Whatever power a court of equity may have to relieve a tenant
from forfeiture for breach of covenant to pay taxes, it cannot
require the owner to risk the loss of his property by compelling
him to contest the validity of an irredeemable tax title, based on
taxes not paid by the tenant, so that, if the title be invalid, the
tenant may pay the taxes and be relieved of the forfeiture, nor is
this rule affected by the fact that the tax title is held by a
third party.
Where the forfeiture from which relief is sought has been
occasioned by gross negligence of the person seeking relief, the
default is not one brought about by accident or mistake.
Even if default in complying with a covenant has been brought
about by accident or mistake, in the absence of culpability of the
other party, a court of equity will not relieve the party in
default from forfeiture unless it can be done with justice to the
innocent party.
Where a lease contains a covenant to pay taxes, the fact that
the owner has on some occasions collected the amount from the
tenant and himself paid the taxes does not relieve the tenant from
the obligation to pay the taxes according to the lease, or, where
it appears that his failure to do so was not the result of the
owner's conduct, relieve him from the forfeiture resulting from his
breach of the covenant to pay them.
Where a tenant is in default and his lease subject to forfeiture
for nonpayment of taxes for which the property has been sold, and
before the landlord determines to avail of the forfeiture, he
offers to condone it provided the tenant commence proceedings to
have the outstanding tax title declared invalid and secure him from
loss in case it be sustained and the tenant refuses so to do, no
principle of equity prevents the landlord, or renders his action
fraudulent, in taking any course most conducive to his own interest
and not forbidden by law to regain possession of the premises and
to obviate the danger of a contest as to the validity of the tax
sale.
25 App.D.C. 182 reversed.
The facts are stated in the opinion.
Page 204 U. S. 47
MR. JUSTICE WHITE delivered the opinion of the Court.
These appeals are from a decree of the Court of Appeals of the
District of Columbia, which adjudged that a tax sale of certain
real estate in the District was void, and which relieved the lessee
of the premises from a threatened forfeiture of the lease, asserted
to have resulted from the failure of the tenant to pay the taxes to
enforce which the tax sale was made. The complainant in the
original bill was Caroline King, the lessee
Page 204 U. S. 48
of the premises, and the defendants were Marianne A. B. Kennedy
(the lessor) and Louis Kann, Sigmund Kann, and Myer Cohen, whom it
was alleged claimed to be either the equitable or legal owners of
the tax title in question. The defendant Kennedy died the day the
bill was filed, and Henry Randall Webb, as her executor, and Maria
G. Dewey, as her heir at law, were substituted as defendants.
The lessor prosecuted an appeal from an order granting an
injunction
pendente lite, restraining him, among other
things, from prosecuting landlord and tenant proceedings based upon
a right of reentry arising from the alleged forfeiture caused by
the nonpayment of taxes and tax sale referred to in the bill. The
Court of Appeals, on the face of the bill, sustained the order of
injunction. 21 D.C. App. 141. The cause, having been put at issue
by separate answers asserting the right of the lessor to forfeit
and the right of the holders of the tax title, was tried on the
merits and was decided in favor of the complainant. It was taken to
the Court of Appeals on behalf of all the defendants except Mrs.
Dewey, and the decree of the lower court, adjudging the tax sale to
be void and relieving from the alleged forfeiture, was affirmed. 25
D.C.App. 182.
The origin of the controversy and the facts, as to which there
is no dispute, are as follows:
The property in controversy, No. 715 Market Space, in the City
of Washington, was owned by and assessed for taxation in the name
of Maria T. Gillis at the time of her death, intestate, in 1871.
Marianne A. B. Kennedy, as the heir at law of Mrs. Gillis, took
possession of the property as owner, without any administration
upon the estate of Mrs. Gillis. After the death of Mrs. Gillis,
continuously up to the making of the tax sale hereafter referred
to, the property remained on the public records and continued to be
assessed in the name of Mrs. Gillis, except that a small portion of
the rear end of the premises was at a time not shown, but prior to
the tax sale before referred to, assessed for taxation in the name
of Mrs. Kennedy and her husband.
