Steinacher v. Swanson

Carter, J.

The plaintiff, as a taxpayer, commenced this action against the county treasurer of Fillmore county praying for an injunction to restrain the defendant from complying with the provisions of House Roll No. 4, now chapter 15, Laws 1935, Special Session, on the ground that said act was unconstitutional and void. The trial court sustained a general demurrer to the petition and dismissed the action. From this judgment, plaintiff appeals.

It also appears from the record that one Logan A. Rogers was granted leave to file a petition in intervention in which he alleges that said act is unconstitutional for the reason that on November 6, 1934, an initiative petition was submitted to and adopted by the voters of the state which provided for a unicameral legislature for Nebraska; that on May 18, 1935, in accordance therewith, an act was passed declaring that the legislature should consist of one house with 43 members, while the special session which convened on October 28, 1935, consisted of two houses con*442trary to the provisions of the Constitution and the statutes of Nebraska then in force. A general demurrer to the petition in intervention was sustained by the trial court and the petition in intervention dismissed. From this dismissal, the intervener also appeals.

We will first discuss the ruling of the trial court on the demurrer to the petition in intervention. It is the contention of intervener that chapter 15 was passed by an extraordinary session of the bicameral legislature at a time when it had been abolished by constitutional amendment. Section 1, art. Ill of the Constitution, as amended by the initiative petition adopted November 6, 1934, provides, in part, as follows: “Commencing with the regular session of the legislature to be held in January, nineteen hundred and thirty-seven, the legislative authority of the state shall be vested in a legislature consisting of one chamber.” By the express statement of the constitutional amendment adopted, it was not to become effective until January, 1937. By its own terms, the amendment to the Constitution was not effective until the commencement of the regular session in 1937. Until it became effective the old bicameral legislature was the regularly constituted legislative authority in this state. The contention of intervener that the extraordinary session of the legislature had no legal existence, because of the amendments referred to, is without merit and the trial court very properly dismissed his petition.

It is contended by plaintiff that the title to the act is defective in that' it violates section 14, art. Ill of the Constitution of Nebraska which provides, in part: “No bill shall contain more than one subject, and the same shall be clearly expressed in the title. And no law shall be amended unless the new act contain the section or sections as amended, and the section or sections so amended shall be repealed.” The title to the act is, in part, as follows: “An act relating to revenue; to provide for and accelerate the payment of delinquent taxes on real and personal property which have been delinquent for more than one (1) year prior to September 1, 1935, by permitting pay*443ment of all such taxes either by payment in full or in the case of personal property in five (5) annual equal instalments and in the case of real property in ten (10) annual equal instalments, without interest, penalties or other charges added thereto; to provide penalties for defaults; and to amend sections” (here follows a list of amended sections), “and to’ repeal said original sections, and to declare an emergency.”

This act is clearly one which relates to the revenue. Its title sets forth the salient points covered in the body of the act, including the sections of laws amended and repealed. Without going into .this subject further, we hold that the title to the act meets all the requirements of that part of the constitutional provision hereinbefore quoted.

The act in substance provides that (1) if a taxpayer on or before September 1, 1936, pays his 1935 real or personal taxes in full with interest and penalties, he may then discharge all of his real or personal taxes which became delinquent before September 1, 1935, by paying only the principal amount thereof without interest, penalties or costs added. (2) If he is not able to pay such delinquent taxes in full in cash, a method is provided by which he may pay his delinquent personal taxes in five annual instalments, or his delinquent real estate taxes in ten annual instalments, all without interest, penalties or costs. These provisions are made to apply where tax sale certificates have been issued to and are still owned and held by a county or other governmental subdivisions. The act, however, does not apply where the delinquent taxes have been sold to a bona fide purchaser and a tax sale certificate issued prior to the passage of the act. Neither does it apply where the tax was levied for a special purpose or levied as a special assessment.

It is first contended that the act violates section 4, art. VIII of the Constitution of Nebraska. This section provides: “The legislature shall have no power to release or discharge any county, city, township, town or district whatever, or the inhabitants thereof, or any corporation, or the *444property therein, from their or its proportionate share of taxes to be levied for state purposes, or due any municipal corporation, nor shall commutation for such taxes be authorized in any form whatever.”

