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No. 11,821

IN THE

United States Court of Appeals

For the Ninth Circuit

Dawson County, Montana,

vs.

Appellant,

Mary Hagan, E. B. Clark and Minnie R. Evans, on their own behalf and on behalf of all bondholders of the Upper Glendive- Fallon Irrigation District of the State of Montana, and United States of America,

Appellees, and

Mary Hagan, E. B. Clark and Minnie R. Evans, on their own behalf and on behalf of all bondholders of the Upper Glendive- Fallon Irrigation District of the State of Montana, Appellants.

vs.

Edna Yale, Allen W. Yale and Ruby Yale (his wife), and Ruth Petterson and Hans Petterson (her husband). The Scottish American Mortgage Company, Limited, United States of America, Dawson County and Prairie County, Appellees.

Upon Appeals from the District Court of the United States for the District of Montana.

BRIEF FOR APPELLANTS.

(Second Appeal)

iU

hLb ^c i^'i

fbi

D. C. Warren, PAUL P, O'BRIEN,

E. W. POPHAM, . OUKf

Cecil N. Brown,

Glendive, Montana,

Attorneys for Appellants.

Pbbnau-Walsh Pkinting Co., San Fbancisco, CAiiroBNiA

Subject Index

Page

Opinion below 2

Jurisdiction 2

Question presented 2

Statement of the case 3

Sununary of argument 7

Argument 9

Overpayment 17

Collateral attack 21

Assessments after tax deed 22

Agreed price binding in condemnation action 25

The judgment against the United States is void 26

No reply filed by bondholders 26

Tax deed extinguishes appellee 's lien 27

Distribution erroneous 28

Conclusion 29

Table of Authorities Cited

Cases Pages

Anaconda Copper Mining Co. v. Thomas, 48 Mont. 222, 137 Pac. 380 (1913) 27

Bank of Edenton v. United States (4 Cir.), 152 Fed. (2d) 251 18,25

Blue Valley Creamery Co. v. Consolidated Products Co. (1936, CCA 8th), 81 Fed. (2d) 182 15

Carroll v. Carroll (1853), 16 How. U. S. 275, 14 L. Ed. 936 16

Cascade v. Weaver, 108 Mont. 1, 90 Pac. (2d) 164 (1939) 24 Cosman v. Chestnut Valley Irrigation District, 74 Mont. Ill,

239 Pac. 879, 40 A.L.R. 1344 (1925) 10

Danforth v. United States, 308 U. S. 271, 24 L. Ed. 240, 60 S. Ct. 231 18, 25

Edquest v. Tripp and Dragstedt ct al., 93 Mont. 446 (1933) 10 Empire Theatre Company v. Cloke et al., 53 Mont. 183, 163

Pac. 107 (1917) 14

Erie Railroad Company v. Tompkins, 114 A.L.R. 1457

(1938) 12

Goldsbury v. MacConnell, 73 Colo. 35, 215 Pac. 872 22

Hartmann v. The City of Bozeman, 116 Mont. 392, 154 Pac.

(2d) 279 (1944) 24

Hawks V. Hamill (1933), 288 U. S. 52, 77 L. Ed. 610, 53

S. Ct. 240 15

Hopper V. Chandler, 183 Ark. 469, 36 S. W. (2d) 398. .. . 22

Judith Basin Irrigation District v. Malott, 73 Fed. (2d) 142 (1934), 97 A.L.R. 508 11

Malott case, 296 Pac. 1, 89 Mont. 37 12

Mettler v. Ames Realty Co., 61 Mont. 152, 201 Pac. 702

(1921) 14

Muschany v. United States, 324 U. S. 49, 89 L. Ed. 744. .. . 25

Oliver v. United States, 156 Fed. (2d) 281 18

Table of Authorities Cited iii

Pages Richardson v. Lloyd et al., 90 Mont. 127, 300 Pac. 254

(1931) 21

River Farms of California v. Gibson, County Treasurer, 42

Pac. (2d) 95 (1935) 16

Seaboard Airline v. United States, 261 U. S. 299, 67 L. Ed.

664 25

Smith V. Whitney, 105 Mont. 523, 74 Pac. (2d) 450 (1937) 21

Smyth V. United States, 302 U. S. 329, 82 L. Ed. 294 25

Spratt V. Helena Power Transmission Company, 37 Mont.

