Clayton County Board of Assessors v. Aldeasa Atlanta Joint Venture

304 Ga. 15

• Court: Supreme Court of Georgia
• Decided: June 18, 2018
• Docket: S18A0430
• Status: Published

Opinion

304 Ga. 15 FINAL COPY

S18A0430. CLAYTON COUNTY BOARD OF TAX ASSESSORS v. ALDEASA ATLANTA JOINT VENTURE.

BENHAM, Justice.

This case presents the issue of whether the contract involved in this case

between the City of Atlanta and a private business for the lease of retail

concession space at Hartsfield-Jackson Atlanta International Airport creates a

taxable interest subject to ad valorem taxation by Clayton County. The City

of Atlanta owns the Airport, which lies partially in Clayton County outside the

City’s boundaries. Appellee Aldeasa Atlanta Joint Venture entered into the

written agreement with the City to lease space on two different concourses at

the Airport for the non-exclusive rights to operate two duty free retail stores.

In stipulations of fact that were filed in the trial court in this matter, the parties

referred to the agreement as the Concessions Agreement. The Concessions

Agreement became effective on November 15, 2007 and was for a term of five

years. Appellant Clayton County Board of Tax Assessors (“County”) issued real property tax assessments to Aldeasa for the 2011 and 2012 tax years on

Aldeasa’s purported leasehold improvements on the two parcels involved in

the Concessions Agreement and also on Aldeasa’s purported possessory

interest in the two parcels. Aldeasa appealed the assessments and paid the tax

pending the outcome of the appeal.

The matter came before the Clayton County Superior Court, where both

parties filed cross-motions for summary judgment. The trial court found the

Concessions Agreement created a usufruct interest in the property, and not an

estate in real property; it rejected the County’s assertion that it was legally

authorized to impose a property tax on usufructs located at the Airport; and it

also rejected the County’s assertion that the Concessions Agreement created a

taxable franchise. Accordingly, the trial court granted Aldeasa’s motion for

summary judgment and denied the motion filed by the County. The County

filed this appeal, and asserts that four different taxable interests were created

by the Concessions Agreement: an estate for years that may be taxed as real

property pursuant to OCGA § 48-5-3; a possessory interest in the real property

that may be taxed pursuant to OCGA § 6-3-21; a franchise interest that is subject to tax under OCGA § 48-5-421; and taxable leasehold improvements.1

As more fully set forth below, we affirm the trial court’s order.

1. Did the Concessions Agreement create an estate in real property

or a nontaxable usufruct? The first issue we address is whether the

Concessions Agreement created a taxable estate in real property or a

nontaxable usufruct. Generally, real property, including a leasehold and an

interest in real property less than a fee interest, is subject to ad valorem

taxation. OCGA § 48-5-3.2 For there to be a taxable estate “there must be

ownership of an interest in the property.” Henson v. Airways Svc., 220 Ga. 44,

52 (136 SE2d 747) (1964). An estate for years is an interest in real property

that is generally subject to ad valorem taxation. See OCGA § 48-5-3. An

estate for years is one which “carries with it the right to use the property in as

absolute a manner as may be done with a greater estate . . . .” OCGA § 44-6-

103. By Georgia statutory law, however, the grant by a landowner to another

of the right “simply to possess and enjoy the use of such real estate either for a

1 Although the notice of appeal was initially filed in the Court of Appeals, the case was transferred to this Court, which has exclusive appellate jurisdiction over constitutional matters, because the appeal of the trial court’s order draws into question the constitutionality of OCGA § 6-3-21. 2 The City of Atlanta is not subject to taxation for the real property it owns in this case because the Airport is public property. See OCGA § 48-5-41 (a) (1) (A) and (B) (i). fixed time or at the will of the grantor” passes no estate; instead it creates a

landlord-tenant relationship in which the tenant holds only a usufruct. OCGA

§ 44-7-1 (a). Because a usufruct is not considered an estate in real property

under Georgia law, it is not subject to ad valorem property tax. See, e.g.,

Stuttering Foundation, Inc. v. Glynn County, 301 Ga. 492, 496 (2) (a) (i) (801

SE2d 793) (2017); Macon-Bibb County Bd. of Tax Assessors v. Atlantic

Southeast Airlines, 262 Ga. 119 (414 SE2d 635) (1992); Whitehead v.

Kennedy, 206 Ga. 760, 761 (58 SE2d 832) (1950).

The Concessions Agreement (now expired) granted a five-year term of

possession to Aldeasa (but with provision for early termination), and Clayton

County notes that this creates a rebuttable presumption that it conveyed a

taxable estate for years. See OCGA § 44-7-1 (b); Macon-Bibb County, supra,

262 Ga. 119 (a rebuttable presumption exists that a lease for five years or more

creates a taxable estate for years). Here, the Concessions Agreement expressly

states that it creates a usufruct and passes no estate out of the City. These

express terms are not dispositive, however, since the “key inquiry turns upon

whether various restrictions in the agreement, limiting [the lessee’s] use of the

premises, sufficiently negate the presumption that this is an estate for years.”

