Courtney v. Byram

California Court of Appeal Oct 8, 1942 No. Civ. 13674Published

Before: Gould

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Holding. The court held that an assignment for the benefit of creditors does not discharge real property from tax liens, nor does it relegate tax claims to the status of general debts subject to assignment proceedings. Consequently, the state's power to collect taxes through property sales cannot be enjoined by such assignments.

Issues

Whether delinquent real property taxes constitute a 'debt' subject to assignment for the benefit of creditors under Civil Code section 3468.
Whether an assignment for the benefit of creditors can enjoin the state from selling property to satisfy a tax lien.
Whether the declaratory relief statute may be invoked against the state or its political subdivisions in this context.

Disposition. Affirmed; restraining order dissolved.

Quotations verified verbatim against the opinion

“A tax is a charge upon persons or property to raise money for public purposes. It is not founded upon contract; it does not establish the relation of debtor and creditor between the taxpayer and State.”

“The statute, enacted for the benefit of debtors and creditors, cannot be used as a means of depriving the state of its essential revenue.”

“It has been held that the declaratory relief statute (§ 1060, Code Civ. Proc.) may not be invoked against the state or its political subdivisions”

GOULD, J. pro tem.

By proceedings regularly taken under sections 3449-3473, inclusive, of the Civil Code, plaintiff as assignee for the benefit of creditors of Clyde Hillis, an insolvent debtor, took possession of his property, including certain realty upon which city and county general taxes were long delinquent and which the tax collector of Los Angeles County was about to sell in the manner provided by law for the collecting and enforcing of taxes. Confronted with this situation, plaintiff-assignee assumed the position that the tax obligation was simply one of the “debts” or “liens” of the debtor for the benefit of whose creditors he was acting, and that the county with its tax claim was to be relegated to the same position as another “creditor.” He sought by injunctive remedy to halt the proposed tax sale and to subject the county’s tax claim to the proceedings under the assignment for the benefit of creditors. Defendant tax collector filed

[771]

a general demurrer. Injunction was denied and the demurrer was sustained without leave to amend. Plaintiff appeals.

Appellant formulates as follows the only question involved upon this appeal: “Whether delinquent general taxes on real property secured by a lien thereon in this state are a debt and a lien for securing the payment of a debt owing by a debtor to the county and state as creditor, within the meaning, intention and provisions of the last two paragraphs of section 3468 of the Civil Code?” Or, as stated by respondent: “Does an assignment of property for the benefit of creditors discharge such property from the prior lien of taxes thereon and relegate such taxes to a mere parity with the general debts of the assignor?”

Unquestionably the lower court correctly sustained the demurrer without leave to amend.

It is true that appellant has discovered many decisions in which a tax is spoken of as a “debt”, e. g.: “. . . A tax constitutes a debt owed by the person upon whom such tax has been legally imposed”

(National Ice etc. Co.

Pacific Fruit Express Co.,

11 Cal. (2d) 283 [79 P. (2d) 380], at 291) ; “. . . in a popular sense a tax duly levied becomes a . . . debt due ...”

Courtney v. Byram

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