia. 655, this was held to mean that
government lands were not taxable until the next year after a
patent could be demanded for them. To the same general effect are
Iowa Falls & Sioux City Railroad v. Cherokee County,
37 Ia. 483;
Goodrich v. Beaman, id., 563;
Iowa Falls
& Sioux City Railroad v. Woodbury County, 38
id.
498. The revenue year of the state for 1861 commenced before March.
It is clear, therefore, that the lands were not taxable for that
year. They were neither entered, located, purchased from the state,
nor patented, within the meaning of the revenue laws, until
then.
We think, however, that for the year 1862 and thereafter, they
were taxable. By the joint resolution, Congress relinquished all
the title the United States then retained to the lands which had
before that time been certified by the Department of the Interior
as part of the river grant, and which were held by
bona
fide purchasers under the state. No further conveyance was
necessary to complete the transfer, and the description was
sufficient to identify the property. The title thus relinquished
inured at once to the benefit of the purchasers for whose use the
relinquishment was made. All the lands involved in this suit had
been certified, and Litchfield, or those under whom he claims, were
bona fide purchasers from
Page 101 U. S. 776
the state. It matters not, so far as this branch of the case is
concerned, that at that time there were doubts as to whether the
United States retained any title which could pass under the
resolution. That question has now been settled in favor of
Litchfield, and it has also been decided that after the resolution
went into effect, the United States had no longer any interest in
the property, legal or equitable. It became private property, and
as such subject to taxation under the revenue laws of the
state.
It only remains to consider whether, under the circumstances of
this case, it is within the power of a court of equity to enjoin
the collection of the interest or penalty which the revenue laws of
the state require the treasurer of the county to collect in case
taxes legally assessed are not paid within the time fixed by law.
The statutes regulating this matter are as follows:
"SEC. 759. On the first day of February, the unpaid taxes of
whatever description for the preceding year shall become
delinquent, and shall draw interest, as hereinafter provided; . .
."
"SEC. 760. The treasurer shall continue to receive taxes after
they have become delinquent until collected by distress and sale,
but if they are not paid before the 1st of March, he shall collect
as a penalty for nonpayment, from each taxpayer so delinquent, one
percent of the amount of his tax additional, and if not paid before
the first day of April, he shall collect another one percent
additional, and so for each full month which shall expire before
the tax shall have been paid. The treasurer shall in all cases make
out and deliver to the taxpayer a receipt for taxes paid, stating
the time of payment, the description of the land, the amount of
each kind of tax, the interest on each, and costs, if any, giving a
separate receipt for each year, and shall make the proper entries
of such payments in the books of his office, and such receipt shall
be in full for his taxes that year. . . ."
By sec. 761, the clerk of the county board of supervisors is
required to keep full and complete accounts with the county
treasurer, and, among other things, to charge him with "interest on
delinquent taxes," and
"on the first day of each month, ascertain the amount of
delinquent and unpaid taxes of all classes on said day, and charge
said treasurer in said account
Page 101 U. S. 777
with one percent on the amount thereof to be collected by him,
as provided in sec. 52 [sec. 760] of this act."
Laws of Iowa, Rev. 1860, pp. 118, 119. On the first day of
October in each year, the treasurer is required to offer at public
sale all the lands on which the taxes for the previous year had not
been paid. Of this sale notice was to be given by advertisement.
Sec. 763, p. 119.
It appears from the agreed statement of the parties that the
lands about which this controversy arises amount in the aggregate
to 32,602 92/100 acres. Of this, 3,301 acres are part of the school
lands selected by the state under the act of 1841, the particulars
of which appear in
Wolsey v. Chapman, supra, and about
17,000 acres fall within the limits of the railroad grant of 1856,
also referred to in that case. In respect to the school lands, it
appears that the state has at all times claimed title adverse to
that of Litchfield and his grantors. In the adjustment of the
controversies with the United States, as was seen in that case, the
agent acting on behalf of the state was specifically required not
to relinquish any claim of the state to its selections under the
act of 1841, and even at the present term of this Court, the state
has appeared here as a litigant, asserting its own title and that
of its grantees as superior and paramount to that of
Litchfield.
