Stutsman County v. Wallace, 142 U.S. 293 (1892)
Case details
Bluebook Citation
Stutsman County v. Wallace, 142 U.S. 293 (1892)
Full caption
STUTSMAN COUNTY v. WALLACE.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Decided
Jan. 4, 1892
Majority
Fulljib (Chief Justice)
Majority
Brown (Justice)
STUTSMAN COUNTY v. WALLACE.
APPEAL FROM THE SUPREME COURT OF THE TERRITORY OF
DAKOTA.
No. 89. Argued November 13,1891. — Decided January 4, 1892.
Upon the construction of the constitution and laws of a State, this court, as a general rule, follows the decisions of its highest court, unless they conflict with or impair the efficacy of some provision of the Constitution or of a law of the United States, or a rule of general commercial law. In the case of an appeal from a judgment of the Supreme Court of a Territory, which was admitted as a State after the appeal was taken, a subsequent judgment of the highest court of the State upon the construction of a territorial law involved in the appeal is entitled to be followed by this court, in preference to its construction by the Supreme Court of the Territory.
Following the decision of the Supreme Court of North Dakota as to the tax-laws of Dakota Territory; Held,
(1) That an erroneous decision of an assessor of taxes under those laws in the matter of exemptions does not deprive the tax proceedings of jurisdiction, and that, until such erroneous decision is modified or set aside by the proper tribunal, all officers with subsequent functions may safely act thereon; and that the rule of caveat emptor applies to a purchaser at a tax sale thereunder;
(2) That under those laws a county treasurer, in making a sale for non-payment of taxes, acts ministerially, the law furnishing the authority for selling the property, and the warrant indicating the subjects upon which it is to be exercised; and he is protected so long as he acts within the statute;
(3) That in the case of lands granted to the Northern Pacific Railroad
Company, on which the costs of survey had not been paid and for which no patents had been issued, it was his duty to proceed to sell, notwithstanding those facts; and that, when the title of the purchaser at the tax sale failed, by reason of the lands not being subject to taxation, the county was not liable for the purchase money under c. 28, § 78 of the Political Code of 1877.
The rule that the known and settled construction of a statute of one State will be regarded as accompanying its adoption by another is not applicable where that construction had not been announced when the statute was adopted; nor when the statute is changed in the adoption.
The court stated the case as follows:
Appellees brought an action in the District Court for the Sixth Judicial District of the Territory of Dakota, September p. 29428, 1886, to recover from Stutsman County certain moneys which they had paid that county for lands which the treasurer of the county had assumed to sell to them in satisfaction of taxes wrongfully assessed thereon, and which sale was therefore invalid. They also sought to recover the amount of taxes paid by them on the land after the sale; and prayed judgment for the amounts paid and interest at thirty per cent per annum thereon from the dates of the payments respectively.
The allegations of the complaint were denied by the defendant, and the action was tried upon a statement of facts agreed to by the parties, which statement was adopted by the District Court as its findings of fact. These finding's were, in substance, that the lands in question were part of the original grant by the United States to the Northern Pacific Railroad Company; that no patents had been issued for them ; that the company earned the lands after the passage of the act of Congress of date July 15, 1870, in regard to the payment of the costs of surveying; that they were surveyed at the expense of the United States government, and no part of the cost and expenses of the survey had at the time of the tax sale been repaid by the railroad company to the United States; that in the year 1880 the proper officers of the county assessed all the parcels of land mentioned in a schedule attached to the complaint, marked “ A,” and levied certain taxes thereon, to wit, the territorial, county, general school, and district school taxes, amounting in the aggregate to $5500, all of which remained unpaid October 1,1882; that prior to that date the then county treasurer of that county offered the lands for sale for the non-payment of said taxes, and for the collection of the same, and sold them to Charles S. Wallace for sums amounting in the aggregate to $5221.75, and the treasurer then and there executed and delivered to Wallace the certificate of sale of the lands in the form provided by law to be issued upon the sale of land for non-payment of taxes, and Wallace paid the treasurer said amount; that in 1881 the officers of the county, duly authorized to assess property therein, assessed and levied taxes upon said parcels of land for the territorial, county and school taxes, and that Wallace, “ in order to protect his tax lien thereon p. 295and equitable title thereto, paid to the defendant’s treasurer, as subsequent taxes upon said land, being the taxes so levied for the year 1881,” the amount of $4699.25, none of which taxes' so levied for the year 1881 had theretofore been paid; that in 1882 the officers of the county assessed and levied territorial, county, general school and district school taxes upon the parcels of land described in the schedule attached to the complaint and marked “ B,” all of which remained unpaid October 1,1883, and the then treasurer of the county offered the lands for sale for the non-payment of the taxes, and for the collection of the same, and sold them to Wallace for the sum in the aggregate of $6033, and the treasurer delivered certificates of sale to Wallace, and he paid the said amount.
That in October, 1884, the Northern Pacific Railroad Company brought an action against the treasurer and Wallace, wherein a decree was entered adjudging the tax proceedings in question to be null and void, and enjoining the treasurer from making, and Wallace from receiving, any tax deed to the property named in schedule “ A,” and in September, 1885, a like action was brought which resulted in a similar decree as to the property named in schedule “ B.”
It was also found that James M. Martin had an interest in the tax receipts under an assignment from Wallace, and that prior to the commencement of this action plaintiffs tendered to the board of county commissioners of Stutsman County the tax certificates in question, “ and offered to surrender said certificates to said county upon the payment of the amount so paid by said plaintiff, Charles S. Wallace, for the purchase of said lands at said sales, and for the payment of the subsequent taxes thereon as aforesaid, together with the interest thereon at the rate of thirty per cent per annum from the dates of such payment; ” but defendant refused to pay that sum, or any part thereof, and the whole is still unpaid; and that no part of the land has ever been redeemed from the sales, nor from either of them, nor from the subsequent taxes paid as aforesaid.
The court found as conclusions of law that no taxes were due upon the lands at the time of their sale, and that they were sold “by the mistake and wrongful act of the defendant’s p. 296treasurer, the then county treasurer of Stutsman County, and that the plaintiffs are entitled to recover from the defendant the amount paid for said lands at said sales and the amount paid as subsequent taxes thereon, as hereinafter stated, together with thirty per cent interest thereon and on the whole amount so paid from and after the date of such payments, as hereinafter specified, to this date',” and thereupon directed judgment in favor of plaintiffs and against Stutsman County for $9921, with interest from and after October 1, 1882, at the rate of 30 per cent per annum, and for the amount of $6033, with interest thereon from and after October 1, 1883, at the rate of 30 per cent per annum, amounting in the aggregate, both principal and interest, to the sum of $35,800, together with costs and disbursements, and judgment was entered accordingly.
Exceptions were duly taken and motion for new trial made and overruled. The county thereupon carried the case, on appeal, to the Supreme Court of the Territory, by which the judgment was affirmed, whereupon an appeal was prayed and allowed to this court.
