Merrill Railway & Lighting Co. v. City of Merrill

96 N.W. 686, 119 Wis. 249, 1903 Wisc. LEXIS 107

Opinions

Dodge, J.

Onr statutes subjecting those engaged in operating street railways, with or without electric lighting and power plants, to a charge graduated upon their gross revenues, in lieu of other taxation, as a part of that scheme contain the provision (subd. 14, sec. 1038) to the effect that upon payment of such license fee “all personal property, franchises, and real estate owned and actually and necessarily used by such person, company, or corporation in the operation of its business, shall be exempt from taxation and other license fees.” Appellants claim that by the clear words of this statute such exemption is confined to real estate absolutely owned in fee simple, while respondents claim that it extends to include property held by lease, as in the present case. The question presented is without direct authority in Wisconsin, and in solving it we are driven to decide which of two rules is applicable; such rules being thoroughly well established in this state, so that little aid is obtainable from other jurisdictions where one or other of them has not been so fully adopted.

On the one hand, it has been held in this state that statutes exempting property from the general rule of taxation are to be construed with the utmost strictness, and that, as so construed, the word “owned,” in statutes describing exempt property, must receive its. most limited meaning, and be satisfied only by complete and entire ownership, or at least not by leasehold title. Weston v. Shawano Co. 44 Wis. 242, 256; Milwaukee v. Milwaukee Co. 95 Wis. 424, 69 N. W. 819; Katzer v. Milwaukee, 104 Wis. 16, 80 N. W. 41; Douglas Co. Agr. Soc. v. Douglas Co. 104 Wis. 429, 80 N. W. 940. On the other hand, it is equally well settled that, where the statute in terms exempting property from general taxation is only a part of a general statutory scheme substituting a license or other impost in lieu of general taxation, the rule of strict construction has no application, but, on the contrary, such a statute is to be construed liberally in favor of' the person required to pay taxes in the substituted license form. Milwaukee & St. P. R. Co. v. Crawford Co. 29 Wis. 116; Milwaukee & St. P. R. Co. v. Milwaukee, 34 Wis. 271, 277; State ex rel. Abbot v. McFetridge, 64 Wis. 130, 24 N. W. 140; Milwaukee E. R. & L. Co. v. Milwaukee, 95 Wis. 39, 47, 69 N. W. 794; Duluth, S. S. & A. R. Co. v. Douglas Co. 103 Wis. 75, 88, 79 N. W. 34.

It cannot be denied that the word “own” is used both colloquially and in the law to designate a great variety of interests in property. As titles and rights to real property vary from the absolute and unqualified fee simple to that of the mere occupant, so the word “own” or “ownership” varies in its significance. Eor most practical purposes the tenant under a lease for 1,000, or even for 100, years exercises as complete control as the holder of the fee simple. The holder of a fee subject to be determined on some remote contingency, or the holder of a life estate, satisfies the ordinary conception of ownership, but the gradations from this phase of partial ownership to that of the mere tenant from month to month are nearly infinite in number, and each almost infinitesimal in degree. It seems, therefore, quite impossible to draw any line logically between the absolute and unqualified fee simple on the one hand and the mere right of occupancy on the other. Hence it is not surprising that we find the word in statutes given the widest variety of construction, usually guided in some measure by the objects sought to be accomplished in the particular instance. This has led some courts to declare that the word has no precise legal signification and may be applied to any defined interest in real estate. Gitchell v. Kreidler, 84 Mo. 476. It has been applied to a mere bailee in construing log-driving lien statutes in Wisconsin. Sec. 3337, Stats. 1898; Wis. R. L. D. Asso. v. Comstock L. Co. 72 Wis. 464, 40 N. W. 146. The instances where the word “own” has been held satisfied by something less than absolute and entire ownership are far too numerous to permit citation. The following are a few in which mere leasehold interest has been deemed sufficient: Gilligan v. Aldermen, 11 R. I. 258; State v. Wyl, 55 Mo. 67; Proctor v. H. & St. J. R. Co. 64 Mo. 112; Choteau v. Thompson, 2 Ohio St. 114; Baltimore & O. R. Co. v. Walker, 45 Ohio St. 577, 16 N. E. 475; North Penn. R. Co. v. Davis, 26 Pa. St. 238; Schott v. Harvey, 105 Pa. St. 222, 228; Eglinton v. Norman, 46 L. J. Q. B. 557; Mourilyan v. Labalmondiere, 30 L. J. M. C. 95. Thus it appears very clearly that the word “owned” is not a technical term; that it is a general expression to describe a great variety of interests, and may .vary in significance according to context and subject matter. That being so, we are constrained by the rule of the Wisconsin authorities to give to it in the statute now under consideration as liberal construction as it will reasonably boar in favor of the respondent company, which has paid the full license fee imposed by law in lieu of all other taxes. The applicability of this rule requiring liberality of construction of course renders nonauthoritative the cases where, as expressly declared, the court was bound to adopt the most strict and limited meaning of which the same word was capable.

