Cornell University v. Rusk County

• Decision Date: 04 December 1991
• Docket Number: No. 91-0581,91-0581
• Citation: 166 Wis.2d 811,481 N.W.2d 485
• Parties: , 73 Ed. Law Rep. 262 CORNELL UNIVERSITY, Plaintiff-Respondent, d v. RUSK COUNTY, Defendant-Appellant. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 485

481 N.W.2d 485

166 Wis.2d 811, 73 Ed. Law Rep. 262

CORNELL UNIVERSITY, Plaintiff-Respondent, ^d v. RUSK COUNTY, Defendant-Appellant.

No. 91-0581.

Court of Appeals of Wisconsin.

Oral Argument Dec. 4, 1991.

Opinion Released Jan. 14, 1992.

Opinion Filed Jan. 14, 1992.

On behalf of the defendant-appellant, the cause was submitted on the brief of and orally argued by Steven P. Anderson, Corp. Counsel, of Ladysmith.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Jeffrey L. Abraham, John A. Busch and Chris J. Trebatoski, and orally argued by John A. Busch of Michael, Best & Friedrich of Milwaukee.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

MYSE, Judge.

Rusk County appeals a declaratory judgment in favor of Cornell University. The judgment declared that privately owned mineral interests are subject to taxation separate from the surface land under sec. 70.32, Stats. The judgment further declared that the issuance of a tax deed for the surface owner's delinquent property taxes does not extinguish the property rights of the mineral interest owner.

Rusk County asserts that the trial court erred because Wisconsin has a unitary taxing system in which the mineral interests are taxed as part of the value of the surface land and not separate from it. Rusk County next contends that when a tax deed is issued, all interests in the property are transferred to the county except those interests specifically exempted by statute. It asserts that because privately owned mineral interests are not specifically exempted by statute, a tax deed extinguishes the proprietary interest of the mineral owner.

Cornell, however, argues that if we decide that Wisconsin has a unitary taxing system and that a tax deed extinguishes its ownership interest in the minerals, such a scheme violates its constitutional right to due process. We conclude that sec. 70.32, Stats., establishes a system whereby privately owned mineral interests are taxed to the surface owner as part of the total value of the property and that a tax deed extinguishes the proprietary interest of the owner of mineral rights. We also conclude that the statutory scheme establishing this process gives Cornell all the process that it is due under the constitution. Accordingly, the judgment is reversed.

The facts in this case are undisputed. Cornell owns an undivided one-half fee simple interest in minerals in a 160-acre parcel in Rusk County. The surface land is owned by someone else. The surface owner of the property failed to pay real property taxes on the land for the years 1985 through 1989.

In 1986, pursuant to sec. 74.57, Stats., the Rusk County clerk issued a tax certificate to Rusk County for the delinquent taxes. Under the tax delinquency statutes, three years from the issuance of the tax certificate, Rusk County could apply for a tax deed that would transfer ownership of the land to it. Accordingly, in 1989 Rusk County applied for a tax deed and issued a written Notice of Application for Tax Deed to Cornell and the surface owner.

Subsequent to the filing of the notice, the surface owner paid the 1985 taxes, thus redeeming the land and avoiding the issuance of a tax deed for the 1985 tax liability. However, tax certificates for the years 1986, 1987 and 1988 remain outstanding, making the property subject to the issuance of a tax deed based upon nonpayment of taxes for those particular years.

Initially, Cornell University brought this suit seeking both injunctive and declaratory relief. The intervening payment of the 1985 taxes made the injunctive relief unnecessary. However, because of the delinquent taxes for 1986, 1987 and 1988, the portion of the action seeking declaratory relief proceeded. Cornell asked the court to declare that (1) privately owned mineral interests are subject to taxation separate from the surface land; and (2) a tax deed issued for delinquent property taxes does not divest the mineral interest owner of his rights in the land. The trial court agreed and granted relief to Cornell. It is this declaratory judgment that Rusk County appeals.

First, we address whether privately owned mineral interests are subject to taxation separate from the tax assessed against the surface land. Wisconsin's constitution has vested its taxing power in the legislature. Article VIII, § I of the Wisconsin Constitution states:

The rule of taxation shall be uniform but the legislature may empower cities, villages, or towns to collect and return taxes on real estate located therein by optional methods. Taxes shall be levied upon such property with such classifications as to forests and minerals including or separate or severed from the land, as the legislature shall prescribe.