Camp v. Delta Air Lines, Inc., 232 Ga. 37, 40 (205 SE2d 194) (1974) (finding the use restrictions in a 30-year lease were incompatible with an estate for years

and rebutted the presumption that the lease created an estate for years). “As in

the construction of all agreements, the cardinal rule to be used by the court is

that the terms of the instrument itself must be scrutinized to ascertain what

interest the parties intended to be conveyed or demised by it.” Allright Parking

of Ga. v. Joint City-County Bd. of Tax Assessors, 244 Ga. 378, 385 (260 SE2d

315) (1979).3 The terms of the Concessions Agreement include the following

restrictions, among others, on Aldeasa’s use of the property: the right of the

City to terminate the agreement at any time and without cause on 30-days’

notice; the right of the City to require Aldeasa to relocate, or to contract or

expand its retail space at any time; and the right of the City to retain control of

the prices Aldeasa charges for merchandise, Aldeasa’s hours of operation, the

delivery companies it may use, and the types of cash registers it must use for

record-keeping purposes. These terms rebut the presumption that this lease

created an estate for years.

3 Additionally, since this case involves a tax dispute and not merely a dispute between the contracting parties, the provisions of the agreement must be objectively scrutinized to determine the legal effect of the agreement, despite its terms stating it creates a usufruct and not an estate in real property. See Allright Parking, supra. Clayton County argues that other terms of the Concessions Agreement

are consistent with the creation of an estate for years and not a usufruct,

including, among others, the requirement to maintain insurance coverage, and

the fact that Aldeasa is prohibited from permitting any liens to be imposed on

the premises. According to Clayton County, the prohibition against liens

demonstrates the parties intended the Concessions Agreement to create a

property interest since it is axiomatic, the County argues, that a lien cannot

attach to a usufruct. Just as in the Allright Parking case, however, even though

certain provisions of the lease agreement may be indicative of an intent to grant

an estate for years, we conclude the extensive restrictions on Aldeasa’s right

to use the premises are fundamentally inconsistent with the concept of an estate

for years, and that the Concessions Agreement creates, at most, a usufruct and

not a taxable estate for years. Id. at 385. See City of College Park v. Paradies-

Atlanta, LLC, 346 Ga. App. 63 (2) (815 SE2d 246) (2018); Clayton County Bd.

of Tax Assessors v. City of Atlanta, 164 Ga. App. 864 (298 SE2d 544) (1982)

(holding the 15-year lease of the Atlanta Airport commissary building to a

private party conveyed a usufruct and not a taxable estate for years).

2. Was an exception to the tax exemption for public property created

by statute? Generally, property owned by a municipality is deemed to be “public property” that is exempt from ad valorem taxation pursuant to OCGA

§ 48-5-41 (a) (1) (A). That tax exemption applies to property located outside

the territorial limits of the government entity that owns it if certain criteria are

met. See OCGA § 48-5-41 (a) (1) (B). The parties agree that the City itself is

exempt from Clayton County property taxes for its real property located in that

county on which it operates the Atlanta Airport. The County argues, however,

that the version of OCGA § 6-3-21 in effect at the time of the tax years at issue

in this case disqualified, from that tax exemption, land that was leased to

private parties. Prior to its 2014 amendment, OCGA § 6-3-21 (1985) provided

that where a municipality owned land outside its territorial limits for the

purpose of maintaining an airport, as set forth in OCGA § 6-3-20, and leased

the land to private parties,

the interests created in such private parties, for the purpose of ad valorem taxation only, are declared not to be used for public, governmental, or municipal purposes and said resulting interests, regardless of the extent of such interest, whether possessory or an estate in land, are subject to ad valorem taxation . . . .4

(Emphasis supplied.) Pursuant to the former language of this statute, Clayton

County asserts that regardless of whether the Concessions Agreement created

4 See Ga. L. 1985, p. 1649, § 1. a taxable estate in real property, it granted Aldeasa a possessory interest that

was taxable in the tax years at issue. According to Clayton County, because

this statute provided that a lessee’s possessory interest in airport land was

subject to taxation during the tax years at issue in this case, it may impose ad

valorem taxation on the value of Aldeasa’s possessory interest in the leased

premises.

(a) The trial court concluded that if former OCGA § 6-3-21 were

interpreted, as Clayton County urges, to authorize Clayton County to impose a

property tax on the usufruct created by the Concessions Agreement, the statute

would violate the Georgia Constitution’s uniformity of taxation requirement.

See Ga. Const. of 1983, Art. VII, Sec. I, Par. III. We agree.

