COUNTIES ‑- IRRIGATION ‑- DISTRICTS ‑- ASSESSMENTS ‑- PROPERTY ‑- TAXATION ‑- LIENS ‑- SALE OF PROPERTY ACQUIRED BY FORECLOSURE BY A COUNTY OR AN IRRIGATION DISTRICT

COUNTIES ‑- IRRIGATION ‑- DISTRICTS ‑- ASSESSMENTS ‑- PROPERTY ‑- TAXATION ‑- LIENS ‑- SALE OF PROPERTY ACQUIRED BY FORECLOSURE BY A COUNTY OR AN IRRIGATION DISTRICT

1.  RCW 87.06.100(4) provides that when an irrigation district sells property acquired in a foreclosure proceeding, it shall not provide a deed to the purchaser until various outstanding taxes and assessments are paid.  These various taxes and assessments must be paid even if they exceed the market value of the property.

2.  If a county sells property acquired at a foreclosure proceeding, the distribution of the proceeds of sale is governed by RCW 84.64.230.  An irrigation district is entitled to a share of the proceeds of sale under RCW 84.64.230 because the irrigation district lien established by RCW 87.03.265 is of equal rank with the lien for general taxes established by RCW 84.60.010.

3.  RCW 84.64.230 provides that no claim shall be allowed against the county on property acquired by the county by tax deed in a foreclosure proceeding.  Thus, an irrigation district cannot foreclose its lien on tax deed property held by the county.

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                                                                    July 15, 1991

Honorable Andrew K. Miller
Benton County Prosecuting Attorney
Benton County Justice Center
7320 West Quinault
Kennewick, Washington 99336
                                                                                                                 Cite as:  AGO 1991 No. 25

Dear Mr. Miller:

            You have requested our opinion on the disposition of property acquired through the foreclosure process.  We paraphrase your questions:

1.          Can an irrigation district or a county acting for the district, pursuant to an Interlocal Cooperation Agreement, sell property acquired by the district in a foreclosure proceeding for market value when accrued assessments exceed market value?

             [[Orig. Op. Page 2]]

2.          If a county sells property it acquired by tax deed in a foreclosure proceeding for less than the total assessments on the property, should some of the proceeds of sale be apportioned to satisfy an outstanding irrigation district assessment on the property?

3.          Can an irrigation district foreclose its assessment liens against property acquired by a county by tax deed in a foreclosure proceeding?

            The answer to questions 1 and 3 is no.  The answer to question 2 is yes.

                                                                     ANALYSIS

            Question 1:

            Can an irrigation district or a county acting for the district, pursuant to an Interlocal Cooperation Agreement, sell property acquired by the district in a foreclosure proceeding for market value when accrued assessments exceed market value?

            In 1988 the Legislature modified the statutory procedure for foreclosing on delinquent assessments owed to an irrigation district.  Laws of 1988, ch. 134.  The new procedure is codified in chapter 87.06 RCW.  RCW 87.06.040 authorizes irrigation districts to foreclose on liens against property for delinquent assessments.  RCW 87.06.070 states:

                        (1) If the court renders a judgment of foreclosure, the court shall direct the treasurer to proceed with the sale of the property andshall specify the minimum sale price below which the property is not to be sold.

                        (2) The treasurer shall sell the property to the highest and best bidder. . . .

(Emphasis added.)

RCW 87.06.100(1) requires that

                        Prior to the treasurer executing and conveying the deed, all persons or entities acquiring property at the foreclosure saleshall be required to pay the full amount of all assessments, costs, and interest for which judgment is rendered; and the full amount of the following if due at the time of the foreclosure sale:  Property taxes, drainage or diking district  [[Orig. Op. Page 3]] assessments, drainage or diking district improvement assessments, irrigation district assessment, and costs and interests relating to such taxes or assessments.  This subsection does not apply to irrigation district's acquisition of property.

(Emphasis added.)

If there are no bidders, then title to the property vests in the irrigation district and the district's acquisition of title shall be as absolute as if the property had been purchased by an individual.  RCW 87.06.100(2).