The parts of the revenue laws of the Territory of Dakota, referred to by counsel, are given in the margin.1
1
Chapter 28 of the Political Code of the Territory of Dakota, as amended from time to time, and in force at the time of the levy and assessment of the taxes and sale of the lands referred to in the complaint, and at the date of the commencement of this action, contained a complete scheme for the assessment, levy and collection of taxes. (Revised Codes, Dakota, 1877, p. 111.) Chap. 15 of the Political Code in the Compiled Laws of 1887 has substantially the same provisions with a new numbering of the sections. (Comp. Laws, Dakota, 1887, p. 337.) Sections 1, 2 and 3 name the classes of property liable to, and enumerate such as are exempt from, taxation. Subdivision one of section 2 states as exempt “ the property of the United States, and of this Territory, including school lands.” Sections 4 to 26 provide for the assessment of “ taxable property,” and prescribe the manner of proceeding by .the assessor in making up the assessment roll. He is required to list and assess “ all taxable property, real an personal,” each year, at its cash value at the place of listing on the day named, and can demand information of the owners, who are obliged to Us all property subject to taxation, and must list property of which the owner are unknown, to “unknown owners.” The form of the assessment roll is prescribed in sections 26 and 27, an 33 to 39. Section 40 reads thus: “ An entry is required to be made upon the tax list and its duplicate, showing what it is, and for what county and what year it is, and the county commissioners shall attach to the lists their warrants under their hand and official seal, in general terms, requiring the treasurer to collect the taxes therein levied according to law; and no informality in the foregoing requirements shall render any proceedings for the collection of taxes illegal. The county clerk shall take the receipt of the county treasurer on delivering to him the duplicate tax list with the warrant of the county commissioners attached, and such list shall be full and sufficient authority for the collection by the treasurer of all taxes therein contained.” Sections 4.1 to 44 relate to the collection of taxes and form of receipts. Section 45 provides: “ It shall be the duty of the county clerk, on receiving any duplicate tax receipt from the treasurer, forthwith to examine the same and compare it with the tax list in his possession, and see if the total amount of taxes and the several amounts of the different funds are correctly entered and set forth in such receipt ; and in case it shall appear that the treasurer has not collected the full amount of taxes and interest which, according to the tax list and the terms of the receipt he should have collected, then the county clerk shall forthwith charge the treasurer with the amount such receipt falls short of the true amount, and the treasurer shall be liable on his official bond to account for and pay over the same.” Sections 46 to 51 relate to the treasurer’s cash-book and the duplicate * cash-book kept by the county clerk. Section 52 is as follows: “ If on the assessment roll or tax list there be any error in the name of chased, the sum paid and the time when the purchaser will be entitled to a deed, which certificate shall be assignable, and said assignment must be acknowledged before some officer having power to take acknowledgment of deeds. Such certificate shall be signed by the treasurer in his official capacity, and shall be presumptive evidence of the regularity of all prior proceedings.- The purchaser acquires the lien of the tax on the land, and if he subsequently pay any taxes levied on the same, whether levied for any year or years previous or subsequent to such sale, he shall have the same lien for them, and may add them to the amount paid by him in the purchase, and the treasurer shall make out a tax receipt and duplicate for the taxes 'on the real estate mentioned in such certificate, the same as in other cases, and shall write thereon, ‘ sold for tax at public sale.’ ”
Counsel for Appellant.
Mr. John F. Dillon for appellant. Mr. Harry Hubbard was with him on the brief.
by sections 28, 29 and 30 the equalization of the assessment roll by the board of county commissioners is provided for; and the board is given power to correct errors made in the list by the assessor and to add thereto any property, real or personal, subject to taxation, omitted by the owner or the assessor. During the session of the board any person, or his agent or attorney, feeling aggrieved by anything in the assessment roll, may apply to the board for the correction of any alleged errors in the listing or valuation of his property, whether real or personal, and the board may correct the same as shall be just.
Under sections 31 and 32 abstracts of assessments must be forwarded to the Territorial auditor, and the assessments may be equalized by the Territorial board for Territorial purposes, and for Territorial taxes.
The rates and date and levy of taxes and the preparation of duplicate tax lists by the county clerk with their form, one of which lists is retained by the county clerk and the other delivered, with the warrant of the county commissioners attached to the county treasurer, are prescribed by sections p. 298298: OCTOBER TERM, 1891.
J/r. TK. E. Dodge (witK whom were Mr. J. H. Baldwin, Mr. I). B. Kurtz and Mr. John & Watson on the brief) for appellees. /
the person assessed or taxed, the name may be changed, and the tax collected, from the person intended, if he be taxable and can be identified by the assessor or treasurer; and when the treasurer, after the tax list is committed to him, shall ascertain that any land or other property is omitted, he shall report the fact to the county clerk, who upon being satisfied thereof, shall enter the same upon his assessment roll, and assess the value, and the treasurer shall enter it upon the tax list, and collect the tax as in other cases.”
Delinquency, penalty for non-payment and lien of taxes are provided for by sections 53 to 56, section 56 reading: “Taxes upon real property are hereby made a perpetual lien thereupon against all persons and bodies corporate except the United States and the Territory, and taxes due from any person upon personal property shall be a lien upon any real property owned by such person, or to which he may acquire a title.”
Sections 57 to 59 treat of collection of taxes by distress and sale of personal property, and sections 60 to 69 of the sale of real property for taxes and the form of certificate of sale.
Section 62 reads:
" That on the first Monday of October in each year, between the hours of nine o’clock, a .m., and four o’clock p.m., the treasurer is directed to offer at public sale at the court house, or place of holding courts in his county, or at the treasurer’s office, where, by law, the taxes are made payable, all lands, town lots or other real property, which shall be liable for taxes of any description for the preceding year or years, and which shall remain due and unpaid, and he may adjourn the sale from day to day until all the lands, lots or other real property have been offered, and no taxable property shall be exempt from levy or sale for taxes.”
Section 67 is as follows:
“ The purchaser of any tract of land sold by the county treasurer for taxes will be entitled to a certificate in writing describing the land so pur-
STUTSMAN COUNTY v. WALLACE. 299,
I. The lands sold by the defendant’s treasurer to the respondent Wallace had not become part of the taxable prop-
Then follows the form of certificate.
Section 69 concludes with the provision: “ And the treasurer is further authorized and required to sell as aforesaid all real estate in his county on which taxes remain unpaid and delinquent for any previous year or years.”
Section 70 provides for a redemption of lands sold for taxes upon the payment of “ the sum mentioned in this certificate, and interest thereon at the rate of thirty (30) per cent per annum from the date of purchase, together with all other taxes subsequently paid, whether for any year or years previous or subsequent to said sale, and interest thereon at the same rate from the date of such payment.”
Section 73 is as follows:
“If no person shall redeem such lands within two years, at anytime after the expiration thereof, and on production of the certificate of purchase, the treasurer of the county in which the sale of such lands took place shall execute to the purchaser, his heirs or assigns, in the name of the Territory, a deed of the land remaining unredeemed, which shall vest in the grantee an absolute estate in fee simple, in such land, subject, however, to all the claims which the Territory may have thereon for taxes or other liens or incumbrances.”
Section 78 reads thus:
“ When, by mistake or wrongful act of the treasurer, land has been sold on which no tax was due at the time, the county is to save the purchaser harmless by paying him the amount of principal and interest to which he would have been entitled had the land been rightfully sold, and the treasurer and his sureties shall be liable for the amount to the county on his bond, or the purchaser may recover the same directly from the treasurer.”
Section 83 requires the county treasurer to pay over to the Territorial treasurer, on or before the first Monday of November, and at all other times on demand, all territorial funds collected by him, and prescribes his fees for such collection and receipt.
Section 84 reads:
“ If the county treasurer shall wilfully and negligently fail to settle with the Territorial treasurer at the time and in the manner above prescribed by law, he shall forfeit to the use of the Territory the sum of five hundred dollars, which sum may berecovered of him, or his sureties, on suit brought by the Territorial treasurer in any court in this Territory having jurisdiction; or in case of failure of the Territorial treasurer to bring such suit, then any citizen of the Territory may bring the same.”
Section 85 provides for the procuring by the territorial auditor of a list from the proper land office of all lands becoming taxable for the first time, m each county, and the forwarding of the list to the clerk of such county.