As to the railroad grant of 1856, the agreed statement shows
that on the demand of the state, the 17,000 acres now in
controversy were certified for the benefit of the Dubuque and
Pacific Railroad Company. This claim on the part of the state was
maintained and constantly asserted adversely to Litchfield until
the case of
Wolcott v. Des Moines
Company, 5 Wall. 681, was decided in this Court at
the December Term, 1866. That decision settled the dispute as to
these lands, and from that time Litchfield has paid all taxes as
they were annually assessed.
The state has never claimed adversely to Litchfield any portion
of the remaining 12,000 acres, but the United States maintained
that the title did not pass by the joint resolution of March 2,
1861, so as to cut off preemption and homestead entries. That
question remained open until the December Term, 1869, of this
Court, when it was settled in the case of
Riley v.
Page 101 U. S. 778
Wells. Until then, or at least until the adjustment
between the United States and the state in 1866, the title of the
navigation company and its grantees to this portion of its lands
was disputed by the United States and sales conflicting with those
of the navigation company were made at the government land
offices.
On the 21st of September, 1860, the Treasurer and Recorder of
Webster County wrote to the agent of the navigation company, the
grantor of Litchfield, to the effect that the lands were on the tax
book, but that until the title was adjusted, they would not be
advertised for sale. Before that time, on the 14th of June, 1860,
the auditor of state wrote the auditors of the several counties in
which the disputed lands were situated, as follows:
"We conclude, in view of the so-called river lands and the
further question as to their being liable to tax, that it would be
well not to offer them for sale for the taxes until these matters
are determined or adjusted in some manner. There are two questions
in regard to them. Firstly, has the state any title to them under
the river grant?, which it is reported has been decided in the
negative, but of which we have no official information; 2d, whether
they are taxable prior to 1859 as the property of the river company
or their grantees. The last question I thought had been decided by
our courts, but learn from Attorney-General Rice that there is some
doubt about it. Upon the whole, it is thought best not to sell at
present, lest it may lead to unnecessary trouble and expense."
It also appears from the statement of facts that during the
years 1863, 1864, 1865, and 1866 the taxes charged against the
property were in some particulars in excess of what the law
allowed. No person was designated on the tax book as owner. Anyone
could pay the taxes and get a receipt. If one of the contesting
claimants paid them supposing the lands were his, he could not, if
he finally failed to maintain his title, recover from the real
owner what he thus advanced. We so held in
Homestead
Company v. Valley Railroad, 17 Wall. 153.
It thus appears that while Litchfield or his grantor was in
reality the owner of the lands from 1862 to 1866, and bound
Page 101 U. S. 779
to pay the taxes for those years as assessed, the state, from
which the taxing power came, disputed his title and set up an
adverse claim in its own right to something more than 20,000 acres.
At the same time, the United States disputed his ownership of the
remaining 12,000 acres. All this was known to the state
authorities, and in view of the facts, the state, by its proper
officer, gave notice to the parties in interest that the lands
would be put on the annual tax books and charged with the taxes the
owner should pay, if the title had passed out of the United States
or the state, in law or in equity, but that, to avoid "unnecessary
trouble and expense," no legal steps would be taken to enforce the
collection "until the title was adjusted." This we understand to be
the legal effect of the instructions of the auditor of state to the
treasurers of the several counties in which the disputed lands were
situated, and the communication from the treasurer of Webster
County to the agent of the navigation company, made while the tax
books of 1859 and 1860 were in his hands for collection. As soon as
the title was adjusted, and even before, Litchfield or those under
whom he claims commenced the payment of the annual taxes as they
fell due, and offered to pay those of 1862, 1863, 1864, 1865, and
1866, with interest at the rate allowed by law for delay in the
payment of ordinary debts; but the treasurer declined to receive
less than the statutory interest or penalty unless the taxes of
1859, 1860, and 1861 were included. Although the lands were
advertised for sale in 1862 and annually thereafter, they were
purposely withheld from sale until this suit was commenced.