            Your first question asks about the selling price of property acquired by the irrigation district pursuant to RCW 87.06.100(2).  RCW 87.06.100(4) provides that when an irrigation district sells property acquired under chapter 87.06 RCW

            it shall not provide a deed to the purchaser until the purchaser pays all drainage or diking district assessments, drainage or diking improvement district assessments, irrigation district assessments, property taxes, costs, and interest that were due at the time the irrigation district acquired title to the property.

            RCW 87.06.100(4) directly answers your question.  The statute provides that the irrigation district shall not provide a deed to the purchaser until the purchaser has paid all of the various assessments that were due when the irrigation district acquired the property.  Even if this sum is greater than the market value of the property, the irrigation district cannot provide the purchaser with a deed until this sum is paid.

            The language in RCW 87.06.100(4) represents a definite change from the prior statute.  RCW 87.03.325 permitted the irrigation board to fix a price that "shall be not less than the reasonable market value of the property."  Laws of 1981, ch. 209, § 5, p. 922.  In 1988 the Legislature repealed RCW 87.03.325.  Laws of 1988, ch. 134, § 15, p. 521.

            In place of RCW 87.03.325, the Legislature enacted RCW 87.06.100(4) which prohibits the district from deeding the property to the purchaser unless all outstanding liens for taxes and assessments owing at the time of foreclosure are paid.  The practical effect of RCW 87.06.100(4) is that the amount owed at the time of foreclosure is the minimum sale price, even if it is greater than the market value of the property.  Accordingly, the answer to your first question is no.

             [[Orig. Op. Page 4]]

            You have also asked about the situation in which a county acts for the irrigation district pursuant to the Interlocal Cooperation Act, chapter 39.34 RCW.  A county selling property acquired by an irrigation district in a foreclosure proceeding must sell the property under the same provisions as the irrigation district.  Under RCW 39.34.080 an agency can contract to perform only those governmental activities which each agency is authorized to perform.  See AGO 1991 No. 19 at 6-7; AGO 1990 No. 4 at 7; AGO 1988 No. 19 at 5.  Therefore, a county handling the sale of foreclosed irrigation district property is bound to follow the provisions of RCW 87.06.100(4) which preclude the irrigation district from setting the foreclosure sale or resale price of the property below the outstanding assessment amounts.

            In connection with Question 1, you have directed our attention to a prior opinion of this office dated July 29, 1937, written to the Honorable J.B. Fink.  Ops. Att'y Gen. 1937-38, 137.  This opinion concluded that an irrigation district could sell property acquired at foreclosure at market value, even though the market value was less than the prior assessments on the property.  This opinion was based on a statute then in force which provided that the

            authority to . . . sell or convey must be conferred by resolution of the board entered on its minutes, fixing the price at which such . . . sale may be made, which price shall be not less than the reasonable market value of such property except as hereinafter authorized.

Ops. Att'y Gen. 1937-38, 137-38; Laws of 1933, ch. 43, § 8, p. 257.

            Based on this language, we concluded that the irrigation district could sell property at market value, even if that value was less than the prior assessments on the property.  The only exception was if the property was being reconveyed to a prior owner.  In the case of reconveyance, the statute provided:

            If the irrigation district reconveys . . . any lands so acquired by it to a grantee who has a right to such reconveyance . . . the grantee before receiving deed, shall pay all the taxes drainage improvement district and irrigation district assessments,which had been cancelled by the deed to the irrigation district . . . .

Ops. Att'y Gen. 1937-38, 138; Laws of 1935, ch. 101, § 1, p. 249.  Reading these two statutes together we concluded "that in case of a sale to a person other than the former owner, the market value  [[Orig. Op. Page 5]] controls and be it more or less than the amount of the foreclosed taxes and assessments . . . ."  Ops. Att'y Gen. 1937-38, 138.

            It is readily apparent that RCW 87.06.100(4) is different from the statutes in effect when we issued Ops. Att'y Gen. 1937-38, 137.  At that time, payment of previously cancelled taxes and assessments was only required upon reconveyance to the previous owner.  Now, RCW 87.06.100(4) applies generally to "the purchaser."  Since the statutes upon which our prior opinion was based have been materially amended, we must conclude that Ops. Att'y Gen. 1937-38, 137 no longer represents an accurate statement of the law.