Sections 89, 95 and 96 are as follows:
§ 89. In the case of dereliction of duty on the part of any officer or person required by law to perform any duty under the provisions of this p. 300erty, within the Territory of Dakota at or prior to the date of such sale. Neither the Territory nor its officers could there-
act in any county in this Territory, such person shall thereby forfeit all pay and allowance that would otherwise be due him, and the county commissioners in any such county, on receiving satisfactory evidence of such dereliction or failure to perform as required by law any duty enjoined by this act, shall refuse to pay such person or persons any sum whatever for such services.”
“ § 95. If any county treasurer shall fail to make return, fail to make settlement, or fail to pay over all money with which he may stand charged, at the time and in the manner prescribed by law, it shall be the duty of the county clerk, on receiving instructions for that purpose from the Territorial auditor or from the county commissioners of his county, to cause suit to be instituted against such treasurer and his sureties or any of them, in the District Court of his county.
“ § 96. Whenever suit shall have been commenced against any delinquent county treasurer, as aforesaid, the board of county commissioners of such county may, at their discretion, remove such treasurer from office, and appoint some suitable person to fill the vacancy thereby created, as hereinbefore provided.”
Sections 94 and 95 of chapter 21 of the Political Code, (Codes, 1877, p. 56,) prescribing the duties of the county treasurer, provide :
“ § 94. He shall be the collector of taxes; shall keep his office at the county seat, and shall attend his office three days in each week. He shall be charged with the amount of all tax lists in his hands for collection, and credited with the amounts collected thereon, and the delinquent list, and shall keep a fair and accurate current account of the moneys by him received, showing the amount thereof, the time when, from whom, and on what account received, in cash, warrants, county or road orders; and if in warrants or orders, their kind, number or other designation, amounts for which they were drawn, interest due thereon and the amounts of the receipts thereon endorsed, if any; also of all disbursements by him made, showing the time when, to whom, on what account and the amount paid; and he shall so arrange his books that the amounts received and paid on account of each separate and distinct fund or appropriation, shall be exhibited in separate and distinct columns, or accounts, and so as to show whether the same was received or paid in cash, or warrants or orders, and if either of the latter, their designation and other particulars as above required; and the county treasurer shall at all times exhibit such accounts, when desired, to the Territorial, county or school officers, entitled to receive the same, and shall at any time pay over the balance in his hands to them, upon receiving proper vouchers.
“ § 95. The books, accounts and vouchers of the county treasurer, and all moneys, warrants or orders, remaining in the treasury, shall at all times be subject to the inspection and examination of the board of county com-
. Argument for Appellees.
fore lawfully assume jurisdiction to tax or sell the same; and it must be conceded that the money received by the county
missioners, and at the regular meetings of the board in January and July of each year, and at such other times as they may direct, he shall settle with them his accounts as treasurer, and for that purpose shall exhibit to them all his books, accounts and moneys, and all vouchers relating to the same, to be audited and allowed, which vouchers shall be retained by them for evidence of his settlement; and, if found correct, the account shall be so certified; if not, he shall be liable on his bond.”
Section 84 of chapter 132 of the laws of North Dakota, enacted in 1890, (Laws North Dakota, 1890, 376, 408,) is as follows: <
“ When a sale of land as provided in this act is declared void by judgment of court, the judgment declaring it void shall state for what reason, such sale is declared void. In all cases where any such sale has been or hereafter shall be so declared void, or any certificate, or deed issued under such sale shall be set aside or cancelled for any reason, or in case of mistake, or wrongful act of the treasurer or auditor, land has been sold upon which no tax was due at the time, the money paid by the purchaser at the sale, or by the assignee of the' State upon taking the assignment, and all subsequent taxes, penalties and costs paid by such purchaser or assignee, shall, with interest at the rate of ten per-cent per annum from the date of such payment, be returned to the purchaser or assignee, or the party holding his right, out of the county treasury, on the order of the county auditor, and so much of said money as has been paid into the State treasury shall be charged to the State by the county auditor and deducted from the next money due the State on account of taxes. * The county treasurer or auditor shall be liable on their bond for any loss occasioned by any such wrongful act. Whefiever any sale of land, or certificate or deed, made or given under this act is declared void by judgment of court, unless the judgment declared the tax to be illegal, said tax and subsequent taxes, returned to the purchaser or assignee as provided in this section, shall remain a lien upon the land sold, and the county auditor shall advertise the same at the next succeeding annual sale, for the full amount of taxes, penalties and costs due on said piece or parcel of land.”
The following are sections of chapter 69 of the Dakota General Laws of 1862 (Laws, 1862, p. 419) :
“ Sect. 36. On the first day of February, the unpaid taxes for the preceding year shall draw interest as hereinafter provided; and taxes upon real property are hereby made a perpetual lien thereon against all persons; and taxes due from any person on personal property shall be a lien on any real property owned by such person.” “ Sect. 39. On the first Monday in October, 1864, and in each year thereafter, the county treasurer is required to offer at public sale at the court house, or if there is no court house, at the office of the county treasurer, all lands on which taxes of any description for the preceding year or years shall have been delinquent and remain p. 302treasurer for these lands, was received without authority of law; for the territorial statute, section 62, chapter 28, from which alone the treasurer derived any authority to sell lands for taxes, only authorized him. to sell “lands, town lots or other real property, which shall be liable for taxes.” The statute did not and could not lawfully authorize him to sell lands which were not liable for taxes, and which consequently could not be taxed, but which belonged to the public domain of the United States.
The acts of the treasurer in selling the lands to the respondents were wrongful, because committed without authority of law, in violation of express enactments, defining and restricting the treasurer’s authority and resulting in civil injury, not only to the owner of the lands unlawfully sold, but to the purchaser thereof wrongfully deprived of his money without consideration. The statute, section 73 of chapter 28, guaranteed to the respondents that if these lands were not redeemed within two years they should, upon production of their certificates of purchase, receive deeds conveying to them in the name of the Territory, all of the lands remaining unredeemed, which deeds should vest in them an absolute estate in fee simple.
The breach of this guaranty did not arise through any defect in the tax proceedings, which the purchasers might have discovered upon an inspection of the record of such proceedings and which would bring them within the rule of caveat emptor, but by reason of the fact that the entire proceedings from their inception were absolutely void and without authority of law. The question in controversy, therefore, is not one of irregularity in the assessment of the taxes levied or of the sale by the county treasurer, but is one of entire
due, and such sale shall be made for and in payment of the total amount of taxes, interest and cost, due and unpaid on such real property.” “ Sect. 54. Immediately after the expiration of the term of three years from the date of the sale of any land for taxes under the provisions of this act, the treasurer then in office shall make out a deed for each lot of land sold and remaining unredeemed, and deliver the same to the purchaser upon the return of the certificate of purchase.”
absence of power or authority in the taxing officers to assess and the treasurer to collect or make sale of the lands for their payment.
The rule of caveat emptor as applied to tax sales purchases has never, to our knowledge, been held to apply to a case where there was no charge or tax due. In such case nothing passes by it to the purchaser. No right to receive or retain the money exists in the officer making the sale, and in such cases the courts have uniformly held that the purchaser, who thus paid his money and got nothing for it, should have the same returned to him. And so whenever the question has been raised, the courts have not hesitated to protect bidders at public sales, when there existed, from any cause, an entire absence of power to make the sale, refusing to enforce the payment of the bid or ordering restitution thereof. And in such a case it matters not that the officer making the sale mistakenly supposed he had full power to do so. Todd v. Dowd, p. 304jurisdiction existed and where the title of the purchaser failed by reason of non compliance with the statute causing irregularities in the assessment levy or sale as appeared by the records which were held to be constructive notice to the purchaser of such irregularities, and to this class of cases only has the rule of caveat emptor been applied. Sullivan v. Davis, 29 Kansas, 28; Lynde v. Inhabitants of Melrose, 10 Allen, 49; Rice v. Auditor General, 30 Michigan, 12; Logansport v. Humphrey, 84 Indiana, 467.