Page 204 U. S. 49
In 1890, Mrs. Kennedy leased in writing the premises to Henry
King, Jr., the husband of complainant, for use as a fancy dry goods
store, and, by several extensions, the period of expiration of this
lease came to be October 1, 1908. By the lease, the lessee, his
executors and administrators or assigns, were bound,
"during the continuance and until the end and determination of
the said term for which the said premises are demised, to pay or
cause to be paid in each and every year thereof the taxes, general
and special, of every character and description, assessed against
and levied upon the said premises by the authorities of the general
or local government."
The right to terminate the lease and to reenter upon the breach
of any of the conditions was stipulated. When the lease was made,
King, the lessee, was engaged in the dry goods business in a store
on Seventh Street, not far from the Market Space store. Under the
lease, he entered into possession of the Market Space store and
carried on, in addition, business there until his death on August
18, 1897. Sanctioned by an order of the probate court, an
assignment of the lease covering the store on Market Space was made
to Caroline King, the widow. The business was thereafter conducted
for a time solely in her name. She did not, however, actively
supervise it. Her elder son, Harry King, who had been, during the
latter years of his father's life, in general charge of the
business for his father, remained in that capacity, after the death
of the father, as the representative of his mother, assisted at the
Market Space store, in a subordinate capacity, by a brother, Joseph
King, who, during the father's life, had also, in a subordinate
capacity, been engaged in business at that place. From the making
of the lease in 1890 to the death of King in 1897, it was the habit
of Mrs. Kennedy, when the tax on the Market Space store was about
to become payable, to request the lessee to send her a check for
the amount of the tax, and on the receipt thereof the tax was paid
either by Mrs. Kennedy or her agent. This course was not, however,
followed, after the death of King. The first installment of taxes
which fell due in November, 1897, soon after the
Page 204 U. S. 50
death of King, was directly discharged by Mrs. King, who took
and retained the receipt. This was done at the request of Mrs.
Kennedy, who called at the Market Space store about Christmas,
1897, and asked that the tax be paid. From that time, no request
was made by the lessor to the tenant, as the taxes fell due, to
send her the money to enable her to pay them, nor is it shown that
any express demands were made that the tenant pay the taxes
directly. From the time of the payment, by the tenant, near the
close of 1897, of the first installment of taxes which fell due
after the death of her husband, until the summer of 1900, a period
of more than two and a-half years, no taxes whatever were paid upon
the leased premises. In the interval, the following taxes became
overdue:
Second installment of tax for 1898, due in May, 1898;
First installment of tax for 1899, due in November, 1898;
Second installment of tax for 1899, due in May, 1899;
First installment of tax for 1900, due in November, 1899;
and,
Second installment of tax for 1900, due in May, 1900.
On July 24, 1900, the two installments of the tax for 1900, due
in November, 1899, and May, 1900, with accrued penalties, were paid
by the tenant under the following circumstances: as testified by
Harry King, he being concerned over past-due taxes owing on a large
number of tracts of real estate owned by the estate of his father,
it "occurred" to him to have the "bookkeeper go down to the tax
office and inquire for the tax bills of 715 Market Space." The
bookkeeper went and subsequently reported that the two installments
for 1900 were due, and Harry King paid them. The nature of the
inquiry made by the bookkeeper at the tax office, and what
occurred, is the subject of controversy, and we pretermit its
consideration. Nearly a year after, in May, 1901, the two
installments of taxes for 1899, due in November, 1898, and May,
1899, with interest and penalties, along with the taxes for 1901,
were paid by the tenant. The payment of the 1899 taxes was by way
of redemption of a sale of the property for such taxes made on
April 12,
Page 204 U. S. 51
1900. There is no doubt that the payment of the arrears for 1899
was a result of the visit by the bookkeeper to the tax office. It
will be observed that the payments which were made in 1900 and 1901
of taxes which were in arrears did not embrace the second
installment of the tax of 1898, due in May, 1898. To enforce that
installment a sale had been made in April, 1899, and a certificate
was issued to the purchaser a few days thereafter, which was
subject to a right of redemption during a period of two years. In
other words, when the installments of taxes which were in arrears
were paid on July 24, 1900, the property had been sold for the last
half of the tax of 1898, and when the payment was made in 1901 of
the arrears for 1899, the period for redemption had elapsed.
