Pulsfus Poultry Farms, Inc. v. Town of Leeds

• Decision Date: 25 May 1989
• Docket Number: No. 87-1033,87-1033
• Citation: 440 N.W.2d 329,149 Wis.2d 797
• Parties: PULSFUS POULTRY FARMS, INC., Larry W. Pulsfus and Jayne E. Pulsfus, Plaintiffs-Respondents, v. TOWN OF LEEDS, a Wisconsin municipal corporation Defendant-Appellant-Petitioner.
• Court: Wisconsin Supreme Court

Page 329

440 N.W.2d 329

149 Wis.2d 797

PULSFUS POULTRY FARMS, INC., Larry W. Pulsfus and Jayne E.

Pulsfus, Plaintiffs-Respondents, v. TOWN OF LEEDS, a Wisconsin municipal corporation

Defendant-Appellant-Petitioner.

No. 87-1033.

Supreme Court of Wisconsin.

Argued March 29, 1989.

Decided May 25, 1989.

Jeffrey P. Clark, argued, Jean M. Williams, and Lathrop & Clark, on brief, Madison, for defendant-appellant-petitioner.

Jean G. Setterholm, argued, DeWitt, Porter, Huggett, Schumacher & Morgan, S.C., on brief, Madison, for plaintiffs-respondents.

Jeffrey T. Roethe and Roethe, Buhrow, Roethe, Pope & Fish, Edgerton, amicus curiae for Wisconsin Agri-Business Council, Inc., Property Tax Network, Wisconsin Corn Growers Ass'n, and Wisconsin Pork Producers Ass'n.

Richard J. Stadelman, Shawano, amicus curiae for Wisconsin Towns Ass'n.

DAY, Justice.

This is a review of a decision by the court of appeals, Pulsfus Farms v. Town of Leeds, 144 Wis.2d 729, 424 N.W.2d 737 (Ct.App.1988), which affirmed a judgment of the Circuit Court for Columbia County, Honorable Earl J. McMahon, Judge. The circuit court found that a layer house and its contents, owned by Pulsfus Poultry Farms, Inc., (Pulsfus), constituted farm machinery used in farming and was exempt from taxation pursuant to sec. 70.111(9), Stats.1983-84. ¹ The Town of Leeds (Town) was ordered to reimburse Pulsfus for the taxes illegally assessed, levied and collected on the property. The court of appeals affirmed the judgment of the circuit court. Neither court determined whether the layer house or its contents was real or personal property. We reverse because we hold that the layer house is real property, that the contents in question are fixtures attached to the real estate and are part of the real estate. They are therefore not exempt by sec. 70.111(9).

The issues presented are: First, whether real property is exempt from taxation by sec. 70.111(9), Stats.? We conclude that only personal property is exempt pursuant to this statute. Second, is the Pulsfus layer house and its contents exempt from taxation by the Town pursuant to sec. 70.111(9)? We conclude the layer house is a building and its contents are fixtures attached to real estate. Therefore, they do not qualify for the exemption provided by sec. 70.111(9). Thus, we reverse the decision of the court of appeals.

The basic facts are undisputed. Pulsfus is engaged in producing and marketing eggs. The "layer house" contains cages wherein approximately 86,000 layer hens produce eggs. This layer house is a special purpose structure built, designed, and operated specifically for the mass production of eggs. It is made of steel beam framing and metal siding resting on a concrete foundation. The bottom portion supports the balance of the structure and related equipment and also provides for the collection of chicken manure.

There are three tiers of hen cages which are interconnected and supported by truss rods. There is an automatic water system which is attached to the cages. This system is directly connected to the Pulsfus well. It also carries medication to the hens. Two large bulk storage bins are mounted on an "I" beam and scale which are bolted onto a six-inch-thick piece of concrete. These bins are located outside but supply food which is transported by feed troughs located outside the cages. Eggs are collected by a conveyor belt system which runs underneath the cages. It transports the eggs directly to the packing facility. This belt system is hung from the top of the ceiling. The main electrical equipment is built into the building and attached to the outside of the house. The internal electrical system is hung on the walls. There is also a backup generator which is in the building and which automatically activates if there is a power interruption. The layer house's ventilation system is connected to the electrical system and is also built into the walls of the layer house.

The cage system, the feeder system, the water system, the electrical system, and the egg collecting system are all interconnected. There is a system of walkways for the operator to use to observe and treat the hens and repair the system. An operator, however, spends only a few hours a day working in the layer house. The layer house creates an automated controlled environment for the efficient production of eggs.

In 1983, the Town assessed the layer house and its contents as real estate subject to taxation. ² The amount of the assessment is not in dispute. Rather Pulsfus alleges the layer house is exempt from taxation pursuant to the exemption provided by sec. 70.111(9), Stats. After unsuccessfully appealing this decision to the Town's Board of Review, Pulsfus initiated this action to declare that the Town's "assessment, levy and collection of a tax" against the layer house was "unlawful, without authority and void." It also requested an injunction against the Town from assessing or collecting any taxes from them for property used in the production of eggs, and a money judgment "for the total amount of the tax unlawfully levied against Plaintiff Pulsfus' real property and collected from [Pulsfus] under protest."

