B-1564, FEBRUARY 29, 1940, 19 COMP. GEN. 768

B-1564: Feb 29, 1940

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A STATUTORY LIEN WHICH ATTACHED TO PROPERTY FOR STATE TAXES ASSESSED BEFORE THE PROPERTY WAS ACQUIRED BY THE GOVERNMENT IS A LIEN FOR PENALTIES AND INTEREST ON THE DELINQUENT TAXES SUBSEQUENTLY ACCRUING UNDER THE STATE STATUTE TO THE DATE OF PAYMENT. WHERE PROPERTY ACQUIRED BY THE GOVERNMENT IS SUBJECT TO A PRIOR LIEN. IT IS FOR THE ADMINISTRATIVE AGENCY CONCERNED. 1940: REFERENCE IS MADE TO LETTER OF JUNE 28. AS FOLLOWS: REFERENCE IS MADE TO D.O. ENCLOSED IS COPY OF MY LETTER OF APRIL 18. VOUCHER NO. 1541646 WAS APPROVED FOR PAYMENT AND ENCLOSING CHECK NO. 169549. ADVISING THAT IN HIS OPINION PENALTY AND INTEREST ON DELINQUENT TAXES ASSESSED AGAINST PERSONAL PROPERTY ACQUIRED BY THE UNITED STATES DO NOT CEASE TO ACCRUE AS OF THE DATE TITLE TO THE PROPERTY IS ACQUIRED BY THE UNITED STATES BUT CONTINUE TO ACCRUE THEREAFTER AS A LEGAL LIABILITY OF THE UNITED STATES UNTIL FINAL PAYMENT OF THE TAXES.

B-1564, FEBRUARY 29, 1940, 19 COMP. GEN. 768

TAXES - STATE - PROPERTY ACQUIRED BY THE FEDERAL GOVERNMENT - INTEREST AND PENALTIES SUBSEQUENTLY ACCRUING; JURISDICTION AS TO DISCHARGING PRIOR LIENS ON PROPERTY ACQUIRED BY THE GOVERNMENT WHILE A STATE MAY NOT TAX PROPERTY OWNED BY THE FEDERAL GOVERNMENT, A STATUTORY LIEN WHICH ATTACHED TO PROPERTY FOR STATE TAXES ASSESSED BEFORE THE PROPERTY WAS ACQUIRED BY THE GOVERNMENT IS A LIEN FOR PENALTIES AND INTEREST ON THE DELINQUENT TAXES SUBSEQUENTLY ACCRUING UNDER THE STATE STATUTE TO THE DATE OF PAYMENT, AND MAY BE DISCHARGED ONLY BY PAYMENT ACCORDINGLY. 18 COMP. GEN. 493, MODIFIED. WHERE PROPERTY ACQUIRED BY THE GOVERNMENT IS SUBJECT TO A PRIOR LIEN, IT IS FOR THE ADMINISTRATIVE AGENCY CONCERNED, AND NOT THE GENERAL ACCOUNTING OFFICE TO DETERMINE WHETHER THE LIEN SHOULD BE DISCHARGED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, FEBRUARY 29, 1940:

REFERENCE IS MADE TO LETTER OF JUNE 28, 1939, FROM THE ASSISTANT COMPTROLLER, FARM CREDIT ADMINISTRATION, AS FOLLOWS:

REFERENCE IS MADE TO D.O. VOUCHER NO. 1541646, APPROVED FOR PAYMENT IN THE AMOUNT OF $532.33 TO THE TREASURER OF YELLOWSTONE COUNTY, BILLINGS, MONTANA, COVERING TAXES FOR THE YEARS 1934 TO 1938, INCLUSIVE, ASSESSED AGAINST PROPERTY FORMERLY OWNED BY THE BROADVIEW FARMERS ELEVATOR COMPANY, BROADVIEW, MONTANA, AND ACQUIRED BY THE UNITED STATES ( FARM CREDIT ADMINISTRATION) AT FORECLOSURE SALE HELD ON SEPTEMBER 17, 1938.

