The provisions in the statutes of Minnesota exempting from
taxation the lands granted by the state to the Winona and St. Peter
Railroad Company to aid in the construction of its railroad until
the land should be sold and conveyed by the company ceased to be
operative when the full equitable title was transferred by the
company, and the railroad company could not thereafter, by
neglecting to convey the legal title, indefinitely postpone the
exemption.
State v. Winona and St. Peter Railroad Co., 21
Minn. 472, followed.
Statutes exempting property from taxation are to be strictly
construed.
Chapter 5 of the Laws of Minnesota of 1881, providing generally
for the assessment and taxation of any real or personal property
which had been omitted from the tax roll of any preceding year or
years, does not, when applied to the land granted by that state to
the Winona and St. Peter Railroad Company, deprive the owners of
that land of their property without due process of law in violation
of the provisions of the Fourteenth Amendment to the Constitution
of the United States.
A legislature can provide for collecting back taxes on real
property without making a like provision respecting back taxes on
personal property.
On March 3, 1857, Congress passed an act, 11 Stat. 195, c. 99,
granting lands to the Territory (now State) of Minnesota to aid in
the building of railroads. On May 22, 1857, the
Page 159 U. S. 527
territorial legislature granted a portion of these lands,
including those in controversy, to the Transit Railroad Company.
Laws of Minnesota, 1857, special session, p. 17. The fourth section
of subchapter 2 of this act provided that "the lands so granted
shall be and are exempted from all taxation until the same shall
have been sold and conveyed by said company." The Transit Company
failed to comply with the conditions of this act, and thereafter,
by an act passed March 10, 1862, all its rights, benefits,
property, and franchises, including the exemption of the lands from
taxation, were transferred to the Winona and St. Peter Railroad
Company. Laws of Minnesota, 1862, p. 243. The latter company
accepted the transfer and grant and proceeded to build the
railroad, and, as built, the lands were from time to time certified
to the state, and by the state deeded to the company, some of the
lands being thus conveyed in 1869 and other in 1870 and 1871.
On October 31, 1867, the railroad company entered into a
contract with D. N. Barney and others. This contract recited the
adjustment and settlement of an indebtedness of the company to
Barney and his associates for money theretofore advanced, and
provided for payment thereof in bonds and lands. No particular
description was made in this contract of the lands to be thus
conveyed, but only a general reference to the lands as those
included in this congressional and state grant. The plaintiff in
error, having succeeded to the rights of Barney and his associates,
sought to obtain title to the lands, but the railroad company
refused to convey, whereupon, in 1879, suit was instituted, which
terminated March 7, 1887, in a final decree of the circuit court of
the United States directing a conveyance.
In 1881 (Laws 1881, c. 5, p. 24) the Legislature of Minnesota
passed an act providing generally for the assessment and taxation
of any real or personal property which had been omitted from the
tax roll of any preceding year or years. Under this statute, in
1886, the officers of Redwood County proceeded to assess and tax
these lands for the taxes of past years. In the proceedings thus
instituted, the plaintiff in error appeared and defended on the
ground that the lands were,
Page 159 U. S. 528
by virtue of the fourth section of subchapter 2 of the Act of
May 22, 1857, exempt from taxation until after the decree of March
7, 1887, and also on the further ground that the act of 1881 was
unconstitutional in failing to provide proper notice to the owners
of the property sought to be assessed and taxed. The proceedings
terminated adversely to the plaintiff in error, and it immediately
sought a review thereof in the supreme court of the state. That
court directed judgment to be entered against the land for the
taxes for the six years immediately preceding the assessment,
holding that all claims for taxes for prior years were barred by
the statute of limitations.
Redwood County v. Winona & St.
Peter Land Co., 40 Minn. 512. To reverse this judgment,
plaintiff in error sued out this writ of error.
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
Two questions are presented: first, has the State of Minnesota,
in disregard of Section 10 of Article I of the Constitution of the
United States, passed any law impairing the obligation of
contracts? And, second, were the tax proceedings in violation of
that clause of the Fourteenth Amendment which prohibits a state
from depriving any person of property without due process of
law?
