Continental Motors Corp. v. Muskegon Tp., No. 13

CourtSupreme Court of Michigan
Writing for the CourtSOURIS; DETHMERS, KELLY, BLACK, and O'HARA, JJ., concurred with SOURIS; ADAMS; KAVANAGH, C. J., and SMITH, J., concurred with ADAMS
Citation376 Mich. 170,135 N.W.2d 908
PartiesCONTINENTAL MOTORS CORPORATION, a Virginia corporation, Plaintiff-Appellant, v. TOWNSHIP OF MUSKEGON, a constitutional body corporate, Defendant-Appellee, and Orchard View School District, and County of Muskegon, Intervening Defendants-Appellees.
Decision Date13 July 1965
Docket NumberNo. 50,No. 13

Page 908

135 N.W.2d 908
376 Mich. 170
CONTINENTAL MOTORS CORPORATION, a Virginia corporation,
Plaintiff-Appellant,
v.
TOWNSHIP OF MUSKEGON, a constitutional body corporate,
Defendant-Appellee,
and
Orchard View School District No. 13, and County of Muskegon,
Intervening Defendants-Appellees.
No. 50.
Supreme Court of Michigan.
July 13, 1965.

[376 Mich. 173]

Page 909

Joseph T. Riley, Muskegon, Butzel, Eaman, Long, Gust & Kennedy, Clifford W. Van Blarcom, Philip T. Van Zile II, Detroit, of counsel, for Continental Motors Corp.

Charles A. Larnard, Muskegon, for Muskegon Tp.

[376 Mich. 174] Poppen, Street & Sorensen, Muskegon, for Orchard View School Dist. No. 13.

Harry J. Knudsen, Pros. Atty. for Muskegon County; Harold M. Street, of counsel.

Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, I. Henry Kutz, Robert A. Bernstein, Attorneys, Department of Justice, Washington, D. C., George E. Hill, U. S. Atty., H. David Soet, Asst. U. S. Atty., for United States, amici curiae.

Before the Entire Bench.

SOURIS, Justice.

In this appeal plaintiff challenges the validity of P.A.1959, No. 266. Pursuant to legislative authorization purportedly contained in that act, by its amendment of section 14 of the general property tax law, 1 the defendant township assessed plaintiff corporation taxes in the amount of $63,000 for the 1961 tax year upon the value of personal property [376 Mich. 175] consisting of machinery and equipment in plaintiff's possession on December 31, 1960, the tax day, which it was using in the performance of government contracts, but title to which machinery and equipment was in the United States Government. Plaintiff paid the tax thus assessed under protest and commenced an action at law to recover such taxes. Upon adverse judgment below, this appeal was taken.

Act 266 amended section 14 of the general tax law by adding the words 'and personal property not otherwise taxed under this act which is in the possession of any person, firm or corporation using same in connection with a business conducted for profit shall be deemed the property of such person for taxation and assessed to him accordingly;'.

The subject of Michigan's taxation of defense production facilities owned by the federal government but in the possession and use of private contractors and subcontractors of the government has been the subject of much litigation in state and federal courts and it has generated a substantial volume of judicial and scholarly comment. 2 The specific [376 Mich. 176] issue presented

Page 910

in this appeal relating to the effect of P.A.1959, No. 266 is, however, a matter of first impression, although some comment by way of obiter dicta was made with respect thereto in Continental Motors v. Muskegon Twp., 365 Mich. 191, 112 N.W.2d 429, and General Motors Corp. v. City of Detroit, 372 Mich. 234, 126 N.W.2d 108. Broadly stated, the issues presented in the parties' oral arguments and in their briefs include the nature of the tax authorized by Act 266, whether ad valorem or specific; the measure of the tax, whether the true cash value of the property possessed and used or of the right to possession and use; and the constitutionality of the tax the ultimate burden of which, although assessed and initially paid by plaintiff as possessor and user of the government's personal property, will be borne by the federal government which itself is constitutionally immune from direct taxation by the states. 2a

In Continental Motors v. Muskegon Twp., 365 Mich. 191, 112 N.W.2d 429, supra, we held that prior to Act 266 of P.A.1959, our legislature had not authorized a tax on possessory rights or other limited interests in personal property. We said, in Continental, that by enactment of Act 266 the legislature authorized a tax on beneficial rights in personal property such as were involved there (365 Mich. at 199, 112 N.W.2d 429) and as are involved here. Later in the opinion, at p. 200, 112 N.W.2d 429, we said that since 1959 possessory interests in personal property, otherwise exempt from taxation, have been made taxable. Now in the case at bar, the issue being squarely before us for decision, we must determine the constitutional validity of that which we said the legislature sought to accomplish by Act 266.