ENCLOSED IS COPY OF MY LETTER OF APRIL 18, 1939, ADDRESSED TO MR. T. A. COTHRON, TREASURER OF YELLOWSTONE COUNTY, BILLINGS, MONTANA, EXPLAINING THE BASIS ON WHICH D.O. VOUCHER NO. 1541646 WAS APPROVED FOR PAYMENT AND ENCLOSING CHECK NO. 169549, IN THE AMOUNT OF $532.33. ALSO ENCLOSED RE:

COPY OF LETTER DATED MAY 25, 1939, FROM MR. JOSEPH E. FARRELL RETURNING CHECK NO. 169549 AND REFUSING TO ACCEPT PAYMENT ON THE BASIS OUTLINED IN MY LETTER OF APRIL 18, 1939.

COPY OF LETTER DATED MAY 17, 1939, ADDRESSED TO MR. W. A. BROWN, STATE EXAMINER, BY MR. ENOR K. MATSON, FIRST ASSISTANT ATTORNEY GENERAL OF MONTANA, ADVISING THAT IN HIS OPINION PENALTY AND INTEREST ON DELINQUENT TAXES ASSESSED AGAINST PERSONAL PROPERTY ACQUIRED BY THE UNITED STATES DO NOT CEASE TO ACCRUE AS OF THE DATE TITLE TO THE PROPERTY IS ACQUIRED BY THE UNITED STATES BUT CONTINUE TO ACCRUE THEREAFTER AS A LEGAL LIABILITY OF THE UNITED STATES UNTIL FINAL PAYMENT OF THE TAXES. (COPY OF THIS LETTER WAS SENT TO THE FARM CREDIT ADMINISTRATION WITH MR. JOSEPH E. FARRELL'S LETTER OF MAY 25, 1939.)

COPY OF MY LETTER OF JUNE 10, 1939, ADDRESSED TO MR. JOSEPH E. FARRELL, TREASURER OF YELLOWSTONE COUNTY, BILLINGS, MONTANA, QUOTING FROM YOUR DECISIONS PUBLISHED AT 18 COMP. GEN. 493 AND 17 COMP. GEN. 526 AND ENCLOSING STANDARD VOUCHER FORM 1034 FOR EXECUTION BY THE COUNTY TREASURER IN THE EVENT THAT HE CONSIDERED MR. ENOR K. MATSON'S OPINION BINDING UPON HIS OFFICE.

IN REPLY TO MY LETTER OF JUNE 10, 1939, WE RECEIVED FROM THE TREASURER OF YELLOWSTONE COUNTY BUREAU VOUCHER NO. 9719 WITHOUT A LETTER OF TRANSMITTAL. THE VOUCHER IS SUBMITTED HEREWITH FOR PREAUDIT AND IT WILL BE NOTED THAT THE COUNTY IS CLAIMING ALL PENALTY AND INTEREST WAIVED BY CHAPTER 20 OF THE MONTANA SESSION LAWS OF 1937 IF PAID ON OR BEFORE DECEMBER 1, 1938. BUREAU VOUCHER 9719 COVERS TAXES AND PENALTIES IN THE TOTAL AMOUNT OF $668.52, WHEREAS D.O. VOUCHER NO. 1541646 WAS APPROVED FOR PAYMENT IN THE TOTAL AMOUNT OF $532.33. YOUR ATTENTION IS CALLED TO THE FACT THAT D.O. VOUCHER NO. 1541646 WAS EXECUTED BY THE CLAIMANT UNDER DATE OF OCTOBER 11, 1938, AT WHICH TIME PENALTY INTEREST, EXCEPT ON THE 1937 TAXES, COULD NOT BE LEGALLY CLAIMED, BUT THAT CHECK IN PAYMENT OF THE VOUCHER WAS NOT ISSUED UNTIL APRIL 11, 1939. THE DELAY IN SETTLEMENT IS ACCOUNTED FOR LARGELY BY THE DIFFICULTIES ENCOUNTERED BY THIS OFFICE IN OBTAINING FROM THE GREAT NORTHERN RAILWAY COMPANY PURSUANT TO YOUR PREAUDIT DIFFERENCE STATEMENT DATED NOVEMBER 30, 1938, A COPY OF THE LEASE DATED AUGUST 31, 1929, BETWEEN THE RAILWAY COMPANY AND THE BROADVIEW FARMERS ELEVATOR COMPANY. ADDITIONAL DELAY WAS OCCASIONED BY YOUR RECONSIDERATION OF THE VOUCHER PURSUANT TO OUR LETTER DATED FEBRUARY 13, 1939, AND SIGNED BY MR. K. A. BRASFIELD, COMPTROLLER, RECOMMENDING THE DISALLOWANCE OF AN AMOUNT OF $2.05 FROM THE PENALTY CHARGED ON THE 1937 TAXES. IN THIS CONNECTION, WE ARE ENCLOSING A COPY OF LETTER DATED NOVEMBER 22, 1938, FROM MR. T. A. COTHRON, TREASURER OF YELLOWSTONE COUNTY, AND A COPY OF OUR REPLY DATED NOVEMBER 26, 1938, SIGNED BY MR. R. N. WEIGANDT, TREASURER OF THE REVOLVING FUND.