On July 25, 1901, Mrs. King received a letter sent from
Rochester, New York, by one Wiltsie, stating that he had bought the
property in April, 1899, at a tax sale to enforce the tax for the
second half of the year 1898, and that he was entitled to a deed of
the property, but would surrender the tax certificate if immediate
payment was made of the amount of his, Wiltsie's, advance,
viz., $143.93, together with the statutory interest at the
rate of fifteen percent, and a charge for releasing, to be agreed
upon. Harry King replied to this letter on July 30, 1901, and asked
to be informed of the charge for redemption. Wiltsie answered on
August 1, 1901, calculating the statutory interest at $50.38, and
naming $100 as his fee or charge for releasing. To this letter
reply was made that Harry King was out of town, and that, on his
return, the letter of Wiltsie would be laid before him. On
September 17, 1901, Wiltsie wrote King, and called attention to the
fact that he had not heard from him, and requested to be informed
by return mail when the matter would have attention. To this King
replied, objecting to the charge of $100 for releasing, and stated
that in his opinion $50 would be an equitable charge. The letter
concluded as follows:
"Unfortunately we have paid you quite a considerable amount of
money in the past for tax sales. We are not interested
Page 204 U. S. 52
in this piece of property in any way except as tenant, as we are
not the owners or the mortgagees. If it should meet with your
approval send us a bill and we will send check."
It was replied on September 24, 1901, that if the matter was
attended to promptly, $75 would be accepted for the release
certificate, and that the papers had been sent to the Central
National Bank of Washington, where, on payment of $279.90, they
would be delivered up.
Neither Mrs. King nor her representatives, after learning in
July of the sale of the property and of the outstanding tax title,
gave any notice of that fact to the lessor, nor did they apparently
concern themselves further about the matter until the purchase of
the certificate from Wiltsie, as hereafter stated, by Cohen, one of
the defendants.
Both the Kann defendants carried on business on Market Space,
having stores on each side of the property leased to King, and the
situation was therefore such that the possession of that property
was particularly advantageous to the Kanns. Indeed, they had at
some previous time stated to Webb, the attorney of the lessor, that
if they could obtain a long lease of the premises, they would be
willing to pay a rent much in advance of that paid by Mrs. King.
Some time in September, 1901, one Knight called upon the Kanns and
informed them that the property at 715 Market Space had been sold
for taxes. They referred him to Webb, the attorney of the lessor.
Knight called upon Webb, said to him that Wiltsie had bought the
property at the tax sale, and solicited employment to set aside the
sale. Webb on the next day made inquiry, and discovered the fact of
the sale and the outstanding certificate and the lapse of the
period of redemption. He informed the lessor of the fact and of her
right to forfeit the lease. Mrs. Kennedy, who was advanced in age,
being nearly eighty years old, was perturbed, and, in a letter to
Webb, expressed solicitude as to obtaining a new tenant in case the
lease of Mrs. King was forfeited. As a result of the conferences
and the correspondence between Mrs. Kennedy and her counsel, the
latter called on Cohen,
Page 204 U. S. 53
another defendant, who was the attorney of the Kanns, and
desired to know whether the Kanns were yet willing to lease at an
increased rent, and was informed they were. Shortly after Cohen
advised the Kanns to purchase the Wiltsie tax certificate, and upon
their giving him authority to use his discretion in the matter, he
determined to go at once to Rochester to accomplish that purpose.
