Zangerle v. Standard Oil Co. of Ohio
| Decision Date | 07 March 1945 |
| Docket Number | 30071. |
| Citation | 60 N.E.2d 52,144 Ohio St. 506 |
| Parties | ZANGERLE, Auditer, et al. v. STANDARD OIL CO. OF OHIO et al. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
1. By virtue of the provisions of Sections 5386 and 5388 General Code, all engines, machinery, tools and implements of a manufacturer, of every kind and description used or designed to be used in refining or manufacturing, except such as are legally regarded as improvements on land and so considered in arriving at the value of real property assessed for taxation, and except such as are used for generation or distribution of electricity other than for the use of the person generating or distributing the same, shall be listed and assessed for taxation at 50 per cent of the true value thereof in money.
2. The criterion of a fixture requires the combined application of three requisites, to wit, (1) actual annexation to the realty or something appurtenant thereto, (2) appropriation to the use or purpose of the realty with which it is connected and (3) the intention of the party making the annexation to make the article a permanent accession to the freehold.
3. Although slight attachment to realty may be sufficient to give a chattel the character of a fixture, provided the other requisites of a fixture are present, as a general rule to give it such character it must be so attached that it loses its identity as a chattel or that it cannot be removed without injury to itself or to the freehold, apart from the reduced value of the freehold due to the abstraction of the thing removed.
4. The decisive test of appropriation is whether the chattel under consideration in any case is devoted primarily to the business conducted on the premises, or whether it is devoted primarily to the use of the land upon which the business is conducted.
5. The intention of the annexer must be determined from the nature of the article affixed; the relation and situation of the party making the annexation; the structure and mode of annexation purpose or use for which the annexation has been made, taking into consideration whether it was made with a view of permanence or with a view of serving a special purpose or business; the economic advantage, if any, of treating the annexed property as real or personal; the relationship between the parties interested in the land and chattel and the resulting equities arising from such relationship; and contracts or agreements between those having ownership of or equitable interests in the chattel, tending constructively to annex such chattel to or to sever it from real estate.
6. Machinery installed on land for the benefit of an industry located thereon, which, if the industry itself was removed would be of no particular benefit to the naked land, cannot be considered for tax purposes an improvement on land, but personal property.
This is an appeal by the auditor and Board of Revision of Cuyahoga county from a decision of the Board of Tax Appeals under date of June 23, 1944, determining the tax valuation for the tax year 1934 of the property in the two refineries of The Standard Oil Company of Ohio (hereinafter designated as Standard Oil) located in Cleveland.
The valuation as determined by the auditor and sustained by the board of revision for the year 1934 was: Lands, $932,830; improvements, $5,664,750; or a total of $6,597,580. Standard Oil protested this valuation, claiming that the value of its land was but $792,900 and the processing equipment thereon but $2,146,342, or a total of $2,939,242. The auditor entered the assessment as found by the board of revision.
Thereupon, an appeal was taken by Standard Oil to the then Tax Commission of Ohio. Its successor, the Board of Tax Appeals, reduced the valuation of the lands to the sum of $792,900 as claimed by the Standard Oil, and reduced the valuation of the processing equipment to $2.918,723, or a total of $3,711,623. In other words, the Board of Tax Appeals reduced the valuation of the land below that claimed by the auditor, in the sum of $139,930, and reduced the valuation of the processing equipment below that claimed by the auditor in the sum of $2,746,027, although that reduction is less than the reduction claimed by Standard Oil, in the sum of $772,381.
The reductions by the Board of Tax Appeals in the valuation of the land, in the sum of $139,930 and in the valuation of the processing equipment, in the sum of $2,746,027, are now complained of by the auditor and are the subject of this appeal. On the other hand, the refusal of the Board of Tax Appeals to reduce the valuation of the processing equipment in the further sum of $772,381 is complained of by Standard Oil and is the subject of its appeal in case No. 30072. Standard Oil Co. of Ohio v. Zangerle, Aud., 144 Ohio St. 523, 60 N.E.2d 59.