60, 94 Pac. 631 (1908) 14

State ex rel. j\Ialott v. Cascade County, 22 Pac. (2d) 811,

94 Mont. 394 (1933) 12, 14, 16, 17

State V. Board of Commisioners of Cascade County, 89 Mont.

37 (1931) 296 Pac. 1 9, 10

State ex rel. Malott v. Board of County Commissioners, 89

Mont. 37, 296 Pac. 1 11, 12

State ex rel. Osten v. Billings, 91 Mont. 76, 5 Pac. (2d)

562 (1931) 22, 24

State ex rel. Walkel v. Jones, 80 Mont. 574, 261 Pac. 356,

60 A.L.R. 551 (1927) 15

State V. Salt Lake County, 85 Pac. (2d) 858 (1938) 16

Toole County Irrigation District v. Moody, 125 Fed. (2d) 498 (1942) 13

United States v. Miller, 317 U. S. 369, 63 S. Ct. 276, 87 L.

Ed. 336, 147 A.L.R. 55 (1943) 20

United States v. North Carolina, 136 U. ,S. 211, 34 L. Ed.

336 25

United States v. Rogers, 255 U. S. 163, 65 L. Ed. 566, 41

S. Ct. 281 25

Statutes

Laws of Montana 1937 5, 8, 22

Revised Codes of Montana 1921 :

Section 7210 13, 14

Sections 7208, 7213, 7226, 7229, 7231 13

Section 7232 11, 13

iv Table of Authorities Cited

Pages Revisi'd Codes of Montana 1935:

Section 9160 26

Section 9187 4,18

Revised Codes of Montana 1921, Section 2235, subdivision 1, as amended by laws of 1927, Chapter 85, Section 3. . . . 12

26 R.C.L. 446 22

25 Stat. 357 2

54 Stat. 1119 2

40 U.S.C.A. 258a 4, 22, 26

U. S. Code:

Title 40, Section 257 2

Title 28, Section 1291 2

Title 28, Sections 1331 and 1345 2

Texts

97 A.L.R. 514 12

14 Am. Jur. 295, Section 83 15

18 Yale Law Journal, pages 1-8 14

m

No. 11,821

IN THE

United States Court of Appeals For the Ninth Circuit

Dawson County, Montana,

vs.

Appellant,

Mary Hagan, E. B. Clark and Minnie R. Evans, on their own behalf and on behalf of all bondholders of the Upper Glendive- Fallon Irrigation District of the State of Montana, and United States of America,

Appellees, and

Mary Hagan, E. B. Clark and Minnie R. Evans, on their own behalf and on behalf of all bondholders of the Upper Glendive- Fallon Irrigation District of the State of Montana, Appellants,

vs.

Edna Yale, Allen W. Yale and Ruby Yale (his wife), and Ruth Petterson and Hans Petterson (her husband). The Scottish American Mortgage Company, Limited, United States of America, Dawson County and Prairie County, Appellees.

Upon Appeals from the District Court of the United States for the District of Montana.

BRIEF FOR APPELLANTS.

(Second Appeal)

OPINION BELOW.

This appeal is from the judgment entered by the District Court on November 24, 1948, pursuant to findings of fact made and conclusions of law stated by direction of this Court in its per curiam opinion filed November 1, 1948.

Judgment was in favor of the bondholders as to distribution of the funds in the registry of the Court being an award of just compensation in a condemna- tion action.

JURISDICTION.

Jurisdiction of the District Court rests in the gen- eral condemnation act of August 1, 1888, 25 Stat. 357, 40 U. S. Code, Section 257, and the act of October 14, 1940, 54 Stat. 1119, and Sections 1331 and 1345, Title 28, U. S. Code.

The jurisdiction of this Court rests on Section 1291, Title 28, U. S. Code.

QUESTION PRESENTED.

These appeals are taken by adverse claimants to the fmids deposited in the registry of the Court in a con- demnation proceeding wherein a declaration of tak- ing was filed on April 27, 1942, the amount deposited as just compensation is not being contested in this action.

Notice of appeal by Dawson County, Montana, and Prairie County, Montana, were filed December 10,

1948. Cross appeals by bondliolders were filed on De- cember 27, 1948.

The question before the Court was whether the bondholders had a lien upon the lands at the time of the filing of the declaration of taking on April 27, 1942. Title to said lands having i^assed to the counties by tax deeds taken in 1931 and 1939.