1
Met. (Ky.) 281; Washington v. J/b Gaughan, 34 Mississippi, 304; Riddle v. Hill, 51 Alabama, 224; Boykin v. Cook, 61 Alabama, 472; Burns v. Ledbetter, 56 Texas, 282; Laughman v. Thompson, 6 Sm. & Marsh. 259; Bartee v. Tompkins, 4 Speed, 623; Norton v. Supervisors, 13 Wisconsin, 611; Chapman v. City of Brooklyn, 40 N. Y. 372; Commonwealth Bank v. Nayor of New York, 43 N. Y. 184; Newman v. Supervisors, 45 N. Y. 676; Schwinger v. Hikok, 53 N. Y. 280; Preston y. Boston, 12 Pick. 7; Corbin v. Davenport, 9 Iowa, 239; Phillips v. City of Hudson, 31 N. J. Law (2 Vroom) 143; Dodd v. Neilson, 90 N. Y. 243; Commissioners v. Young, 18 Kansas, 440; Clapp v. Pine Grove Township, 138 Penn. St. 35. Applying the same rule it has • been repeatedly held that taxes illegally imposed and collected may be recovered back. Slack v. Norwich, 32 Vermont, 818; Dorr v. Boston, 6 Gray, 131; Gillette v. Hartford, 31 Connecticut, 351. The rule that a purchaser cannot recover the money paid by him at a void tax sale, is based upon the principle that he is a volunteer in the payment of charges levied on lands subject to taxation, and has been applied only in cases where vol. cxlu —20
Assuming that the assessor had no jurisdiction of the subject matter, the treasurer was not protected by his warrant in the sale of the lands in question, and his acts were wrongful under the numerous decisions of this court pertinent to the subject.
When a court or other officer acts without jurisdiction of the subject matter, all is void and such acts are regarded in law as nullities, constituting no justification, but all persons concerned in executing such judgments or any process predicated thereon are trespassers and liable to an action thereon. Griffiths. Frazier, 8 Cranch, 9; Dynes v. Hoover, 20 How. 65; Erskine v. Hohnbach, 14 Wall. 613'; Hayes v. Pacific Mail Steamship Co., 17 How. 596. »
The statute, section 78, chapter 28, political code (section 1629, Compiled Laws of Dakota) is cumulative arid not exclusive. It is merely declarative of the common law rule “ that an action lies for money paid by mistake or upon a consideration which happens to fail, or for money got through imposition.” Moses v. Macferlan, 2 Burrow, 1005 ; Louisiana n. Wood, 102 U. S. 294.
The States of Iowa, Nebraska, Kansas and Wisconsin had previously enacted similar statutes to the one above quoted, and while no two of them were couched in exactly the same language, they were prompted by a common object, designed to subserve a common purpose and in each instance, when construed by the highest courts of those States so as to give effect to the object designed by the legislature, they have received a common construction.
The statute in question (section 78 of chapter 28) had its
STUTSMAN COUNTY v. WALLACE. 3Ó5
origin in the statutes of Iowa and exists there to-day in the same form as originally enacted. It was taken by Nebraska from Iowa and by Dakota from Nebraska. It is true that in the latter State the statute was, prior to the decisions by the Supreme Court of that State, (Coulter v. Mahaska Co., 17 Iowa, 92; Scott v. Chickasaw Co., 46 Iowa, 253; Morris v. County of Sioux, Ml Iowa, 416,) amended so as to read “When by mistake of the treasurer or other officer lands are sold ” etc.; but those decisions clearly show that no significance was given to the words contained in the amendment by the Supreme Court of Nebraska. The Supreme Court of Dakota, therefore, in the construction of this statute followed the familiar rule adopted by this court in numerous cases, by adopting the construction of the courts of those States by whose legislatures the statute was originally adopted. The statute having been taken from Iowa and Nebraska, the legislature in adopting it, adopted the construction put upon it by the courts of those States, which construction became part of the law itself. McDonald v. Hovey, 110 U. S. 619; Metropolitan Railroad Co. v. Moore, 121 U. S. 558.
Mb. Chief Justice Fulljib, after stating the case, delivered the opinion of the court.
Appellees recovered judgment for the amounts paid and thirty per cent per annum interest thereon. Interest at this rate was that which purchasers at tax sales received upon redemption, and section 78 of chapter 28 of the Political Code of the Territory of Dakota provided that the purchaser, who came within its terms, should be saved harmless, by being paid the principal and interest to which he would have been entitled if the land had been rightfully sold. Unless the recovery was justified under the statute, this judgment must be reversed.
Stutsman County is one of the counties of North Dakota, which was admitted into the Union after this cause was docketed in this court. In Tyler v. Cass County, 48 N. W.: Rep. 232, not yet published in the official reports, where the state of facts was substantially such as is disclosed by this* ^oord, the Supreme Court of the State decided that no p. 306recovery could be had by the purchaser at a tax sale whose title failed, either at common law or under the section in question, which in 1885 had been amended in a point not material here, and became § 1629 of the Compiled Laws of Dakota of 1887.
It is well settled that upon the construction of the constitution and laws of a State this court, as a general rule, follows the decisions of her highest court, unless they conflict with or impair the efficacy of some provision of the Federal Constitution or of a Federal statute or a rule of general commercial law. Norton v. Shelby County, 118 U. S. 425, 439; Gormley v. Clark, 134 U. S. 338, 348.
Our mandate in this case must be issued to the state Supreme Court, which will in its turn direct the state court succeeding to the District Court of the Territory to proceed in conformity to our judgment. 25 Stat. 683.
The parties are citizens of North Dakota. The litigation proceeded upon the recognition and allowance of the exemption of the lands from taxation under the laws of the United States, and no Federal questions were involved. Tyler v. Com County, ante, 288. The case belongs to the class upon which the local decisions are ordinarily given controlling effect, and the adjudication of the highest tribunal of the State in the case cited should be considered in the light of this rule, though the appeal is from the Supreme Court of the Territory, which reached the opposite conclusion.
The Supreme Court of the State held that lands which were part of the original grant to the Northern Pacific Railroad Company and had been surveyed at the expense of the United States and earned by the company after the passage of the act of Congress of July 15, 1870, but no part of the survey fees had been repaid to the United States, although they had been disposed of by the company and conveyed to third parties, who were in pqssession, were not in fact taxable; yet that, since land was a subject of taxation in Dakota Territory, primafacie they were taxable; that the assessor being a judicial official, where property is exempt from taxation by class and not by specific .description, has full jurisdiction, and it is p. 307his duty to decide in each instance whether or not a particular piece of property falls within any of the exempted classes, and in this respect the source of the law that establishes the exemption is immaterial; that an erroneous decision of an assessor in the matter of exemptions does not deprive the tax proceedings of jurisdiction, but until such erroneous decision is modified or set aside by the proper tribunal all officers with subsequent functions may safely act thereon; that the rule of caveat emptor applied to the plaintiff; and that there was no right of recovery at common law. It was further held that under the law in force when the tax sale in question in the case was made, the treasurer, in the matter of the collection of the taxes, was purely a ministerial officer, and when he received the duplicate tax list with the warrant of the county commissioners attached, if such process was fair on its face and contained nothing that would ’ apprise the treasurer of any defects or infirmities, and it did not appear that the treasurer had any knowledge of any defect or infirmities, such treasurer was fully protected from personal liability in collecting the taxes upon all property contained in his list, so long as he acted strictly within the statute; that the law furnished his authority for selling the property for delinquent taxes; that the warrant with the tax list attached gave him the subjects upon which to exercise such authority; that the statute which required the treasurer to “ sell all lands liable for taxes of any description for the preceding year or years,” meant all lands liable to taxation as shown by the process in his hands, and he could not refuse to sell lands on his list nor could he sell lands not on his list; that the sale of the lands in that case was neither the mistake nor the wrongful act of the treasurer within the meaning of section 1629, Compiled Statutes; and that the plaintiff had no right of action under that section. And further, that section 84 of chapter 132 of the‘laws of North Dakota for 1890 had no application to a sale of lands made before the enactment of said chapter.