With respect to the first question, it may be noticed that since
the grant in 1862 to the Winona and St. Peter Railroad Company, the
legislature of the state has passed no statute in terms referring
to the lands or attempting to repudiate or break the contract of
exemption. The act of 1881 is one making general provision for
putting upon the tax roll all lands that have escaped taxation in
prior years. Of the validity
Page 159 U. S. 529
of a statute of that character -- that is, one providing
generally for subjecting to taxation lands that have improperly
escaped taxation in prior years -- there can be no serious doubt,
so that the real contention is that the taxing officers applied
this valid statute to lands which ought not to have been subjected
to its operation by reason of a prior contract between the state
and its grantee. Does this bring the case within the constitutional
inhibition against a state's passing a law impairing the obligation
of a contract?
Railroad Company v.
Rock, 4 Wall. 177;
St. Paul &c. Railway v.
Todd County, 142 U. S. 282;
Mobile & Ohio Railroad v. Tennessee, 153 U.
S. 486;
Central Land Company v. Laidley,
159 U. S. 103.
Assuming, but not deciding, that this law of 1881, enacted
subsequently to the contract created by the acts of 1857 and 1862,
as practically applied by the officers of the state to the taxation
of these lands, presents the question of a violation of the
constitutional inhibition, and the contention of plaintiff in error
is that it does, and that the question was distinctly presented to
the state court, and by it decided, we are of opinion that the
judgment of that court was correct and that it must be affirmed.
The contract of exemption was by the terms of the act to continue
until the lands were "sold and conveyed." Plaintiff in error
insists that these words extend the exemption until the legal title
is conveyed, which was not done until the decree of 1887. The state
court held that the exemption was continued only until the full
equitable title was transferred, and that the railroad company
could not thereafter, by neglecting to convey the legal title,
postpone indefinitely the exemption. This question was first
presented to that court in
State v. Winona and St. Peter
Railroad Co., 21 Minn. 472, and the decision in the present
case was simply an affirmance of the prior ruling.
See also
Brown County v. Land Company, 38 Minn. 397;
Brown County
v. Land Company, 39 Minn. 380.
It is familiar law that statutes exempting property from
taxation are to be strictly construed.
Bank v. Tennessee,
104 U. S. 493;
Railroad Company v. Dennis, 116 U.
S. 665;
Page 159 U. S. 530
Railroad Company v. Thomas, 132 U.
S. 174;
Schurz v. Cook, 148 U.
S. 397.
Section 4 of the act of 1857, after providing that the lands
should be exempted from taxation until "sold and conveyed," added
that, in consideration of the grant of land and other franchises,
the railroad company should pay into the treasury of the territory
or state three percent upon all the gross earnings, and that this
three percent, when paid, should be in lieu of all taxes whatever.
Construing the entire section, the supreme court of the state held
that the manifest object was to apply the full value of the land to
the construction of the road; that, when that object was secured,
the purpose of the exemption ceased; that it could not have been
the contemplation of the legislature to have created an exemption
dependent wholly upon the will of the grantee, and entirely
irrespective of the complete accomplishment of the object for which
the lands were granted; that it was not to be expected that a sale
could be made of the entire body of lands at once; that sales would
progress slowly and from time to time as purchasers could be found,
and that it would obviously detract from the value of the grant if,
while holding these lands only for purposes of sale, the company
was compelled to pay taxes thereon; but that when the company had
received full payment for the lands, its interest in the matter
ceased, and the purpose of the grant was accomplished. It could not
be supposed that the legislature purposed to bestow an exemption
upon purchasers from the railroad company. The company, and not its
grantees, was the intended beneficiary. The matter of exemption was
between it and the state. It was to pay three percent of its gross
earnings, and this in lieu of all other taxes, including those upon
these lands. No such equivalent was suggested as between the
purchasers and the state. No contract of any kind was expressed as
between them. Reference was made in the opinion to
Carroll v.
Safford, 3 How. 441, and
Witherspoon v.
Duncan, 4 Wall. 210, in which this Court held, as
to lands purchased from the United States, that after the full
equitable title had passed and the government simply held the naked
legal title as trustee for the purchaser, they became subject to
state taxation.