BUREAU VOUCHER 9719 DOES NOT HAVE THE ADMINISTRATIVE APPROVAL OF THE FARM CREDIT ADMINISTRATION. IT IS OUR VIEW THAT TO REINSTATE TAX PENALTIES AFTER DECEMBER 1, 1938, WHICH HAD BEEN WAIVED BY A STATE STATUTE THAT WAS STILL IN EFFECT WHEN THE UNITED STATES ( FARM CREDIT ADMINISTRATION) ACQUIRED TITLE TO THE TAXED PROPERTY ON SEPTEMBER 17, 1938, AND THAT DID NOT EXPIRE UNTIL DECEMBER 1, 1938, IS ESSENTIALLY TO IMPUTE A PENALTY TO THE UNITED STATES FOR DELAY IN PAYMENT OF AN AMOUNT DUE. ACCORDING TO YOUR DECISION OF DECEMBER 22, 1937 (17 COMP. GEN. 526), CONGRESS HAS ADOPTED "THE COMMON LAW RULE THAT DELAY OR DEFAULT IN PAYMENT (UPON WHICH, IN THE ABSENCE OF EXPRESS AGREEMENT, THE RIGHT TO RECOVER INTEREST RESTS) CANNOT BE ATTRIBUTED TO THE SOVEREIGN.' OUR VIEWS WITH RESPECT TO THE PENALTIES CLAIMED BY THE TREASURER OF YELLOWSTONE COUNTY ARE SET FORTH MORE FULLY IN MY LETTER OF JUNE 10, 1939, TO THE CLAIMANT.

THERE IS ENCLOSED FOR PROPER DISPOSAL BY YOUR OFFICE CHECK NO. 169549, IN THE AMOUNT OF $532.33, ACCEPTANCE OF WHICH WAS REFUSED BY THE PAYEE FOR REASONS SET FORTH IN THE ENCLOSED COPY OF MR. ENOR K. MATSON'S LETTER OF MAY 17, 1939.

IT WILL BE APPRECIATED IF YOU WILL NOTIFY THE FARM CREDIT ADMINISTRATION OF YOUR ACTION CONCERNING THIS MATTER.

THE MATTER WAS TREATED AS A TAX CLAIM ASSERTED AGAINST THE UNITED STATES BY THE TREASURER OF YELLOWSTONE COUNTY MONT., FOR AN AMOUNT IN EXCESS OF THE CHECK FOR $532.33 THERETOFORE ISSUED IN HIS FAVOR FOR TAXES, PENALTIES, AND INTEREST ACCRUED AND PAYABLE AS OF THE DATE THE GOVERNMENT ACQUIRED THE PROPERTY. AS SUCH, THE CLAIM WAS DISALLOWED SEPTEMBER 22, 1939, ON THE GROUND THAT THE RIGHT OF THE STATE TO THE PAYMENT OF TAXES, INTEREST, OR PENALTY ACCRUING PRIOR TO THE DATE THAT TITLE TO PROPERTY PASSES TO THE UNITED STATES BECOMES FIXED AS OF THAT DATE, A NUMBER OF SUPREME COURT DECISIONS HOLDING THAT THE UNITED STATES IS GENERALLY NOT LIABLE FOR INTEREST ON CLAIMS AGAINST IT BEING CITED IN SUPPORT OF THE DISALLOWANCE. THE CHECK FOR $532.33 WAS TRANSMITTED TO THE TREASURER OF YELLOWSTONE COUNTY WITH NOTICE OF THE DISALLOWANCE.

THE TREASURER OF YELLOWSTONE COUNTY RETURNED THE CHECK TO THIS OFFICE WITH HIS LETTER OF OCTOBER 5, 1939, AS FOLLOWS:

REFERRING TO YOUR LETTER OF SEPTEMBER 22ND AND MY LETTER OF SEPTEMBER 25TH, REGARDING CLAIM TO WHICH YOU HAVE ASSIGNED NUMBER 10841738.