Section 1629 of the Compiled Laws is identical with section 78, chapter 28, of the Dakota Political Code, except that in hen of the words, “the amount of principal and interest to p. 308which he would have been entitled had the land been rightfully sold,” the words, “ the amount of principal and interest at the rate of twelve per cent per annum from the date of sale,” have been substituted. Compiled Laws, 1887, p. 362.
Section 78 is as follows: “When, by mistake or wrongful act of the treasurer, land has been sold on which no tax was due at the time, the county is to save the purchaser harmless by paying him the amount of principal and interest to which he would have been entitled had the land been rightfully sold, and the treasurer and his sureties shall be liable for the amount to the county on his bond, or the purchaser may recover the same directly from the treasurer.”
The county is thus made liable in the first instance, “ when by mistake or wrongful act of the treasurer, land has been sold on which no tax was due at the time,” while a personal liability to the purchaser is directly imposed upon the treasurer, who with his sureties is also made liable for the amount to the county on his bond. This statutory provision is not the same as that of the act of North Dakota of 1890, and many similar State statutes, making counties generally liable to the purchaser at tax sales, when the sales are declared void. Nor is it the same as had previously existed. The law for the organization of the Territory of Dakota was passed March 2, 1861, and on the 15th of May, 1862, an act of its first legislative assembly was approved, which formed chapter 69 of its laws, entitled, “Revenue.” (Laws Dakota, 1862, vol. 1, p. 419.)
Section 58 read thus: “ When, by mistake or unlawful act of the treasurer, land has been sold on which no tax was due at the time, or whenever land is sold unlawfully in consequence of any other mistake or irregularity rendering the sale void, the county shall hold the purchaser harmless by paying him the amount of principal and interest and .costs to which he would have been entitled had the land been rightfully sold, and the treasurer and his sureties will be liable to the county for the amount of his official bond: Provided, That the treasurer or his sureties shall be liable only for his own or his deputy’s acts.”
The treasurer was the collector of taxes and directed to sell, p. 309but he was not made liable if the sale were unlawful through mistakes or irregularities chargeable to others, but only for his own acts. When in section 78 of c. 28 of the Code of 1877, the words,“ or whenever land is sold unlawfully, in consequence of any other mistake or irregularity rendering the sale void,” were dropped out, the proviso was also exscinded as no longer necessary.
Under it as recast the county is not ultimately to respond. The liability falls upon the treasurer in either event, but does not arise save where the treasurer is himself in fault in selling the land. The wrong arising from selling land for taxes on which no tax is due, is not necessarily the result of the mistake or wrongful act of the treasurer; and upon the facts in this record, if he were protected by his warrant and acted strictly within the statute, he could not be held nor, of course, could the county, under that section.
We agree with the learned State Supreme Court that the treasurer acted in the sale as a ministerial officer, and that while the law furnished authority for selling property for delinqent taxes, the warrant furnished the subjects upon which to exercise the authority.
In Erskine v. Hohnbach^ 14 Wall. 613, 616, Mr. Justice Field, speaking for the court, said: “ Whatever may have been the conflict at one time, in the adjudged cases, as to the extent of protection afforded to ministerial officers acting in obedience to process, or orders issued to them by tribunals or officers invested by law with authority to pass upon and determine particular facts, and render judgment thereon, it is well settled now, that if the officer or tribunal possess jurisdiction over the subject matter upon which judgment is passed, with power to issue an order or process for the enforcement of such judgment, and the order or process issued thereon to the ministerial officer is regular on its face, showing no departure from the law, or defect of jurisdiction over the person or property affected, then, and in such cases, the order or process will give full and entire protection to the ministerial officer in its regular enforcement against any prosecution which the party aggrieved thereby niay institute against him, although serious errors may have p. 310been committed by the officer or tribunal in reaching the conclusion or judgment upon which the order or process is issued.”
Things may be void as to all persons and for all purposes, or as to some persons and for some purposes, and although the assessor may have been without jurisdiction over the particular property, yet as he had general jurisdiction to list property for taxation, and there is no pretence that there was anything on the face of the warrant to apprise the treasurer of the lack of jurisdiction, he cannot be held, in executing the warrant, as guilty of a wrongful act within the intent and meaning of this statute.
The 40th section of chapter 28 shows that the warrant required the treasurer to collect the taxes therein levied according to law, and that the duplicate tax list with the warrant of the county commissioners attached was full and sufficient authority for the collection by the treasurer of all taxes therein contained. It was his duty to proceed, and he cannot be held to have been bound by the extrinsic fact that the costs of survey had not been paid, and that, therefore, these particular lands were not taxable.
We think the conclusion inadmissible that the legislature intended that the treasurer should be held responsible for the mistakes or wrongful acts of other officers, when acting in strict compliance with the exigency of the process committed to him.
It has been ruled that where an officer knows of facts aliunde his process, which render the proceedings void, he is not protected; but that question does not arise here, as no such knowledge on the part of the treasurer is found; nor is there any basis for the contention that the treasurer made any mistake of fact in the premises.
It was earnestly argued that, inasmuch as by section 62 the treasurer is directed to sell all lands “ which shall be liable for taxes,” there is just as much a question of law or fact presented for his decision as is presented to a sheriff when he is directed to sell the property of a defendant on execution, or required to determine the exemption of property from execution; but this ignores the fact that the warrant commanded him to p. 311collect the taxes from the specific property against which they were levied, and that he had no discretion to use, no judgment to exercise, and no duty to perform except to sell the particular property for delinquency. Buck v. Colbath, 3 Wall. 334, 343. , Comparing sections 36, 39, and 54 of chap. 69 of the Laws of 1862 with sections 56, 62, and 73 of chap. 28 of the Code of 1877, (these will be found in the margin, ante, 298, 299,) it is contended that the legislature, in changing the language requiring the county treasurer to sell “ all lands on which taxes of any de¿bription for the preceding year or years shall have been delinquent and remain due,” so as to read : “ all lands, town lots or other real property, which shall be liable for taxes of any description for the preceding year or years, and which shall remain due and unpaid,” and adding the words: “ And no taxable property shall be exempt from levy and sale for taxes,” must be assumed to have intended to impose upon the treasurer the duty of determining in each instance whether or not the property was taxable, and that this view is confirmed by the amplification of the clause requiring the treasurer to execute a deed to the purchaser. We do not think so. If, as the state Supreme Court remarks, the treasurer must disregard his Warrant and sell no property not liable for taxes, even though the same appeared on his list, it would be equally true that he must sell all lands that were liable for taxes, although the same did not appear on his list.
Under section 37 of chap. 28 of the Code of 1877, as under section 1593 of the Compiled Laws, the clerk was directed to prepare a list which should contain all the taxable lands in the county with the names of the persons or parties in whose name each subdivision was listed, and also a duplicate of the tax list when completed, and, retaining one, to deliver the other to the treasurer, and to these lists the warrants are attached. -The clerk makes the list from the assessment roll after the taxes are levied, and can no more change it than the treasurer can ; and the order is to sell lands shown to be liable by being upon the list.
By section 56 it was provided that taxes due from any p. 312person upon personal property should be a lien upon any real property owned by such person or to which he may acquire a title; and hence the argument that the amendment of section 39 of chap. 69 of the Laws of 1862 by section 62 of chap. 28 of the Code of 1877, was objectless except upon the basis of appellee’s contention, is completely answered by the Supreme Court in pointing out that in order to give effect to the provision relative to the lien on realty of taxes on personalty, it was necessary to direct all lands to be sold that were “liable for taxes of any description.”