Page 159 U. S. 531
We concur in these views. A permanent exemption of land from
taxation, or an exemption dependent upon the will of an individual,
is something not to be adjudged unless the language creating such
exemption clearly compels such construction, and when a statute
creates an exemption with the evident design of aiding in
accomplishing a particular result, the exemption should be expected
to cease when that result has been accomplished, and the statute
should be read in the light of such expectation. While it may be
that the word "conveyed" generally implies the passing of the legal
title, it is not inaptly or incorrectly used to describe a transfer
of title, legal or equitable, and whether used with a narrow and
technical meaning or in a broad and general sense is to be
determined by the context and the circumstances under which the
entire instrument or document in which it is found was framed.
"There can be no doubt whatever of the general proposition that
in the interpretation of any particular clause of a contract, the
court is not only at liberty, but required, to examine the entire
contract, and may also consider the relations of the parties, their
connection with the subject matter of the contract, and the
circumstances under which it was signed."
Chicago, Rock Island &c. Railway v. Denver & Rio
Grand Railroad, 143 U. S. 596,
143 U. S. 609.
Read in the light of these rules of construction, the words "sold
and conveyed," as found in the exempting section, are satisfied
when the railroad company has received full payment for the lands
and executed an instrument by which all its equitable and
substantial interest in them is transferred. It has then not
contracted to sell, but has sold; it has not contracted to convey,
but has conveyed. It has parted with all its interest, and is
thereafter only a barren trustee of a naked legal title held for
the benefit of the true owner.
It is now earnestly contended by plaintiff in error that the
Barney contract did not operate to transfer the full equitable
title. Two propositions are relied upon: first, it is said that the
contract contained dependent covenants, and that the covenant to
convey the lands depended upon the performance of certain
conditions by the contractors, and second
Page 159 U. S. 532
that the lands were not particularly described. With reference
to these contentions, it may be remarked that the only part of the
record in the case of
Barney and Others v. The Railroad
Company, which is before us, is the decree which recites no
performance of conditions precedent, but simply adjudges a
conveyance. Can we assume therefore that it was based upon the
performance by the plaintiff of conditions precedent? Must it not
rather be held that it adjudicated rights created solely by the
original contract, and enforced a conveyance stipulated in it?
Turning to the contract itself, we find that it recites the
advancement of large sums of money by Barney and associates
theretofore made for the construction and equipment of 105 miles of
railroad, a liquidation of the indebtedness thereby created, and
part payment thereof, and then contains an agreement to issue
certain bonds in further part payment, and, for the residue of the
said indebtedness, promises to convey all the granted lands earned
by the construction of the 105 miles of railroad. It is also true
that there is no description of the lands by sections, towns, and
ranges, and that the contract stipulates that the conveyance shall
be when the railroad company shall obtain the title; but the
description by reference to the acts of Congress and the
territorial and state legislatures is sufficient, and the right to
a conveyance is established by the contract, and is given as final
payment of an indebtedness already existing. Subsequent to these
stipulations, there is a further promise that the contractors will
fully pay and discharge certain floating debts of the company,
amounting to the sum of $49,000, which is undoubtedly part of the
consideration on the part of the contractors. But such promise
seems to stand as an independent covenant, and it would be doing
violence to the language to hold that performance of this promise
was a condition precedent to the right to receive payment in bonds
and lands. Not only that; the contractors in terms agreed to
"receive and accept the property and things hereinbefore agreed to
be transferred to them in full payment, satisfaction, and discharge
of all indebtedness" of the railroad company to them. It is also
true that the contract contemplated the possibility of an extension
of the road,
Page 159 U. S. 533
and that such extension, if made by Barney and his associates,
was to be paid for by an additional issue of bonds and the
conveyance of the lands within the limits of the grant to be earned
by such further construction. But there is nothing in the record to
show that such construction was in fact undertaken by Barney and
his associates, or that any of these lands passed by virtue
thereof.
But a conclusive answer to the contention is this: the
proceedings in the district court were commenced to enforce the
payment of taxes delinquent and unpaid on the first Monday of
January, 1888, and the final decision of the supreme court limited
the right to recover such delinquent taxes to the period of six
years prior thereto. The decree in the circuit court of the United
States was entered on March 7, 1887. The findings of fact show that
the suit in which this decree was entered was commenced in 1879.
