Des Moines Union Ry. Co. v. Chi. Great W. Ry. Co.

• Decision Date: 13 April 1920
• Docket Number: No. 32844.,32844.
• Citation: 177 N.W. 90,188 Iowa 1019
• Parties: DES MOINES UNION RY. CO. v. CHICAGO GREAT WESTERN RY. CO.
• Court: Iowa Supreme Court

188 Iowa 1019

177 N.W. 90

DES MOINES UNION RY. CO.

v.CHICAGO GREAT WESTERN RY. CO.

No. 32844.

Supreme Court of Iowa.

April 13, 1920.

Appeal from District Court, Polk County; Thomas J. Guthrie, Judge.

The opinion states the case. Reversed.

Salinger, J., dissenting.

Carr, Carr & Evans, of Des Moines, for appellant.

Parrish & Cohen, of Des Moines, for appellee.

WEAVER, C. J.

The plaintiff is a corporation owning a railway and in connection therewith certain terminal facilities in the city of Des Moines. The defendant is also a corporation owning and operating a line of railway extending from Chicago in the state of Illinois to and through the city of Des Moines and thence to Kansas City in the state of Missouri. In the record before us the plaintiff is spoken of as the “Des Moines Company” and the defendant as the “Chicago Company,” and for convenience they will be so designated in this opinion.

On July 2, 1896, the plaintiff and the corporation then owning the Chicago Railway Company entered into a written contract by which the Chicago Company was granted the right to the use of a portion of the property of the Des Moines Company located in the latter city, and the Des Moines Company on its part also undertook to render certain services for the Chicago Company. The contract was to continue in force for the term of 25 years. Among stipulations of said contract is one upon the proper interpretation and effect of which this case is made to turn. The ninth section or clause of the contract sets forth the considerations which the Chicago Company is to render or pay to the Des Moines Company for the agreement so entered into by the latter. Among these considerations are the following:

“9. The Chicago Company, in consideration of the grants and provisions hereof, agrees to pay to the Des Moines Company in the manner and at the times hereinafter specified, the following sums, to wit: * * *

Fifth. One-third of all taxes or assessments, special or otherwise, and public charges of every kind and nature that shall or may be taxed or assessed against the Des Moines Company or its property during the aforesaid term of years. * * *”

Provision was further made for the keeping and rendering of mutual accounts and for monthly payments.

Later, the Chicago Company, named in this contract, was succeeded in the ownership and control of said railway by the defendant in this case and by agreement thereafter made between plaintiff and defendant the latter assumed the liability of its predecessor thereunder.

This action is brought at law by the Des Moines Company to recover an amount which it alleges is due and payable to it under the terms of said contract. The alleged facts upon which that claim is founded as stated in the petition are that in each of the years 1914, 1915, and 1916 the United States of America assessed against plaintiff and its property an income tax aggregating for said 3 years the sum of $6,263.18, which assessments have been paid and discharged in full by the plaintiff, and that defendant thereby became charged with the duty under its contract, above quoted, to repay to the plaintiff the one-third part of said levies. The petition further alleges that in the year 1917 the United States assessed against the plaintiff an excise tax on the estimated value of its capital stock to the amount of $428.50 and thereafter a further tax of like character for the year 1918 to the amount of $938.50, all of which has been paid by the plaintiff, and for one-third of which amount it demands a recovery from the defendant.

To this petition the defendant demurred on grounds which may be briefly stated as follows: That the defendant's covenant as shown by reference to the contract does not provide for payment by it of the income taxes or excise taxes imposed on the plaintiff by the federal government, nor is such obligation in any manner to be implied from the terms of the contract, nor does the language thereof evidence any such intent.

The trial court overruled the demurrer, and defendant, electing to stand thereon, declined to plead over, and excepted to the ruling. Judgment was thereupon entered in plaintiff's favor for the amount of its demand, and defendant appeals.

The particular clause of the contract on which the plaintiff's claim is based is in the above-quoted agreement of the defendant “to pay one-third of all taxes or assessments, special or otherwise, and public charges of every kind and nature that shall or may be taxed or assessed against the Des Moines Company or its property during the term.”