The disposition of the compensation deposited in the registry of the Court was the sole question for decision herein involving questions of law only.

Partial distribution to the counties was made on July 11, 1944, of the amount of the general taxes against said lands at the time of taking the tax deeds. The matter of the further distribution of the remain- ing funds was reserved by the Court. (Transcript pages 67 and 68.)

The special assessments made against the lands in- volved were challenged by the counties. (Appellants' Brief page 12.)

STATEMENT OF THE CASE.

We supplement the statement of the case, pages 1 to 4 inclusive in appellants' brief on file herein, with the following:

Under Montana law, a tax deed creates a doubtful title and the present action was brought by the United 'States to quiet title. (Transcript page 104.) The value of the lands to be condemned was agreed upon by the appellant counties and the United States. No appear- ance challenging the action was made by the appel-

lants as they appeared only for the purpose of dis- tribution of the compensation agreed upon deposited in the registry of the Court when the action was com- menced. (Transcript pages 98, 99, 101, 104 and 105.)

The counties and the United States agreed upon condemnation as the best procedure to quiet title to obtain immediate possession in the United States by reason of the provisions of Section 258-A Title 40, United States Code Annotated under which the fee title to the lands vests in the United States upon the filing of the declaration of taking and the deposit of the funds determined to be just compensation.

Under Montana law any decree to quiet title to the lands brought in the State Courts where service of summons by publication process is necessary by rea- son of the non-residence of the defendants, would not become final until one year after the entry of the de- cree of such Court under the provisions of Section 9187 Revised Codes of Montana 1935, and the deci- sions of the Supreme Court of Montana construing said section. The complaint shows the United States required the immediate possession of the lands. (Transcript pages 25 and 26, Paragraph VIII.)

SPECIFICATION OF ERRORS.

Appellant intends to rely on this appeal on the con- tentions that the District Court of the United States for the District of Montana, being the trial Court be- low, erred:

1. In adopting as its rule in making distribution of the funds in the registry of the Court the dictum of the Montana Supreme Court in a decision wherein the method of distribution of funds derived from the sale of tax deed lands was not before said Court for de- cision.

2. In finding overpayments to appellants of taxes due them where the contract between the United States and appellants fixed the acreage to be sold to the United States by appellants and the purchase price was agreed upon in a lump sum with no divi- sion into tracts.

3. In the judgment entered distribution is made to appellees who have no lien on the tax deed lands and no right to the funds, said order being in fact a collateral attack on the tax titles of appellants not permissable under Montana law.

4. In its interpretation of Chapter 63, Laws of Montana, 1937 which has no application to this cause as no taxes were levied after the tax deeds were taken by appellants and such act has been determined by the Supreme Court of Montana to be prospective and not retroactive.

5. In failing to give proper consideration to the stipulation between the United States and these ap- pellants which fixed by agreement the lands to be tak- en and the price to be paid by the United States, which becomes binding upon both parties in a con- demnation action.

6. Ill ordering judgment against the United States witli interest from July 11, 1944 in favor of the ap- pellee bondholders the records showing the value of the lands taken by the United States was fixed by agreement with the owners, the appellants herein such judgment and interest thereon being void.

7. The judgment entered herein is contrary to the admissions of the parties by their pleadings in that Paragraph III of defendant, Dawson County's an- swer was not denied by reply and therefore the facts therein set forth cannot now be challenged by the ap- pellees. (Transcript pages 49-50.)

8. The award to the appellee bondholders by the judgment herein is contrary to the decisions of the Su- preme Court of Montana wherein they are classified the same as any mortgagee investor with no greater rights and the same obligations as to pajonent of taxes to protect the lien of their investment.

9. Conclusion of law #1 adopted by the Court is contrary to the statute law of Montana, and the deci- sions of its Supreme Court thereon and creates a pre- cedent unwarranted under such statutes and decisions in distril)uting the remainder of the compensation de- posited in the Court to ])ondholders who had no lien on the fund having lost all claim of lien to the lands taken by the tax deeds. Such conclusions should not be adopted by this Court as it would in effect require all counties in Montana to divide the sale price of tax deed lands to all persons who held liens on the lands sold prior to the tax deed proceedings.