The decree relates back to the time of the commencement of the
suit, and adjudicates the rights of the parties as of that date. It
was therefore an adjudication that in 1879, Barney and his
associates held the full equitable title to these lands, but the
lands were held subject to no taxes prior to those of 1880. It is
therefore unnecessary to enter into any elaborate discussion of the
terms and stipulations of the contract, or to seek to determine
what are or are not dependent covenants. It is enough to rest upon
the fact that, by a conclusive decree of a competent court, it is
established that the full equitable title had passed to the
plaintiff in error prior to the time at which the lands were
adjudged taxable. The case, therefore, in this direction is
narrowed to the single question as to the scope and meaning of the
exempting statute of May 22, 1857, and, for the reasons stated, we
agree with the supreme court of the state in its construction
thereof.
The other contention of plaintiff in error is that in these tax
proceedings there was a lack of due process of law. That they were
in substantial conformity with the provisions of the Minnesota
statutes, and that there is nothing in those statutes in conflict
with the state constitution is settled for this Court adversely to
the plaintiff in error by the decision of the
Page 159 U. S. 534
supreme court of the state.
State Railroad Tax Cases,
92 U. S. 575,
92 U. S. 618;
Palmer v. McMahon, 133 U. S. 660;
Pittsburgh, Cincinnati &c. Railway v. Backus,
154 U. S. 421.
We pass, therefore, to consider the claim that the Minnesota
statutes, so far as they attempt to provide for the subjection of
property which has escaped taxation in prior years to the taxes of
those years, violate that clause of the Fourteenth Amendment to the
United States Constitution which forbids a state to deprive one of
property without due process of law. What are the provisions of
those statutes? The general tax law of the state is found in the
statutes of 1878, commencing at page 2. Section 113 contemplated
the collection of unpaid back taxes. This section was amended in
1881 (Laws of 1881, page 24) so as to read as follows:
"If any real or personal property shall be omitted in the
assessment of any year or years and the property shall thereby
escape taxation, when such omission shall be discovered, the county
auditor shall enter such property on the assessment and tax books
for the year or years omitted, and he shall assess the same and
extend all arrearage of taxes properly accruing against such
property with seven (7) percent interest thereon, from the time
said taxes would have become delinquent, and the same shall be
extended against such property on the tax list for the current
year."
This, being an amendatory statute, places the amended section as
part of the general tax law, and it is to be construed accordingly.
The section provides that if any property shall have been omitted
from the assessment of any year, it shall, upon discovery of that
fact, be entered upon the assessment and tax books for that year;
that all taxes for that year be charged thereon against it, with
interest, and then extended against it on the tax list for the
current year. In other words, for the purposes of collection, it
stands on the tax list for the current year the same as any other
property, and all taxes thereon are to be collected in the same
manner. The amount of the tax for the omitted year is the same as
that which was enforced against all other properties for that year,
so that the only difference is in the mode of assessment and the
charge of interest.
Page 159 U. S. 535
We must therefore inquire in the first place whether, under the
general tax law, there is sufficient provision for notice to the
owner of property before it is subjected to sale for nonpayment of
taxes; in the second place, whether the difference in the mode of
assessment deprives the property owner of any constitutional right;
and, in the third place, whether there is in section 113 any other
matter which vitiates it.
With reference to the collection of taxes, it may be remarked
generally that the Minnesota statute authorizes such collection by
suit in court. By section 70, the county auditor is required,
between June 1st and 15th, to file in the office of the clerk of
the district court of the county a list of the delinquent taxes
upon real estate, which shall contain a description of the land,
the name of the owner, if known, and, if unknown, so stated, and
the amount of the delinquent tax for each year, which list shall be
verified by his affidavit, and the filing of this list is to be
considered as the filing of a complaint by the county against each
piece or parcel of land therein described to enforce payment of the
taxes and penalties appearing against it. Publication is then to be
made of this list, together with a notice in the form prescribed by
statute, for at least two weeks, in some newspaper of general
circulation in the county. Secs. 71, 72. Upon the final publication
of this notice, the jurisdiction of the court over the property
attaches. Sec. 73. Within twenty days after the last publication,
any person having an estate, right, title, or interest in or lien
upon any parcel of land described in such list may file in the
office of the clerk of the court an answer setting forth his
defense or objection to the tax or penalty, which shall describe
the piece or parcel of land, and state the facts constituting his
defense or objection to such tax or penalty, and thereupon the
court is to hear and determine the questions raised by this
complaint and answer as it hears and determines any other action.