Therefore, we must examine the statutes to determine if the legislature has classified mineral interests in such a manner that they are subject to separate taxation from the land.

The resolution of this issue involves statutory interpretation. Statutory interpretation presents a question of law that we review de novo. State v. Michels, 141 Wis.2d 81, 87, 414 N.W.2d 311, 313 (Ct.App.1987). When interpreting a statute we first look to the language of the statute to determine if it is ambiguous.

Section 70.32, Stats., sets up the manner in which property taxes will be assessed. It provides:

Real property shall be valued by the assessor in the manner specified in the Wisconsin property assessment manual provided under s. 73.03(2a) from actual view or from the best information that the assessor can practicably obtain, at the full value which could ordinarily be obtained therefor at private sale. In determining the value the assessor shall consider, as to each piece, its advantage or disadvantage of location, quality of soil, quantity of standing timber, water privileges, mines, minerals, quarries, or other valuable deposits known to be available therein, and their value; but the fact that the extent and value of minerals or other valuable deposits in any parcel of land are unascertained shall not preclude the assessor from affixing to such parcel the value which could ordinarily be obtained therefor at private sale. If on the assessment date occurring in 1957 or in any year thereafter any person other than a governmental unit of Wisconsin owns real estate in which a Wisconsin governmental unit has retained mineral rights, timber rights or an easement or any similar interest in such real estate, the value of any such retained right shall be eliminated in determining the assessable value of such property, and such retained interest shall be excepted in the assessment description of such land and in any notice, tax certificate or tax deed following any such assessment. (Emphasis added.)

The county argues that this statute clearly sets up a unitary taxing system with respect to land and mineral interests except in the case where the government is the owner of the mineral rights.

There is no question that sec. 70.32, Stats., standing alone, unambiguously establishes a unitary taxing scheme. Schmidt v. Town of Almon, 181 Wis. 244, 194 N.W. 168 (1923). In Schmidt, the property owner protested payment of the portion of taxes on her land that was attributable to the standing timber. The timber rights were owned by another person. The taxpayer argued that the person who owned the timber rights should have the duty to pay the taxes attributable to the timber. The court rejected this argument stating:

Section 70.32 prescribes the method to be followed by the assessor in the valuation of the real estate, and the elements of value to be taken into consideration in arriving at the assessment. Among such elements is the existence of standing timber upon the land. When such valuation shall be fixed as a result of a compliance with the provisions of section 70.32, the assessment must be levied as a unit against the real estate, and the timber itself constitutes but an element of the value of the real estate proper, namely the land. So that ... a legislative intent is made manifest for the assessment of land as a unit, and not for a separate assessment against the owner of standing timber.

Id. at 247, 194 N.W. at 169.

Cornell, however, directs our attention to sec. 706.057(2)(d), Stats., which provides a procedure for the establishment and lapse of mineral interests. The statute provides that a mineral interest is "used" if "property taxes are paid on the interest in minerals by the owner of the interest in minerals." Cornell argues that this statute acknowledges a separate tax to be assessed against mineral interests.

It is possible for an ambiguity to be created by the interaction of two separate statutes. In re Walker's Estate, 75 Wis.2d 93, 102, 248 N.W.2d 410, 414 (1977). "Statutes relating to the same subject matter are to be construed together and harmonized." State v. Burkman, 96 Wis.2d 630, 642, 292 N.W.2d 641, 647 (1980).

Cornell, however, offers us no way to harmonize the idea contained in sec. 706.057(2)(d), Stats., with sec. 70.32, Stats. It merely argues that the legislature evinced its intent to tax minerals separately by enacting sec. 706.057(2)(d).

We conclude that the only way to harmonize these statutes is to read them in the manner offered by the county. Rusk County submits that sec. 706.057(2)(d), Stats., contemplates protection of an owner of mineral interests who contracts with the surface property owner to pay the taxes attributable to the mineral interests on the property. Such an agreement, once complied with, would protect the mineral interest owner from having his rights lapse due to non-use. Thus, the county argues that there is no conflict between this idea and the unitary tax system set forth in sec. 70.32, Stats.

The county's reconciliation of these two statutes is supported by Schmidt. The court suggested in Schmidt that the property owner contract with the owner of the timber interests to recover that portion of the taxes...