He communicated his intentions to Webb, who endeavored to dissuade
him. Cohen went to Rochester. The papers which had been sent to
Washington in consequence of the correspondence between Wiltsie and
King were returned to Rochester. Cohen bought the certificate, took
an assignment of the same in October, 1901, and, returning to
Washington, procured a tax deed for the property from the
commissioners of the District, which was duly recorded. Thereafter
Mrs. Kennedy notified Mrs. King of her intention to reenter because
of the forfeiture of the lease resulting from the sale of the
property for the nonpayment of taxes. Harry King then called at the
bank to take up the certificate, and found that it had been
returned to Wiltsie. Negotiations ensued between Mrs. King and Mrs.
Kennedy looking to a compromise of the matter, and a letter was
written by the counsel of Mrs. King to Mrs. Kennedy asking to be
permitted to use her name in proceedings to be brought to cancel
the tax sale. This was declined. At all times, Mrs. King insisted
upon her right to continue in possession under the lease despite
the default. The Kanns notified Mrs. Kennedy that they were the
real holders of the tax title, and would attempt to enforce their
rights under it unless a lease of the property was made to them at
the previously suggested increased rental. The counsel of Mrs.
Kennedy, Webb, advised making such a lease. Placed between the
threatened assertion by the Kanns of the tax title, unless they
obtained a lease, and the insistence of Mrs. King that she was
entitled to retain the property under her lease, Mrs. Kennedy
wavered. The result was a letter addressed by Webb, the counsel for
Mrs. Kennedy, to the counsel for Mrs. King, submitting a
proposition of compromise, which was in substance
Page 204 U. S. 54
that Mrs. Kennedy would waive the forfeiture upon condition that
Mrs. King promptly commenced and prosecuted proceedings to have the
tax deed to Cohen declared a nullity or defend against any claim
under the tax title, and upon the further condition that Mrs. King
furnish a bond with sufficient surety to pay the sum of $70,000 in
the event that the tax title was held to be valid. Counsel for Mrs.
King in writing declined this offer. The letter doing this made no
counterproposition, but referred to and did not expressly withdraw
the previous offer of Mrs. King, if she were allowed the use of
Mrs. Kennedy's name, to conduct proceedings to vacate the tax
title. In addition the letter, which was quite lengthy, expressly
stated the opinion of the counsel of Mrs. King to be that the tax
title was void and could be set aside. It insisted that Mrs. King
would be relieved by a court of equity from the forfeiture alleged
to have resulted from her inadvertent omission to pay the tax, and
besides stated various grounds which, it was deemed, placed Mrs.
Kennedy in a position where she could not, as against Mrs. King,
ask to be protected against the risk, if any, of the outstanding
tax title held by the Kanns. These grounds were, in substance, that
the tax certificate had been bought by the Kanns at the instance of
the counsel of Mrs. Kennedy, for the purpose of making sure of a
forfeiture of Mrs. King's rights, and with the knowledge that
negotiations were pending between Mrs. King and Wiltsie, and for
the purpose of forestalling the acquisition by Mrs. King of the tax
certificate.
The negotiations having failed, Mrs. Kennedy commenced landlord
and tenant proceedings to recover possession. Before the time set
for the trial of the proceedings, Mrs. King commenced this suit,
which, as we at the outset stated, sought to have the tax title
declared void, to have complainant relieved from the forfeiture,
and for an injunction restraining the prosecution of a landlord and
tenant proceeding.
That a court of equity, even in the absence of special
circumstances of fraud, accident, or mistake, may relieve against
a
Page 204 U. S. 55
forfeiture incurred by the breach of a covenant to pay rent, on
the payment or tender of all arrears of rent and interest by a
defaulting lessee, is elementary.
Sheets v.
Selden, 7 Wall. 416. But that principle cannot
control this case even if it be conceded, for the sake of argument,
that it applies to collateral covenants in leases, such as the
obligation to repair, to insure, and even to pay taxes, said in the
Sheets case to be settled in England adversely to such
right, but to be an open question in this country, and as to which
there may be differences of opinion in state courts of last resort.
Noyes v. Anderson, 124 N.Y. 175;
Giles v. Austin,
62 N.Y. 491;
Gordon v. Richardson, 185 Mass. 492;
Lundin v. Schoeffel, 167 Mass. 465;
Mactier v.