Sec. 75. It is a full defense that the taxes have been paid or that
the property is not subject to taxation. Sec. 79. The list is
prima facie evidence of compliance with all provisions of
law in relation to the assessment and levy of taxes. No omission of
any of the things required
Page 159 U. S. 536
by law in relation to such assessment and levy
"shall be a defense or objection to the taxes appearing upon any
piece or parcel of land, unless it be also made to appear to the
court that such omission has resulted to the prejudice of the party
objecting, and that the taxes against such piece or parcel of land
have been partially, unfairly, or unequally assessed, and in such
case, but no other, the court may reduce the amount of taxes upon
such piece or parcel, and give judgment accordingly."
Sec. 79.
We think this opens to the property owner full opportunity for
defense, and that he can raise every objection to which in law he
is entitled. If he has paid his taxes or if the land is not subject
to taxation, the property is wholly discharged. If there has been
any irregularity in the proceedings which worked to his prejudice,
he can show such irregularity, and, so far as it has injured him,
secure a reduction in the amount. In reference to this matter, we
quote from the opinion of the supreme court of the state in this
case, which shows fully the extent to which a party can, under the
statutes of the State of Minnesota, make defenses to these tax
proceedings:
"Within twenty days after the last publication of the delinquent
list, any person may, by answer, interpose any defense or objection
he may have to the tax. He may set up as a defense that the tax is
void for want of authority to levy it, or that it was partially,
unfairly, or unequally assessed.
Commissioners v.
Nettleton, 22 Minn. 356. He may set up as a defense
pro
tanto that a part of a tax has not been remitted, as required
by some statutes.
Commissioners of Houston County v.
Jessup, 22 Minn. 552. That the land is exempt, or that the tax
has been paid.
County of Chisago v. St. Paul & Duluth
Railroad, 27 Minn. 109. That there was no authority to levy
the tax, or that the special facts authorizing the insertion of
taxes for past years in the list did not exist, or any omissions in
the proceedings prior to filing the list, resulting to his
prejudice.
County of Olmsted v. Barber, 31 Minn. 256. The
filing of the list is the institution of an action against each
tract of land described in it, for the recovery of the taxes
appearing in the list against such tract, and tenders
Page 159 U. S. 537
an issue on every fact necessary to the validity of such taxes.
Chauncey v. Wass, 35 Minn. 1. The only limitation or
restriction upon the defenses or objections which may be interposed
is that contained in section 79, to the effect that if a party
interposes as a defense an omission of any of the things provided
by law in relation to the assessment or levy of a tax, or of
anything required by any officer to be done prior to filing the
list with the clerk, the burden is on him to show that such
omission has resulted in prejudice to him, and that the taxes have
been partially, unfairly, or unequally assessed. This relates not
to want of authority to levy the tax, but to some omission to do or
irregularity in doing the things required to be done in assessing
or levying a tax otherwise valid.
Commissioners of St. Louis
County v. Nettleton, supra. And certainly, in justice or
reason, a party cannot complain that, when he objects to a tax on
the ground of some omission or irregularity in matters of form, he
is required to show that he was prejudiced."
All the privileges which are secured to the property owner in
respect to the taxes of the current year are also secured to him in
reference to those imposed under amended section 113. He is
therefore notified and given an opportunity to be heard before his
property is taken from him. Questions of this kind have been
repeatedly before this Court, and the rule in respect thereto often
declared. That rule is that a law authorizing the imposition of a
tax or assessment upon property according to its value does not
infringe that provision of the Fourteenth Amendment to the
Constitution which declares that no state shall deprive any person
of property without due process of law, if the owner has an
opportunity to question the validity or the amount of it either
before that amount is determined, or in subsequent proceedings for
its collection.
McMillen v. Anderson, 95 U. S.
37;
Davidson v. New Orleans, 96 U. S.
