Wood v. Lovett

1941-05-26

Headline: Court blocks Arkansas repeal that stripped protections for buyers of tax-forfeited land, holding states cannot impair contracts that guaranteed titles immune from certain procedural defects.

Holding: The Court held that Arkansas’ repeal of a 1935 law that promised purchasers immunity from certain tax-sale defects unconstitutionally impaired contracts, so buyers’ titles under the 1935 law are protected and the repeal cannot divest them.

Real World Impact:

Stops states from undoing promised protections to buyers of tax-forfeited land.
Protects purchasers’ titles when they bought under statutes promising immunity from procedural defects.
Limits state power to repeal laws that formed part of buyers’ purchase bargain.

Topics: tax sales, property rights, contracts and state law, tax forfeiture

Summary

Background

Certain Arkansas land was sold to the State in 1933 for unpaid taxes. In 1936 the State, through its land commissioner, conveyed that land to private buyers. In 1935 the Arkansas legislature had passed a law (Act 142) saying courts could not set aside tax sales for certain procedural irregularities, which gave buyers protection. The legislature repealed that law in 1937. In 1939 a private person who owned the land before the tax sale sued to cancel the State’s deeds and reclaim the land, alleging the original sales were void for irregularities. The buyers admitted the irregularities but said the 1935 law protected their title.

Reasoning

The Court addressed whether the 1937 repeal unlawfully impaired the contractual protection the State had offered to buyers under the 1935 law. The majority said the 1935 statute, together with the State’s deeds, created contractual rights for purchasers who relied on the statutory immunity. Under the Constitution’s contract-clause rule, the State could not later pass a law that effectively took away that promised protection. The Court therefore reversed the Arkansas Supreme Court and held the repeal could not divest the buyers of the protected title they acquired under the 1935 law.

Real world impact

The decision protects people who bought property from a State after tax forfeiture when the State had promised statutory immunity from certain procedural attacks. It limits a State’s ability to undo statutory protections that were part of the bargain buyers relied on. Sales or statutes enacted to reassure purchasers are harder to nullify by later repeal.

Dissents or concurrances

Justice Black dissented, arguing the repeal was a reasonable exercise of state power to address widespread tax delinquencies and preserve homes; Justices Douglas and Murphy joined his view.