            Question 2:

            If a county sells property it acquired by tax deed in a foreclosure proceeding for less than the total assessments on the property, should some of the proceeds of sale be apportioned to satisfy an outstanding irrigation district assessments on the property?

            Your second question deals with the sale of tax deed property acquired by a county rather than an irrigation district.  A county can acquire a tax deed in one of two ways.  First, a county can foreclose on property pursuant to chapter 84.64 RCW.  RCW 84.64.200 provides that "if no other bids are received, the county shall be considered a bidder . . . and where no bidders appear, acquire title" to the property.

            Second, a county and an irrigation district may choose to have a combined foreclosure sale pursuant to RCW 87.06.110.  A combined sale is to be conducted by agreement pursuant to the Interlocal Cooperation Act, chapter 39.34 RCW.  RCW 87.06.110 requires that the agreement "include a specific statement as to which entity shall assume title if no bids are received equal to or greater than the amount listed on the minimum bid sheet."  Thus, a county may acquire property by tax deed by agreement with the irrigation district.

            Your question is based on the assumption that the tax deed property will be sold for less than the total of the outstanding assessments against the property.  As we explained in response to Question 1, an irrigation district cannot sell property it acquires through foreclosure unless the purchaser pays the outstanding assessments against the property.  RCW 87.06.100(4).  This restriction does not apply to a county selling tax deed property.  RCW 84.64.270 provides when "the legislative authority desires to sell [property acquired by foreclosure] it shall then enter an order on its records fixing . . . which . . . property shall be sold and the minimum price for each of such units"  [[Orig. Op. Page 6]] (emphasis added).  Thus, a county may sell its tax deed property for any price it chooses.  State ex rel Friedlander v. Dunning, 132 Wash. 622, 623, 233 P. 8 (1925).  See also RCW 85.08.500;Thestrup v. Grays Harbor Cy., 12 Wn.2d 545, 548, 122 P.2d 797 (1942).

            The disposition of proceeds from the sale of tax deed property by a county is governed by RCW 84.64.230 which provides:

                        No claims shall ever be allowed against the county from any municipality, school district, road district or other taxing district for taxes levied on property acquired by the county by tax deed under the provisions of this chapter, but all taxes shall at the time of deeding said property be thereby canceled:  Provided, Thatthe proceeds of any sale of any property acquired by the county by tax deedshall be justly apportioned to the various funds existing at the date of the sale, in the territory in which such property is located, according to the tax levies of the year last in process of collection.

(Emphasis added.)

            InTacoma v. Pierce Cy., 79 Wn.2d 361, 485 P.2d 454 (1971), the court summarized the distribution of proceeds authorized by RCW 84.64.230.  The court said:

            [T]he proceeds that come to the county through the sale of tax title property are to be distributed to those funds created and maintained by general tax levies, unless the legislature has expressly provided that the special assessment shall constitute a lien of equal rank with the general tax lien or has preserved the lien of local assessments by allowing them to share in the proceeds.

79 Wn.2d at 364.  Thus, an irrigation district can only share in the proceeds of sale pursuant to RCW 84.64.230 if (1) the irrigation district fund is created and maintained by general tax levies; (2) the Legislature has expressly provided that the special assessment shall constitute a lien of equal rank with the general tax lien; or (3) the Legislature has preserved the lien of local assessments by allowing them to share in the proceeds.

            It is clear that the assessment by an irrigation district meets neither the first or third criteria.  An irrigation district assessment is not a general tax levy.  The distinction between a general tax and a special assessment was first spelled out inMcMillan v. Tacoma, 26 Wash. 358, 67 P. 68 (1901):

             [[Orig. Op. Page 7]]

            The theory upon which general taxation proceeds is entirely distinct from that of local assessments.  General taxation is sought to be enforced against all classes of property upon anad valorem basis, while local assessments are limited to real property within a given district, and are based entirely upon the theory of special benefit by which the value of property is enhanced in excess of the general good.  General taxation is enforced to serve the necessary purposes of government,while local assessments are enforced to serve mere local convenience, and for the additional benefit or private property holders.