SUMMARY OF ARGUMENT.

(a) The distribution ordered in the judgment en- tered awarding the remaining funds in the registry of the Court to the bondholders was based upon dicta in a decision of the Supreme Court of Montana in a case where the Court suggested a method of disposi- tion of the funds derived from the sale of the tax deed lands by the county. The Court itself stated the matter was not then before it for decision, and the case is not authorit}^ for the conclusions adopted by the trial Court in its judgment.

(b) The judgment entered awarding the fimds to the bondholders representing just compensation is a collateral attack on the tax title to these lands owned by the counties and sold to the United States. Such an attack is contrary to the decisions of the Supreme Court of Montana relating to tax deed titles.

(c) The United States and the counties stipulated on the value of the tax deed lands purchased by agree- ment between them in which the acreage was fixed and no division of such acreage was made by the parties into tracts. Such agreement and stipulation is bind- ing upon both parties.

(d) The bondholders invested in lands subject to general taxation and in order to protect such invest- ment were by law obligated to see that the general taxes levied in each year were paid or the lands re- deemed from the tax sale or the bondholders could purchase the outstanding tax sale certificate and take tax title to the lands.

8

(e) Under Montana law the tax title of the coun- ties was an independent grant from the sovereign and the lands were free from all prior liens and encum- brances including prior tax liens.

(f ) No irrigation assessments were made after the tax deeds were taken so that Chapter 63 of the Laws of Montana, 1937, has no application in this action. The act being prospective and not retroactive.

(g) The equity rule followed by the Court below does not apply in this case as the award of just com- pensation is payable only to the owner of the land. The same being free and clear of all encumbrances and liens by the taking of the tax deeds, under Mon- tana law and decisions.

(h) The judgment entered herein sets a precedent on a point of fundamental law not passed upon by the Supreme Court in its decisions or enacted by Montana Statute Law. The award to bondholders of part of the sale price of the lands taken by the United States of America where they had no lien on the lands under Montana law, if followed by this Court, would require the distribution of a part of the sale price of tax deed lands sold by the counties to be paid to all holders of liens of record prior to the tax deeds which is contrary to express holdings of the Supreme Court of Montana.

(i) Appellant, Dawson County, Montana in Par- agraph 3 of its answer set forth its claim and title to the purchase price of the land sold by it to the United States. Further pleading no person whom-

9

soever had any right, thereto, and its title was free from all liens or encumbrances and claimed the right to the distribution of the just compensation for said lands. None of these allegations were denied by re- ply and they now stand admitted in this proceeding and entitle said appellant to the funds remaining in the Registry of the Court applicable to said lands of said County taken hy the United States.

ARGUMENT.

We shall follow our specification of errors in the order of presenting our argument in this cause.

We first call attention to the case (Transcript page 152) relied upon by the bondholders and adopted by the Court in its findings. State v. Board of Commis- sioners of Cascade County, 89 Montana 37, (1931) 296 Pacific 1. At the outset we call attention to the statement of our Supreme Court on points 17 and 19 thereof as follows:

''The decision of a court in any case should be read in the light of the precise question then un- der consideration. Cohens v. Virginia, 6 Wheat. 264, 5 L. Ed. 257. This court, speaking through Mr. Chief Justice Callaway, in the case of State ex rel. Walker v. Jones, 80 Mont. 574, 261 P. 356, 360, 60 A. L. R. 551, said: 'It is the rule of uni- versal application that general expressions used in a court's opinion are to be taken in connec- tion with the case under consideration' citing Bramwell v. United States F. & G. Co., 269 U. S. 483, 46 S. Ct. 176, 70 L. Ed. 368. And again, in

10

the case of Sun River Stock & Land Co. v. Mon- tana Trust & Savings Bank, 81 Mont. 222, 262 P. 1039, 1047, this court said: 'In considering the meaning and intent of the language of an opinion one must have constantly in mind the facts of the case in which the opinion is written. For, as Chief Justice Marshall observed, it is impossible so to use language as that general expressions apply in every instance with the same meaning to every condition of facts' citing Chater v. San Francisco Sugar Refining Co., 19 Cal. 220."

This case was followed in Edquest v. Tripp and Dragstedt, et ah, 93 Montana 446 (1933).