Under these circumstances, we think equity may relieve against
that part of the statutory interest which is in the nature of a
penalty. This provision was undoubtedly made to secure promptness
in the payment of taxes when actually due and demandable. It was
evidently not intended so much as punishment for nonpayment as
compensation for delay. In all parts of the statute except sec.
760, it is spoken of as interest. In one place in that section it
is termed a penalty, but in another referred to as interest. The
amount increases as the time of payment is put off. Now it seems
clear to us that if a state, under whose authority a tax is levied,
sets up a title
Page 101 U. S. 780
in itself to the property taxed adverse to that of the true
owner, and, to save "unnecessary trouble and expense," forbears to
enforce the collection until the "title is adjusted," no claim can
properly be made for extraordinary compensation on account of a
delay in payment of the tax which may fairly be said to have been
brought about by its own wrongful acts. Under the circumstances,
Litchfield and his grantor might well have supposed that the taxes
as charged were not to be treated as "delinquent" until in some
form it had been determined whether the lands taxed were in law
taxable. It now appears that the adverse claims of the state and
the United States were unjust, and that Litchfield is bound for the
payment of the taxes of 1862 and thereafter. He therefore actually
owes the money called for by the taxes, and may properly be charged
with such interest after the taxes became due as is by law payable
on other money obligations; but the extraordinary compensation
given by the statute for delay in payment of taxes charged on the
tax books, and in the regular process of collection, occupies a
different position. It is an elementary principle in equity
jurisprudence that if money is lying dead to meet an obligation,
and delay in its payment is caused by the fault of him to whom it
is to be paid, interest during the delay is not recoverable. Here
the delay was caused by the improper interference of the state and
the United States with the title. Litchfield himself has been
guilty of no fraud or willful default. The state has voluntarily
abstained from enforcing the collection because of doubts about its
right to do so, and Litchfield has had the use of his money while
the dispute remained unsettled. As soon as the title was adjusted,
he offered to pay what was actually due, with ordinary interest,
and this was refused. Under these circumstances, we think the court
below was right in enjoining the collection of all penalty or
interest in excess of six percent per annum. In
Stryker v. Polk
County, 22 Ia. 137, there is a strong intimation that in a
case like this, such relief might be granted. None of the
objections which were found to granting the injunction asked for in
that case exist here, and it is clearly made to appear that the
action of the state affected the title of this plaintiff
prejudicially. Such a case was made by the bill and established by
the evidence.
Page 101 U. S. 781
It may fairly be inferred from what is said in
Litchfield v.
County of Hamilton, 40 Ia. 66, that in such a case, the courts
of the state would afford the remedy.
Although taxes in Iowa are levied and collected by the counties,
all is done under the authority of the state, and the counties are
charged with whatever is done by the state affecting the rights of
the taxpayer. No complaint is made by Litchfield of the amount
found due from him by the court below if the decree is in other
respects right, as we find it to be.
Decree affirmed, each party to pay the costs of his own
appeal.
NOTE -- In
Litchfield v. County of Hamilton, error to
the Supreme Court of the State of Iowa, which was submitted on
printed arguments by Mr. George G. Wright for the plaintiff in
error and by Mr. Daniel D. Chase for the defendants in error.
MR. CHIEF JUSTICE WAITE, in delivering the opinion of the Court,
remarked that the only federal question presented was whether the
lands in Hamilton County, which Litchfield held by the same title
he did those in Webster County, involved in the preceding case,
were taxable for the years 1859, 1860, 1861, 1862, 1863, 1864, and
1865. For the reasons stated in the other case, the Court held that
the taxes for 1859, 1860, and 1861 were illegal and their
collection should be enjoined, but that those for 1862 and the
following years were properly collectible. The court below decided
that they were legally assessed for all the years, and decreed that
they be paid in full, with all interest, penalties, and costs. The
liability of Litchfield for interest and penalties after 1861 did
not present any federal question.
The decree of the state court was reversed, and the cause
remanded with directions to enjoin the collection of all taxes and
charges on the lands in question for the years 1859, 1860, and
1861, but with leave to enter such further decree in reference to
the taxes of 1862 and thereafter as the court should be advised
might be proper under the circumstances.