Dillard v. New Mexico State Tax Commission

The opinion in this case heretofore filed by me is hereby withdrawn and the opinion to follow filed in lieu thereof.

From so much of the prevailing opinion as holds the veteran's exemption cannot be claimed out of community property as a whole, I dissent. The community estate as known and recognized in this state is sui generis. It is neither an estate in cotenancy, nor yet one in joint tenancy, although in the right of survivorship obtaining in the husband, it takes on a characteristic of the latter. In re Chavez's Estate, 34 N.M. 258, 280 P. 241, 69 A.L.R. 769. The husband's dominion over the community as its head in management and control is such that, save for necessity of the wife's joinder in conveying or encumbering the real estate, he acts as the virtual owner. 1941 Comp. § 65-403.

In this management and control, he may bind the community for debts and he alone can do so. Morris v. Waring, 22 N.M. 175,159 P. 1002, and Fidel v. Venner, 35 N.M. 45, 289 P. 803. The entire community, whether consisting of real or personal property or both, may be seized and sold, not the husband's interest alone, to satisfy a judgment for debts so created. The same consequences attach to a judgment against him for a tort committed in his management of the community estate. He possesses the power of testamentary disposition over his half of the community. The wife does not, save as to any portion set apart to her by judicial decree for support and maintenance. 1941 Comp. § 31-108. His power to handle and transfer personal property of the community is limited only by the condition that he make no disposition in fraud of her rights therein.

It was with this background and general knowledge on the part of the people as a whole of the husband's vast dominion and control over community property that they voted upon the constitutional amendment (Art. 8, § 5) authorizing the veteran's exemption and that the legislature itself acted in adopting the same. It is my settled conviction that the allowance of such exemption in the community estate as a unit, without differentiating between the separate interests of the spouses therein, accords with the true intent, both of the people in authorizing and the legislature in extending, the exemption in question. The rule of strict construction applicable to exemptions may not be employed to deny a meaning fairly obvious. Flaska v. State, 51 N.M. 13, 177 P.2d 174. Of course, as the prevailing opinion states, the wife has a present, vested one-half interest in the community estate. Beal v. Ares, 25 N.M. 459, 185 P. 780, and McDonald v. Lambert, 43 N.M. 27, 85 P.2d 78, 120 A.L.R. 250. Nevertheless, none can gainsay the fact that it is a "present, vested" interest subject to the powers and incidents in relation to same outstanding in the husband hereinabove enumerated.

If the prevailing opinion stands, then a means of accomplishing dissolution of the community in a manner not intended by adoption of the amendment authorizing a veteran's tax exemption, through sale of the wife's interest to satisfy tax delinquencies, is achieved through judicial decision. There is and was no statutory authority for it. Cf. Smedberg v. Bevilockway, 7 Cal. App. 2d 578,46 P.2d 820; McClain v. Tufts, 83 Cal. App. 2d 140, 187 P.2d 818; Grolemund v. Cafferata, 17 Cal. 2d 679, 111 P.2d 641. When the veteran's exemption amendment was voted upon, governing statutes of long standing and well understood prescribed the conditions under which a dissolution of the community might be accomplished. Death, dissolution incident to divorce, and a statutory suit for dissolution following permanent separation (1941 Comp. § 25-702) represented the only means provided by law for dissolving the community. Any other method superimposed by judicial construction lacks statutory sanction and is unauthorized. Smedberg v. Bevilockway, supra, and McClain v. Tufts, supra. It is not to be supposed that the people in adopting this amendment intended that revolutionary changes in the nature and concept of the community estate, and the manner of dissolving it, should be wrought. In voting upon the amendment, the people well knew from acts of long standing that the community could be dissolved in certain prescribed ways and no other.

In Smedberg v. Bevilockway, supra, it was sought to reach the wife's interest in community real estate to satisfy a tort judgment against her alone but the effort failed. The California court based its conclusion on dual considerations: First, that to permit this to be done would approve a forced division of the community property in a way not authorized by statute. In the second place, the court fortified its refusal by citing an analogy between the community estate and an estate by the entirety. In an estate by the entireties held by husband and wife, the survivor took the property owned jointly with the other free from a judgment against the decedent. Lunnen v. Hunter,348 Pa. 402, 35 A.2d 292. And one of the tenants, acting alone, cannot sever the estate. 4 Thompson on Real Estate, Perm.Ed., 332, § 1804. Cf. Hernandez v. Becker, 10 Cir., 54 F.2d 542.

To limit dissolution of the community to the statutory means provided does not mean the community may not be made to satisfy just obligations and liabilities. But when it does so, it must be for such only as may claim against it as a whole, not against the undivided interests therein, the segregation of which will work its dissolution. The estate, as indicated, is sui generis. The separate interests of husband and wife in it are so delicately interwoven and interdependent that they may not be torn apart without destroying the whole and accomplishing a dissolution. The legislature has said when that can be done. In adopting this amendment the people did not intend that it should be done otherwise.