97;
Hager v. Reclamation District, 111 U.
S. 701;
Spencer v. Merchant, 125 U.
S. 345;
Palmer v. McMahon, 133 U.
S. 660;
Lent v. Tillson, 140 U.
S. 316;
Pittsburgh, Cincinnati &c. Railway v.
Backus, 154 U. S. 421.
That the notice is not personal, but by publication, is not
sufficient to vitiate it. Where, as here, the statute prescribes
the
Page 159 U. S. 538
court in which and the time at which the various steps in the
collection proceedings shall be taken, a notice by publication to
all parties interested to appear and defend is suitable, and one
that sufficiently answers the demand of due process of law.
State Railroad Tax Cases, 92 U. S.
575,
92 U. S. 609;
Hager v. Reclamation District, 111 U.
S. 701,
111 U. S. 710;
Kentucky Railroad Tax Cases, 115 U.
S. 321;
Lent v. Tillson, 140 U.
S. 316,
140 U. S. 328;
Pittsburgh, Cincinnati &c. Railway v. Backus,
154 U. S. 421. It
cannot be doubted, under these various authorities, that in respect
to the collection of these taxes, ample provision is made for
notice, and therefore that it cannot be adjudged that the owner is
for want thereof deprived of his property without due process of
law.
With respect to the next inquiry, it is true there is a
difference in the mode of assessment. Section 113 authorizes the
county auditor to make the assessment, while as to property
generally the assessment is made by the county assessor. The latter
also acts upon actual view (sec. 33), while there is in section 113
no such direction to the county auditor. The assessment made by the
assessor comes before a town board of review (sec. 39), and
subsequently before a county board of equalization. (Sec. 44).
Neither of these provisions is found in section 113. So that the
difference between the two modes of assessment may be stated thus:
in the one case, there is an assessment by one officer, with a
right to review his action; in the other, there is an assessment by
a different officer, and no provision for a review except as the
matter comes before the court in the proceedings for the collection
of taxes. But there is nothing in this difference to affect the
constitutional rights of a party. The legislature may authorize
different modes of assessment for different properties, provided
the rule of assessment is the same.
Kentucky Railroad Tax
Cases, 115 U. S. 321,
115 U. S. 337;
Pittsburgh, Cincinnati &c. Railway v. Backus,
154 U. S. 421.
One other suggestion is made by counsel for plaintiff in error.
Section 113 contemplates the assessment and taxation of both real
and personal property. It is claimed that the taxation of personal
property is manifestly void, because, even under the general tax
law, there is no provision for notice to
Page 159 U. S. 539
the owner of the property before the charge is fixed upon him,
and that it cannot be assumed that the legislature would attempt to
provide for the taxing of real property which had escaped taxation
in prior years without also providing for a like taxation of
personal property, and hence that the whole section must fail. The
supreme court of the state was of opinion that even if the tax on
personal property was not collectible under the general provisions
of the tax law for the reason claimed, yet there was at least a
valid tax which, in the absence of any law providing another
method, might be enforced by an ordinary personal action. It seems
to us also that the assumption that it cannot be believed that the
legislature would never seek to provide for the collection of back
taxes on real property without at the same time including therein a
like provision for collecting back taxes on personal property,
cannot be sustained. The case is different from that of an ordinary
tax law, in which there may be some foundation for the claim that
the legislature is expected to make no discrimination, and would
not attempt to provide for the collection of taxes on one kind of
property without also making provision for collection of taxes on
all other property equally subject to taxation; for this statute
rests on the assumption that, generally speaking, all property
subject to taxation has been reached, and aims only to provide for
those accidents which may happen under any system of taxation, in
consequence of which, here and here, some item of property has
escaped its proper burden, and it may well be that the legislature,
in view of the probabilities of changes in the title or situs of
personal property, might deem it unwise to attempt to charge it
with back taxes, while at the same time, by reason of the
stationary character of real estate, it might elect to proceed
against that. At any rate, if it did so, it would violate no
provision of the federal Constitution, and whether it did so or not
was a matter to be determined finally by the supreme court of the
state.
These being the only matters presented, and in them appearing no
error, the judgment of the supreme court of the state will be
Affirmed.