The difference of $3,518,408 between the assessed valuation, by the auditor, of the refinery 'improvements' or processing equipment and the valuation thereof as claimed by Standard Oil arises from two causes: (3) The inclusion by the auditor in his real estate assessment of many items of refinery machinery and equipment as 'improvements' on land, claimed by Standard Oil to be personalty, and (b) the increased valuation, by the auditor, of the property treated by him as realty. By far the greater part of this difference resulted from the first cause.
The land, upon which these refineries are located and operated, and certain improvements thereon are conceded by all parties to be real estate, but there is also upon such property, much heavy machinery and equipment used in the process of oil refining, the classification and valuation of which are in dispute. In general, the following items are conceded to be realty: Buildings, including built-in heating, ventilating, plumbing, sprinkling, lighting, sanitary and drinking water systems; foundations for all units; brick and concrete stacks and chimneys; embankments and fills; fire banks and fire walls; retaining walls and other brick and concrete walls; paving and driveways; bridges and tunnels; railroad tracks, switches and trestles; fences; pits, cisterns, culverts, masonry, underground flues and water wells; drain, sewers and plumbing; and other such like property permanently attached to the land.
On the other hand, there is a large amount of heavy oil-refinery machinery and equipment, the classification of which, as to its being improvements on land or machinery and therefore personalty, is in dispute. Standard Oil claims that there should be classified as personal property all machinery and equipment regardless of size, used in the refining process, and items auxiliary to such machinery and equipment, which could not be advantageously used on Standard Oil's land if the oil refining business were removed, and which because of their method of affixation could be removed without material damage either to themselves or to the realty and could be set up and operated in some other location. It is claimed that this equipment would not add value to the land if the latter were used for any other purpose, and that it would, in fact, be a detriment in that the equipment would have to be moved off before the land could be used for any other purpose.
The auditor claims that this machinery and equipment, for the most part, are improvements on the land and therefore assessable as real estate. It is undisputed that this machinery and equipment are used as a part of a continuous refining process; that they are unique in character, being specially designed for the oil-refining business and are useless for any other business or industry; and that these refining structures are ponderous in size, of iron, steel, brick and concrete construction, and firmly and stably annexed to concrete foundations by foundation bolts.
In general, this machinery and equipment may be described roughly as follows: Tools; instruments; meters; motors; turbines; engines; generators; ovens; dryers; scales; condensers; condenser boxes; coolers; exchangers; bubble towers; fractionating towers; compressors; stills; reflux, soaking, stripping and receiving drums; pumps and accessories; tanks and accessories; cranes and crane runways; hoists and conveyors; and, with certain exceptions, water-treating plants complete; pipe still unit and accessories complete, including process water-cooling towers; continuous crude and coke stills and accessories complete; agitators and acid plant complete; steam-still units and accessories complete; gas absorption plant complete; cracking units and accessories complete; water-pumping station complete; boilers, plants and accessories complete; and reducing stills and accessories complete--such exceptions being buildings, foundations, concrete walls, stacks and hearths, heating furnace, sewers, drains, pits, fences, railroad tracks, switches, etc.
With respect to the classification issue, the Board of Tax Appeals in its decision on appeal held that the great bulk of this refining machinery and equipment, as above described, was personalty, excepting however from this classification five refinery units consisting of two process steam-boiler plants, two water-treatment plants and one main water-pumping station, which the board held were incident to the land and which items are the subject matter of the appeal by Standard Oil in case No. 30072 in this court.
In the instant case, the auditor claims that the Board of Tax Appeals erred in excluding from its realty valuation the bulk of the property contended by Standard Oil to be personalty, and also in granting any reduction in the assessed valuation of the land and other property.
Other pertinent facts will be stated in the course of the opinion.
Frank T. Cullitan, Pros. Atty., Saul S. Danaceau, and ...
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