The language of section 73 of chapter 28 of the Code of 1877, that a tax deed shall run “ in the name of the Territory,” and “ shall vest in the grantee an absolute title in fee simple, in such land,” whatever weight may be attached to it in a different connection, contributes nothing to sustain the position that where such title fails, recovery can be justified under section 78.
It is said that section 78 had its origin in a statute of Iowa, was thence taken into the statutes of Nebraska and by the Territory of Dakota from Nebraska, and several decisions of the highest courts of Iowa and Nebraska are referred to as giving the provision a construction differing from that of which we approve. We do not find that any decision of that tenor had been announced prior to the adoption of the provision by the legislature of Dakota, and the rule that the known and settled construction of a statute of one State will be regarded as accompanying its adoption by another, is inapplicable. And the terms of the statutes of Iowa and Nebraska considered in the cases cited, were so different from that involved here, as to deprive the decisions of the weight which might justly be ascribed to them if they had argued and disposed of the precise question before us.
The judgment is reversed and the cause remanded to the
Supreme Court of the State of North Dakota for further proceedings in conformity to lava.
Syllabus.
SUNFLOWER OIL COMPANY v. WILSON.
SAME v. SAME.
APPEALS FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF MISSISSIPPI.
Nos. 122,123. Argued and submitted December 15,1891. — Decided January 4,1892.
An oil company contracted with a railway company to purchase certain rolling stock and lease the same to the railway company at an agreed rental, the latter agreeing to purchase the same on or before a given day and pay for it in cash, or if it should be unable to do so to turn it over to the oil company, at the expiration of the contract, in good order and condition. It was further agreed that freights earned by the railway by transportation for the oil company might be applied to the payment of the rental and of the purchase money. The railway company was insolvent and, before the expiration of the contract, its mortgage bondholders had proceedings instituted in equity for the foreclosure of their mortgage, in which W. was appointed receiver. The receiver continued to use the rolling stock. The oil company intervened, claiming to recover from the receiver the balance of the purchase money, and to secure the carrying out of the contract by the receiver, and the retention by it of the amount of freights due from it, and their application to the payments of the rent and the purchase money. The receiver answered, declining to Complete the contract, and averring that the rental had been paid in full and that there was a balance due him for freight. He also filed a cross-petition to recover the surplus. Held,
(1) That the contract provided that if the railway company became unable to pay its current debts in the ordinary course of business, it should be released from its obligation on returning the property;
(2) That the receiver had the right to return the property, upon complying with the terms of the.contract in respect thereto;
(3) That, notwithstanding the absence of a provision in the contract forfeiting payments already made, in case of failure to complete the purchase, it was open to doubt whether an action aj; common law would lie to recover such payments;
(4) That the dismissal of the intervening petition did not necessarily involve the dismissal of the cross-petition, and that the court might do full justice between the parties;
(5) That the receiver was as much entitled to recover the money due upon the contract made with the railway company as with himself;
(6) That as between the railway company and the receiver, the latter was entitled to the money, subject to any valid set-off of the oil company.
The court stated the case as follows:
This was an intervening petition by the Sunflower Oil Company to enforce the specific performance of a contract by the railway company to purchase certain engines and cars until a balance of $6732.15 claimed to be due should have been paid and discharged; and a cross-petition by the receiver to recover freights earned, in the sum of $10,258.86, in excess of the rental of such engines and cars.
The case arises upon the following facts: In 1877 the Mobile and Northwestern Railway Company, for the purpose of raising money to build its road, executed a trust deed upon all its property in the amount of $250,000, to secure a series of bonds in that amount, to be negotiated. The railway company made early default in the payment of its interest upon these bonds, but, notwithstanding its default, the bondholders suffered the property to remain in its hands, and under the uninterrupted control and management of the company, until November 15, 1886, when the original bill in this case was filed. During the continuance of such default, and in January, 1883, the president of the railway company contracted with the Baldwin Locomotive Works for two locomotives at a cost of $7600 each, to be completed in the autumn of that year. Just preceding their completion, the only locomotive the railway then had became permanently disabled, and though the new locomotives ordered were nearing completion, the company had no money, nor means of raising money, to pay for them. In this strait, the bondholders being unwilling to extend their assistance, application was made to the Sunflower Oil Company, appellant, for the means necessary to purchase the rolling stock, and avert a total suspension of the company’s business. Under these circumstances a contract was executed, October 6,1883, between the oil company and the railway company to the following effect: The oil company agreed to purchase from the Baldwin Locomotive Works two p. 315locomotives and tenders complete, named, respectively, La Flour and Yazoo, at the price of $7600 each, and to invest the further sum of $2400 in box and flat cars, and to lease the same to the railroad to January 1, 1886, for $1408 per annum, payable in monthly instalments. This was exactly 8 per cent upon the amount invested. The La Flour and the cars were to be paid for by the oil company in cash, and were at once to be and to continue its property until purchased by the railway company in the manner hereinafter provided. The Yazoo was to be purchased upon the obligation of the railway company, payable in six months from date, guaranteed by the mercantile firm of Fargason & Co. of Memphis, which guaranty the oil company agreed to procure; and until payment the title to the Yazoo was to remain in the Baldwin Locomotive Works. Should the railway company pay the obligation at maturity, the title to the engine was to vest in it, but should the same be paid by Fargason & Co. the title was to be and remain in the Sunflower Oil Company until the railway company should acquire title to it and the other property in the manner hereinafter set forth. Should the railway company promptly meet its obligation to the locomotive works for the Yazoo, then the rents payable to the oil company were to be reduced to $800 per annum, payable monthly. The railway company agreed to take all proper care of the rolling stock, and turn the same over in good order to the oil company at the end of the contract, “ should said railroad company be then unable to purchase the same, at the price hereinafter mentioned,” and agreed to use the same upon its line of road, and to turn the same over at the demand of the oil company, should it at any time violate its agreement.
The railway company further agreed that it would, on or before January 1, 1886, purchase all said property from the oil company, and pay for it in cash at the cost price, and should also have the right at any time before that date to purchase the whole by paying the cash price thereof, in which event the contract for rent should immediately cease and determine, but the other terms of the contract were to remain unimpaired. The railway company further agreed that it p. 316would erect houses at several of its depots for the purpose of receiving cotton seed in bulk for the oil company, and would provide scales for weighing seed, and would haul seed in bulk from various points along the line of its road for the oil company; that the agents of the railway company would weigh the cotton seed and purchase the same, if desired, free of cost for any such services; that it would haul all sacks for the oil company free of charge; that it would receive and haul all freights for the oil company at the Mississippi River, opposite Helena, free of charge for storage or commission; and that the freight paid should be at reasonable rates to be fixed at various times by the presidents of the two companies, but the freight on seed in bulk was not to exceed $1.75 per ton, and that on seed in sacks was not to exceed $2.00 per ton. It was further agreed that the railway company would not haul cotton seed in bulk for any other corporation or person, nor permit its agents to purchase or pay for cotton seed for any other corporation or person, and that it would give all needed facilities and preferences to the oil company to enable it to control all the cotton seed along the line of its road, “ as it now is, or as it may be while this contract is in force.” All freights earned were to be credited on the rental of the property, and should-there remain a surplus after paying the rent, it was to remain in the hands of the oil company and go as a credit upon the purchase-money of said property; interest was to be allowed said railway company on said surplus at the rate of 8 per cent per annum. The railway company was to furnish a monthly statement of freights at the end of each month, while the contract continued, to be credited in the manner above stated. The contract was to continue in force until January 1, 1886; and on this day, January 1, 1886, a further contract was made extending the time for one year from that date, for the purchase by the railway company of such engines and cars.