This Court has long held that, with certain exceptions that are not

applicable in this case, the uniformity rule for property taxes prohibits the

General Assembly from creating different classifications of tangible property

and taxing them differently. See, e.g., Heron Lake II Apts., L.P. v. Lowndes

County Bd. of Tax Assessors, 299 Ga. 598, 609 (791 SE2d 77) (2016); Griggs

v. Greene, 230 Ga. 257, 264 (2) (197 SE2d 116) (1973). The County stipulated

below that the only usufructs or possessory interests that it taxed in the

pertinent tax years are those located at the Airport. It also stipulated that other usufructs exist in Clayton County, including those held by private parties on

government-owned property. If the former version of OCGA § 6-3-21

authorized the County to tax only usufructs at the Airport, then the statute

would be unconstitutional, and we will not interpret it in that manner if another

reasonable interpretation exists. “If a statute is susceptible of more than one

meaning, one of which is constitutional and the other not, we interpret the

statute as being consistent with the Constitution.” Cobb County School Dist.

v. Barker, 271 Ga. 35, 37 (1) (518 SE2d 126) (1999). See also Bd. of Public

Ed. for the City of Savannah v. Hair, 276 Ga. 575, 576 (1) (581 SE2d 28)

(2003). Likewise, if a usufruct is a separately taxable property interest as

Clayton County urges, we note that it would be a violation of the uniformity of

taxation requirement to tax some usufructs in Clayton County and not others,

since all property within a taxing jurisdiction must be taxed uniformly. See

Griggs, supra, 230 Ga. at 258 (2).

(b) We agree with the trial court that the relied-upon language of the

former version of OCGA § 6-3-21 was never intended to impose property taxes

on usufructs at the Airport. That language — that the interests of a private

party lessee of a municipality that owns land used as an airport, “whether

possessory or an estate in land, are subject to ad valorem taxation” — was added to the statute by a 1983 amendment. Ga. L. 1983, p. 647, § 1. The

predecessor to OCGA § 6-3-21 was enacted in 1933, and the original statute

simply declared that lands owned or otherwise controlled by a municipality or

other political subdivision for the purpose of operating an airport were owned

for a public purpose. See Ga. L. 1933, p. 102, § 2. When read in conjunction

with the predecessor of OCGA § 48-5-41, this established that land on which

a city maintained an airport was exempt from taxation. See Ga. L. 1919, p. 82,

§ 1. In 1982 the Court of Appeals, in Clayton County Bd. of Tax Assessors,

supra, 164 Ga. App. 864, held that neither the City of Atlanta nor a private

party could be taxed on land the City owned at the Atlanta Airport and leased

to that party for operating a business that served the airport, where the lease

was deemed to convey a usufruct and not an estate for years. A few months

later, the General Assembly passed HB 492 to amend OCGA § 6-3-21. Ga. L.

1983, p. 647, § 1. The amendment struck the former statute in its entirety and

substituted new language declaring that, for the purpose of ad valorem

taxation, those facilities on municipal-owned airport land that were leased to

private parties were not considered to be used for public purposes and that “the

resulting interests, regardless of the extent of such interest, whether possessory

or an estate in land, are subject to ad valorem taxation . . . .” The language of former OCGA § 6-3-21 as it existed in tax years 2011 and 2012 did not impose

a tax on usufructs at the Airport; it merely stated that certain lease interests

were not exempt from taxation.5

3. Are Aldeasa’s rights subject to taxation as a franchise? Clayton

County also claims Aldeasa’s rights under the Concessions Agreement are

subject to taxation as a franchise, regardless of whether its rights amount to an

estate for years or a usufruct. We note, however, that the annual notices of

assessment to Aldeasa did not purport to tax a franchise interest. Instead, they

described the property being assessed as “real property.” Since franchises are

not identified in OCGA § 48-5-3 as taxable real property interests, the notices

of assessment do not authorize Clayton County to impose a franchise tax on

Aldeasa’s rights under the Concessions Agreement. See City of College Park,

supra, 346 Ga. App. at 64 (1).

4. May Clayton County tax Aldeasa’s purported leasehold

improvements? Finally, we reject Clayton County’s assertion that the trial

court erred by failing to find that Aldeasa owns taxable leasehold

5 We note that OCGA § 6-3-21 was amended again in 2014 to clarify that the type of lease interests that are not exempt from ad valorem taxation in the circumstances described by that Code section are limited to those that “create an estate in land . . . .” See Ga. L. 2014, p. 824, § 1/HB 399. improvements, or that the court improperly failed to address this ground for

taxation. Clayton County filed notices of assessment of the purported

leasehold improvements on the two parcels involved in the Concessions

Agreement, along with the notices of assessment of Aldeasa’s purported

possessory interests in the parcels. It is undisputed that Aldeasa has paid all

applicable taxes on its personal property. The improvements that Clayton

County attempts to tax are fixtures to realty. See OCGA § 44-1-2 (a) (2). The

trial court properly concluded, however, that Aldeasa held only a usufruct and

not an estate in real property. It follows that Aldeasa could not be assessed for

leasehold improvements that were not personal property but instead were

attached to and passed with the real property it did not own. See Fulton County

Bd. of Assessors v. McKinsey & Co., 224 Ga. App. 593, 595 (2) (481 SE2d

580) (1997).

Judgment affirmed. All the Justices concur. Decided June 18, 2018.

OCGA § 6-3-21; constitutional question. Clayton Superior Court. Before

Judge Ison, Senior Judge.

Freeman Mathis & Gary, Arash A. Sabzevari, Jack R. Hancock, for

appellant.

Eversheds Sutherland (US), W. Scott Wright, Alla Raykin, for appellee.