First Nat. Leasing Corp. v. City of Madison

• Decision Date: 13 December 1977
• Docket Number: No. 75-753,75-753
• Citation: 81 Wis.2d 205,260 N.W.2d 251
• Parties: FIRST NATIONAL LEASING CORPORATION, a Wisconsin Corporation, Respondent, v. CITY OF MADISON, a Municipal Corporation, Appellant.
• Court: Wisconsin Supreme Court

Page 251

260 N.W.2d 251

81 Wis.2d 205

FIRST NATIONAL LEASING CORPORATION, a Wisconsin Corporation Respondent, v. CITY OF MADISON, a Municipal Corporation, Appellant.

No. 75-753.

Supreme Court of Wisconsin.

Argued Nov. 2, 1977.

Decided Dec. 13, 1977.

Henry A. Gempeler, City Atty., on brief and Robert E. Olsen, Asst. City Atty., argued, for appellant.

H. Robert Kilkelly (argued) and Lee, Johnson & Kilkelly, S. C., Madison, on brief for respondent.

HEFFERNAN, Justice.

The Methodist Hospital of Madison, Wisconsin, leases x-ray and hospital-type equipment from the First National Leasing Corporation. It is contended that such equipment is exempt from property taxation under the provisions of subsec. 70.11(4m), Stats., which provides:

"(4m) Nonprofit Hospitals. Property which is used exclusively for the purposes of any hospital of 10 beds or more devoted primarily to the diagnosis, treatment or care of the sick, injured, or deformed, which hospital is owned and operated by a corporation, voluntary association, foundation or trust, no part of the net earnings of which inures to the benefit of any shareholder, member, director or officer, and which hospital is not operated principally for the benefit of or principally as an adjunct of the private practice of a doctor or group of doctors. The exemption herein granted shall be effective and apply to assessments of property for taxation made, or permitted to be made pursuant to s. 70.44, in the year 1957 and subsequent years." (Emphasis supplied.)

The City of Madison's position is that the property is not exempt from taxation, because it is not "used exclusively" for the purposes of the hospital. It bases its contention on the stipulated facts that the leasing company does business for profit, takes depreciation on the leased property for income tax purposes, and has put the property up as collateral on a loan. Hence, although the city acknowledges the hospital use, it argues that there are other uses made of the property by the lessor and, accordingly, the hospital's use is not exclusive.

The stipulated facts show that the plaintiff leased property to the Methodist Hospital pursuant to a lease dated January 19, 1968. During the tax years of 1972 and 1973, the periods in contention here, the property principally x-ray equipment was located in the Methodist Hospital, was in its exclusive possession, and was operated only by hospital personnel in the performance of their regular hospital duties. The lease provided that, in the event the property leased was found to be taxable, the Methodist Hospital would pay the taxes.

For the purposes of determining the exemption question, the leasing company paid the taxes for the years 1972 and 1973 and, after filing the appropriate claims with the city for a refund, commenced an action for the return of the taxes paid. The circuit court on December 23, 1975, entered a judgment determining that the property was exempt from taxation under subsec. 70.11(4m), Stats. We affirm that judgment.

Because the facts are stipulated, the only questions presented to this court are matters of law, to which this court may address itself without the requirement of giving special deference to the determinations of the trial court. National Amusement Co. v. Department of Revenue, 41 Wis.2d 261, 266, 163 N.W.2d 625 (1969).

The burden of showing that property is exempt from taxation is on the person seeking the exemption, and the rule is that all doubts are to be resolved against the exemption and in favor of taxability. Wisconsin Electric Power Co. v. Department of Revenue, 59 Wis.2d 106, 111, 207 N.W.2d 841 (1973). We, nevertheless, said in Columbia Hospital Assn. v. Milwaukee, 35 Wis.2d 660, 668, 151 N.W.2d 750, 754 (1967):

"However, a strict construction is nonetheless a construction, and an exemption statute need not be given an unreasonable construction or the narrowest possible construction. A 'strict but reasonable' construction seems to be the pithy and popular statement of the rule."

Moreover, in all problems of statutory construction, legislative intent is to be derived by giving the language its ordinary and accepted meaning. Transamerica Financial Corp. v. Department of Revenue, 56 Wis.2d 57, 64, 201 N.W.2d 552 (1972).

The leasing company's argument is that the statute, in referring to property "used exclusively" for hospital purposes, is satisfied when the property is physically used exclusively for hospital purposes. It contends that it is, therefore, immaterial that the property is owned by another, leased to the hospital for profit, or used by the lessor as a loan collateral.

The City of Madison's argument is basically that utilized by Justice Traynor in his dissent in Ross v. City of Long Beach, 24 Cal.2d 258, 266, 148 P.2d 649, 653 (1944). Therein, Justice Traynor said:

"The word 'property' includes all of the interests and estates therein. Therein is a recognized distinction in the several interests that may exist in property, and this court has sanctioned their separate consideration for purposes of taxation. . . . It follows that the property is not tax exempt unless all interests in the property, including the lessor's interest, are used exclusively for public schools."

While there is much to be said for this legalistic analysis which conceives of "property" as a bundle of rights and interest, some of which may be held by different persons for different purposes, we are satisfied that the term was not so employed in Wisconsin's legislative language. It is a strained and unreasonable construction of the word, rather than a natural and ordinary one.

The City of Madison does not contend that the mere ownership of the property by other than a hospital qualifying under subsec. 70.11(4m), Stats., would make the property taxable if the use by the hospital were gratuitous or if the property were leased to the hospital by a nonprofit corporation. Nevertheless, the city apparently contends that, despite the conceded exclusive physical use by the hospital, the property is taxable if any of the intangible incidents of ownership, such as mortgageability or depreciability, inure to the benefit of the lessor.

It is apparent, however, from the face of subsec. 70.11(4m) Stats., and the context in which it appears, that the legislature made no attempt to predicate taxability on whether an owner derived a profit or other benefit from property which was used exclusively for hospital purposes. Not all of the exemptions set forth in sec. 70.11 are phrased solely in terms of "used exclusively." For example, under subsecs. 70.11(4), (7), (13), (16), and (17), the property is exempt only if owned and used exclusively by the particularly favored institution. But in respect to nonprofit hospitals under subsec. 70.11(4m), the only criterion is that the property be "used exclusively." Ownership is not mentioned.

It would thus appear that the legislature, in granting this exemption to the hospital, intentionally chose not to give any weight to ownership or incidents of ownership, such as the right to take depreciation or to use the property as loan collateral. The focus of the legislature was upon the utilization or employment of the property by the hospital, the institution which it sought to treat favorably by affording a tax exemption.

Had it sought to make the exemption dependent on ownership by the favored institution or to exclude exemption if the beneficial or profitable incidents of ownership inured to an owner not the hospital, it could have said so in (4m), as it did in other subsections of sec. 70.11, Stats.

It should be noted, moreover, that the original drafts of subsec. 70.11(4m), Stats., required not only that the property be used exclusively, but that the property be owned by a nonprofit hospital. Because the ownership requirement was stricken from the draft bill, it is apparent that the legislature was not concerned about those attributes of property that inure to the title holder but have nothing to do with the physical use of the property.

Nevertheless, property has...