Sproul v. Gilbert

• Decision Date: 08 February 1961
• Citation: 359 P.2d 543,226 Or. 392
• Parties: Niles P. SPROUL, Jack Vaughan, J. P. French, Bonham Keerins, W. S. Wyland, W. S. Wexler and B. A. Sweet, Respondents, v. George GILBERT and Ray H. Brisbois and State to Oregon, by and through Dean Ellis, Charles Mack and Ferdinand H. W. Hoefke, constituting and acting as the State Tax Commission, Appellants.
• Court: Oregon Supreme Court

Page 543

359 P.2d 543

226 Or. 392

Niles P. SPROUL, Jack Vaughan, J. P. French, Bonham Keerins W. S. Wyland, W. S. Wexler and B. A. Sweet, Respondents, v. George GILBERT and Ray H. Brisbois and State to Oregon, by and through Dean Ellis, Charles Mack and Ferdinand H. W. Hoefke, constituting and acting as the State Tax Commission, Appellants.

Supreme Court of Oregon.

Argued and Submitted at Pendleton, Oct. 31, 1960.

Decided Feb. 8, 1961.

Alfred B. Thomas, Asst. Atty. Gen., argued the cause for appellants. With him on the briefs were Robert Y. Thornton, Atty. Gen., and Donald H. Burnett, Asst. Atty. Gen.

Roy Kilpatrick, Canyon City, argued the cause and submitted a brief for respondents.

John R. Hay, Ronald L. Orloff and Hart, Rockwood, Davies, Biggs & Strayer, Portland, filed a brief for Oregon Cattlemen's Ass'n as amicus curiae.

Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL, GOODWIN and KING, JJ.

O'CONNELL, Justice.

This is a suit for declaratory relief under ORS 28.130, the Uniform Declaratory Judgments Act. Plaintiffs attack an assessment subjecting their interests in certain grazing lands in Grant county to an ad valorem tax imposed upon them under ORS 307.060. Defendants, the Grant county assessor and sheriff and the State Tax Commission, appeal from a judgment for plaintiffs.

The interests subject to be taxed are grazing privileges on lands owned by the federal government. These interests were created pursuant to Section 15 of the Taylor Grazing Act (43 U.S.C.A. § 315m) which authorizes the Secretary of the Interior to lease certain lands in the public domain for grazing purposes.

ORS 307.060, under which the tax was imposed, reads as follows:

'307.060 Property of the United States held by a person under lease or other interest less than fee. Real and personal property of the United States or any department or agency thereof held by any person under a lease or other interest or estate less than a fee simple, other than under a contract of sale, shall be assessed and taxed as for the full true cash value thereof subject only to deduction for restricted use. The lien for the tax shall attach to and be enforced against only the leasehold, interest or estate in such real or personal property. This section shall not apply to real or personal property held by this state or any county, municipal corporation or political subdivision therein which is:

'(1) In immediate use and occupation by such political body; or

'(2) Required, by the terms of the lease or agreement, to be maintained and made available to the Federal Government as a military installation and facility.'

Plaintiffs contend that the grazing privilege granted to them by the Secretary of he Interior is not 'a lease or other interest or estate less than a fee simple' described in ORS 307.060. They further contend that if their interests are subject to taxation under ORS 307.060 the statute is unconstitutional because it purports to levy a tax on the property of the United States, and because it discriminates against lessees of the United States.

The trial court held that ORS 307.060 is constitutional but that plaintiffs' interest 'constitutes not a leasehold interest but merely a license to use the property for grazing.'

Defendants appeal from that part of the judgment which declares that plaintiffs have no taxable interest; plaintiffs cross-appeal from that part of the judgment which declares that ORS 307.060 is constitutional.

The Taylor Grazing Act makes provision for the granting of two different types of grazing privilege, depending upon whether the land is within or outside an established grazing district. Where the land is within a grazing district the Secretary of the Interior is authorized by Section 3 of the Act (43 U.S.C.A. § 315b) to issue a grazing permit; where the land is not included in a grazing district the Secretary is authorized by Section 15 (43 U.S.C.A. § 315m) to lease it upon such terms as he may prescribe. The pertinent parts of Sections 3 and 15 of the Taylor Grazing Act read as follows:

'Sec. 3 The Secretary of the Interior is authorized to issue or cause to be issued permits to graze livestock on such grazing districts to such bona fide settlers, residents, and other stock owners as under his rules and regulations are entitled to participate in the use of the range, upon the payment annually of reasonable fees in each case to be fixed or determined from time to time, and in fixing the amount of such fees the Secretary of the Interior shall take into account the extent to which such districts yield public benefits over and above those accruing to the users of the forage resources for livestock purposes. Such fees shall consist of a grazing fee for the use of the range, and a range-improvement fee which, when appropriated by the Congress, shall be available until expended solely for the construction, purchase, or maintenance of range improvements. * * * Such permits shall be for a period of not more than ten years, subject to the preference right of the permittees to renewal in the discretion of the Secretary of the Interior, who shall specify from time to time numbers of stock and seasons of use. * * * So far as consistent with the purposes and provisions of this Act, grazing privileges recognized and acknowledged shall be adequately safeguarded, but the creation of a grazing district or the issuance of a permit pursuant to the provisions of this Act shall not create any right, title, interest, or estate in or to the lands. (43 U.S.C.A. § 315b)

* * *

* * *

'Sec. 15 The Secretary of the Interior is further authorized, in his discretion, where vacant, unappropriated, and unreserved lands of the public domain are so situated as not to justify their inclusion in any grazing district to be established pursuant to * * * this Act, to lease any such lands for grazing purposes, upon such terms and conditions as the Secretary may prescribe * * *. (43 U.S.C.A. § 315m)'

The intention of Congress to provide for the creation of two distinct types of interest, i. e., the 'permit' under § 315b and the 'lease' under § 315m is apparent from an examination of other sections of the Taylor Grazing Act. The section which most clearly evidences this intent is § 315p. This section implements § 315g which authorizes the Secretary of the Interior to exchange grazing land for state land. Section 315p provides as follows:

' § 315p. Exchange of lands; issuance of patent subject to outstanding lease.

'The Secretary of the Interior in adjudicating State exchanges, under section 315g of this title, involving lands embraced in outstanding leases under section 315m of this title issued prior to the filing of the State exchange application, is hereby authorized upon the request of any State to issue patent to the State, subject to such outstanding lease: Provided, That the United States shall not by reason of the issuance of any such patents be required to account to the State for any money due and collected prior thereto as rent for any part of the then-current annual rental period except as was, on August 24, 1937, provided by law. Aug. 24, 1937, ch. 744, 50 Stat. 748.' [Emphasis added.]

The use of the terms 'outstanding lease,' 'rent' and 'rental period' are, of course, indicative of an intention to regard the interests created under § 315m as leases. But what is more important, § 315p recognizes that § 315m leases create substantial interests in land and that the patent issued by the Secretary of the Interior is taken subject to that interest. The interest acquired under a § 315b permit is not excepted under § 315p because the grazing privilege acquired under a permit is not an interest in land. Section 315b specifically provides that permits 'shall not create any right, title, interest, or estate in or to the lands.'

The difference between a permit and a lease is also recognized in § 315i which provides for a different disposition of the moneys collected under § 315b and under § 315m.

The distinction between the 'permit' to graze authorized under Section 3 and the 'lease' of grazing lands under Section 15 is reflected in the forms prepared by the Department of Interior for use in memorializing the grant of the privilege in each instance. The grant of a privilege to graze under Section 3 is made by two instruments which are entitled '_____ Year Grazing Permit' and 'Application For Grazing License or Permit.' The latter, when endorsed, operates as the permit itself. The permit is granted for the grazing of a certain number of cattle during a designated period described in the permit as a certain number of animal-unit months. The permit does not describe a specific area of land upon which the permittee is entitled to run his cattle other than the designation of the grazing district to which he is limited. The privilege granted under a Section 3 permit is not exclusive; permits may be granted to more than one person for a single grazing district.

The form of instrument used to grant the right to graze under Section 15 is quite different. It is entitled 'Application To Lease and Lease of Lands for Grazing Livestock.' This application, when accepted by the federal agency, constitutes the lease itself. Unlike the grazing permit granted under Section 3, the lease contains a legal description of the land to which the grazing right extends in terms of range, township, section and government lots. The lessee has the exclusive right to use the described land for grazing as against all other persons. Throughout the instrument the language commonly found in leases is used. In the application portion of the instrument the applicant 'applies to lease all or any part of the lands described,' and he agrees that his signature to the application shall also constitute an 'acceptance of this lease when executed by the proper officer in behalf of the United States.' At the foot of the application form a provision for...