The major thrust of appellant's attack against Act 266 is that it imposes an ad valorem tax upon the [376 Mich. 177] interest of a possesor and user of another's tax exempt tangible personal property measured by the cash value of the tangible property rather than by the cash value of the possessor's interest therein. Appellee meets this attack principally by contending that the possessory interest is an interest in the property which interest is subject to an ad valorem tax and, because such interest includes the right to use the property in a private business conducted for profit, its value for such tax purposes is equivalent to the cash value of the tangible property. Other arguments are advanced, pro and con, but in the view we take of Act 266 none of the arguments advanced need be considered for purposes of decision.

When Continental Motors v. Muskegon Twp., 365 Mich. 191, 112 N.W.2d 429, supra, was decided, Act 266 was not before the Court for determination of its constitutional validity. Nonetheless, by way of obiter dictum, we suggested, at p. 200, 112 N.W.2d 429, that it was of significance that Act 266 was cast in the pattern of an ad valorem tax rather than in express language of a specific tax upon possessory interests. Earlier, by separate legislative enactment of P.A.1953, No. 189, 3 the legislature imposed a new tax upon possessory interests in another's tax exempt realty when such realty is used in a business conducted for profit. This new tax has been held to be a specific or excise tax upon the privilege of possession and use

Page 911

and not an ad valorem tax on the realty itself notwithstanding the measure of the tax is the cash value of the realty. United States v. City of Detroit, 345 Mich. 601, 608, 77 N.W.2d 79, aff'd 355 U.S. 466, 78 S.Ct. 474, 2 L.Ed.2d 424 (1958), Township of Muskegon v. Continental Motors Corporation, 346 Mich. 218, 222, 77 N.W.2d 799, aff'd sub nom. United States v. Township[376 Mich. 178] of Muskegon, 355 U.S. 484, 78 S.Ct. 483, 2 L.Ed.2d 436 (1958). Instead of enacting a distinctively separate tax to reach possessory interests in another's tax exempt personal property, as was done in P.A.1953, No. 189 to reach such interests in realty, the legislature in 1959 sought to accomplish the same result by amendment of the State's general property tax law which theretofore imposed only an ad valorem property tax. See Continental Motors v. Muskegon Twp., 365 Mich. 191, supra, at 197, 112 N.W.2d 429. It is our decision that notwithstanding the legislative effort to draw the new tax in the pattern of an ad valorem property tax, it comprises in actuality a specific or excise tax and was, therefore, not an appropriate subject to engraft upon the general property tax law by amendment thereof without also amending that law's title to comply with the requirements of Article V, § 21 of our then effective Constitution of 1908.

That a tax upon possessory rights, such as are involved here, is an excise and not an ad valorem property tax seems to us too clear for sustained debate. Just two years ago, in Dooley v. City of Detroit, 370 Mich. 194, 121 N.W.2d 724, we had occasion to consider the nature of excises for the purpose of determining the validity of a city ordinance imposing an income tax. In that case, at p. 205 et seq., 121 N.W.2d at p. 729, we again defined an excise as 'a tax imposed upon the performance of an act, the engaging in an occupation, or the enjoyment of a privilege', citing 26 R.C.L., Taxation, § 209, at p. 236, which had been relied upon in earlier decisions of this Court. While the legislature in imposing the new tax has utilized the language of ad valorem taxation, the tax nonetheless in its operation and practical effect is a tax upon the privilege of possession and use for profit of another's tax exempt personal property and, therefore, it is an excise and not an ad valorem property tax. The importance of this [376 Mich. 179] distinction lies in the fact that whatever legislative name or trappings a new tax bears it may not be imposed validly by amendment of the general property tax law unless it can be said that that law's title is broad enough to include within its scope the new tax or, if not, unless the law's title also is amended to enlarge its scope.

Article V, § 21 of our Constitution of 1908, effective when amendatory Act 266 was adopted, read as follows:

'No law shall embrace more than 1 object, which shall be expressed in its title. No law shall be revised, altered or amended by reference to its title only; but the act revised and the section or sections of the act altered or amended shall be re-enacted and published at length. No act shall take effect or be in force until the expiration of 90 days from the end of the session at which the same is passed, except that the legislature may give immediate effect to acts making appropriations and acts immediately necessary for the preservation of the public peace, health or safety by a 2/3 vote of the members elected to each house.'