26 Wash. at 361-62.

            The irrigation district assessment authorized in chapter 87.03 RCW is clearly a special assessment under this test.  The assessment is not made upon anad valorem basis.  Instead, RCW 87.03.240 provides that the assessment "shall be made in proportion to the benefits accruing to the lands assessed".  The Legislature recognizes the distinction between the irrigation assessment and general taxes.  For example, RCW 87.03.270 provides that county treasurers who "collect irrigation district assessments may send the statement ofirrigation district assessments together with the statement ofgeneral taxes."  (Emphasis added.)  Since the irrigation district fund is not maintained by general tax levies, it is not entitled to a share of the proceeds of sale in that basis.

            The irrigation district also does not qualify for a share of the proceeds on the third basis.  The Legislature has not preserved the irrigation district lien as it has some others.  InTacoma v. Pierce Cy., the court referred to RCW 35.49.160 as an example of this kind of statute.  79 Wn.2d at 366.  RCW 35.49.160 provides:

                        Whenever property struck off to or bid in by a county at a sale for general taxes is subsequently sold by the county, the proceeds of the sale shall first be applied to discharge in full the lien or liens for general taxes for which property was sold; the remainder, or such portion thereof as may be necessary, shall be paid to the city or town to discharge all local improvement assessment liens against the property; and the surplus, if any, shall be distributed among the proper county funds.

See alsoRCW 85.08.490.  We have reviewed chapters 87.03 and 87.06 RCW and we find no similar statute that preserves the lien of an irrigation district.

             [[Orig. Op. Page 8]]

            This brings us to the second basis upon which proceeds might be distributed to an irrigation district‑-that the Legislature has expressly provided that the special assessment shall constitute a lien of equal rank with the general tax lien.  The court discussed this rule in Tacoma v. Pierce Cy. and contrasted two of its prior decisions.  InCommercial Waterway District No. 1 v. King Cy., 197 Wash. 441, 85 P.2d 1067 (1938), the court allowed a special assessment by a water district to receive a pro rata share of the proceeds of sale because the lien for the water district assessment had equal priority with the lien for general taxes.  This was because the statute authorizing the water district assessment (Laws of 1913, ch. 46, § 4, p. 118) provided that assessments "shall constitute liens against each such lot or tract of land of equal rank with state, county and city taxesand shall have the same priority over all other liens as state, county and city taxes have" (emphasis added).  197 Wash. at 443; 79 Wn.2d at 364.

            On the other hand, inKeene v. Seattle, 31 Wash. 202, 71 P. 769 (1903), the court refused to permit a special street assessment to share in the proceeds.  The court looked at the lien for special assessments of first class cities which stated:

            Said lien shall be paramount and superior to any other lien or incumbrance whatsoever, theretofore or thereafter created, except a lien for assessments for general taxes.

Laws of 1901, ch. 118, § 1, p. 240; 31 Wash. at 206 (emphasis added).  Thus, the statute established that the street assessment was junior‑-rather than equal to‑-the lien for general taxes.  According to the court, the statute authorizing the street assessment lien did not state "that the lien for local assessments shall be of equal rank with the general tax lien, and . . . we think it cannot be held that such was intended, and especially so in the absence of a specific statement to that effect."  31 Wash. at 205.

            Based on these two decisions, the court in Tacoma v. Pierce Cy. refused to allow a demolition assessment to share in the proceeds of sale pursuant to RCW 84.64.230.  The court said:

                        In the present case the legislature did not provide in RCW 35.80.030(1)(h) that the demolition assessment shall constitute a lien with equal rank to that of general taxes, nor did the legislature provide that a city should share in the proceeds in excess of the general taxes.

