Otter Tail Power Company, a Corp. v. Degnan
| Decision Date | 15 January 1934 |
| Docket Number | 6207 |
| Citation | 252 N.W. 619,64 N.D. 413 |
| Court | North Dakota Supreme Court |
Rehearing Denied February 16, 1934.
Appeal from District Court, Ramsey County, Grimson, J 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 and Traynor & Traynor, for appellant.
In the matter of the taxation of property owned by a state or municipality but leased to private parties and so not used for governmental purposes, in states where ownership is made the test of the exemption, taxes levied upon such property have been repeatedly held void. Oakland v. Albers Bros Mill. Co. 43 Cal.App. 191, 184 P. 868; Water Comrs. v. Auditor Gen. 115 Mich. 546, 73 N.W. 801; San Francisco v. McGovern, 28 Cal.App. 491, 152 P. 980; People ex rel. International Nav. Co. v. Barker, 153 N.Y. 98, 47 N.E. 46; Portland v. Welch (Or.) 269 P. 868; Eugene v. Keeney (Or.) 293 P. 924.
The assessment must be limited to the leasehold interest, and not made against the interest retained by the state. Note in 23 A.L.R. 248; Jetton v. University of the South, 208 U.S. 489, 52 L. ed. 584; Zumstein v. Consolidated Coal & Min. Co. 84 Ohio St. 264, 43 N.E. 329.
A leasehold estate would be subject to taxation on such value as it would bring at a fair voluntary sale for cash, but it would not be liable for taxes on the freehold estate in the lands. Tramwell v. Faught, 74 Tex. 559, 12 S.W. 317.
Land held under a lease from the city should for the purpose of taxation be valued as a leasehold estate, and not as a fee simple estate. Philadelphia, etc., R. Co. v. Appeal Tax Ct. 50 Md. 397; San Pedro, etc. R.R. Co. v. Los Angeles (Cal.) 179 P. 393; Oakland v. Albers Bros. Mill. Co. 43 Cal.App. 191, 184 P. 868.
Express statutory authorization is necessary in order to provide the proper taxing machinery to assess and tax a leasehold interest apart from the fee title. North American Lumber Co. v. Blaine, 81 Wash. 13, 142 P. 438; Montgomery v. Branford (Conn.) 142 A. 574.
By a covenant to pay taxes the lessee does not obligate himself to pay taxes which may be illegal or void. 36 C.J. 116; Scott v. Society of Russian Israelites, 59 Neb. 571, 81 N.W. 624.
Sinness & Duffy and Romanus J. Downey (F. T. Cuthbert and S. W. Thompson on brief), for respondent.
When land of county or city is leased, it is generally regarded as not devoted to public use, and hence is not exempt from taxation. People v. Chicago, 124 Ill. 636, 17 N.E. 56; Sanitary Dist. v. Henbery, 226 Ill. 480, 80 N.E. 1012; Essex Co. v. Salem, 153 Mass. 141, 26 N.E. 431; Sexton v. Coahoma County, 86 Miss. 380, 38 So. 636. A lease of such lands may require the lessee to pay the taxes on the property. Moss Point etc. Co. v. Harrison Co. 89 Miss. 448, 42 So. 290. And where property belonging to a municipality is leased under a perpetual lease, the lessee, for the purposes of taxation, is regarded as the owner of the property. Norfolk v. Perry Co., 108 Va. 28, 61 S.E. 866, 128 Am. St. Rep. 940.
The leasehold interest of the lessee is a proper subject for taxation. Carrington v. People, 195 Ill. 484, 63 N.E. 163; State v. Tucker, 38 Neb. 56, 56 N.W. 718; Moeller v. Gormley, 44 Wash. 465, 87 P. 50.
As a general rule, all property within the state is subject to taxation, and when a claim of exemption is made, it must clearly appear, and the party claiming it must be able to point to some provision of law plainly giving the exemption. People v. Colman, 135 N.Y. 231, 31 N.E. 1022.
When doubt exists as to the construction of law permitting the taxation of state property, the doubt must be resolved in favor of the state. People v. Miller, 94 A.D. 567, 88 N.Y.S. 253.
Where a municipality owning its own waterworks system makes some arrangements whereby it turns the maintenance and operation of the plant over to a private individual or corporation, it becomes taxable while under the control of such other person or corporation. Mobile v. Stein, 54 Ala. 23; Los Angeles v. Los Angeles City Waterworks, 49 Cal. 638; Swanton v. Highgate, 81 Vt. 152, 69 A. 667; Jetton v. University, 208 U.S. 489, 52 L. ed. 584; People ex rel. Van Nest v. Tax & A. Comrs. 80 N.Y. 573; Parker v. Redfield, 10 Conn. 490.
Moellring, J., did not participate.
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 paying 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 $ 298,173.00 as a lump assessment and that in this amount is included the sum of $ 7,000.00 as the assessment on the property involved being assessment at the rate of one hundred per cent. of its value. For taxable purposes this is reduced to seventy-five 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...
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