Holman Transfer Co. v. City of Portland

• Court: Supreme Court of Oregon
• Writing for the Court: Before BRAND; LUSK; TOOZE; ROSSMAN
• Citation: 196 Or. 551,249 P.2d 175
• Parties: HOLMAN TRANSFER CO. et al. v. CITY OF PORTLAND et al
• Decision Date: 26 November 1952

Page 175

249 P.2d 175

196 Or. 551

HOLMAN TRANSFER CO. et al. v. CITY OF PORTLAND et al.

Supreme Court of Oregon,

Argued Sept. 9, 1952.

Decided Oct. 22, 1952.

Rehearing Denied Nov. 26, 1952.

See 250 P.2d 929.

C. D. Christensen, of Portland, argued the cause for appellants. With him on the brief were Clark & Clark, of Portland.

Dan M. Dibble, Deputy Dist. Atty., of Portland, argued the cause for respondents. With him on the brief was John B. McCourt, Dist. Atty. for Multnomah County, of Portland.

Before BRAND, C. J., and ROSSMAN, LUSK, LATOURETTE, WARNER and TOOZE, JJ.

LUSK, Justice.

This is a suit for a declaratory decree brought to determine whether certain real property owned by the defendant, City of Portland, and leased by the city to the plaintiffs, Holman Transfer Company, a corporation, and Rudie Wilhelm Warehouse Company, Inc., a corporation, is exempt from taxation for the fiscal year 1948-49 under the provisions of an act of the legislature passed in 1947 hereinafter set out. Defendants are the City of Portland, Multnomah County and others. The court entered a decree declaring that the property was not exempt from taxation for the year in question and that the tax levied for that year was lawful and valid. Plaintiffs appeal.

The relevant facts were stipulated by the parties as follows:

'That it is admitted for all purposes in this suit that prior to January 1, 1947, the defendant City of Portland, acting by and through its Commission of Public Docks, entered into a lease in writing with Pope & Talbot, Inc. whereby all of the property involved in this suit was leased to said Pope & Talbot, Inc., and, pursuant to said lease, said Pope & Talbot, Inc. entered into possession of all of the said property and continued in such possession as lessee from the City of Portland under said lease until on or about October 14, 1947, and that prior to July 1, 1947, the plaintiffs subleased said premises from said Pope & Talbot, Inc. and thereafter occupied the premises as such subtenants until October 14, 1947, and that on or about October 14, 1947, the plaintiffs, as lessees, and the Defendant City of Portland, acting through its Commission of Public Docks, as lessor, entered into a lease in writing by the terms of which said premises were leased to plaintiffs for a term of years; that a copy of said lease is attached to, as a part of, plaintiffs' complaint; that subsequent to October 14, 1947, plaintiffs were in possession of said premises as lessees under said lease of October 14, 1947.'

The only provision of the lease material to the controversy reads:

'The Lessees agree, upon billing by Lessor, promptly to pay to Lessor all taxes that may be levied against the demised premises under authority of Chapter 382, Oregon Laws, 1947, or any other law or statute, from the time that the Lessees take possession thereof until the expiration of this lease, or any renewal thereof; taxes for fractional parts of fiscal years shall be pro-rated.'

The legislation to be construed is found in Secs. 1 and 2, ch. 382, Oregon Laws 1947. Section 1 is a new provision, and Sec. 2 amends Sec. 110-201, O.C.L.A., as amended by ch. 296, Oregon Laws 1945. So far as now material they read:

'Section 1. All real property of this state or any institution or department thereof or of any county or city, town or other municipal corporation or political subdivision of this state, held under lease or rented by any person, corporation or association whose real property, if any, is taxable, shall be subject to assessment and taxation for the true cash value thereof uniformly with real property of non-exempt ownerships; provided, however, that real property owned by any city or town, or any dock commission or port, and held under a lease heretofore executed, or rented under an agreement heretofore executed, by any person, corporation or association, whose real property, if any, is taxable, shall not become subject to assessment and taxation for the fiscal year 1947-1948, and for the fiscal year 1948-1949; * * *

'Section 2. That section 110-201, O.C.L.A., as amended by chapter 296, Oregon Laws 1945, be and the same hereby is amended so as to read as follows:

'Sec. 110-201. The following property shall be exempt from taxation:

* * *

* * *

'(3) All public or corporate property of the several counties, cities, towns, school districts, irrigation districts, drainage districts, ports, water districts and all other public or municipal corporations in this state used or intended for corporate purposes, except real property belonging to any such public or municipal corporation and held under a contract for the purchase thereof, and except, further, real property held under a lease or other interest or estate in such real property less than the fee simple; provided, however, that real property owned by any city or town or any dock commission or port, and held under a lease heretofore executed, or rented under an agreement heretofore executed, by any person, corporation or association, whose real property, if any, is taxable, shall not become subject to assessment and taxation for the fiscal year 1947-1948, and for the fiscal year 1948-1949'. (Italics added.)

We have italicized the provisos in both sections as the case concerns itself primarily with their construction. As they are couched in identical language, we shall speak simply of 'the proviso'.

As the stipulation shows, the property was in possession of Pope & Talbot, Inc. from some time prior to January 1, 1947, until about October 14, 1947, under a lease from the City of Portland. We may observe in passing that nothing is claimed for the fact mentioned in the stipulation (and we deem it immaterial) that the plaintiffs were in possession of the property for a period as sublessees under Pope & Talbot, Inc. The plaintiffs' lease from the city commenced October 14, 1947, at which time they entered into possession of the property and so continued through the fiscal year 1948-49.

We shall assume for the purposes of this opinion, what probably is the law, that the word 'heretofore' in the phrase 'under a lease heretofore executed' refers to the effective date of the Act, which was July 5, 1947.

The precise question is whether real property of the city, held by the plaintiffs under a lease which was executed after the Act had become effective, is exempt from taxation for the year in question because, at the time of the effective date of the Act, it was held by a different party under a different lease theretofore executed. Plaintiffs assert that the proviso creates such an exemption. We do not agree.

The theory behind the legislation, it may be reasonably assumed, is that even publicly owned property should pay its share of the cost of government when in the hands of a private person and devoted to a private use. The legislature, however, evidently deemed it expedient to provide that during the two fiscal years following passage of the Act property then held under a lease executed before adoption of the new taxing policy should be exempt, for the obvious reason that such leases had been entered into at a time when the property was exempt from taxation, and, of course, took no account of a tax liability which then did not exist. After the Act became effective, however, the municipality and the prospective lessee could make their agreement with the knowledge that the property was subject to taxation. The municipality would be enabled, as the City of Portland did in this case, by a provision in the lease to pass on the obligation to pay the tax to the lessee. No doubt such agreements were very much in the minds of the legislature. While it is true that the tax is not against the owner but against the property, still we are dealing with a statute which makes the question of exemption or no exemption dependent upon whether or not the property is held under lease by a person whose real property is taxable. The courts have more than once observed that taxation is an exceedingly practical matter. In Knapp v. Josephine County, 192 Or. 327, 353, 235 P.2d 564, 575, this court said, 'we think that all tax statutes should be construed in as practical a manner as possible.' In most instances the owner does pay the tax and taxes are an important consideration in agreeing on the terms of a lease of taxable land. The legislature, of course, was not unaware of these facts. Indeed, an amendment passed in 1949, and which we shall again have occasion to mention, indicates very clearly that the legislature by them had concluded that the respite for only two years was not sufficient, and that the exemption should continue during the full term of leases executed prior to the effective date of the 1947 Act--undoubtedly because of hardships which would otherwise result in cases of leases executed before adoption of the Act and not yet expired.

The argument has centered upon the meaning of the phrase 'held under a lease heretofore executed' in the proviso. Plaintiffs' contention involves the somewhat remarkable proposition that although the property was held by them during the fiscal year 1948-49 under a lease executed after the Act became effective, the legislature intended that it should be exempt from taxation during that year because, before the Act became effective, it had been leased to a different person; or, in other words, that the question of exemption of leased property was to be wholly dependent on its status prior to, or at the time of, the effective date of the Act. Underlying this contention are two fundamental errors. One results from a failure to read correctly and grammatically the phrase just quoted; the other is the assumption that the phrase is plain and unambiguous, that it can have but one meaning, and that is the meaning which the plaintiffs ascribe to it, and therefore that it is not open to construction.

The former of these errors is revealed in the following quotation from the...