Osborn, 146 Mass. 399;
Tibbetts v. Cate, 66 N.H. 550;
Bacon v. Park, 19 Utah 246. We say this because the
general principle, as declared in the
Sheets case, rests
upon the ground that
"the rent is the object of the parties and the forfeiture only
an incident intended to secure its payment; that the measure of
damages is fixed and certain, and that, when the principal and
interest are paid the compensation is complete."
When the foundation upon which the doctrine is based is borne in
mind, it becomes apparent that it affords no ground for the
contention that it is applicable to a case where the failure to
perform a covenant to pay taxes has led to a tax sale, ripening
into a
prima facie irredeemable title held adversely to
the lessor. In other words, the doctrine lends no support to the
proposition that a court of equity can require an owner to risk the
loss of his property by compelling him to engage in a contest
involving the validity of an irredeemable tax sale, for the purpose
of endowing the tenant with the right, if the tax title be held
invalid, to pay the taxes and thus be relieved of a forfeiture. To
extend the principle to such a degree would be destructive of
rights of property, since it would subject everyone who made a
lease of his property containing a covenant by the lessee to pay
taxes to the hazard of the loss of his title if only the tenant
chose to violate the covenant, and thus give rise to the coming
into existence of a tax title
prima
Page 204 U. S. 56
facie valid and irredeemable in character. And the
force of these considerations is not avoided by the reasoning which
led the court below to its conclusion, or by the arguments at bar
advanced to support that conclusion.
Thus, the court, in its opinion, considering the paramount issue
to be the validity of the tax sale, first disposed of that
question, and, concluding that the sale was void, proceeded to
determine its power to grant relief from the forfeiture, upon the
hypothesis that there never had been a tax sale, that the taxes
were still due, and could be paid, and that the tenant was willing
to pay them. But thus to contemplate the controversy was to assume
the very question for decision -- that is, the power of a court of
equity, in order to relieve from a forfeiture, to endow a tenant
with the right to create at the risk of the owner, a primary
controversy,
viz., to compel the owner against his will to
jeopardize his title by testing the validity of the irredeemable
tax sale -- a hazard which the owner was desirous of avoiding. The
paramount issue was not, as assumed, the invalidity of the tax sale
as a mere abstract question, but, we repeat, was the right of the
tenant to invoke at the hands of the court a determination of that
question at the risk of the owner. And this view is not changed by
saying that the decision at the instance of the tenant as to the
validity of an irredeemable tax title, held by a third person, was
an incident to the right of the tenant to be relieved from the
forfeiture, for to so say is but to destroy the foundation upon
which the right to relief from the forfeiture rested -- that is,
the ability of the tenant, when applying for relief, to make
complete compensation. And the misconception of the general
doctrine just pointed out pervades the argument at bar of the
appellee. Thus, while no authority is referred to sustaining the
right of a tenant to test the validity of an outstanding
prima
facie irredeemable tax deed, caused to exist by the default of
the tenant, the ultimate result of the contentions is to assume
that principle as established and to predicate rights upon that
hypothesis. In other words, in substance, by a
petitio
principii, the propositions
Page 204 U. S. 57
urged treat the outstanding tax title as void and proceeded to
demonstrate the right to relief under that assumption.
There being, then, no foundation for the contention that it was
within the ordinary power of a court of equity to relieve from the
forfeiture, we come to consider whether the case as made by the
record is brought within the general authority of a court of equity
to relieve in cases of fraud, accident, or mistake. We put out of
view, for ulterior consideration, the question of fraud, and
therefore presently examine only the contentions as to the
existence of the elements of accident or mistake. In considering
this subject, two propositions are obvious: first, where the
forfeiture from which relief is sought has been occasioned by the
gross negligence of the person claiming to be relieved, the default
so occasioned is not one brought about by accident or mistake; and
second, that even where accident or mistake has been shown,
especially in the absence of culpability or fraud on the part of
the other party, a court of equity will not grant relief from the
forfeiture unless it can be done with justice to that party.