I AM RETURNING HEREWITH CHECK NO. 169549 DRAWN ON THE TREASURER OF THE UNITED STATES BY G. F. ALLEN IN THE AMOUNT OF $532.33, DATED APRIL 11, 1939, SYMBOL NUMBER 92-716. I AM UNABLE TO ACCEPT THIS AMOUNT IN FULL SETTLEMENT OF THE TAXES FOR THE YEARS 1934 TO 1938, INCLUSIVE, ON THE PROPERTY FORMERLY OWNED BY THE BROADVIEW FARMERS ELEVATOR COMPANY, BROADVIEW, MONTANA. IF YOU DESIRE TO MAKE PAYMENT OF THESE TAXES AT ANY TIME WE WILL COMPUTE THE INTEREST FOR YOU TO ANY DATE THAT YOU WISH, BUT PAYMENT IN FULL OF THESE TAXES MUST CONTAIN THE INTEREST UP TO THE TIME THAT PAYMENT IS ACTUALLY MADE.

I AM ENCLOSING HEREWITH COPY OF THE OPINION OF THE ATTORNEY GENERAL OF THIS STATE, ON THIS MATTER.

THE COPY OF THE OPINION OF THE ATTORNEY GENERAL OF MONTANA, DATED OCTOBER 2, 1939, AND ADDRESSED TO THE STATE CHIEF EXAMINER, IS AS FOLLOWS:

YOU HAVE SUBMITTED TO US THE LETTER OF JOSEPH E. FARRELL, TREASURER OF YELLOWSTONE COUNTY, DATED SEPTEMBER 25, 1939, RELATING TO THE TAX ON THE PROPERTY FORMERLY OWNED BY THE BROADVIEW FARMERS ELEVATOR COMPANY, ACQUIRED BY THE UNITED STATES FARM CREDIT ADMINISTRATION THROUGH FORECLOSURE PROCEEDINGS.

YOU ALSO FORWARDED LETTER FROM THE COMPTROLLER GENERAL TO THE TREASURER OF YELLOWSTONE COUNTY, DATED SEPTEMBER 22, 1939. SOME OF THE AUTHORITIES CITED BY THE COMPTROLLER GENERAL ARE THE SAME AS BEFORE SUBMITTED; THE OTHERS ARE ALONG THE SAME LINE AND DO NOT SEEM TO US TO BEAR ON THE QUESTION. THIS IS NOT A CLAIM AGAINST THE UNITED STATES, AS WAS THE FACT IN PRACTICALLY ALL OF THE CASES CITED BY THE COMPTROLLER, BUT RATHER A LIEN AGAINST PROPERTY OWNED BY THE UNITED STATES, WHICH THE UNITED STATES MUST PAY TO OBTAIN A CLEAR TITLE AND WHICH YOU HAVE NO AUTHORITY TO REMIT IN PART BY WAIVING THE INTEREST. THIS TAX LIEN IS AN OBLIGATION OF THE FORMER OWNER WHICH THE UNITED STATES ASSUMED WHEN IT PURCHASED THE PROPERTY, JUST AS A JUDGMENT WOULD BE, AND THE INTEREST RUNS THEREON UNTIL IT IS PAID.

IN DECISION OF DECEMBER 3, 1938, 18 COMP. GEN. 493, ADDRESSED TO THE GOVERNOR, FARM CREDIT ADMINISTRATION, IN A SIMILAR CASE, IT WAS SAID:

IT IS WELL ESTABLISHED THAT PROPERTY OF THE UNITED STATES IS NOT SUBJECT TO TAXATION BY THE STATES AND THAT THE RIGHT OF A STATE TO TAX PRIVATE PROPERTY CEASES WHEN THE TITLE THERETO PASSES TO THE FEDERAL GOVERNMENT. ACCORDINGLY, WHEN PROPERTY IS ACQUIRED BY THE UNITED STATES, THE RIGHT OF THE STATE TO THE PAYMENT OF TAXES, INTEREST, OR PENALTY ACCRUING PRIOR TO THE DATE THE TITLE PASSES TO THE UNITED STATES BECOMES FIXED AS OF THAT DATE, AND NO INTEREST OR OTHER PENALTY MAY BE ASSESSED AGAINST THE UNITED STATES ON THE PROPERTY ON OR AFTER THAT TIME (15 COMP. GEN. 179; 17 ID. 526).