In the case above quoted the Montana Supreme Court had before it for decision this question only whether or not the lien of irrigation district bonds is a general obligation of the irrigation district or merely a charge against the lands within the district and the holding in that case reversed the former de- cisions of the Supreme Court in the case of Cosman V. Chestnut Valley Irrigation District, 74 Montana 111, 239 Pacific 879, 40 A. L. R. 1344 (1925).

After determining the matter at issue, the Court went on to say at page 95, Volume 89, Mo7itana Re- ports :

"It has been suggested by counsel for respond- ents that the county hold title to these lands as a trustee. While this matter is not directly before the court for detei'mination, yet we observe in connection therewith that, when the county ac- quires these lands l^y tax deed on account of de-

11

linquent taxes and irrigation district assessments, it takes and holds such title as a trustee. The moneys derived from the sale of such lands are trust funds. The parties and entities interested in that fund are the school districts within the county, the coimty itself, the state to the extent of the taxes owing to it, the bondholders, and the holders of the debenture certificates."

The statement of the Court above set forth shows clearly what can happen in a case where the Court endeavors to express its views on matters not before it for decision. In connection with this statement above referred to this Court in the case of Judith Basin Irrigation District v. Malott, 73 Fed. 2nd 142, (1934) 97 A. L. R. 508, made the following pertinent statement :

"The Supreme Court of Montana in State ex rel. Malott V. Board of County Commissioners, 89 Montana 37, 296 Pacific 1, expressly overruled its previous decisions and decided irrigation dis- trict bonds were not the general obligation of the district, but merely a charge against the lands within the district, and that each tract of land was only liable for its proportion of the entire bonded indebtedness. It was also held in that case that when the land had been sold for taxes and when conveyed to the county by tax deed and subsequently sold by the county, as provided by law, that the purchaser acquired the lands free and clear from any lien of the bonds or any fu- ture taxation for the payment thereof."

Citing Section 7232 of the Rev. Codes of Montana, as to the duty to assess the tax annually for the pay-

12

ment of the ])onds and at page 514, in 97 A. L. R. point #8, '*we also suggested that the question of the dis- position of the funds derived by the sale of the lands deeded to the county for the State, county and irri- gation district taxes suggested by the Supreme Court of Montana in its dictum in the case of State ex rel. MaJott V. Board of County Commissioners, supra, was in conflict with the statutory rule Revised Code of Montana, 1921, Section 2235 Subdivision 1, as amended by laws of 1927, Chapter 85, Section 3, in re- lation thereto.

In the case above quoted, the same question was be- fore this Court, as was before the Supreme Court of Montana in the case known as the Malott case, 296 Pacific 1, 89 Montana 37. Subsequent to this decision, which was never appealed to the Supreme Court of the United States for final decision, the United States Supreme Court in the case of Erie Railroad Company V. Tompkins, 114 A. L. R. 1457 (1938), held contrary to this Court's decision in the Judith Basin v. Malott case above referred to, the holding being:

"The phrase, 'laws of the several states,' as used in statute requiring federal courts to apply laws of the several states except in matters governed by federal Constitution or statutes held to include not only state statutory law, but also state de- cisions on questions of general law, in absence of any constitutional provision purj)orting to confer upon, federal courts power of declaring substan- tive rules of common law applicable in a state."

This doctrine is followed in the Montana case of Toole County Irrigation District v. Moody, 125 Fed-

13

eral 2nd 498 (1942) from which we quote the following specific holdings made by the Court, none of which support the findings of the district Court in its con- clusion of law #1 wherein this decision is quoted as supporting such conclusions. The holdings of the Court in said case, are as follows:

1. ''Recovery could not be had against dis- trict in action on irrigation district bonds on ground that l)onds even if not accrual obligations of district when issued had l)ecome so by reason of a subsequent agreement, where action was not based upon the agreement and agreement in so far as it purported to make the bonds general obligations of district was void. ' '

2. "The doctrine that a Federal Court must follow decisions of the highest Court of a state is as applicable to actions founded on contract as to tort actions."

3. ''The Federal Courts in determining whether ])onds issued by Montana irrigation dis- trict were general obligations of the district were required to folloAV decisions that such bonds is- sued pursuant to Montana statutes were not gen- eral obligations of irrigation district, but merely a charge against land within the district." Revised Codes of Montana 1921, Sections 7208, 7210, 7213, 7226, 7229, 7231 and 7232.

