RICE, County Treasurer, et al. v. JEROME, 97 F. 719

CALDWELL, Circuit Judge, after stating the case as above, delivered the opinion of the court. It is conceded that the hinds of the company purchased at the tax sale were subject to taxation; that the taxes thereon had been legally levied and assessed, and were due' and unpaid at the date of the tax sale. In the view we take of the case, it is not necessary to determine whether there are any irregularities in the tax sale which would avoid it. The circuit court did not, as is erroneously assumed by counsel in their briefs, decree that the tax sale was irregular or void. The decree is silent upon that subject.

The Colorado Coal & Iron Development Company was a private corporation, formed for pecuniary profit, and owing no duty to the public. In the matter of taxation, such a corporation stands on the footing of a natural person. Its insolvency does not exempt its property from taxation or from the operation of the revenue laws of the state, or in any manner interfere with the due execution of those laws, or with the rights of persons acquired under them. Nor does the appointment of a receiver for ouch a corporation operate to annul or extinguish the lien acquired by a purchaser of its lands at a tax sale.

The holder of the tax certificates was not, therefore, required to present his certificate to the court, under its order requiring the creditors of the company to present their claims. The insolvency oí the company, and the appointment of a receiver of its property, in no manner affected the validity and force of valid liens on its property, whether such liens were acquired by purchase of its lands at a tax sale or otherwise.

The legal and equitable right acquired by the purchaser of the company’s lands at a tax sale, and which might have been successfully asserted against the company, may be asserted against the receiver of its property.

It is the settled construction of the statutes of Colorado that before lands sold at a tax sale for taxes legally assessed and due can be recovered from the holder of the tax title, or his lien thereon for the taxes and penalties canceled, the owner must pay to the holder of the tax title the amount for which the lauds sold at the tax sale, together with the interest and penalties provided by the laws of the state. Morris v. Bank, 17 Colo. 231, 29 Pac. 802; Mitchell v. Arkell, 3 Colo. App. 253, 32 Pac. 720; Knowles v. Martin, 20 Colo. 392, 393, 38 Pac. 467; Crisman v.

Johnson, 23 Colo. 264, 47 Pac. 296; Charlton v. Kelly, 24 Colo. 273, 50 Pac. 1042; Rustin v. Tunnel Co., 23 Colo. 350, 47 Pac. 300. In the case of Charlton v.

Kelly, supra, the supreme court of Colorado said: “When the recovery of possession is by an action, or where, as in the case at bar, the object of the action is to remove a cloud or to quiet title, it is only fair, where it appears the taxes were legally assessed and due, for which the sale was made, that the owner should, before receiving a decree in his favor, pay, not only taxes paid by the defendant after the sale, together with interest, but also the amount for which the same was sold at the tax sale, together with the interest and penalties provided by law.” In the case from which we have quoted, the court points out that the amount of the interest and penalties which the holder of a tax title is entitled to receive is definitely fixed by sections 3904 and 3905 of Mill’s Annotated Statutes of Colorado.

The taxes on the company’s lands, for which they were sold, being “legally assessed and due,” this case falls exactly within the rule laid down in Charlton v. Kelly, supra. The circuit court disregarded this rule, and only required its receiver to pay the sum paid for the lands at the tax sale, and 8 per cent, interest, whereas it should have required the payment of the interest and penalties specified in the sections of the statute hereinbefore referred to. The decisions of the supreme court of a state, construing and expounding its revenue laws, are binding upon the federal courts in that state.

Assuming, but not deciding, that the tax sale was. irregular, that fact — the taxes on the land being legally assessed and due — does not exempt the owner from the obligation to pay the interest and penalties prescribed by the statute. The fact is recognized that the titles acquired at tax sales are frequently — we might say generally — invalid for some irregularity in the sale. This is so well known that there would be few bidders for lands sold at tax sales if the purchasers had to rely solely on maintaining the validity of the sale, and lost their investment when that proved to be invalid.

Such a rale would encourage delinquency, and discourage the sale of delinquent lands, and practically deprive the state of her taxes on lands whose owners chose not to pay them. It is therefore the policy of the state to encourage the purchase of delinquent lands at tax sales by giving the purchaser who pays the taxes of the delinquent owner a lien on the land for the taxes paid, with liberal interest and penalties, whether the sale he valid or invalid.

The delinquent owner who fails to discharge his obligation to the state by paying the taxes on his lands is not to be rewarded for his delinquency, and his obligation to pay the taxes and the interest and penalties thereon is not affected by any irregularity in the sale. This policy is not confined to the state, of Colorado. It prevails in other states. In Coats v. Hill, 41 Ark. 149, the supreme court of Arkansas says: “By our law, taxes axe glebas ascripti, — serfs of tbe soil, — a charge which follows the land in whosesoever hands It may go.

And if the tax sale may be invalid to devest the title of the former owner, by reason of irregularities and failure of the officers properly to discharge their duties, yet the purchaser is subrogated to the lien of the state.” And it is held in a long line of cases in that state that this subrogation extends to and includes the interest and penalties prescribed by law, and that it extends, also, to taxes subsequently paid on the land by the holder of the tax title. The circuit court erred in entertaining the bill at all.

The plaintiff did not pay or offer to pay the taxes, interest, and penalties to which the holder of the tax certificates was clearly entitled on the face of the bill. Tu the federal courts such payment or tender is an indispensable condition to the right of the owner to maintain a bill in equity to cancel the tax-sale certificates, or remove the cloud cast by them upon his title. Whitehead v. Trust Co. (C. C. A.; decided at the present term) 98 Fed. 10, and cases there cited.

The case last cited disposes, also, of the contention that the holder of the tax certificates should not be permitted to demand and receive the deed for the lands embraced therein, because they were, in contemplation of law, in the custody of the receiver. Without repeating it, we affirm what is there said on this point. The decree; of the circuit courtJs reversed, and the cause is remanded, with instructions to dismiss the bill for want of equity.