Otter Tail Power Co. v. DeGnan
| Decision Date | 16 February 1934 |
| Docket Number | No. 6207.,6207. |
| Citation | 252 N.W. 619,64 N.D. 413 |
| Parties | OTTER TAIL POWER CO. v. DEGNAN. |
| Court | North Dakota Supreme Court |
OPINION TEXT STARTS HERE
Syllabus by the Court.
1. The constitutional provision (section 176 of the Constitution) exempting property of municipal corporations from taxation is not limited to property used by the municipality for governmental purposes.
2. Rights and privileges appertaining to buildings, structures, and improvements on real estate are subject to taxation as real estate.
3. The term “operative property of a public utility” means and includes any and all property reasonably necessary for use by said company exclusively in the operation and conduct of the business in which it is engaged; and in ascertaining what is operative property, the tax commissioner takes into consideration all of the property used in the operation and conduct of the business.
4. Where a public utility, by contract set forth in an ordinance enacted by a municipality, has the use of buildings belonging to the municipality, the use of said buildings must be considered by the tax commissioner in determining the operative property of the utility company.
5. In the case at bar, the value of the use of said buildings granted to the plaintiff by the municipality was assessed at the value of the buildings, and it being shown that the plaintiff was granted the “use and possession of said buildings until the year 1942,” and there being nothing in the record showing a different valuation, the assessment will be deemed correct.
Appeal from District Court, Ramsey County; G. Grimson, Judge.
Action by the Otter Tail Power Company against Catheryn Degnan, Treasurer of Ramsey County, State of North Dakota. From the judgment dismissing the action, plaintiff appeals.
Affirmed.
Field & Field, of Fergus Falls, Minn., and Traynor & Traynor, of Devils Lake, for appellant.
Sinness & Duffy and Romanus J. Downey, all of Devils Lake (F. T. Cuthbert, City Atty., and S. W. Thompson, State's Atty., both of Devils Lake, on the brief), for respondent.
The plaintiff is a foreign corporation and says it is engaged “in the general business of the generation, transmission, and sale of electric energy for public and private use, and, as a part of such business is engaged therein in the City of Devils Lake,” in Ramsey county; that “the operative properties of the plaintiff * * * were assessed for the taxing year of 1931 by the State Tax Commissioner and the State Board of Equalization, and such assessment of said operative properties therein was certified from the office of the State Tax Commissioner to the County Auditor of Ramsey County and was by the said County Auditor claimed to be extended upon the assessment and tax records of the county of Ramsey”; that there was included in this assessment one item of property described as: “Office structure located on Lots 21, 22, 23 and 24, Block 19, O. P.”; that the assessment of the operative properties and the tax levied and extended thereon were determined, levied, and extended in one lump sum and the records do not disclose how much of such assessment thereof or the tax levied is properly referable to the item of property so described; that the defendant is the treasurer of Ramsey county and collected from the plaintiff $10,293.69-the total tax levied on the operative properties of the plaintiff in Ramsey county, including the item of real estate described-that such property is owned in fee simple by the city of Devils Lake, a municipal corporation, and is exempt from taxation; that under protest in writing, to the effect that the lots described are exempt from taxation and should not be included in the assessment of plaintiff's property; and that the tax is illegal and without waiving any of its rights, the plaintiff paid the amount of tax demanded, brings this action to recover from the county the amount of excessive tax collected and asks the court to determine the proper amount of the total tax “levied and assessed against the operative properties of the plaintiff * * * which is referable to and represents and is a tax levied and extended upon the said item of property particularly described above.”
The defendant alleges that this specific property described “including the office structure and the portion of the lots necessary for the use thereof is now and for more than six years last past has been used and occupied by the plaintiff herein for private business purposes, and that such property has not been used or occupied by the City of Devils Lake for governmental or municipal purposes”; that this property, though owned by the city of Devils Lake, has been used and occupied by the plaintiff pursuant to the terms and conditions of Ordinance No. 215 of the city of Devils Lake, which ordinance grants to the plaintiff the “right and privilege to use the brick building belonging to the said City of Devils Lake and situated upon Lots Twenty-two, Twenty-three, and Twenty-four of Block Nineteen-together with its appurtenances, and so much of the said premises as may be reasonably needed for its convenient use during a term commencing upon the approval of this ordinance and terminating on the 26th day of July, 1942, for the purpose of housing and maintaining its pumping equipment and water works plant and of housing its telephone exchange, and for the use and occupation of its office force.”
