City of Chicago v. Univ. of Chicago

• Decision Date: 07 April 1922
• Docket Number: No. 14408.,14408.
• Citation: 134 N.E. 723,302 Ill. 455
• Parties: CITY OF CHICAGO v. UNIVERSITY OF CHICAGO et al.
• Court: Illinois Supreme Court

302 Ill. 455

134 N.E. 723

CITY OF CHICAGO

v.UNIVERSITY OF CHICAGO et al.

No. 14408.

Supreme Court of Illinois.

Feb. 22, 1922.

Rehearing Denied April 7, 1922.

In the matter of the application of the City of Chicago for the confirmation of a special assessment against leasehold estates and improvements owned by the University of Chicago and others. From an order of the county court, overruling objections, the University and others appeal.

Affirmed.Appeal from Cook County Court; Frank S. Righeimer, Judge.

Shannon & Morrill, of Chicago (Edward N. D'Ancona, of Chicago, of counsel), for appellants.

Samuel A. Ettelson, Corp. Counsel, and George A. Curran, both of Chicago (George P. Foster, of Chicago, of counsel), for appellee.

CARTWRIGHT, J.

The county court of Cook county overruled the objections of appellants to an application of the city of Chicago for the confirmation of a special assessment against leasehold estates and improvements owned by the appellants for benefits resulting from an improvement of State street, between Madison and Monroe streets, in Chicago, and this appeal was prosecuted from that judgment.

The lots assessed are located in section 16, granted by the government of the United States to the state of Illinois for the use of the inhabitants for schools, and granted by the state to the city of Chicago in trust for such use. Upon propositions of law submitted by the objectors the court held that lands in section 16, the title to which was vested in the city of Chicago in trust for the use of schools, are exempt from special assessment, but refused to hold that leasehold estates in and improvements on such lands are so exempt. The latter holding is assigned for error, and it is argued that leasehold interests in and improvements on school lands are exempt from special assessment by virtue of section 2 of article 8 of the Constitution, which is as follows:

‘All lands, moneys, or other property, donated, granted or received for schools, college, seminary or university purposes, and the proceeds thereof, shall be faithfully applied to the objects for which such gifts or grants were made.’

[1] This constitutional provision secures the public school lands of the state from taxation or special assessments. City of Chicago v. People, 80 Ill. 384;People v. Trustees of Schools, 118 Ill. 52, 7 N. E. 262. Section 2 of the Revenue Act (Hurd's Rev. St. 1919, c. 120) provides that all lands donated by the United States for school purposes not sold or leased, all property of schools, including the real estate on which the schools are located, not leased by such schools or otherwise used with a view to profit, shall be exempt from taxation. This section purports to create an exception in the case of school lands leased or otherwise used with a view to profit, but this exception was set aside by the court in People v. City of Chicago, 216 Ill. 537, 75 N.E. 239. In that case school lands were leased for 99 years and improved with a permanent building for business purposes, but the court went to the length of holding that, because the rental reserved was to be regarded as proceeds of the lands, taxation of the fee would take a portion of the rental, and would be an indirect diversion of the proceeds to other purposes than schools. In this case there was no attempt to assess the fee or reversion, but the court held it to be exempt, and the leasehold and improvements are not school lands, or proceeds of school lands. The leaseholds are the property of the lessees, and the improvements have been created, paid for, and are for the benefit of the lessees, to enable them to enjoy the leasehold estates. The leases created no charge against the lands on account of taxes or assessments, but the lessees covenanted to pay all water rates, and all taxes, duties, and assessments, general or special, levied or assessed upon the premises during the continuance of the leases.

[2] Another reason given for insisting that the leasehold estates could not be assessed is that they are not real estate. Under the common law adopted in this state a leaseholdfor years, although the rent may be nominal, the term 1,000 years and the improvements annexed to the freehold and immovable, retains its character as a chattel. Thornton v. Mehring, 117 Ill. 55, 25 N. E. 958;Zimmermann v. Dawson, 294 Ill. 380, 128 N. E. 546. The seeming anomaly is explained in Williams on Real Property, on page 9, where the rule is traced to its origin under the feudal law. The nature of the leasehold estate as personal or real property, however, does not determine the right to assess it for benefits derived from a local improvement. Section 9 of article 9 of the Constitution authorizes the General Assembly to vest the corporate authorities of cities, towns, and villages with power to make local improvements by special assessment, or by special taxation of contiguous property or otherwise, and the Local Improvement Act vests corporate authorities of cities, villages, or incorporated towns with power to make such local improvements as are authorized by law by special assessment, or by special taxation of contiguous property, or by general taxation or otherwise, as they shall by ordinance prescribe. Section 60 of the Revenue Act provides that, when real estate which is exempt from taxation is leased to another whose property is not exempt, and the leasing of which does not make the real estate taxable, the leasehold estate and appurtenances shall be listed as the property of the lessee thereof, or his assignee, as real estate. The Constitution and statute do not limit the power to assess contiguous property such as in law is regarded as real estate, and, so far as taxation is concerned, leasehold estates such as were assessed in this case are to be considered real estate.

[3][4] Although by virtue of the common law a leasehold remains a chattel real, it was within the power of the state to declare its nature contrary to the common law for the purpose of taxation. People v. International Salt Co., 233 Ill. 223, 84 N. E. 278. For such purpose the Legislature may declare personalty to be real estate and real estate personalty. Johnson v. Roberts, 102 Ill. 655;Shelbyville Water Co. v. People, 140 Ill. 545, 30 N. E. 678,16 L. R. A. 505;Knopf v. Lake Street Elevated Railroad Co., 197 Ill. 212, 64 N. E. 340. Charging contiguous property with benefits resulting from a local...