4. Judicial Decisions.

"The act of Circuit Court of Appeals in ac- tion on Montana Irrigation District bonds in giving effect to Montana decisions that bonds did not constitute general ol^ligations of irrigation district, did not constitute 'an impairment of ob- ligation of contract' since the Courts' decision

14

was merely that the obligation allegedly impaired did not exist." Revised Codes of Montana, Sec- tion 7210.

This Court should not adopt the doctrine of the Supreme Court in the Malott case herein before cited, as to such doctrine the Montana Courts have held:

1. In the case of the Empire Theatre Com- pany V. Cloke et ah, 53 Montana 183, 163 Pacific 107. (1917.) "An obiter dictum is a gratuitous oi)inion, an individual impertinence which, whether it be wise or foolish, right or wrong, bindeth none not even the lips that utter it."

2. Mettler v. Ames Realty Co., 61, Montana 152, 201 Pacific 702. (1921.) ''Observations made during the course of an opinion upon a subject not involved in the case do not require explana- tion and are not binding upon the Court." At page 165 tlie Court says, ''The language of Hon- orable Simeon E. Baldwin is particularly pertin- ent here: 'If the writer of a judicial opinion has I)ermitted his pen to move too fast and gone be- yond the exigencies of the case, it is the strength of our system of remedial justice that his words lose their authority, as soon as the bounds of nec- essity are passed. ' " ( Citing 18 Yale Law Journal pages 1-8 inclusive.)

3. "All that is necessary to make a decision of this Court authoritative is that there shall ap- pear to have been an application of the judicial mind to the ijrecise question adjudged and that the point was fully considered." Spratt v. Hel- ena Poiver Transmission Company, 37 Montana 60, 94 Pacific 631. (1908.)

15

4. We quote from 14 Am. Jur. 295, Section 83, '^The doctrine of stare decisis contemplates only such points as are actually involved and de- termined in a case, and not what is said by the Court or judge outside the record or on points not necessarily concerned therein. Such expres- sions being obiter dicta do not become preced- ents." Citing State ex rel. Walkel v. Jones, 80 Montana 574, 261 Pacific 356, 60 A. L. R. 551. (1927.)

5. In the case of Hawks v. Hamill (1933), 288 U. S. 52, 77 L. Ed 610, 53 Supreme Court 240, Justice Cardozo observed: ''An opinion may be so framed that there is doubt whether the part it invoked as an authority is to be ranked as a definitive holding or merely a considered dictum. But the result will not be changed though the definition of perpetuities be something less than a decision. At least it is a considered dictum, and not comment merely obiter. It has capacity, though it be less than a decision, to tilt the bal- anced mind toward submission and agreement.

In controversies so purely local, little gain is to be derived from drawing nice distinctions be- tween dicta and decisions. Disagreement with either, even though permissible is at best a last resort, to be embraced with caution and reluc- tance. The stranger from afar, unacquainted with the local ways, permits himself to be guided by the best evidence available, the directions or the counsel of those who dwell upon the spot." See also quoting with approval Blue Valley Creamery Co. v. Consolidated Products Co., 1936, CCA 8th 81 Fed. 2nd, 182.

16

6. The Court in CarroU v. Carroll, 1853, 16 How U. S. 275, 14 L. Ed 936 held that the duty of the Federal Courts to follow state court deci- sions extends only as far as the rules of stare decisis permit, and since dicta i.e. expressions not necessary to the actual decision of the contro- versy before the Court have no value as binding precedents in common law Courts, a Federal Court is not required to follow dictum in a State Court decision.

The Malott case was not followed hj any other case reported as to the trustee doctrine where the county acquires title to lands through tax deeds. It was, how- ever, mentioned in other cases such as River Farms of California v. Gibson, County Treasurer, 42 Pacific 2nd 95 (1935). By statute, the county treasurer was creating a trustee of the irrigation district funds as well as for sale and for redemption of the lands from tax liens. The case cites with approval the doctrine of the Supreme Court of Montana in the Malott case but an examination of the facts and matter for decision before the California Court and Malott case facts and the doctrine set forth therein are entirely different.

In the Utah case. State v. Salt Lake County, 85 Pacific 2nd 858 (1938), the Utah Court refused to follow the doctrine of the Malott case in the follow- ing language:

"Court decisions are authoritative only upon questions of law or facts actually presented, dis- cussed and decided."