The purpose of such constitutional provision needs no extensive exposition for it has been the subject of many opinions of this Court, among them being People ex rel. Drake v. Mahaney, 13 Mich. 481; Ryerson v. Utley, 16 Mich. 269; Bissell v. Wayne Probate Judge, 58 Mich. 237, 24 N.W. 886; Brooks v. Hydorn, 76 Mich. 273, 42 N.W. 1122; Vernor v. Secretary of State, 179 Mich. 157, 146 N.W. 338; MacLean v. Board of Control, 294 Mich. 45, 292 N.W. 662; Leininger v. Secretary of State,

Page 912

316 Mich. 644, 26 N.W.2d 348, and People v. Stanley, 344 Mich. 530, 75 N.W.2d 83. It is sufficient to say only that the title of a legislative act must give notice to...

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27 practice notes
  • Henderson v. Dep't of Treasury, Docket No. 312859.
    • United States
    • Court of Appeal of Michigan (US)
    • September 25, 2014
    ...of labor or the rendition of services” and on the “use of capital....” Id.Later, in Continental Motors Corp. v. Muskegon Twp., 376 Mich. 170, 178, 135 N.W.2d 908 (1965), the Supreme Court explained the distinction between the ad valorem tax and the excise tax. At issue in Continental Motors......
  • Weaver v. Prince George's County, No. 2
    • United States
    • Court of Appeals of Maryland
    • September 1, 1977
    ...(Tucker ed. 1803). More recently, courts have employed a more expanded definition. In Continental Motors Corp. v. Township of Muskegon, 376 Mich. 170, 135 N.W.2d 908, 911 (1965), an excise was defined as "a tax imposed upon the performance of an act, the engaging in an occupation, or the en......
  • City of Detroit v. Walker, Docket Nos. 96594
    • United States
    • Supreme Court of Michigan
    • July 26, 1994
    ...204-206, 121 N.W.2d 724 (1963) (upholding Detroit's income tax ordinance as an excise tax); Continental Motors Corp. v. Muskegon Twp., 376 Mich. 170, 180, 135 N.W.2d 908 (1965) ("A basic distinction between an ad valorem property tax and an excise tax is that the former is regarded as prima......
  • Bankhead v. McEwan, Docket No. 8948
    • United States
    • Court of Appeal of Michigan (US)
    • June 30, 1971
    ...germane to the object expressed in the title will be enacted into law. Continental Motors Corporation v. Township of Muskegon (1965), 376 Mich. 170, 179, 135 N.W.2d 908. See, also, Leininger v. Secretary of State (1947), 316 Mich. 644, 26 N.W.2d 348; Regents of University of Michigan v. Pra......
  • Request a trial to view additional results
27 cases
  • Henderson v. Dep't of Treasury, Docket No. 312859.
    • United States
    • Court of Appeal of Michigan (US)
    • September 25, 2014
    ...of labor or the rendition of services” and on the “use of capital....” Id.Later, in Continental Motors Corp. v. Muskegon Twp., 376 Mich. 170, 178, 135 N.W.2d 908 (1965), the Supreme Court explained the distinction between the ad valorem tax and the excise tax. At issue in Continental Motors......
  • Weaver v. Prince George's County, No. 2
    • United States
    • Court of Appeals of Maryland
    • September 1, 1977
    ...(Tucker ed. 1803). More recently, courts have employed a more expanded definition. In Continental Motors Corp. v. Township of Muskegon, 376 Mich. 170, 135 N.W.2d 908, 911 (1965), an excise was defined as "a tax imposed upon the performance of an act, the engaging in an occupation, or the en......
  • City of Detroit v. Walker, Docket Nos. 96594
    • United States
    • Supreme Court of Michigan
    • July 26, 1994
    ...204-206, 121 N.W.2d 724 (1963) (upholding Detroit's income tax ordinance as an excise tax); Continental Motors Corp. v. Muskegon Twp., 376 Mich. 170, 180, 135 N.W.2d 908 (1965) ("A basic distinction between an ad valorem property tax and an excise tax is that the former is regarded as prima......
  • Bankhead v. McEwan, Docket No. 8948
    • United States
    • Court of Appeal of Michigan (US)
    • June 30, 1971
    ...germane to the object expressed in the title will be enacted into law. Continental Motors Corporation v. Township of Muskegon (1965), 376 Mich. 170, 179, 135 N.W.2d 908. See, also, Leininger v. Secretary of State (1947), 316 Mich. 644, 26 N.W.2d 348; Regents of University of Michigan v. Pra......
  • Request a trial to view additional results

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