While it is true that the act in question provides that interest, penalties and costs may be remitted or waived under certain contingencies, it has been established as a legal principle that interest, penalties and costs are no part of the tax and do not, therefore, fall within this provision of the Constitution.

In Jones v. Williams, 121 Tex. 94, 45 S. W. (2d) 130, the court said: “The word ‘interest’ in a delinquent tax act is a penalty for the failure to pay taxes at a designated time and is not part of the tax itself. It is imposed by the legislature in the nature of a fine, and the legislature having the power to impose it also has the power to repeal or cancel it.”

In Biles v. Robey, 30 Pac. (2d) (Ariz.) 841, the court said: “We think it is obvious that the various impositions made by legislative authority for the failure to pay taxes when due, whether they are called interest, penalties, costs, or anything else, are in reality penalties and not debts. The. question has been frequently discussed, and the decisions are almost entirely to the effect that where the original taxes themselves are not regarded as debts upon which legal interest is collectible in the absence of a statute authorizing it, any additional payment required by the legislative authority after a tax has become delinquent is no part of the tax itself, as interest is a part of the ordinary loan, but is a penalty which is merely a part of the procedure used by the state for the purpose of collecting the tax.”

Other cases holding to the same effect are: State v. Koeln, 332 Mo. 1229, 61 S. W. (2d) 750; Livesay v. DeArmond, 131 Or. 563, 284 Pac. 166; Henry v. McKay, 164 Wash. 526, 3 Pac. (2d) 145; State v. Hitsman, 99 Mont. 521, 44 Pac. (2d) 747.

We therefore conclude that penalties, including interest *445and costs, are no part of a tax and that the legislature is not prevented from waiving or remitting such penalties by the provision of the Constitution last above quoted.

Is the act in conflict with that part of section 4, art. VIII of the Constitution which provides “nor shall commutation for such taxes be authorized in any form whatever?” The word “commutation” is defined in Webster’s International Dictionary as follows: “A substitution, as of a less thing for a greater; as, commutation of fares, copyright, or rations ; specif., the substitution of one form of payment for another, or one payment for many, or a specific sum of money for conditional payments or allowances.” An authoritative text-writer defines “commutation” as follows: “Alteration; change; substitution; the act of substituting one thing for another; a passing from one state to another. Also the conversion of the right to receive a variable or periodical payment into the right to receive a fixed or gross payment; a substitution of a less thing for a greater, especially a substitution of one form of payment for another, or one payment for many, or a specific sum of money for conditional payments or allowances, etc.; a substitution of one sort of payment for another, or of a money payment in lieu of a performance of a compulsory duty or labor, or of a single payment in lieu of a number of successive payments, usually at a reduced rate.” 12 C. J. 215.

“Commutation” is defined in Words & Phrases (2d) as follows: “ ‘Commutation’ is a passing from one state to another; an alteration; a change; the act of substituting one thing for another; a substitution of one sort of payment for another, or of a money payment in lieu of a performance of a compulsory duty or labor, or of a single payment in lieu of a number of successive payments, usually at a reduced rate.”

In Woodrough v. Douglas County, 71 Neb. 354, 98 N. W. 1092, our court discussed this identical provision of the Nebraska Constitution. The court said: “Again, commutation is a passing from one state to another; an alteration, a change; the act of substituting one thing for another; *446a substitution of one sort of payment for another, or of a money payment in lieu of a performance of a compulsory duty or labor, or of a single payment in lieu of a number of successive payments, usually at a reduced rate.”

It is quite apparent that the framers of the Constitution of 1875, the one first containing this provision, and the members of all subsequent constitutional conventions, have been imbued with the idea that all taxpayers are entitled to the same treatment by the government they support. For this reason they have expressly written into our Constitution that the legislature not only shall have no power to release or discharge any one from the payment of his share of taxes, but a commutation for taxes in any form whatever is prohibited. (Italics ours.) From an examination of the definitions of the word “commutation” herein-before set out, and the use of the words “in any form whatever,” contained in our constitutional provision, it is quite apparent that the legislature is prohibited by the Constitution from changing the method of payment of any tax once levied. Clearly, under this constitutional provision, the legislature cannot reduce the amount of the tax, extend the time of payment, or in any manner change the method of payment. The time of payment has been extended by the terms of the act under consideration. The taxing authorities are prohibited from foreclosing their tax liens in those cases falling within the act. We are obliged to hold that chapter 15, Laws 1935, Special Session, contravenes that part of section 4, art. VIII of the Constitution, which provides, “nor shall commutation for such taxes be authorized in any form whatever.”