Ill a suljsequent decision of the Supreme Court of Montana, State ex rel. Malott v. Cascade County, 22

17

Pacific 2nd 811, 94 Montana 394 (1933), in which the sole question was the right of the county treasurer to assign tax certificates of sale to a private person who purchased to take tax title to the land and wipe out the lien of irrigation district bonds. The Court held this could not be done, and in its decision cited the Malott case 89 Montana 37, 296 Pacific 1, with ap- proval, but in its decision it referred to debenture certificates which in this particular case had been is- sued by the county to the irrigation district. In this case now l^efore this Court there were no debenture certificates involved. The decision above referred to specifically holds:

"If the land would sell for an amount in excess

of the taxes and assessments

* * * J?

This, of course, was impossible in the instant case. The compensation deposited for the Dawson County lands being $23,526.00, and for the Prairie County lands, $7680.00, which were the amounts for which the counties agreed to sell the lands to the United States. Unpaid irrigation assessments totalled $41,662.98, so that the case is not authority for the trustee doctrine. The statement made pertaining to the irrigation dis- trict assessments was not before the Court for decision.

OVERPAYMENT.

We contend there could be no overpayment as to the counties as they sold specific acreages of land for a gross sum of money. No changes or alteration of the

18

original contract was made at any time ])y any of the parties. This action was brought and completed to (juiet title to the landa as a means of gi\dng the United States a complete and immediate title and possession under the provisions of the Federal Code. The fee was vested in the United States upon the filing of the declaration of taking, the method of payment adopted Avas by agreement. The condemnation action and award followed the original agreement.

The legal procedure of condemnation was used as a means of determining to whom payment should be made, as well as giving the United States superior rights to the land that could not be obtained under State law as any judgment in a Montana action to quiet title where defendants are served by public pro- cess does not become final until one year after the en- try of the decree under the provisions of Section 9187 Revised Codes of Montana 1935.

The bringing of an action to condemn merely for the purpose of quieting title would not alter or change the original agreement of the parties so that the di- vision of the lands into tracts was merely for the con- venience of the agencies of the United States who took I)ossession of the land and used it for their purposes. Bank of Edenton v. United States, 4th Circuit, 152 Fed. (2d) 251-4, Danforth v. United States, 308 U. S. 271-282, Oliver v. United States, 156 Fed. (2d) 281- 282.

In the Danforth case above cited, '^An offer by United States officer to purchase perpetual flow- age easement over land for specified amount, in

19

connection with flood control program, mention- ing desire to consnmmate the purchase by friendly condemnation proceedings, was, when accepted, an agreement to fix the price of the easement at the named figure, and was binding in subsequent condemnation proceeding, notwith- standing attempt of the govermnent to withdraw the offer after acceptance."

The lower Court in its decision and order on Sep- tember 4, 1947, pages 98 and 99 of the Transcript on Appeal makes this statement :

''The lands embraced in this action were acquired by the G-overnment through an agreement which included total acreage of the purchase and con- sideration therefor, and also through condem- nation proceedings, wherein declaration of taking was filed, (sec. 258a, Title 40, U. S. C. A.), and commissioners were appointed by the court to ap- praise the lands, which was done in accordance with the terms of the aforesaid agreement of pur- chase; and thereafter they made their return and awarded as just compensation for the same total acreage the same amount of money as had there- tofore been agreed upon between the Govern- ment and the defendants herein, Dawson and Prairie Counties, which sum was thereafter de- posited in the registry of the court. Final judg- ment was entered on the awards of the commis- sioners, and no appeal was ever taken there- from. ' '

Our contention is that the counties, after the sign- ing of options to the Government, and stij^ulating with the Government for the purchase price of the acre-

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age to be taken were in no position to file in the con- demnation action any pleading making changes nor in any way abrogating the contract and agreements made, nor can they seek to have the commissioners ap- I3ointed appraise the land at any greater value by means of appraising tracts where the total value would exceed the agreed price between the United States and the counties. There could and has been no division of the consideration for the acreage sold.

