JEOPARDY DISTRAINT -- EXTINGUISHMENT OF LIENS
(1) Jeopardy distraint is appropriate for enforcement of a personal property tax lien where the property is about to be acquired by a P.U.D.
(2) Acquisition of property by the state or a political subdivision thereof should extinguish tax liens, regardless of the manner in which title is acquired.
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October 21, 1949
Honorable A. C. Grady
Port Townsend, Washington Cite as: AGO 49-51 No. 147
You have requested the opinion of this office concerning the following question:
Is the remedy of jeopardy distraint available where personal property encumbered by a tax lien is about to be sold by a private power company to a public utility district?
Our conclusion may be summarized as follows:
The remedy of jeopardy distraint is appropriate for enforcement of the lien of personal property taxes under the circumstances presented.
Puget Sound Power and Light Company is about to sell to a public utility district certain of its personal property upon which [[Orig. Op. Page 2]] a personal property tax lien has attached. It is our understanding that the Tax Commission has informally taken the position that where a tax lienmight be extinguished upon acquisition of the encumbered property by the state or a governmental unit thereof, collection of the taxes may properly be enforced by jeopardy distraint authorized by section 43, chapter 206, Laws of 1939 (Rem. Rev. Stat. 11250). We feel that the view adopted by the Tax Commission is well founded.
Rem. Rev. Stat. 11250,supra, provides in part as follows:
"Whenever in the judgment of the assessor or the county treasurer personal property is being removed or is about to be removed without the limits of the state, or is being dissipated or about to be dissipated, the treasurer shall immediately prepare papers in distraint, * * *"
The obvious intent of this statute was to provide a remedy by which a tax lien could be enforced where the property against which the lien exists is being or is about to be so scattered or disbursed as to make collection of the tax impossible, or, at best, problematical by the usual enforcement procedure. Thus, if property is about to be transferred to a public body under such circumstances as will result in a destruction of the tax lien upon that property, then the property is about to be disbursed or "dissipated" so as to prejudice enforcement of the tax lien by the normal procedure and the remedy of jeopardy distraint permitted by section 11250, supra, should be available.
This brings us to the question of whether acquisition of personal property by a public utility district will result in an extinguishment of the lien of personal property taxes thereon. The broader question as to the effect of acquisition of property by the state, or a political subdivision thereof, on a prior tax lien on such property, was exhaustively reviewed in an opinion of this office to the Prosecuting Attorney of King County dated January 20, 1930 (Ops. Atty. Gen. 1929-30, page 477). However, it is felt that recent developments in this field plus the extraordinary importance of this problem, justify a review of this entire question at this time.
In the early case ofPuyallup v. Lakin, 45 Wash. 368, 88 Pac. 578, the City of Puyallup purchased several items of personal property which were encumbered by a personal property tax lien. The Supreme Court of the State of Washington held that where a municipality acquires property under a voluntary contract of purchase, it is subject to a prior lien for state, county and school district taxes. The same result was [[Orig. Op. Page 3]] reached in Puget Sound Power and Light Company v. Seattle, 117 Wash. 351, 201 Pac. 449, wherein it was held that where a city purchases a street railway system consisting of personal property under a voluntary contract of sale, the lien of personal property taxes existing prior to such acquisition is not affected.
The doctrine ofPuyallup v. Lakin, supra, was restricted in Gasaway v. Seattle, 52 Wash. 444, 100 Pac. 991, 21 L.R.A. (N.S.) 68 where property encumbered by a tax lien was acquired through condemnation by the City of Seattle. It was held that the prior tax lien was discharged upon acquisition of the property by the city, the court distinguishing the Puyallup case, supra, in the following language:
"InPuyallup v. Lakin, supra, the property was purchased under a contract. The law of eminent domain and the special statute upon which this case rests were not under consideration. The city had the right of contract and, in the absence of any law exempting it from the burdens of its trade, it was bound to meet them. The difference between that case and this is that the one rests in simple contract, the other is sustained by the sovereign power of the state. We are unwilling to extend the doctrine announced in the Puyallup case. * * *"
InState v. Snohomish County, 71 Wash. 320, 128 Pac. 667, the court discussed thePuyallup case, supra, but was not required to rule on the question of whether acquisition of property by the state discharged the lien of taxes thereon. It was held that lands purchased by the state were free of any purported prior tax liens, the lien for real property taxes attaching to the land afterlevy and the lien for personal property taxes attaching to the personal property taxed at the time of assessment. Hence, in theSnohomishCounty case there was no lien at all at the time the state acquired title.
The Attorney General took the position that the distinction as to manner of acquisition was untenable and that the essential distinguishing feature of these cases was whether or not the property was acquired by the public body for a public or a private or quasi-public use. If acquired for a public use, the governmental body would not be liable for the payment of the tax and the lien would be extinguished. However, if the property was acquired for a private or for a quasi-public use then the tax lien would remain unaffected. That opinion concluded that the proper solution to this problem was upon a theory of merger. See opinion of this office to Prosecuting Attorney of King County dated January 20, 1930, (Ops. Atty. Gen. 1929-30, page 477).
[[Orig. Op. Page 4]]
We now come to the recent case (1945) of Halvorsen v. Pacific County, 22 Wn. (2d) 532, 156 P. (2d) 907, 158 A.L.R. 563, landmark decision on this question. Oyster lands were taken from the state by a private owner and during the term of private ownership real estate taxes became a lien upon the land. Subsequently the lands reverted to the state through abandonment. The lands were subsequently again deeded by the state to the plaintiff who sued to quiet his title to the lands. Pacific County resisted this suit, contending that it had an interest in the lands through its tax liens. The Supreme Court held that the plaintiff had a fee simple title unencumbered by any tax lien which Pacific County may theretofore have had against the property. It was reasoned that upon acquisition of the lands by the state through abandonment, the prior tax liens were extinguished. The court reviewed the prior cases and upon authority of Gasaway v. Seattle, supra, andState v. Snohomish County, supra, laid down the following rule:
"* * * When the state or one of its legal subdivisions acquires full title to real estate, the existing county tax liens thereon are not enforceable, because if a sale was made on foreclosure of the lien it would be only of the interest of the owner from whom title was acquired, and, that interest having ceased to exist, there would be nothing to sell under the foreclosure proceedings.