THE ACTION IN THE PRESENT CASE, BOTH BY THE FARM CREDIT ADMINISTRATION AND BY THIS OFFICE, FOLLOWED THAT DECISION. WHAT WAS THERE SAID, HOWEVER, WAS WITHOUT REGARD TO THE CONCEPT NOW ADVANCED BY THE ATTORNEY GENERAL OF MONTANA--- WHICH APPEARS CORRECT--- THAT IN SUCH CASES THERE IS NOT INVOLVED A CLAIM, AS SUCH, AGAINST THE UNITED STATES, BUT THE EXISTENCE OF A VALID PRIOR LIEN ON PROPERTY ACQUIRED BY THE UNITED STATES, AND THE CONDITIONS UNDER WHICH THE PROPERTY MAY BE DISCHARGED OF SUCH VALID PRIOR LIEN, IF THE UNITED STATES CHOOSES TO DISCHARGE THE PRIOR LIEN TO CLEAR ITS TITLE IN THAT RESPECT. AS THE ATTORNEY GENERAL OF MONTANA POINTS OUT, IF THE PRIOR LIEN HAD BEEN AN INTEREST-BEARING JUDGMENT, THERE WOULD BE NO DOUBT THAT INTEREST WOULD HAVE TO BE PAID ON THE JUDGMENT DOWN TO THE DATE OF PAYMENT TO DISCHARGE THE LIEN. LIKEWISE, IF THERE HAD BEEN A PRIOR MORTGAGE TO SECURE PAYMENT OF AN INTEREST-BEARING DEBT, INTEREST WOULD HAVE TO BE ALLOWED TO DATE OF SETTLEMENT TO DISCHARGE THE LIEN OF THE PRIOR MORTGAGE. OF COURSE, A STATE MAY NOT ASSESS TAXES ON PROPERTY OWNED BY THE FEDERAL GOVERNMENT, BUT THAT IS NOT INVOLVED IN THE DISCHARGE OF A STATUTORY LIEN WHICH ATTACHED TO THE PROPERTY FOR TAXES ASSESSED BEFORE IT WAS ACQUIRED BY THE GOVERNMENT. THE ACQUISITION OF PROPERTY BY THE UNITED STATES MAY NOT BE VIEWED AS LEGALLY DIVESTING THE STATE OF A VESTED LIEN FOR TAXES WITH PENALTIES AND INTEREST TO DATE OF PAYMENT ATTACHING TO THE PROPERTY BY OPERATION OF LAW UNDER STATE STATUTES PRIOR TO THE GOVERNMENT'S OWNERSHIP. OF COURSE, THE LIEN FOR THE TAXES IS A LIEN FOR THE SUBSEQUENTLY ACCRUING PENALTIES AND INTEREST ON THE DELINQUENT TAXES. BOARD OF COMMISSIONERS V. BERNARDIN (10 CIR.) 74 F./2D) 809; BALTIMORE TRUST CO. V. INTEROCEAN OIL CO., 30 FED. SUPP. 560. IT WOULD FOLLOW THAT IF THE GOVERNMENT CHOOSES TO DISCHARGE SUCH A PRIOR LIEN IT MUST DO SO ON THE CONDITIONS UNDER WHICH IT VESTED AND TO WHICH IT IS SUBJECT, THE SAME AS A PRIOR JUDGMENT OR MORTGAGE LIEN. TO THE EXTENT THAT THE DECISION OF DECEMBER 3, 1938, SUPRA, MAY BE TO THE CONTRARY, IT SHOULD NO LONGER BE FOLLOWED.

IT IS FOR THE ADMINISTRATIVE AGENCY CONCERNED, OF COURSE, AND NOT THIS OFFICE, TO DETERMINE PRIMARILY WHETHER A PRIOR LIEN ON PROPERTY ACQUIRED SHOULD BE DISCHARGED. ACCORDINGLY, THE CHECK FOR $532.33 PREVIOUSLY ISSUED IN FAVOR OF THE TREASURER OF YELLOWSTONE COUNTY IS RETURNED HEREWITH FOR ADMINISTRATIVE ACTION IN THAT RESPECT, AND YOU ARE ADVISED THAT IF IT BE DECIDED TO DISCHARGE THE TAX LIENS THIS OFFICE WILL NOT OBJECT TO PAYMENT OF SUCH ADDITIONAL AMOUNT AS MAY BE REQUIRED BY STATE LAW TO EFFECT SUCH DISCHARGE.