STATE ex rel. K. BERRY PETERSON, Attorney General, Appellant,
COUNTY OF MARICOPA and JOHN D. CALHOUN, as Treasurer of the County of Maricopa, Appellees
APPEAL from a judgment of the Superior Court of the County of Maricopa. Howard C. Speakman, Judge. Judgment reversed and cause remanded, with instructions.
Mr. K. Berry Peterson, Attorney General, and Mr. Charles L. Strouss and Mr. J. R. McDougall, Assistant Attorneys General, for Appellant.
Mr. Dudley W. Windes, for Appellees.
The state of Arizona, hereinafter called plaintiff, filed a complaint in the superior court of Maricopa county, alleging that it had been [38 Ariz. 348] since December 19, 1930, the owner in fee simple and entitled to the possession of certain premises in Maricopa county, described as "the South Half (1/2) of the Southwest Quarter (1/4) of Section Two (2), Township One (1) South, Range Three (3) West of the G. & S.R.B. & M."; that the defendants, the county of Maricopa and John D. Calhoun, as treasurer of said county, claimed a lien against said premises for the payment of certain taxes thereon, and, unless they were paid, defendants would sell the premises in satisfaction of the alleged lien thereon.
Plaintiff claimed that by reason of section 2, article 9, of the Constitution of Arizona, said property was exempt from taxes and from sale for the purpose of enforcing a tax as being state property, and that any tax lien that might have existed against the property when the state became the owner thereof merged in the state's superior title in fee. The prayer of the complaint was that the legal rights and status between the parties in respect to the property be adjudicated and that the alleged tax lien be held to be void.
The answer set up that there were regularly assessed and levied against said property before plaintiff acquired title thereto state and county taxes for the years 1918 to 1929, inclusive; that plaintiff had acquired its title to the property in the year 1930 through foreclosure of a mortgage held by it as security for money loaned and purchase at a judicial sale under such foreclosure, and prayed that the court adjudge the tax lien to be superior to the title of the state so acquired. Judgment was rendered in favor of defendants, and from the judgment this appeal was taken.
While it is not so entitled, apparently this suit is based on the Declaratory Judgments Act (sections 4385-4390, Revised Code 1928), and seeks for a determination [38 Ariz. 349] as to whether taxes duly assessed and levied against property in private ownership and delinquent at the time of the purchase by the state at a judicial sale under foreclosure of a mortgage held by it are a lien upon said property after its purchase as aforesaid.
We have held in the case of Steinfeld v. State, 37 Ariz. 389, 294 P. 834, that a mortgage held by the state is a lien subordinate to a tax title in the hands of a bona fide purchaser at a tax sale made before the state had foreclosed its mortgage lien, notwithstanding the provisions of section 2, article 9, supra. This decision, so far as that feature of it is concerned, is based on the fact that a mortgage does not, under the law of Arizona, confer any interest in the land covered by the mortgage, and for that reason the taxes under which the land in the case cited was sold were not levied on state property.
In the present case, however, an entirely different situation presents itself. There are no equities or vested rights of an innocent purchaser to be considered. It is simply a contest between the right hand of the state, in its capacity as holder of the legal title through a foreclosure sale, and its left hand, in its capacity as tax gatherer, both on its own behalf and that of its subordinate agencies, the county and various school districts or municipalities.
The question is one of first impression in this state, and since, as we have stated, only the rights of the public are concerned, the real test, in the absence of a specific expression in the Constitution or an act of the legislature governing the situation, is one of public policy. There are two rules upon this point found in the decisions; the first that a previously existing tax lien becomes merged in he legal title when the property affected is acquired by the state, and the second that when the property is acquired for any [38 Ariz. 350] other than strictly governmental purposes the tax lien still persists, though its enforcement may be suspended. The reasoning which supports the first rule is well set forth in the case of State v. Locke, 29 N.M. 148, 30 A.L.R. 407, 219 P. 790, as follows:
"The exemption granted to the property of the United States is perhaps compulsory; that to the state, all counties, towns, cities and school districts arises from public policy,
which repudiates, as being utterly futile, the theory of the state taxing its own property in order to produce the funds with which to operate its own affairs. To tax it would merely require and render it necessary to levy new taxes to meet the demand of those already laid; that the public would thus be taxing itself to produce the money with which to pay to itself the taxes previously assessed, thereby benefiting no one except the officers employed to collect and disburse such revenues, whose compensation would merely serve to increase the burden of this useless and idle ceremony. The object of taxing property is to produce the revenues with which to conduct the business of the state; it is entirely inconsistent with our theory of government for the property of the state to be taxed, or sold for taxes, in order to produce the money to be expended by the state. Such a procedure is but taking the money out of one pocket and putting it in the other. Another consideration, which should not be overlooked, is that if public property, that is to ...