Counsel for cross-appellants urges with considerable force that practical construction by the taxing authorities in allowing the exemption from the community as a whole, universally employed in this state since 1923, when the first Soldier's Exemption Act (L. 1923, c. 130) was passed, and acquiescence in that construction by the legislature in subsequent amendments of the act (L. 1933, c. 44, and L. 1947, c. 79) calls for a reversal of the trial court's ruling denying it out of the community as a whole. My views accord with those of counsel in this connection. Furthermore, counsel's argument in this behalf is reinforced by practical construction of still another exemption statute in our laws.

The same constitutional provision which enabled the legislature to exempt from taxation the property of every honorably discharged soldier under the conditions stated, likewise authorized the legislature to exempt from taxation the property of each head of a family to the amount of two hundred dollars. Such an exemption has existed from early territorial days (L. 1876, c. 17, § 1) and from the very beginning has been applied to the community as a whole. While it is true the legislature later, L. 1925, c. 102, § 3, expressly extended the exemption to property, title to which is held by the wife, as well as to property, title to which is held by the husband, the amendment merely copied and was declaratory of a practice already long established in the application of this exemption to the common property as a whole. If the majority opinion be correct in holding the veteran's exemption may not be so applied, then a construction employed in this state as to head of the family exemption for virtually 75 years, and to the veteran's exemption since its authorization in 1923, has been wrong and without sanction of law all the while — an error it has taken seventy-five years to discover.

It is to be remembered that when the people adopted the constitutional head of family exemption, they were familiar with the practice universally followed since enactment of the statute in 1876 of satisfying the exemption out of common property. Certainly, they supposed it would continue application in the future as over the third of a century in the past. The prevailing opinion seeks to minimize the effect of this practical construction by reference to the 1925 amendment above mentioned authorizing satisfaction of the exemption from property, title to which is in the wife, as well as property, title to which is in the husband. The CHIEF JUSTICE, who writes for the majority, does not explain how this statute could have any validity as to property of the wife, except as the constitution may have authorized it. In conceding that the statute does so authorize, the majority necessarily concede that in adopting the constitution containing head of family exemption, the people adopted it as the same had been previously so long applied, namely, subject to satisfaction from the common property. Any attempt to apply the exemption to any property of the wife otherwise held, save where she herself is head of the family, would be without constitutional authorization and void.

In Temple Lodge No. 6 A.F. A.M., v. Tierney, 37 N.M. 178,20 P.2d 280, 284, this court dealt with a tax exemption which had back of it a long and uniform official interpretation. We held this interpretation by the taxing officials practically controlling. Among other things, we said:

"This early interpretation and uniform practice is highly persuasive, if not controlling. The principle is familiar that, in a case of doubt, courts will sustain the reasonable construction long and uniformly followed by the co-ordinate branches of the government. It is not comity alone that dictates this rule. It is because of the unfortunate and far-reaching results often produced by a judicial decision rendering illegal what has been theretofore recognized as legal. If this rule were not generally observed, legal decisions might, by their upsetting results, do more harm than good. In such cases it is deemed wiser to leave the desired reform to the political departments which can minimize the consequences of change by limiting its results to the future."

One of the strongest reasons supporting the rule which favors adoption of any reasonable official interpretation of long standing, as we pointed out in Temple Lodge No. 6, A.F. A.M., v. Tierney, supra, is because of the unfortunate and far-reaching results, "rendering illegal what has been theretofore recognized as legal." It is difficult to imagine any more unfortunate or far-reaching result than one which will compel the reassessment and payment of taxes for the past decade on the wife's interest in community property on which veteran's exemption heretofore has been allowed, to protect its marketable character and avoid forfeiture at delinquent tax sales. Indeed, in many instances, where the property exempted is real estate, the confusion and hardship will be added to by reason of intervening transfers to innocent purchasers. When we recall that the same confusion and unbearable hardship will follow application of the majority decision to property on which the head of family exemption has been allowed out of community property, it seems the reasons for a holding otherwise ought to be deemed absolutely conclusive.

The practical construction, so long employed without question as to each exemption, is correct and carries out the true intent of the pertinent constitutional provision and of the legislature acting under it. The people adopted the veteran's exemption, fully mindful of the practice long followed in allowing head of the family exemption out of the community as a whole. They intended no practice in applying it different from that prevailing for more than a third of a century in reference to the head of family exemption.

As a matter of fact, the framers of the constitutional amendment in question no doubt felt it would be a work of supererogation to declare expressly what the language of the exemption itself fairly implies, namely, that it was to extend to the community as a whole. It authorized the legislature to exempt from taxation under the conditions named the property of every honorably discharged soldier and "the widow of every such soldier," etc. In acting under such authority the legislature extended the exemption to the widows of soldiers along with the soldiers themselves. In other words, within constitutional and statutory contemplation, the exemption being to the soldier while living and to his widow after death, the latter provision merely preserved to her an exemption already enjoyed by both in the common property.