Referring to its opinion on the appeal from the order granting
an injunction
pendente lite, and in effect reiterating the
view therein expressed, that the averments of the bill justified
the relief prayed, the court, in its opinion on the final hearing,
said:
"But the testimony makes it more plain than even the allegations
of the bill of complaint did that she is entitled to the relief
which she asks. The testimony shows quite conclusively that, while
the lease required the annual taxes on the property to be paid by
the lessee, yet the invariable custom of the lessor down to the
time of the default had been to demand and receive the amount of
the taxes from the lessee, and to pay the taxes herself by her own
agents. For the taxes of the second half of the year 1898, in
connection with which the default occurred, the lessor failed for
some reason to make the usual demand for the money wherewith to pay
the taxes, and the lessee was in the midst of financial trouble and
distress caused by the recent death of her husband, who had been
the lessee down to the
Page 204 U. S. 58
time of his death. The record shows to us quite plainly that the
default of the lessee was excusable under the circumstances, and
that no harm would be done to anyone by her relief from the nominal
forfeiture which she has incurred."
By this reasoning, it was assumed the case was brought within
the grounds of relief for accident or mistake upon two inferences,
both treated as alleged in the bill and established by the
testimony -- first, the prior practice of the lessor in calling
upon the tenant to hand her the money to pay the taxes and then
herself paying them, and second, the failure of the lessee, after
this practice was discontinued, to call to mind that the tax was
due and payable, owing to her disturbed state of mind at that
particular time. In the argument at bar, reliance is principally
rested upon the first of these grounds, and indeed it is insisted
that the testimony goes much further than implied by the court
below, and demonstrates that the conduct of the lessor was such as
to mislead the lessee, and thereby estop the former from asserting
the forfeiture.
Let us consider separately the two grounds: first, accident or
mistake as engendered by the course of dealing of the lessor, and,
second, accident or mistake arising from oversight, the alleged
result of the particular circumstances surrounding the tenant at
the time of the failure to pay the taxes. As to the first ground,
it would seem to be an afterthought, since it was not suggested in
the correspondence between the parties immediately preceding the
litigation that Mrs. Kennedy by her conduct had in anywise led to
the default of the tenant. To the contrary, that view was excluded,
for in the letter written to Mrs. Kennedy, dated October 8, 1901,
asking authority to use her name in proceedings to be brought by
the tenant to cancel the tax sale, the attorneys of Mrs. King
said:
"We assume that you are aware that your tenant has always paid
the taxes upon the demised premises, and the failure to pay the one
made the basis of the notice was an oversight, caused by the death
of Mr. Henry King, Jr., which was being remedied at the time your
notice was received. "
Page 204 U. S. 59
And although it would seem that the court below assumed to the
contrary, the fact is the bill contained no averment justifying the
default in paying, upon the theory that it had been induced by the
conduct of the lessor. To the reverse, it was specifically stated
in the fifth paragraph of the bill that the alleged single default
in the payment of taxes arose "wholly through oversight and
inadvertence," without in anywise charging that the conduct of Mrs.
Kennedy was in whole or in part the cause of the oversight or
inadvertence. Besides, in the eleventh paragraph of the bill,
explicit reference was made to the letter to which we have just
above referred, and it was alleged that, by its terms, Mrs. Kennedy
was notified
"that the failure to pay the taxes was simply an oversight,
which was being remedied at the time the notice of refusal to
accept the rent was received."
True it is that the testimony shows that, prior to the death of
Henry King, Jr., in August, 1897, the lessor was in the habit of
calling upon the tenant for the amount required to pay the tax then
due or about to become due, in order that she might herself pay
them. True also is it that Harry King, in testifying, made
statements from which the inference can be deduced that, in
conducting the business for his mother after the assignment of the
lease subsequent to the death of his father, he relied upon a
continuance of this practice. But it must be borne in mind these
statements were made after the death of Mrs. Kennedy, who died on
the day the bill was filed, and their inaccuracy is, we think,
conclusively shown by the mode of dealing following the assignment
of the lease and the conduct of the tenant in respect to the matter
of taxes. The very first payment of taxes made after the death of
Henry King was made by the tenant herself, paying the taxes at the
request of Mrs. Kennedy, and retaining the receipt. Nearly three
years of default followed, without any payment of taxes by the
tenant whatever, and without any inquiry being made by the tenant
on the subject. When, in July, 1900, the two defaulting
installments of the tax for 1900 were paid by the tenant, they were
not paid at the instance of Mrs. Kennedy, or because
Page 204 U. S. 60
of any request upon her part, but because it "occurred" to the
tenant to do so. When they were paid, the payment embraced interest
and penalties, for which the tenant could not have deemed herself
responsible if the course of dealing asserted had been relied upon.