In November, 1886, Moses H. Katzenberger and others, holders of a majority of the bonds, filed a bill in the District Court of the United States for the Northern District of Mississippi to enforce a sale of the property and franchises covered by the trust deed, and praying for a receiver pending the pro p. 317ceedings. Subsequently the bill was amended, and on December 16, 1886, Benjamin Wilson, the defendant and appellee in this case, was appointed receiver of the company. Having duly qualified the receiver took charge of the road and began to operate the same under the orders of the court, using the rolling stock under an arrangement for that purpose. The same day the receiver was appointed an order was made that the receiver continue any existing contract for the purchase or use of the rolling stock then used on said road until, for sufficient cause shown, such contract should be annulled. A subsequent order permitted him to “ make any change in the contract heretofore existing ” in relation to the rolling stock.
On February 14, 1887, the Sunflower Oil Company, appellant, which was not a party to the original bill, interposed by petition, setting up its contract with the railway company, alleging a balance due it of $6732.15 on the purchase of said engines and cars, and praying that the receiver be required to carry out the terms of said contract, by continuing to carry freights for the appellant, and by allowing it to retain all moneys due or to become due the receiver for such services, as credits on such rental and purchase-money accounts, until the full indebtedness of the railway company was discharged. The receiver answered, denying that the railway company * had ever made any binding contract to purchase such rolling stock, and that the contract was a contract of rental with a mere option to buy; that appellant had retained of the freights earned by said railway, the sum of $10,258.86, in excess of the agreed rental of the property, and for the recovery of the same, filed his answer in the nature of a cross-petition. The court was of the opinion that the relation between the parties was one of lessor and lessee, and decreed that the oil company pay to the receiver the amount above named, being the excess of the earnings of the road in the hands of the oil company over the amounts due for rents. From that decree the first appeal was taken. At the same time an account was taken of the amount due the receiver for the surplus of freights earned by the railroad while in his hands, over the rents due the oil company during the same period, which p. 318resulted in a further decree against the oil company, in favor of the receiver, for $3729.82. From that decree the second appeal was taken to this court.
Mr. John W. Cutrer and Mr. William D. Cutrer for appellant.
The receiver, appointed at the suit of the bondholders, after the death of the trustee, and acting for their benefit, did not have conferred on him any power to sue for, nor to recover, property and assets not covered by the terms of the trust deed] and earnings of a railroad company, though named in the trust deed, are not covered by it, and do not accrue for the benefit of the creditors secured thereby, while the railroad property remains in the possession of the mortgagor. Freedman’s Saving & Trust Co. v. Shepherd, 127 U. S. 494.
Although the power to sue for this class of railroad property or assets may have been sought to be conferred on the receiver by the order making the appointment, we contend that the effort was vain, and that the receiver did not acquire thereby a legal right to sue, nor any authority to recover. The earnings of a railway company sufficient to provide for the operation of its road and the surplus belong to the company, subject to its sole control; Gilman v. III. de Miss. Tel. Co., 91 IT. S. 603; and those who receive any part of such earnings before the appointment of a receiver, are not bound to account for them, to any mortgage bondholder, nor to any person suing for him, or in his behalf. Galveston Railroad v. Cowdrey, 11 Wall. 459.
The decisions upon contracts of this character are numerous in England and America. Many recent cases hold that where it is apparent that the contract, though nominally a hiring, is, in reality, a conditional sale, the courts will so regard it, looking to the substance rather than the form. Benjamin on Sales, §§ 393, 425-433; Hervey v. R. I. Locomotive Worhs, 93 IT. S.
664. The intention of the parties, and the practical construction placed by them upon their contracts, prevail in every instance over the mere language of the instrument. Donahoe p. 319v. KettreU, 1 Clifford, 141; Irwin v. United States, 16 How. 523; United States v. Gibbons, 109 U. S. 200; Mobile &c. Ry. Co. v. Jurey, 111 U. S. 592; Harkness v. Russell, 118 U. S. 663; Topliff v. Topliff, 122 U. S. 122; Dist/rict of Columbia v. Gallagher, 124 U. S. 505.
This being true, the contract stands before the court, as stated, as, in effect, a conditional sale, with a right of rescission on the part of the vendor, in case the purchaser shall fail in payment of the purchase money. The vendor, however, has never sought rescission, but by its suit insists that the purchaser shall comply with and complete its obligation to purchase, by the continued making of payments which it is entirely able to make and to meet.
There is a manifest distinction, well stated by the authorities, between a hiring or lease, with Cie privilege or option to the lessee to purchase, and possession, as in the present instance, under a contract of conditional sale, or unconditional undertaking to purchase. The language of the contract is plain and unaccompanied by any limitation of the obligation or liability assumed. “The said railroad company further agrees that it will, on or before the said 1st day of January, 1886,purchase all of said property from said oil company, and pay for it in cash the cost price thereofI This clause immediately succeeds the clause from which counsel have evolved their conception of the option contended for, as though it were, thereby, purposely intended to exclude from the contract and wholly preclude any such doubt or hypothesis as that they assert.
Proceeding upon the hypothesis that the contract cannot be construed as an option, without force as against the railway company, but is, instead, an obligation enforcible on the demand of the oil company, we submit that the means adopted by the parties to effect the discharge of such obligation, is exactly in the line of what the law itself would have provided no contract had been made. The railway company had ample authority to pledge its earnings, and to execute a contract, hypothecating a particular portion of them for the discharge of appellant’s claim. Mississippi Rev. Code (1880) c. p. 32038, § 1033 ; Jones on Railway Securities, §§ 114-120; Teal v. Walker, 111 U. S. 242; Sage n. Memphis & Little Hock Hallway Co., 125 U. S. 361; Freedmans Savings Co. v. Shepherd, 127 U. S. 501. The pledge was intended to cover only enough to meet the actual cash cost price of the rolling stock. And when the receiver was appointed he took the road, its property, including under the express order of the court this rolling stock and its income, subject to that pledge, and he was bound to respect it.
As to the cross-petition, there are no authorities which will warrant retaining it for the rendition of a personal money judgment, or that will sustain such a judgment when rendered, where the court, on final hearing oh the merits, dismisses the original bill, refusing to grant any relief upon it. The rule in Mississippi is the same as that established by this court; and there can be no exception in principle or practice, engrafted on it, that can be made to embrace and save the judgment in this cause. Cross v. Valle, 1 Wall. 1; Dows v. Chicago, 11 Wall. 108; Gilmer v. Felhour, 45 Mississippi, 627; Jacks v. Bridewell, 51 Mississippi, 881; Belcher v. Wilkerson, 54 Mississippi, 677; Wright v. Frank, 61 Mississippi, 32.
Mr. Holmes Cummins and Mr. Edward Mayes, for appellee submitted on their brief.
Mr. Justice Brown, after stating the case, delivered the opinion of the court.
(1) This case turns upon the construction of the contract of October 6, 1883, between the Sunflower Oil Company and the Mobile and Northwestern Railway Company, the substantial provisions of which were that the oil company should purchase of a manufacturer certain rolling stock, which it should lease to the railway company at a rent equal to 8 per cent upon the cost price, the latter agreeing to purchase the same of the oil company on or before January 1, 1886, and pay for it in cash, with a proviso that, in case it should be unable to purchase the same, it should turn it over to the oil company in good order and condition, at the expiration of the contract.