After a one-day trial, the circuit court issued a written decision in favor of Pulsfus. Using the "use or function" test as stated in Ladish Malting Co. v. Dept. of Revenue, 98 Wis.2d 496, 297 N.W.2d 56 (1980), and Revenue Dept. v. Greiling, 112 Wis.2d 602, 334 N.W.2d 118 (1983), the circuit court found that "the layer house, with its integrated cages, wiring, water piping, feed and egg conveyors, and support equipment, constitutes farm machinery used in farming and comes within the exemption of sec. 70.111(9) of the Wisconsin Statutes." The circuit court noted the Town's contention that the facility was a building and its contents were fixtures and therefore not exempt, but refused to rely on that theory for its decision. The Town appealed.

The court of appeals affirmed the decision of the circuit court. It held that the "use or function" analysis was the only one required to decide whether the layer house was exempt and that the circuit court had "correctly applied that test to the Pulsfus layer house." Pulsfus, 144 Wis.2d at 737, 424 N.W.2d 737. In a footnote, it rejected the Town's argument that only personal property was exempt under sec. 70.111(9) Stats. "Whether the facility is attached to the realty, or has a building-like appearance, or has incidental functions, is immaterial under the cases defining and applying the use-function test." Id. 144 Wis.2d at 732-33 n. 1, 424 N.W.2d 737.

Judge Gartzke in his dissent agreed with the majority's conclusion that the facility was a machine, but concluded "[t]he majority's analysis is incomplete." Id. 144 Wis.2d at 737, 424 N.W.2d 737 (Gartzke, J., dissenting). Adopting the Department of Revenue's interpretation of sec. 70.111(9), Stats., he determined "that farm machinery is exempt only if it is not a fixture." Id. 144 Wis.2d at 741, 424 N.W.2d 737. Judge Gartzke then concluded that "the layer facility, its interior installations and the storage bins are fixtures." Although it is a farm machine under sec. 70.111(9), "it is not exempt from general property taxes." Id. 144 Wis.2d at 744, 424 N.W.2d 737. The Town petitioned this court for review which was accepted.

This case involves the construction of sec. 70.111(9), Stats., and whether it applies to the Pulsfus layer house. A question of statutory construction is a question of law. Sacotte v. Ideal-Werk King & Priester, 121 Wis.2d 401, 405, 359 N.W.2d 393 (1984). This court decides questions of law independently and without deference to the reasoning of the lower courts. Ball v. District No. 4, Area Board, 117 Wis.2d 529, 537, 345 N.W.2d 389 (1984).

When construing a statute, the primary source of construction is the language of the statute itself. If the statute's meaning is unambiguous on its face, this court will look no further. Id. 117 Wis.2d at 538, 345 N.W.2d 389. A statute is ambiguous, however, if it is "capable of being interpreted by reasonably well informed persons in either of two or more senses." In re Estate of Haese, 80 Wis.2d 285, 292, 259 N.W.2d 54 (1977). Ambiguity can be created by the interaction of two separate statutes. In Matter of Estate of Walker, 75 Wis.2d 93, 102, 248 N.W.2d 410 (1977).

The Town asserts the statute, sec. 70.111(9), Stats., see note 1, is ambiguous as to whether real, personal, or both types of property are exempt. Pulsfus contends the statute is clear that all types of property are exempt. We conclude the statute is ambiguous.

In his dissent Judge Gartzke stated that reasonable persons could disagree as to whether or not "farm machinery" which is also a fixture is exempt under sec. 70.111(9), Stats. Pulsfus, 144 Wis.2d at 737, 424 N.W.2d 737 (Gartzke, J., dissenting). We agree with Judge Gartzke's observation.

In construing a statute, the entire section and related sections are to be considered in its construction or interpretation. State v. Clausen, 105 Wis.2d 231, 244, 313 N.W.2d 819 (1982). Interrelated tax exemption subsections should be construed in pari materia. See Columbia Hosp. Assn. v. Milwaukee, 35 Wis.2d 660, 669, 151 N.W.2d 750 (1967) (Exemptions under sec. 70.11 Stats., are to be construed in pari materia.)

Judge Gartzke noted another subsection of sec. 70.111, Stats., is sec. 70.111(14). Pulsfus, 144 Wis.2d at 737-38, 424 N.W.2d 737 (Gartzke, J., dissenting). It provides:

70.111 Personal property exempted from taxation. The property described in this section is exempted from general property taxes: ... (14) MILKHOUSE EQUIPMENT. Milkhouse equipment used by a farmer, including mechanical can coolers, bulk tanks and hot water heaters. This exemption shall apply whether such equipment is deemed personal property or is so affixed to the realty as to be classified in the category of real estate. (Emphasis added.)

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