Despite this fact, no proof whatever was made of any notice to Mrs.
Kennedy of the fact or of any claim being made against her in the
premises. And the same thing is true as to the payments made in
May, 1901, of the current taxes and some of the overdue
installments. Besides, when these payments were made, the property
had been sold for the overdue installments, but was yet subject to
redemption, and the statutory interest of fifteen percent was paid
by the tenant without any intimation of a claim of any character
against the lessor. Indeed, the conduct of the tenant in respect to
the very tax for which a forfeiture was asserted is absolutely
inconsistent with the theory that she deemed that her landlord was
the cause of the default, for, when notice was received by the
tenant from the purchaser at the tax sale of the outstanding
irredeemable tax certificate, more than two months and a half
elapsed before the purchase of the certificate by Cohen, and no
complaint was made to the landlord that she had neglected to demand
payment of the tax, and that in consequence the default and loss
was occasioned, but a negotiation was opened to purchase the
outstanding title for the account of the tenant alone. When this
line of conduct is considered in connection with the fact, already
stated, the conclusion is inevitable that the suggestion that the
conduct of the landlord had induced the failure to pay, first made
after the death of Mrs. Kennedy, is without foundation.
And the facts which we have just stated also render it
impossible to conclude that the nonpayment of the tax was due to a
mere temporary oversight, and not to gross negligence. How can an
inference of temporary oversight be possible when the long period
of the failure by the tenant to pay any tax whatever is borne in
mind, and when we also consider the delay of more than two months
and a half which took place after
Page 204 U. S. 61
knowledge was conveyed, by the letter of Wiltsie, of the
outstanding irredeemable tax certificate?
The fact that the tenant was a merchant, and of necessity kept
mercantile books, is significant. The mind cannot conceive of
adequate entries being made of the taxes which were belatedly paid
which would not have at once suggested those which were unpaid. The
inference fairly deducible from the letter to Wiltsie --
"Unfortunately we have paid you quite a considerable amount of
money in the past for tax sales" -- adds cogency to the
irresistible inferences as to negligence.
And even if the foregoing considerations which establish the
absence of accident or mistake and demonstrate the presence of
gross negligence are put out of mind, and accident or mistake be
assumed for the sake of the argument, nevertheless, under the
circumstances of the case, a court of equity could not give relief.
This follows since the relief sought could not be afforded without
subjecting the lessor to the peril of contesting the validity of
the outstanding
prima facie irredeemable tax title.
We come to the question which we hitherto put aside for final
consideration --
viz., the alleged fraud. It, in any
event, only involves a consideration of what took place with regard
to the purchase of the tax certificate by Cohen as the agent of the
Kanns, and the circumstances surrounding and connected with that
purchase, and the use made or the certificate. Concerning these
matters the court below said:
"We find no evidence whatever in the record of any fraud or
wrongdoing perpetrated by anyone concerned. We only find the
evidence of a situation created by a keen commercial rivalry and
shrewd management, wholly untainted by wrongdoing, but still a
situation from which injury is threatened to the complainant's
rights of property, and against which she is entitled to be
relieved. For that there was an arrangement between the defendants
whereby the tax certificate was to be used to oust the complainant
from the property we think is too plain to be reasonably
questioned. There was undoubtedly a concurrence of effort for that
purpose; perhaps no formal combination
Page 204 U. S. 62
or preconcerted action. But it matters not what we call it. The
undoubted fact is there was cooperation between the defendants to
use the tax certificate to the detriment of the complainant's
rights, and there being such cooperation, the defense of
multifariousness cannot prevail. The one purpose of the bill is to
relieve the complainant from the effect of this tax certificate and
of the tax title based upon it."
