Crocker-McElwain Co. v. Bd. of Assessors of City of Holyoke

• Decision Date: 04 January 1937
• Citation: Crocker-McElwain Co. v. Bd. of Assessors of City of Holyoke, 296 Mass. 338, 5 N.E.2d 558 (Mass. 1937)
• Parties: CROCKER-McELWAIN CO. v. BOARD OF ASSESSORS OF CITY OF HOLYOKE. CHEMICAL PAPER MFG. CO. v. SAME.
• Court: Supreme Judicial Court of Massachusetts

296 Mass. 338

5 N.E.2d 558

CROCKER-McELWAIN CO.

v.BOARD OF ASSESSORS OF CITY OF HOLYOKE.

CHEMICAL PAPER MFG. CO.

v.SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

Jan. 4, 1937.

Appeals from Board of Tax Appeals.

Proceedings by the Crocker-McElwain Company, and by the Chemical Paper Manufacturing Company, against the Board of Assessors of the City of Holyoke, on applications for an abatement of taxes on real estate. The assessors failed to act on such applications within four months, and the taxpayers appealed to the Board of Tax Appeals. From the decisions of the Board of Tax Appeals, the taxpayers appeal.

Decision of the Board of Tax Appeals affirmed.P. Nichols and P. Nichols, Jr., both of Boston, for appellants.

R. L. Davenport, of Holyoke, for appellee.

FIELD, Justice.

These two cases come before us on appeals by the respective taxpayers from decisions of the board of tax appeals. G.L.(Ter. Ed.) c. 58A, § 13, as amended by St.1933, c. 321, § 7. Each taxpayer was assessed on real estate in the city of Holyoke for the year 1932, and made an application to the assessors for an abatement. The assessors failed to act on such applications within four months after they were filed and thereafter these taxpayers appealed to the board of tax appeals. G.L.(Ter. Ed.) c. 58A, § 6, as amended by St.1933, c. 167, § 4. The board of tax appeals granted an abatement to each taxpayer-$546.04 to the Crocker-McElwain Company, and $1,983.22 to the Chemical Paper Manufacturing Company. From these decisions of the board the taxpayers respectively appealed to this court and now contend that they are entitled to larger abatements than those granted.

Facts found by the board of tax appeals as of April 1, 1932, include the following: Each taxpayer owns land in the city of Holyoke, not contiguous to the Connecticut River, which is here referred to as a mill site. On these sites are mill buildings and hydraulic structures. The properties are used in the manufacture of paper. ‘Appurtenant to each of the two mill sites is a right to use a certain amount of water for the generation of power, established by indentures with the Holyoke Water Power Company under which the mill sites and water power rights were conveyed, and a further right to use a certain amount of water for process, established by other indentures. This company owns a dam across the Connecticut River and a system of canals running through the city in three levels. Between the different levels there are mill sites, conveyed by the company to various mills with appurtenant water power privileges. The water in the canals passes through flumes, water wheels and raceways on the mill sites from one level to another, finally emptying into the river again below the dam. The water power developed by the company's hydraulic system is utilized by the grantees of water power privileges at the mill sites, and also by the company itself. * * * Mill power is defined as the right to draw from the nearest canal and through the land to which the mill power is annexed 38 cubic feet of water per second when the head is 20 feet and inversely proportionate quantities as the head varies. Permanent mill powers were computed on the basis of the low wate flow of the Connecticut River. The total number of permanent mill powers owned by grantees is 177.2 and the Holyoke Water Power Company itself uses 13.09 additional.’

‘The indentures between the the Holyoke Water Power Company and the * * * [taxpayers] conveying the mill sites and granting permanent mill powers contain terms and conditions set forth in a document, called ‘Proposals,’ annexed to and made a part of each indenture. Among these terms and conditions it is provided that the company shall forever maintain the dam and keep the canals in good repair and that the land constituting the mill sites shall not be used except for mills. Article V thereof is in part as follows: ‘In order to continue in the grantors an interest in common with the grantees, for the preservation and support of the mill powers which may be granted, and to secure a fund to indemnify the grantees for expenses which may be incurred by them for making repairs, if the grantors should improperly neglect to make them, it is proposed that part of the consideration of every sale, and all that is to be allowed the grantors for repairs, etc., by them assumed, should be paid or secured to them in the form of a reservation of rent. It is therefore declared, that each mill power, with the land to which it is annexed, shall forever be subject to a perpetual annual rent * * *; which rent is to be paid in yearly payments forever. * * *’ And the indentures provide that the conveyance of the land together with the mill powers is in consideration of money and other consideration paid and of the rent reserved and of the other agreements of the grantees, and that the granted premises are conveyed subject to the agreements, terms and conditions in the proposals obligatory upon the grantees, ‘and among other things yielding and paying to the said Holyoke Water Power Company, and its successors and assigns forever, for each mill power above granted * * * the yearly rent’ as therein specified.'