In County of Lancaster v. Trimble, 33 Neb. 121, 49 N. W. 938, the court, in a case involving a statute permitting counties to purchase tax sale certificates and foreclose them, except that no action could be brought unless the amount due exceeded $200, held that the statute violated the constitutional provision herein quoted. The court said: “The legislature is without power to release any inhabitant or corporation from his or its proportionate share of *447taxes, nor can it confer such authority upon county commissioners. It has authorized them to purchase real estate at tax sale, but has provided for the foreclosure of tax cei-tificates in their hands only when the amount due thereon exceeds a specified sum. The proviso clause of the section of the statute quoted expressly prohibits county commissioners from foreclosing tax liens when the amount of the lien is $200 or less. It, in effect, places it in the power of county commissioners to release the taxes upon lots and lands where the amount of the delinquent taxes thereon is. not over $200. All they would have to do to accomplish it is to purchase that kind of property for the county at tax sale. The legislature is powerless to confer such authority. It cannot do indirectly what the Constitution prohibits it from doing directly; that is clear. Wood v. Helmer, 10 Neb. 65, 68.” On rehearing, id., 34 Neb. 752, 52 N. W. 711, the court said: “It is insisted that, even if the right to foreclose the lien exists, still the amount claimed must exceed $200 to authorize the institution of an action. After a very careful examination of the entire question we are satisfied that our former opinion is right.”

In County of Lancaster v. Rush, 35 Neb. 119, 52 N. W. 837, a case involving the same statute as was considered in County of Lancaster v. Trimble, supra, the court said: “It is urged that the petition did not allege a cause of action, because the amount claimed to be due upon the tax certificate does not amount to $200. The precise question was before the court in County of Lancaster v. Trimble, 33 Neb. 121, and the same case upon rehearing, decided at the present term, 34 Neb. 752, and it was held that the proviso clause of section 1, article 4, chapter 77, Compiled Statutes, restricting the foreclosure of tax liens by counties to cases where the amount due on the tax certificate exceeds the sum of $200, is inimical to the provisions of section 1, article 9, of the Constitution. The conclusion there reached is sound. The Constitution requires that all the taxable property in the state shall contribute its proportionate share of taxes, and prohibits the legislature from releasing the *448property of an individual from the taxes imposed thereon. The only remedy for the enforcement of the collection of the tax levied on the real estate in question is by foreclosure proceedings, and if such action cannot be maintained because the amount due is less than $200, then said real estate is released from said taxes, and an increased burden will necessarily fall upon other property. We adhere to the conclusion of the court announced in the second hearing, County of Lancaster v. Trimble, supra, to the effect that, in addition to the special provisions of statute providing for the foreclosure of a tax lien by a county, the power is conferred by sections 1 and 2, article 5, chapter 77, Compiled Statutes.”

It will be noted in the cases last above cited that a law which makes it possible for a taxpayer to escape his tax obligation .to the state is violative of section 4, art. VIII of the Constitution. It must be conceded that, if the legislature has the power to extend the time in which taxes must be paid, as was done in the instant case, it could repeat the extensions or extend them for such a duration of time that it would amount to a remission of the tax. Under the cases cited, the legislature is without power to so do. The legislature cannot accomplish indirectly what it may not do directly. As has often been said, it is not what has been done but what can be done, under a statute that determines its constitutionality. We submit that, under the act before us, the legislature could effect a complete remission of taxes by the indirect method mentioned. In County of Lancaster v. Rush, supra, the statute prevented foreclosure of the tax lien where the amount due thereunder was less than the fixed amount of $200, while in the case at bar the statute prevents the foreclosure of the tax lien by postponing the date when foreclosure can be brought. We hold that the act in question is unconstitutional for the reason that, if it be upheld, it places it within the power of the legislature to circumvent the express prohibition of the Constitution against releasing or discharging any person from the payment-of his proportionate share of taxes.