Conclusion No. 5 of the Court is erroneous in order- ing repayment (Tr. 153-154), citing in support of such conclusion the case of United States v. Miller, 317 U. S. 369, 63 Supreme Court 276, 87 L. Ed. 336, 147 A. L. R. 55 (1943). A close examination of this case shows that there is a very distinct difference of facts in that case and the instant case. In the Miller case the Court paid to three respondents upon their api)lication when the action was filed the sum of $850.00 each as just compensation. The case proceeded to trial and the jury fixed the awards assessing them at a less sum than the sum awarded and paid by the Court. Repayment was ordered by the Supreme Court in the case. Here compensation was fij?;ed on all of the lands sold ])y the coimties to the United States by agreement. There was no trial. The commissioners awarded the sum agreed upon. The division into tracts was made by the agents of the United States. (Transcript pages 103 and 104.)

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COLLATERAL ATTACK.

Under our Court decisions after the taking of lands by tax deed, all liens and encumbances have been ex- tinguished, including prior tax liens. The bondhold- ers are in such a position now and since the counties obtained the lands by tax title no attack can be made except by direct action. Here the Court's order of distribution is a collateral attack on the tax title as an attempt is made to give part of the just compen- sation agreed upon and deposited in the registry of the Court to appellees who had no lien on the lands or from the funds deposited.

On collateral attack our Court has said in Richard- son V. Lloyd et al., 90 Montana 127, 300 Pacific 254 (1931), quoting from page 132, Montana Reports: "A tax deed operates to divest the original owner of his title to the land. (Sec. 2215, Rev. Codes 1921.) Though subsequent in time, it is para- mount in right over the title of the mortgagors, and extinguishes all former titles. (State ex rel. City of Great Falls v. Jeffries, 83 Mont. Ill, 270 Pacific 638.)

The general rule is that a tax title cannot be as- sailed collaterally, but must be attacked, if at all, in a direct action. (37 Cyc. 1490, note 84 ; 4 Cooley on Taxation, 4th ed., sec. 1408; West v. Negrotto, 52 La. Ann. 381, 27 South. 75; State Mortgage Corp. V. Traylor, (Tex. Civ. App.) 32 S. W. (2d) 887.)"

In the case of Smith v. Whitney, 105 Montana 523, 74 Pac. 2d 450 (1937), our Court makes this state- ment;

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*'No person may question the validity of a tax sale or deed unless he can first show that he, or those under whom he claims had some title to the property at the time of the sale."

Citing- 26 RCL 446, Goldsbury v. MacConnell, 73 Colo. 35, 215 Pac. 872, Hopper v. Chandler, 183 Ark. 469, 36 S. W. 2d 398.

ASSESSMENTS AFTER TAX DEED.

No assessments for the irrigation, district were made after 1938, hence no right to further assess the lands could be made under Chapter 63 Laws of 1937, as this act was passed to protect future districts to be created. After the law Avas passed, it had no applica- tion to the irrigation district created before its en- actment. The title here passed to the United States, April 27, 1942. No further assessments were possible imder the express provisions of this statute, 40 USCA 258a.

The Montana Supreme Court has construed Chap- ter 65 Laws of 1937 in the case of State ex rel, Osten V. Billings, 91 Montana 76, 5 Pac. 2d 562 (1931), from which we quote on page 81 :

"The validity and effect of the tax deed is to be determined by the statutes in force when the sale was made and not by statutes subsequently en- acted, for, except as to governmental agencies, the sale of land for delinquent taxes constitutes a contract between the purchaser and the state, the obligation of which cannot be impaired to the disadvantage of the purchaser by subsequent leg-

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islation. (37 Cyc. 1452; 26 RCL 434; Prowant V. Smith, 77 Okl. 257, 188 Pac. 93; Walker v. Ferguson, 176 Ark. 625, 3 S. W. 2d 694.)"

'^ 'The right of property acquired by the purchaser at this sale, and the right of redemption remain- ing to the owner, must l)oth be governed by the law in force at the time of sale. Neither, in our judgment, could be either abridged or enlarged by subsequent legislation. This is unquestionably so as to the right of the purchaser.' (Merrill V. Bearing, 32 Minn. 479, 21 N. W. 721 ; and see Johnson v. Taylor, 150 Cal. 201, 119 Am. St. Rep. 181, 10 LRA (n. s.) 818, 88 Pac. 903.)"

We further quote from the holding of our Court in the title, page 82 as follows:

"We hold that one who purchases a certificate of sale from the county occupies the same position legally