‘The water power belonging to the mill site of the Chemical Company is 16 permanent mill powers, and an annual rent is reserved of $450 a mill power. At the Crocker Company mill site the water power is 10 permanent mill powers and the annual rent is $1,500 a mill power. * * * The assessors in valuing these mill sites added to the square foot value of the land, as estimated by them, a value of $10,000 for each of the 16 mill powers at the Chemical Company's site and a value of $12,000 for each of the mill powers at the Crocker Company's mill site. In thus valuing the mill powers they did not take into consideration the annual rents paid for them. They did not value the right to process water.’

Copies of indentures and the ‘proposals' incorporated therein are made a part of the record on appeal. The ‘proposals' contain provisions for re-entry by the grantor of the mill sites and appurtenant mill powers for non-payment of judgments for unpaid rent.

The board of tax appeals ruled that ‘the fair cash value we have to find is the value of the land with water power without considering the obligation to pay rent,’ and ‘that the water power rights enhanced the value of the mill sites, omitting from consideration the rents reserved, by $120,000 in the case of the Crocker Company's mill site and by $160,000 in the case of the Chemical Company's mill site.’

The taxpayers state that the sole question raised by their appeals is ‘whether, as a matter of law, the Board might, in valuing these mill sites, consider the enhancement in value due to the right created by indenture to enjoy the use of the water power without considering the obligation to pay rent created by the same indenture.’

It is not disputed that the so called mill powers are valid rights appurtenant to the mill sites and that in valuing such mill sites as real estate for the purposes of taxation any enhancement of the value thereof by reason of such appurtenant rights is to be considered. The narrow question for decision is whether in determining the amount of such enhancement the obligation to pay rent is to be considered. This question must be answered in the negative.

Principles governing taxation in a situation like the present were stated in Essex Co. v. Lawrence, 214 Mass. 79, 90, 91, 100 N.E. 1016, 1018, though in that case the tax upon the water power company-the Essex Company-was in question, rather than, as here, taxes upon grantees of mill sites and mill powers appurtenant thereto. In that case it was said: ‘The Essex Company as the owner of the entire water power development with contiguous land had a right to carve its property by selling fractional parts as sites for mills with power rights appurtenant and by retaining other parts upon which are located the dam and canals, and to assume by contract with the purchasers of the sites the burden of maintaining the dams and other structures, by which the capacity for power of the river water might be made available in perpetuity. * * * When the mill powers became by use and by conveyance or contract parcel of the several mill sites, they were properly taxable with them, not as distinct and independent items of property, but as increasing the value of the land. * * * If the Essex Company had retained ownership of its original real estate unit, its value would have comprehended the land, its capacity for utilizing the force of the river for power and the structures by which this capacity had been developed. Assuming that this was the most valuable use to which the land could be put, these elements in combination would have made up the entire value of the land. Since it has divided its real estate unit by selling some of its land and incorporating therewith a part of the capacity of the river to produce power, the land value of that which is left must be diminished. If it has acquired as a part of these sales valuable rights to rent, these do not constitute real estate. The capacity of its land for improvement by dams and canals to utilize the fall of the river for power was single; whatever part of it is treated as annexed to the mill sites must be subtracted. In reaching this result, the enhancement of value of the land occupied by the several mills by reason of the mill powers in use annexed to them must be considered. * * * It follows that so far as the capacity of the water of the river to produce power developed by the structures of the Essex Company has been assessed by enhancement of the several mill sites, to the same extent its land and structures should be diminished in the valuation for taxation which otherwise would be placed upon them.’ An earlier case, Lowell v. County Commissioners, 6 Allen, 131, was decided in accordance with these principles.

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