That the city ordinance also provides that the plaintiff is to “keep and maintain the said building insured for its insurable value in a good and responsible insurance company, making said insurance payable to the City of Devils Lake, and shall pay all taxes, special assessments, including paving taxes and sidewalk taxes, and all other charges that have heretofore or may hereafter during the said term be assessed upon or levied against the aforesaid Lots Twenty-one, Twenty-two, Twenty-three, and Twenty-four of Block Nineteen of the City of Devils Lake, or upon any buildings or improvements thereon situated.”
That the contract contained in such ordinance was accepted by the plaintiff, and it is under the provisions and conditions of this ordinance that plaintiff occupies the property.
The case was tried without a jury. The court made findings of fact and conclusions of law in favor of defendant and ordered the dismissal of the action. From the judgment entered, plaintiff appeals.
The contention of the appellant is “that the exact tax that is questioned here is a tax assessed and levied against the whole or fee title to this property, including the reversionary and fee interest of the City of Devils Lake, and is not limited to the ‘value of the use of’ or the ‘leasehold interest of’ the appellant.”
The testimony shows that the operative property of the appellant in Ramsey county, as assessed by the tax commissioner and the state board of equalization, is valued at $298,173 as a lump assessment, and that in this amount is included the sum of $7,000 as the assessment on the property involved, being assessment at the rate of 100 per cent. of its value. For taxable purposes, this is reduced to 75 per cent., and it is admitted in the case that, if the tax levied is prorated on all classes of property assessed, the tax upon the property involved would be $241.66.
It is not claimed the lots were assessed to appellant, nor the well, well property, water mains, or any of the water equipment upon the premises described, as these belonged to and were retained by the city of Devils Lake. As we construe the entire record, it is clear to us the intent was to assess the entire operative property of the appellant, and, though in itemizing, the property is described as lots 22, 23, and 24, the assessment is merely upon the structure used by the plaintiff and it is stipulated that the plaintiff is using these buildings for housing its equipment and for office purposes.
[1] It is the contention of the plaintiff that this property, being owned by the municipality, is exempt from taxation even though not used for municipal or governmental purposes; that the tax is in fact a tax on the whole or fee title and cannot be assessed and levied against a lessee of the municipal property; that the finding that the leasehold interest of the appellant is substantially equal to the ownership of the fee, and that the value of such leasehold interest is substantially the same as the actual present value of said property is improperly injected into the case, and in any event cannot be sustained; that the provisions of the lease do not require the payment of the taxes in dispute; that the statute does not prevent plaintiff “from suing for a refundment of this tax”; and that its claims “with reference to the tax in question go or pertain to the merits or the substantial justice of the tax.”
With reference to the first contention, we note that section 176 of the state Constitution, as amended, says: “The property of the United States and the state, county and municipal corporations * * * shall be exempt from taxation. * * *”
It does not say property used by the municipality, but property of the municipality. In this case ownership is the test of exemption. Bank of North Dakota v. Burleigh County et al., 55 N. D. 1, 16, 212 N. W. 217, has no application here. Hence, so far as the property of the municipality is concerned, it is not taxable. See, also, City and County of San Francisco v. McGovern, 28 Cal. App. 491, 152 P. 980, 984. It is not necessary to discuss the cases which turn upon the use to which the property is put as they are not applicable to the situation here.
[2][3][4] A proper construction of the record shows it is not the intent to levy a tax upon the fee. The appellant has the use of the building under the ordinance. No rent for the use is reserved and, under the provisions of the ordinance, the appellant is “authorized to construct and remove partitions and to make such other changes in the...
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