There follow a few cases from other jurisdictions dealing with tax exemptions which, although not exactly in point, are persuasive of the correctness of the views here announced. Sherman v. Quinn, Cal.App., 179 P.2d 24, affirmed 31 Cal. 2d 661,192 P.2d 17; Village of Hibbing v. Commissioner of Taxation,217 Minn. 528, 14 N.W.2d 923; Eysink v. Board of Supervisors of Jasper County, 229 Iowa 1240, 296 N.W. 376; Town of Wolf River v. Wisconsin Michigan Power Co., 217 Wis. 518, 259 N.W. 710, 98 A.L.R. 1369, and case note at 1372. Only the California case cited, reviewed first in the District Court of Appeal and, finally, by the Supreme Court, is from a state where the community property system prevails. And in that case, Sherman v. Quinn, supra, although the precise question now presented was not litigated, a reading of the two opinions by the separate courts suggests strongly that the tax exemption of the veteran had been extended to the community as a whole and that, too, without question.

The one case cited in the prevailing opinion which, on its facts, presents the identical question before us is Oglesby v. Poage, 45 Ariz. 23, 40 P.2d 90. As said by the CHIEF JUSTICE in the case at bar, the Supreme Court of that state held the veteran's exemption must be confined to his interest in the community. It was denied application to the estate as a whole. There is no disposition on my part to underrate the force of the decision as a precedent against the position here taken. There are, however, factors which distinguish and, in my opinion, weaken its effect as such. In the first place, there is in the Arizona constitutional amendment (§ 2, Art. 9) which is self-executing, no extension of the exemption to the soldier's widow as such. The original provision, before amendment, adopted coincident with statehood, granted a property tax exemption to all widows, resident in the state, whether soldiers' widows or not. Hence, in construing the 1928 amendment extending the exemption to veterans, the Arizona Supreme Court, even though a community property state, could see no significance in the fact that widows of soldiers were to enjoy the exemption because all resident widows, whether widows of soldiers or not, had enjoyed such an exemption since statehood.

Furthermore, in submitting the amendment to popular referendum, and in voting upon it, the people of Arizona did so without that background of practical construction prevailing in New Mexico under which the head of family exemption had been so long applied to the community as a whole, without the propriety of the practice ever being so much as questioned. Indeed, Arizona has had no head of family exemption for taxing officials to construe, the people having defeated the proposal to create one submitted by the state legislature in 1939 (see Laws 1939, p. 368). It is worthy of mention, too, that the husband's dominion over the community estate is not so complete there as in New Mexico, so as to furnish a background of dominion and control in management, and survivorship following the wife's death, as to give him the appearance of virtual owner throughout their joint lives.

The wife in Arizona has the power of disposing of her share by will. Oglesby v. Poage, supra; Arizona Code (1939) § 39-109. The wife in New Mexico may not. 1941 Comp. § 31-108. When the New Mexico veteran claims the exemption in the community as a unit, he claims it in property which, in event of the wife's prior death, he gets, not by inheritance, In re Chavez's Estate, supra, but through survivorship. The wife can do nothing to defeat this right in him. Not so with the Arizona husband. When he claims the exemption out of the community as a whole, he is claiming it in property which, so far as his power to prevent be concerned, may pass to others through testamentary disposition by the wife upon her prior death.

The holy state of matrimony can suffer temporal dissolution only through an exercise by the state of its sovereign power; Hilton v. Roylance, 25 Utah 129, 69 P. 660, 58 L.R.A. 723, 95 Am. St. Rep. 82. Thus it is that marriage, once entered into by the parties, may not be dissolved except as expressly authorized by the state and upon grounds prescribed by it. 1941 Comp. § 25-701. The community estate is born with and of the marriage. It is designed to maintain and preserve the family as a unit. Forsythe v. Peschal, 34 Ariz. 380, 270 P. 865. It can no more be dissolved, save as expressly authorized by the legislature, or by the people in an unequivocal constitutional declaration, than may the marriage itself of which it forms an integral part. Smedberg v. Bevilockway, supra, and McClain v. Tufts, supra. The limitation placed on the veteran's exemption, by denying it application to the community as a whole, and compelling separate assessment of the wife's interest therein, will permit tax sale of her interest and thereby accomplish dissolution of the community without either legislative sanction, or constitutional intendment.

Feeling strongly that the people in adopting the veteran's tax exemption neither intended nor understood they were authorizing new means, additional to those so long obtaining of dissolving the community; nor that they were creating a basis for satisfying the tax exemption submitted, foreign to the practice prevailing and acquiesced in for more than forty-five (45) years in satisfying the head of family exemption, my disagreement with a contrary holding by the majority is herewith recorded. A rehearing should be ordered and an opposite result declared. The majority concluding otherwise.

I dissent.