*449It is quite clear that the act is not violative of section 1, art. VIII of the ■ Constitution, which requires that “taxes shall be levied by valuation uniformly and proportionately upon all tangible property and franchises, and taxes uniform as to class may be levied by valuation upon all other property,” for the reason that the waiver or remission of interest, penalties or costs does not involve a tax. Our Constitution does, however, contain the following provision: “The legislature shall not pass local or special laws in any of the following cases, that is to say: * * * Granting to any corporation, association, or individual any special or exclusive privileges, immunity, or franchise whatever. In all other cases where a general law can be made applicable, no special law shall be enacted.” Const. art. III, sec. 18.

The general rule is: A law which is general and uniform throughout the state, operating alike upon all persons and localities of a class, or who are brought within the relations and circumstances provided for, is not objectionable as wanting uniformity of operation. The classification must be reasonable and not arbitrary. Cleland v. Anderson, 66 Neb. 252, 92 N. W. 306; Livingston Loan & Building Ass'n v. Drummond, 49 Neb. 200, 68 N. W. 375. In State v. Hall, 129 Neb. 669, 262 N. W. 835, the court said:

“By section 18, art. Ill of the Constitution, the legislature is prohibited from passing any act granting to an individual any special or exclusive privileges or immunity, and it is provided that, in all cases where a general law can be made applicable, no special law shall be enacted. Held, to prohibit class legislation which does not operate equally and uniformly upon all members of the class, brought within its operation.
“The legislature may make a reasonable classification * * * concerning them, but the classification must rest upon real differences in situation and circumstances surrounding the members of the class,' relative to the subject of the legislation, which render appropriate its enactment; and to be valid the law must operate uniformly and alike upon every member of the class so designated.”

*450It will be noted that this statute applies only to persons owing delinquent taxes on or before September 1, 1935. It does not apply to real property, taxes for which tax sales certificates were theretofore issued to any one other than a county or other governmental subdivision. Neither does it apply to any taxpayer who becomes delinquent in the payment of his real property taxes after September 1, 1935, nor to any taxpayer who fails to demand the benefits of the act prior to the date that the second instalment of his 1935 real estate taxes becomes delinquent. It discriminates between delinquent taxpayers whose taxes are sold to a private person and those sold to the county or other governmental subdivision. It also discriminates against the delinquent taxpayer whose personal taxes became delinquent after September 1, 1935, and those who became delinquent prior to that time, and against those who fail to demand the benefits of the act prior to December 1, 1936. The act discriminates between taxpayers whose delinquent real estate taxes were sold to a bona fide purchaser before the passage of the act and those whose delinquent taxes were sold to a bona fide purchaser thereafter, the former being excluded from the operation of the act and the latter being included. Neither does it appear in the act that the sale of lands for delinquent taxes is in any way restrained unless and until the delinquent taxpayer complies with the provisions of the act. In view of our decision on other grounds, we will not indulge in a discussion of the question of the inclusion within the act of delinquent taxpayers whose lands were sold for taxes to a bona fide purchaser after the passage of the act, and the effect thereon of the constitutional provision prohibiting the impairment of contracts. In our judgment, the act makes an arbitrary classification of persons upon whom the benefits of the act fall.

In Rosenbloom v. State, 64 Neb. 342, 89 N. W. 1053, Judge Sullivan, in discussing the question of uniform classification, said: “A further contention of counsel for defendant is that, by reason of the exceptions contained in section 152, the law lacks the essential requirement of *451uniformity. The Constitution (art. 9, sec. 1) declares that the legislature may impose a tax upon persons engaged in certain occupations ‘in such manner as it shall direct by general law, uniform as to the class upon which it operates.’ This provision undoubtedly contemplates that all persons pursuing the same business or calling under the same conditions and circumstances shall be treated alike, and subjected to the same burdens; in other words, partiality and favoritism are forbidden, and equality before the law is made a rule of legislative action. But as was said by the supreme court of Pennsylvania in Seabolt v. Commissioners of Northumberland County, 187 Pa. St. 318, ‘Classification is a legislative question, subject to judicial revision only so far as to see that it is founded on real distinctions in the subjects classified, and not on artificial or irrelevant ones, used for the purpose of evading the constitutional prohibition.’ In the case of State v. Farmers & Merchants Irrigation Co., 59 Neb; 1, 4, we had occasion to consider this question, and reached the conclusion, after a pretty thorough examination of the authorities, that the ‘classification, to be valid, must rest on some reason of public policy, some substantial difference of situation or circumstances, that would naturally suggest the justice or expediency of diverse legislation with respect to the objects-, classified.’ ”