             [[Orig. Op. Page 9]]

79 Wn.2d at 366.1/

             This brings us to the question at hand.  We have reviewed chapters 87.03 and 87.06 RCW and we find no language similar to the statutory language in Commercial Waterway ("shall constitute liens against each such lot or tract of land of equal rank with state, county and city taxes and shall have the same priority over all other liens as state, county and city taxes have").  However, this is not the end of the inquiry.  The thrust of the rule is that a special assessment fund can share in the proceeds of sale if the special assessment lien is of equal rank with the lien for general taxes.  Accordingly, we must compare the general tax lien with the irrigation district assessment lien.

            The lien for general taxes (state, county and city) is set out in RCW 84.60.010 which provides:

                        All taxes and levies which may hereafter be lawfully imposed or assessed shall be and theyare hereby declared to be a lien respectively upon the real and personal property upon which they may hereafter be imposed or assessed, which liens shall include all charges and expenses of and concerning the said taxes which, by the provisions of this title, are directed to be made.  The said lien shall have priority to and shall be fully paid and satisfied before any recognizance, mortgage, judgment, debt, obligation or responsibility to or with which said real and personal property may become charged or liable.

(Emphasis added.)  The lien for the irrigation district assessment is set out in RCW 87.03.265 which provides in part:

                        The assessment upon real property shall be a lien against the property assessed, from and after the first day of January in the year in which it is levied, but as between grantor and grantee such lien shall not attach until the fifteenth day of February of the year in which the assessment is payable, whichlien shall be paramount and superior to any other lien theretofore or thereafter created, whether by mortgage or otherwise, except for a lien for prior assessments, and such lien  [[Orig. Op. Page 10]] shall not be removed until the assessments are paid or the property sold for the payment thereof as provided by law.

(Emphasis added.)

            While not identical, the language of the statutes establishing the liens for general taxes and irrigation district assessments is very similar.  Both statutes state that the lien is superior to all other liens (RCW 84.60.010:  "shall have priority . . . before any . . . obligation or responsibility") (RCW 87.03.265:  "shall be paramount and superior to any other lien theretofore or thereafter created").

            An irrigation district is entitled to a share of the proceeds of sale under RCW 84.64.230 if the assessment lien has equal priority with the lien for general taxes.  The question is whether the rule in Commercial Waterway andTacoma v. Pierce Cy. is limited to situations where the Legislature states that the special assessment lien is equal to the general tax lien (e.g.,Commercial Waterway) or whether the rule also applies when the Legislature uses the same language for both the general tax lien and the special assessment lien.

            Obviously, the legislative intent to establish two equal liens is clear when the Legislature specifically declares that the two liens are equal (e.g., "The demolition assessment shall constitute a lien . . . of equal rank with state, county and municipal taxes."  Laws of 1973, 1st Ex. Sess., ch. 144, § 1, p. 1048).  However, we do not believe that the power of the Legislature is so limited that it can only establish equal liens through the use of a specific label or phrase.  Thus, if the Legislature uses the same language to establish a special assessment lien that it uses to establish the lien for general taxes, the two liens have equal priority.  In that case, there is no need for the Legislature to declare that the liens are equal.

            In this case, the language establishing the irrigation assessment lien is not identical to the language establishing the lien for general taxes.  However, the legislative history of the irrigation assessment lien persuades us that the Legislature intended the two liens to have equal priority.

            Irrigation districts were authorized by the Legislature at the time of statehood.  See Laws of 1889-90, § 1, p. 671.  At that time, the law provided that the irrigation "assessment upon real property is a lien against the property . . . and such lien is not removed until the assessments are paid or the property sold for the payment thereof."  Laws of 1889-90, § 23, p. 684.  In 1913 the statute was amended.  The new language provided that  [[Orig. Op. Page 11]] the irrigation district lien was superior and paramount to other liens with the exception of liens for general taxes.  The law stated:

                        The assessment upon real property shall be a lien against the property assessed, from and after the first Monday in March for any year, whichlien shall be paramount and superior to any other lien theretofore or thereafter created, whether by mortgage or otherwise, except for a lien for prior assessments and for general taxes, and such lien shall not be removed until the assessments are paid or the property sold for the payment thereof as provided by law.