"* * *
"* * * We think this rule is supported by the better reasoning and now hold that the lien of the taxes levied upon this land prior to reversion became merged in the title acquired by the state and such taxes are not a lien thereon."
The court expressly declined to overrule Puyallup v. Lakin, supra, but stated that the same distinction drawn by theGasaway and Snohomish County cases, supra, existed in that case. The Puget Sound Power and Light case, supra, was not discussed at all. It will be recalled that the distinction drawn by the Gasaway case was whether the municipality had acquired the property byvoluntary contract of purchase or whether it had taken the property involuntarily in some manner. If the acquisition was attributable to an exercise of the sovereignty of the state or its political subdivisions, then the tax lien was extinguished.
[[Orig. Op. Page 5]]
It is our opinion that the court at no time has attempted to distinguish these cases on the basis of whether the property involved was realty or personalty and we believe that no such distinction can tenably be drawn. Ops. Atty. Gen. 1929-30, page 477,supra. The incidents of title are substantially the same whether the property involved is realty or personalty. Brown, Personal Property, § 125.
A summary of the case law up to the present time regarding the effects of acquisition by a political subdivision of the state upon a prior tax lien appears to be as follows: If the state or a political subdivision thereof acquires property by a voluntary contract of purchase and the lien of taxes is at that time perfected, the lien is unaffected by such acquisition even though the vendee be a political subdivision of the state. However, if the state or a political subdivision acquires such property in any other manner (condemnation, tax foreclosure, abandonment, escheat, etc.) the tax lien is gone.
We do not feel, however, that the question is at this time settled in Washington. In the case ofP.U.D. No. 1 v. Pierce County, 24 Wn. (2d) 563, 572, 166 P. (2d) 933, decided after the Halvorsen case, the court indicated that this question is still open for consideration. In that case a P.U.D. had acquired personal property by a voluntary contract of purchase. Pierce County through its treasurer was about to enforce a tax lien by seizure and sale of a part of the property. The district instituted an action to restrain the treasurer from seizing such property, apparently feeling: (1) that the taxes had not attached as a lien at the time of acquisition and, (2) that even if the lien had attached, it was extinguished on acquisition by the district. Unfortunately, the only question presented to the Supreme Court was whether the taxes had become a lien upon the property prior to the time of acquisition by the P.U.D. The court found that the taxes had not become a lien prior to that time, and expressly refused to decide the question of whether such lien, if it had attached, would have been extinguished by acquisition of the property by the public utility district. The court stated as follows:
"The appellant, by letters to the court and to adversary counsel, written after the submission of this case, contends that * * * even if the taxes were a lien at the time it took title * * *, it being a municipal corporation, they wereipso facto discharged or merged in its title, citingHalvorsen v. Pacific County, 22 Wn. (2d) 532, 156 P. (2d) 907. This question was not raised in the court below, and we do not have the views of the trial judge regarding it; nor have we had the benefit of either written or oral argument by adversary counsel. So important a question should not be considered under such circumstances, and especially when, as here, its consideration would not affect the result of the appeal. We, therefore, * * * express no opinion with regard to it."
[[Orig. Op. Page 6]]
Should this question again be presented to the court it is quite possible that it would adopt the merger theory which has been adhered to by this office (see opinion of this office to Prosecuting Attorney of King County dated August 22, 1949), and would overrule the Puyallup case, supra. The trend in this state toward a uniform application of the theory of merger has culminated in the adoption of that theory by the rule announced in theHalvorsen case. That rule accords with the majority view which holds that where a tax lien and title are joined in the same owner, there is an extinguishment of the lien regardless of the manner of acquiring title. See Annotation in 158 A.L.R. 563, 572. The theory of the Halvorsen case (merger or futility of enforcing the lien) is entirely different than that used in the Gasaway case (enforcement of lien barred by an immunity arising only from an exercise of an attribute peculiar to sovereignty). In addition, the theory of the Halvorsen case is inherently repugnant to the theory of theGasaway case, since an application of the merger theory will result equally in extinguishment of a prior tax lien whether the property on which the lien is attached is acquired by voluntary contract of purchase or by some other means. We believe that the court in the Halvorsen case purported to retain the distinction of the Gasaway case merely to avoid overruling the earlier cases. However, the basic incompatibility of the two theories leads us to believe that thetheory of theGasaway case is no longer acceptable in this state. This causes us to doubt the result of future cases squarely on the facts of Puyallup v. Lakin, supra, and Puget Sound Power and Light v. Seattle, supra.
To summarize, it is likely that the court will rule that merger of a tax lien with title to the property to which the lien is attached results in extinguishment of the lien regardless of the manner of acquisition of title by the lienor. Under such a ruling, the lien of personal property taxes in the present situation would be lost upon sale to a P.U.D. This being true, the only effective way in which to preserve and realize upon that lien would be through the remedy of jeopardy distraint authorized by Rem. Rev. Stat. 11250, supra. Accordingly, you are advised that the remedy of jeopardy distraint is an appropriate and proper remedy for the treasurer of Jefferson County to follow under the circumstances presented.
Very truly yours,
JOHN D. BLANKINSHIP
Assistant Attorney General