In State v. Fischl, 94 Mont. 92, 20 Pac. (2d) 1057, a case discussing this identical subject, but which was overruled on other grounds, the court said: “The act, therefore, advances a plan which would operate to reward a taxpayer who has not paid his tax at the expense of one who has. The taxing authorities received the money of the one who paid his taxes and have since withheld it; this taxpayer must suffer for having paid his taxes to the extent that he has been without the use of his money since he paid, while the other, who did not pay, would save by failing or refusing to pay. But as was said respecting the 1923 act, ‘the act upon its very face discriminates in favor of one who, although unable to prevent delinquency by pay*452ment, was fortunate enough to have his property struck off at tax sale to' the county as against another whose property at the same time was struck off to a citizen. The latter, to effect a redemption, must pay the original tax, addition, interest, and costs; or, if the county has assigned its certificate of sale to a citizen, the redemptioner must assume and discharge a like burden.’ Sanderson v. Bateman, 78 Mont. 235. In so far as the law operates upon taxpayers of the same class, requiring, as it does, full payment from some delinquents and the remission of taxes as to others, it does not afford to all in the same class the equal protection of the laws and is contrary to the Fourteenth Amendment.”

While it is true that the above quotation did not concern the precise point before us, its reasoning is applicable in support of the proposition that the statute before us violates the provisions of section 18, art. III of the Nebraska Constitution. The situation before us is well expressed in State v. Fischl, supra, where the Montana court used the following language: “The wellspring of the act was to alleviate the condition of our unfortunate fellow citizens who, unable to pay their taxes, were forced to see their lands sold at tax sales. In the view of the legislature, as expressed in section 4 of chapter 41, an extraordinary emergency existed by reason of the present world-wide economic condition. Whether the policy of favoring some taxpayers of the same class over others is wise or unwise, the emergent conditions considered, is not for us to decide, nor was it a subject upon which the legislature had a right to legislate, for the expression of the supreme will of the people— the Constitution — decides the policy for us all. It must be remembered that the provisions of the Constitution are mandatory and prohibitory unless otherwise expressed, and these provisions read the same whether in fair weather or in foul. The proposition that an emergency justifies a removal of constitutional safeguards is an egregious fallacy. A safeguard once let down inevitably must lead to mischief. If one be let down, why not another? ‘And many *453an error, by the same example, will rush into the state.’ Our duty is clear. Each1 of us upon assuming office took an oath ‘to support, protect, and defend the Constitution of the state of Montana,’ and from this obligation we shall not shrink.”

We are aware that some authorities hold that constitutional requirements as to uniformity of operation do not apply to statutes providing for a waiver or remission of a penalty. Penalties, including interest and costs, are generally' considered punitive in their nature and a statute remitting them is one of grace to which the question of uniformity has no application. But, as to the extensions of time for payment of the principal amount due as taxes, the question of uniformity of operation upon a class becomes important. To say that one delinquent taxpayer can have an extension of time for the payment of his taxes, while another delinquent taxpayer, because of the arbitrary classification made by the legislature, must pay in full, including all interest, penalties and costs, is such discrimination as to warrant the holding that the classification is unreasonable and arbitrary and therefore void.

In Ewert v. Taylor, 38 S. Dak. 124, 160 N. W. 797, the court said: “Defendant contends that chapter 64 is unconstitutional because it provides that certain taxes assessed thereunder must all be paid on or before March 30th, while all other taxes, even certain taxes assessed under this same law, can be paid one-half on April 1st, and the other half on or before October 31st. This provision requiring payment on an earlier date is one which, from its nature, can only result in inequality — the use of money being a thing of value. There is a fundamental difference between laws under which lack of uniformity and equality may arise owing to defects in human judgment, and laws which absolutely contravene the provisions of the Constitution by themselves creating a lack of uniformity and equality. The mere fact that such lack of uniformity or equality may be slight cannot be considered in support of a law so inherently bad.”

*454We have come to the conclusion that, for the reasons herein stated, the act under consideration is violative of the Constitution in the respects noted and is therefore void. The trial court erred in sustaining defendant’s demurrer. The judgment of the trial court is therefore reversed and the cause is remanded for further proceedings in accordance with this opinion.

Reversed.