Laws of 1913, ch. 165, § 11, p. 571 (emphasis added).  The exception for general taxes enacted in 1913 was deleted from the statute in 1939.  Laws of 1939, ch. 171, § 2, p. 500.  The 1939 amendment indicates that the Legislature intended the irrigation district lien to have equal priority to the lien for general taxes.  The irrigation district assessment lien has not been amended since 1939 when the exception for general taxes was deleted.  It remains codified as RCW 87.03.265.2/

             Since the lien for irrigation district assessments has equal priority to the lien for general taxes, we concluded that RCW 84.64.230 applies.  Thus, if a county sells tax deed property for less than the outstanding assessments against the property, the irrigation district fund is entitled to an apportioned share of the proceeds.  Accordingly, the answer to your second question is yes.

            Question 3:

            Can an irrigation district foreclose its assessment liens against property acquired by a county by tax deed in a foreclosure proceeding?

            The answer to your third question is also controlled by RCW 84.64.230 which provides in part:

                        No claims shall ever be allowed against the county from any municipality, school district, road district or other taxing district for taxes leviedon property  [[Orig. Op. Page 12]] acquired by the county by tax deed under the provisions of this chapter, but all taxes shall at the time of deeding said property be thereby canceled[.]

(Emphasis added.)

            Even though the irrigation district lien is of equal priority to the lien for general taxes, an irrigation district cannot foreclose on tax deed property held by the county.  RCW 84.64.230 prohibits such a claim.

            When the county acquires tax deed property, it holds the land in trust for the state and the various taxing municipalities within which the land lies.  State ex rel. King Cy. Water Dist. v. Stacy, 10 Wn.2d 248, 254-55, 116 P.2d 356 (1941).  The lien of the irrigation district is in effect transferred from the land to the funds acquire by the county when it resells the property.  See Moe v. Brumfield, 182 Wash. 608, 610, 47 P.2d 847 (1935).

            The fact that the liens are of equal priority does not give an irrigation district the right to foreclose on tax deed property held by the county.  Once the county acquires the property the priority of the liens is irrelevant.  The court reached this conclusion inNorth Spokane Irrigation Dist. v. Spokane Cy., 173 Wash. 281, 22 P.2d 990 (1933).  In this case, an irrigation district had foreclosed its lien and, since there were no bidders at the sale, had obtained title to the property.  The question was whether the county could foreclose its lien for general taxes against the irrigation district.  The court ruled that it could not.  The court said:

                        The question before us is whether such deed given by the county to the [irrigation] district relieves the land of the lien of prior general taxes.  We think it does.  In the broadest and most sweeping language, the statute, [Rem. Rev. Stat.] § 74483/

            provides that such deed shall convey to the grantee the absolute title free from all incumbrances.  General taxes are liens upon the property, and must be considered as incumbrances.

             [[Orig. Op. Page 13]]

173 Wash. at 282-83 (emphasis in original).

                        The court affirmed this decision in Kennewick Irrigation Dist. v. Benton Cy., 179 Wash. 1, 35 P.2d 1109 (1934), even though it acknowledged that the lien for general taxes was superior to the lien for irrigation district assessments.  According to the court the "question . . . is not . . . one of priority of liens."  179 Wash. at 10.  Of course, Kennewick Irrigation Dist. was decided prior to 1939, when the Legislature amended the irrigation district assessment lien statute and eliminated the exception for general taxes.  See supra p. 11.  At that time (but not after 1939), the lien for general taxes was superior.  Despite this superiority, the county could not foreclose on property held by the irrigation district.

            Since RCW 84.64.230 provides that no claim shall ever be allowed on tax deed property, we conclude that an irrigation district cannot foreclose its lien on property acquired by the county by tax deed at a foreclosure proceeding.  Accordingly, the answer to your third question is no.

            We trust that the foregoing will be of assistance to you.

Very truly yours,

KENNETH O. EIKENBERRY
Attorney General

LINDA M. MORAN
Assistant Attorney General

WILLIAM B. COLLINS
Assistant Attorney General