There is no doubt of the general proposition that mere inability to pay is no defence to the performance of a contract, or to a promise to pay. A person making purchase of an article is conclusively presumed to intend to pay for it, and to have had his ability to pay in contemplation when he made the purchase; and, if this proviso had not been inserted, no doubt could have arisen regarding the proper interpretation of this contract. But here was a contingency carefully introduced into this contract, upon the happening of which the railway company was to be discharged of its obligation to the oil company by returning to it the rolling stock in good order and condition. We are bound to assume that this provision was inserted for some purpose, *and are bound to give it its proper effect. At the time the contract was entered into, the railway company was financially embarrassed ; its only locomotive had been crippled beyond repair; and it had neither money nor credit with which to purchase another. In this extremity it entered into negotiations with the oil company, which was itself desirous of increasing its facilities for obtaining cotton seed, and a monopoly of that article along the line of said road. But in making the advance necessary to secure the requisite amount of rolling stock, the oil company naturally sought to protect itself in every possible way against loss. This it did, (1) By retaining to itself the title and ownership of such rolling stock until the same should be fully paid for:
(2) By leasing it to the road at a rental equal to 8 per cent upon the value of the property: (3) By retaining the freights due the road for carriage of cotton seed, and crediting them, first, upon the rent, and, second, upon the purchase price of the property: (4) By providing for the return of the property in good order and condition, in case the road was unable to purchase the same for cash by January 1, 1886, subsequently extended to January 1, 1887. The last was a proviso doubtless inserted out of abundant caution, in order to put beyond question the return of the property in case the road should fail to pay for it in full before the expiration of the contract. Under these circumstances, we find it difficult to give these Words any other than their ordinary meaning, viz., that if the
VOL. CXIJI—21
railway company became so deeply involved as to be unable to pay its current debts in the ordinary course of business, it should be released from its obligation upon returning the property. In ordinary speech, a person is said to be unable to make a purchase when he has neither money nor credit sufficient for that purpose, though the entire value of his assets may be greater than the purchase price of the property. It is unnecessary to decide, however, whether the proviso in question created a mere option, or whether anything less than the total insolvency of the company constituted an inability to purchase within the meaning of the contract, since the appointment of a receiver at the suit of bondholders seems to be most conclusive evidence of inability to carry out its contracts, and, indeed, to have been the very contingency contemplated in the proviso. It is unnecessary even to decide whether this inability to purchase could be asserted at all by the railway company, since the defence in this case is set up by the receiver acting in the interest of all the creditors, and claiming that, in view of the insolvency of the company, the oppressive character of the contract and the greatly reduced price at which he could secure similar property, payment ought not to be compelled from the funds in his hands.
The receiver did not simply by virtue of his appointment become liable upon the covenants and agreements of the railway company. High on Receivers, § 273; Hoyt v. Stoddard, p. 323unlike that of Express Company v. Railroad Company, 99 U. S. 191. In that case the express company agreed to loan the railroad company $20,000 upon its notes, to be expended in repairs and equipments. In consideration of this the railroad company agreed to provide the necessary privileges and facilities for the transaction of all the business of the express company over its road; and to charge a certain sum for transportation, which was to be credited monthly toward the payment of the loan, with a proviso that if the loan were not paid within a year, the contract should continue in force for a further period, or until the whole had been repaid. A mortgage upon the road having been foreclosed, the receiver repudiated the contract, forbade the express company from further using the cars of the railroad company, unless upon conditions whereby the contract was virtually surrendered or ignored, and the express company was compelled to abandon the road, although the money loaned, with a portion of the interest thereon, was still due and unpaid. It filed a bill for specific performance, alleging that the railroad company having conveyed away its property, and being in part insolvent, the violation of the contract could not be compensated by any damages that might be recovered at law. This court dismissed the bill, holding that, as the plaintiff had no lien, and the contract was simply for the transportation of persons and property, the court could not require either a specific performance by the receiver, or the satisfaction of the plaintiff’s demand by money; and that the express company had, therefore, no standing in a court of equity.
2
Allen, 442. Upon taking possession of the property, he was entitled to a reasonable time to elect whether he would adopt this contract and make it his own, or whether he would insist upon the inability of the company to pay, and return the property in good order and condition, paying, of course, the stipulated rental for it so long as he used It. Turner v. Bichardson, 7 East, 335; Commonwealth v. Franhlin Insurance Co., 115 Mass. 278; Sparhawh v. Yerkes, ante, 1. Of course, if he elects to take property subject to a condition, he is bound to perform the condition before he can obtain title to the property. He may, however, decline to assume this obligation, and return the property to the purchaser, upon complying with the terms of the contract with respect to such return. The case is not 94 U. S. 798; and Gilman v. Telegraph Co., 91 IT. S. 603; and as between the railway company and the receiver the latter was entitled to the money, subject to any valid set-off of the oil company. There was no error in the disposition of either of these two cases by the court below, and both decrees are, therefore, Aflirmed. Mr. Justice Lamar was not present at the argument and took no part in the decision of this case.
The case of Coe v. New Jersey Midland Railway, 27 N. J. Eq., (12 C. E. Green,) 37, is also instructive in this connection. In that case, the Rhode* Island Locomotive Works Company entered into an agreement with the railway company to fur- * nish the latter certain locomotives and tenders, as upon lease, but with the agreement that, upon payment in full of the rent reserved, they should become the property of the railway. The rent was payable in instalments, for which the company gave its notes; at the time of the appointment of the receiver there was due for rent about $120,000; and the locomotives p. 324were then in possession of the receiver and in use upon the road. Petitioners based their claim to relief upon the ground that the receiver requested them to leave the locomotives in his possession, for use on the road, he guaranteeing to keep them in good order, and promising to apply for authority to pay the claim. In defence, the receiver alleged a notice by bondholders not to pay the rent or deliver the certificates therefor, which had been issued upon his application, because the property was not worth the amount agreed to be paid, and it was not for the interest of the trust that the rent should be paid. It was held that petitioners had no equity arising from the conduct of the receiver to have the contract specifically performed, without regard to the advantage or disadvantage of the trust fund; that although they appeared to be willing up to the time they were warned not to do so, to pay for the property according to the agreement, it might have been an improvident act on their part; that the fact that the receiver had applied for leave to issue the certificates to pay the rent did not bind them; and that the court would not grant the prayer of the petitioners until satisfied that it was for the interest of the trust that it should be done; but that the petitioners would be allowed just compensation for the use of the property while held by the receiver.
(2) Notwithstanding the absence of a provision in the contract forfeiting payments already made, in case of failure to complete the purchase, it is open to doubt whether an action at common law would lie to recover such payments. The courts of Massachusetts, Maine and Illinois hold that partial payments are forfeited; while those of Connecticut, Michigan, Minnesota and Georgia hold that, upon equitable grounds, the buyer is entitled to a return of the money. There seems * to be no doubt, however, that a court of equity may require the return of the money paid, less the amount of any damage sustained to the property, and a reasonable compensation for the use of the same, particularly if there be a clause in the contract providing that upon a certain contingency the prop' erty shall be returned to the seller.
(3) Under the circumstances of this case, and in view of the p. 325fact that a court of equity takes jurisdiction of all questions with respect to this property as ancillary to its jurisdiction over the main case, the dismissal of the intervening petition does not necessarily involve a dismissal of the cross-petition, and the court, having jurisdiction of the entire proceeding, may proceed to do complete justice between the parties.
(4) In the view we have taken of this case, it is unnecessary to consider whether the manifestly illegal stipulations in this contract had the effect of vitiating the entire agreement. It bears evidence upon its face of having been extorted from the necessities of the railway company, and contains many provisions which fail to commend it to the consideration of a court of equity.
There is no practical distinction between these two appeals. By his order of appointment, the receiver was authorized to take possession of the money and assets and all other rights and property of the railway company, wherever the same might be found, including its equitable interests, things in action, and other effects; and he is as much entitled to recover moneys due upon contracts made with the railway company as with himself. Ko question arises with regard to the rights of other creditors, as was the case in Galveston Railroad v. Cowdrey, 11 Wall. 459; American Bridge Co. v. Heideibach,