The demurrer admits the making of the contract and defendant's obligation to contribute to the payment of the taxes therein specified, but it is contended that such agreement does not cover or include the income tax or excise tax imposed by the United States and paid by the appellee. It is this question of construction to which we must address ourselves.

[1] I. “Taxes,” “taxation,” and “assessments” are words in very common and familiar use, the meaning and effect of which are not ordinarily open to serious question, but, like most other words in our language, their scope and application vary according to the nature of the subject under discussion and the circumstances under which they are used. Taxation, in its broadest and most general sense, includes every charge or burden imposed by the sovereign power upon persons, property, or property rights for the use and support of the government and to enable it to discharge its appropriate functions, and in that broad definition there is included a proportionate levy upon persons or property and all the various other methods and devices by which revenue is exacted from persons and property for public purposes. It is only occasionally, however, that the word “tax” or “taxation” is used in this all-embracing and sweeping sense, and Legislatures, courts, and the people have come to differentiate between “general” taxes, “ordinary” taxes, “property” taxes, “excise” taxes, “inheritance” taxes, “occupation” taxes, “special” taxes or assessments, “franchise” taxes, “poll” taxes, “license” taxes, “income” taxes, “excess profits” taxes, and various other methods by which contributions to the public revenues are enforced.

[2][3] When, therefore, we are called to consider a contract in which one party has covenanted with another to pay taxes, and the question arises as to the scope and extent of that obligation, the terms of the covenant are ordinarily open to construction. The end and purpose of the construction of an agreement is to arrive at the real meaning and intent of the parties. To that end we must consider first the natural import of the words or language the parties have chosen for its expression, and read it in the light of its context, as well as in the light of the circumstances under which it was made. Thus reading the contract before us, we are brought to inquire whether the words “taxes” and “assessments” must be given their broadest and most general signification, or will the intent of the parties be better effectuated by so limiting it as not to include the income tax and excise tax which the plaintiff has been required to pay? At the time when the contract was made and for a considerable period of years thereafter, there was no law requiring payment of either an income tax or excise tax, nor was there any apparent reason for anticipating such a change in the policy or manner of raising public revenues. This fact alone would probably not be a sufficient answer or defense to the plaintiff's claim, but it is one of the pertinent facts or circumstances which the court may consider as bearing upon the intent of the parties. Love v. Howard, 6 R. I. 116;Second Univ. Society v. Providence, 6 R. I. 235.

See, also, as to the bearing of such fact upon the question of the intent of the parties, King v. Raab, 123 Iowa, 635, 636, 99 N. W. 306.

In Bolling v. Stokes, 2 Leigh (Va.) 178, 21 Am. Dec. 606, decided by the Virginia court, a lessee covenanted with the owner of the property to pay a specified yearly rent “besides all taxes and other public dues in any manner accruing” upon the premises, which rent should be paid half yearly, “besides taxes and public dues of every kind.” During the term of the lease the street was paved, and the cost assessed upon the property. The lessee paid the assessment, and later sued the owner to recover the expense so incurred. In sustaining the plaintiff's right to recover the court says that “the words of the tenants covenant are very strong,” but they “may be satisfied by the application of them to the ordinary and usual taxes and public dues. To extend them to an expense unknown by the parties, incalculable as to amount, uncertain as to time, and in which the lessee could have no certain interest, would be to disregard all the circumstances under which the contract was made. * * * There was nothing by which it could be estimated, like the usual and customary taxes and public dues. * * * It was an uncertain and extraordinary assessment.”

The Massachusetts court, speaking upon the subject, says:

“In a covenant for the payment of taxes by a lessee, it is to be ascertained by construction what was contemplated by the parties in the use of the terms employed. Those terms are not necessarily to be taken in their strict legal signification.”

Harvard College v. Aldermen of Boston, 104 Mass. 483. Further discussing the matter of construction, it is said in the same case that--

“It may be affected by the character, situation, and condition of the estate, the mode and purpose of the occupation by the tenant, and by all the circumstances of the particular case. Much weight is sometimes given to the consideration that the assessment in question is of a kind in use or authorized at the time the covenant was entered into, or, on the other hand, of a novel or newly authorized nature.”

[4] This is not to deny that where the words of the contract...