For the reason that we agree with the finding that there is no
evidence whatever of any fraud or wrongdoing by anyone concerned,
we are constrained to disagree with the conclusion that the
complainant was entitled to relief. We say this because we are of
opinion that the relief awarded could only have been justified upon
the finding that there was fraud and wrongdoing. We so conclude
because, if it be accepted that there was an agreement and
combination as to the certificate, entirely free from every element
of fraud or wrongdoing, we fail to perceive how an agreement of
that character afforded ground for granting the relief which was
given. But, disregarding mere forms of expression, and assuming
that the general finding that there was no fraud or wrongdoing was
intended to be limited to intentional, as distinguished from
constructive, fraud or wrongdoing, let us briefly review the facts
concerning the acquisition and use made of the certificate in order
to fix whether such a finding is at all sustained by the record.
Although we think it immaterial, as there was no evidence whatever
tending to show that the lessor or her attorney procured the
purchase of the certificate by Cohen, that subject may be put out
of view. The irredeemable tax certificate was in the hands of and
belonged to Wiltsie. He notified the tenant that he held it more
than two months and a half before the purchase by Cohen, and
proffered his willingness to assign it to the tenant. As shown by
the undisputed facts which we have stated, with indifference both
to her own interest and the interest of the landlord, the tenant
neither acted for herself by accepting the offer nor gave any
notification whatever to the landlord on the subject. Cohen, as the
agent of the Kanns, learned of the existence of the
Page 204 U. S. 63
irredeemable tax sale and of the person who held the
certificate. He purchased it by the authority of and for the
benefit of his principals, the Kanns. By the express terms of the
statute under which the certificate was issued, it was assignable.
Granting that the purchase was made in order to aid the Kanns in
obtaining a lease of the property, in the absence of any legal duty
owing by them to the tenant, we fail to perceive how the motive of
Cohen or his principals could operate to make the otherwise lawful
action constructively wrongful. The tenant, by whose negligent
default the sale of the property had been occasioned, certainly had
no exclusive preemptive right to the purchase of the certificate
which would operate to render its purchase by anyone else in his
own interest void. After the purchase of the certificate by Cohen,
what was the position of the landlord? On the one hand confronted
by the assertion of the tenant that the outstanding tax title was
void, that she had a right to be relieved from the forfeiture
caused by the nonpayment of the tax, and was entitled to continue
in possession under the lease, and, on the other, with an offer on
the part of the holder of the tax title to quitclaim the same, and
thus avoid testing its validity, if only a lease was made which
would be advantageous. When it is again borne in mind that this
situation was brought about by the neglect of the tenant to perform
his covenant to pay the taxes, and by his procrastination in
respect to acquiring the tax certificate which had been previously
offered to him, we can conceive of no principle of equity
preventing the landlord from taking a course, not forbidden by law,
which was not only most conducive to her own interest, but which
besides obviated the danger of submitting her title to a contest
concerning the validity of a tax sale. But, if an equitable
principle could be conceived of which prevented the landlord from
so acting under the circumstances stated, that principle would be
inapplicable to the case before us when one of the undisputed facts
to which we have already called attention is considered. That fact
is this: before the landlord irrevocably determined to avail of the
forfeiture and thus avoid
Page 204 U. S. 64
the risk to herself concerning the outstanding tax title, she
offered to condone the forfeiture, provided the tenant commenced
proceedings to have the outstanding tax title declared invalid and
also secured the landlord from loss in the event that such tax
title should be sustained, which offer was declined, on grounds
substantially asserting that the risk resulting from the default of
the tenant should be borne by the owner, and not by the tenant.
The decree of the court below is reversed, and the cause
remanded with instructions to dismiss the bill for want of
equity.
Reversed.
THE CHIEF JUSTICE and MR. JUSTICE HARLAN dissent.