Cleveland-Cliffs Iron Co. v. Glander

• Citation: 145 Ohio St. 423,62 N.E.2d 94
• Decision Date: 20 June 1945
• Docket Number: 30303.,30302
• Parties: CLEVELAND-CLIFFS IRON CO. v. GLANDER, Tax Com'r (two cases).
• Court: United States State Supreme Court of Ohio

62 N.E.2d 94

145 Ohio St. 423

CLEVELAND-CLIFFS IRON CO. v. GLANDER, Tax Com'r (two cases).

Nos. 30302, 30303.

Supreme Court of Ohio

June 20, 1945

Syllabus by the Court.

1. Under the provisions of Section 5388, General Code, such articles as are purchased, received or otherwise held by a manufacturer for the purpose of being used in whole or in part in manufacturing, combining, rectifying or refining, and also articles which were at any time by him manufactured or changed in any way, either by combining or rectifying or refining or adding thereto, with specified exceptions, are authorized to be listed and assessed at 50% of the value thereof.

2. Under the provisions of Section 5385, General Code, a manufacturer is a 'person who purchases, receives or holds personal property, of any description, for the purpose of adding to the value thereof by manufacturing, refining rectifying, or by the combination of different materials with a view of making a gain or profit by so doing.'

3. The provision of any statute which purports to except certain property from general provisions governing taxation is a measure of exemption, and laws relating to exemption of property from taxation being in derogation of equal rights are strictly construed.

4. Where a corporation engaged in the business of mining iron ore for sale to steel manufacturing companies, Before the sale and delivery thereof standardizes the mineral content of the ore in such manner as will achieve a uniformity in the mineral content of its product, which is accomplished by crushing, screening, cleaning and removal of foreign material and silica, and by combining ores from various mines in the process of loading same for shipment, such corporation is not engaged in manufacturing within the provisions of Sections 5385 and 5388(2), General Code, and therefore its personal property may not be listed and assessed at 50% of the true value thereof in money. Schumacher Stone Co. v. Tax Commission, 134 Ohio St. 529, 18 N.E.2d 405, 120 A.L.R 1199; approved and followed Middletown Iron & Steel Co v. Evatt, Tax Com'r, 139 Ohio St. 113, 38 N.E.2d 585, 138 A.L.R. 426, and France Co. v. Evatt, Tax Com'r, 143 Ohio St. 455, 55 N.E.2d 652, distinguished.

Jones, Day, Cockley & Reavis, George B. Young, George H. Rudolph, and Thomas M. Harman, all of Cleveland, for appellant.

Hugh S. Jenkins, Atty. Gen., and Aubrey A. Wendt and Daronne R. Tate, both of Columbus, for appellee.

This case presents two appeals from the Board of Tax Appeals which involve the same questions relative to personal property taxes of the appellant for the years 1940, 1941 and 1943. The appeals were consolidated for hearing in the Board of Tax Appeals, and were heard and submitted on stipulations of fact.

The tax returns of appellant for the years named listed iron ore held in three counties of this state at fifty per centum of its average monthly inventory value and paid its tax based thereon. The tax Commissioner found and determined that the iron ore should have been listed at seventy per centum and made increased assessments accordingly.

Upon appeal to the Board of Tax Appeals, the action of the Tax Commissioner was affirmed.

Further facts are stated in the opinion.

MATTHIAS, Judge.

The appellant claims that it is a manufacturer with reference to the iron ore involved in this controversy, within the meaning of Section 5385, General Code, and that such ore constitutes 'manufactured articles' within the meaning of Section 5388(2), General Code.

The facts essential to a consideration of the questions presented may be summarized as follows:

The appellant, The Cleveland-Cliffs Iron Company, is an Ohio corporation with its principal office located in Cleveland Ohio. For many years it has been engaged in the business of producing and selling iron ore to manufacturers of iron and steel. It operates both open pit and underground mines in the states of Michigan and Minnesota, and the ore produced from these mines in shipped by vessel to lower lake ports. Since the shipping season on the Great Lakes is limited by weather to a period from May to October, inclusive, sufficient ore is transported during that period to supply the steel mills throughout the whole year, which requires storage of ore in stock piles at these lake ports from which deliveries are made as purchased by the steel manufacturing companies.

With rare exception no iron ore is suitable for blast furnace use as mined, since ores vary as to their mineral content. The requirement of the mills for a standard analysis of the ores furnished necessitates the grading of such ores. The most common method of obtaining the desired uniformity of analysis is that of mixing several ores of varying mineral content and chemical analysis to produce a grade of ore containing uniform percentages of iron, silica, phosphorus, sulphur and other ingredients.

After mining operations have begun, extensive sampling of ore is necessary for the purpose of making estimates of available ore and to assist in its preliminary grading. Additional samples are taken from time to time after mining and, since these ores vary in mineral content, it is necessary before shipping to mix them. This mixing is done in several ways. Where ore has been stored in stock piles before loading on the cars, it is mixed by combing the pile with a power shovel. The ores are loaded into cars and thence into vessels. Mixing is accomplished by loading a vessel with different ores from the cars in such amounts that the resulting mixture will attain a predetermined chemical analysis.

During these operations foreign material, lean ore and rock are sorted out, some ore is crushed and screened by machinery, and by a washing process some free silica is removed.

All of the processing of the ores involved in these proceedings was performed by appellant either in Michigan or Minnesota, where the ore was produced.

During the years involved in these appeals, the appellant maintained stock piles of this standardized ore in Cuyahoga, Ashtabula and Lucas counties, Ohio, and these are the subject of the assessments involved herein.

The single question presented in this case is whether these inventories of iron ore should be assessed at 50% of the average monthly inventory value, or at 70% of such value. The determination of that question involves the construction of Sections 5385 and 5388, General Code.

Section 5385, General Code, provides in part as follows:

'A person who purchases, receives or holds personal property, of any description, for the purpose of adding to the value thereof by manufacturing, refining, rectifying or by the combination of different materials with a view of making a gain or profit by so doing, is a manufacturer, and, when he is required to return a statement of the amount of his personal property used in...