In the light of these rules for construction, then, we have to consider whether the legislature can in reason be supposed to have used the word “owned” in so general a sense as to be satisfied by a leasehold right for a term of five years. The purpose of this whole scheme was to measure the contribution of street railways to the public revenues by the earning capacity of their plants as entireties, recognizing that such plants include many elements which are peculiarly intangible and difficult of valuation by ordinary methods, such as the franchises to do business; the privileges to use highways and public grounds; the questionable title to the structures affixed to such realty and consequent difficulty of valuation specifically; the uncertainty, if not absence, of sale value of each element of the plant, except as used in connection with every other part and in connection with the special franchises and privileges. It seems to us entirely probable tha'fc the legislature intended in a general way to exempt from specific assessment and taxation those things which, in association with each other, help to produce the gross revenue on which the license fee is to be measured. In this view it is difficult to ■see why leased property should not fall within the purpose of the exemption as readily as that owned absolutely, while actually used for the purposes of the enterprise. What difference would it make that this power plant had been purchased ? Such fact would neither enhance nor diminish the gross earnings of the entire plant, nor the contribution thereto of this particular property. Why should the legislators care whether the dynamos in the power house or tne motors on the cars were owned or leased ? In either case they contribute equally to produce the revenue on which, the license fee is graded. A further consideration arises out of the general public policy that the entire plant should not be subject to enforced disintegration or severance by process of law. This policy has been so emphatically declared, and the reasons for it so fully explained, that we need only refer to its existence. Wilkinson v. Hoffman, 61 Wis. 637, 21 N. W. ; Fond du Lac W. Co. v. Fond du Lac, 82 Wis. 322, 52 N. W. 439; Chapman V. Mfg. Co. v. Oconto W. Co. 89 Wis. 264, 60 N. W. 1004; State ex rel. Mil. St. R. Co. v. Anderson, 90 Wis. 550, 562, 63 N. W. 746. Is it not probable that a public policy so important that it has been held sufficient to impliedly repeal or restrain statutes regulating the enforcement of mechanics’ liens and the execution of judgments should have been deemed a sufficient reason why even leased property, constituting an integral part of a railway plant and system, should not be subject to be wrenched from such association by the process of sale provided for collection of taxes laid on specific realty ? Other considerations might be urged, but those suggested are sufficient to show that the use of the word “owned” in a sense tó be satisfied by a leaseholding is not so unreasonable as to be unwarranted under the rule of liberal construction which must guide us. We accordingly hold that at the time of the assessment and levy of the taxes assailed the power plant and water power, except so much of the latter as was reserved in appurtenance to the other lands of the fee owners, was “owned and actually and necessarily used” by the plaintiff corporation “in the operation of its business,” within the meaning of those words in subd. 14, sec. 1038, Stats. 1898, and was, therefore, not subject to general taxation.

A suggestion is made by appellants that this exemption statute might be satisfied by a severance of titles in the specific real estate, and by treating as exempt merely the leasehold interest of the street railway company, and subjecting the other interests, to general taxation. Such severance would be wholly foreign to the general scope and policy of our laws for taxation of real estate, and would render unworkable those providing for enforced collection. Wherever the tax statutes deal with real property, they refer to the land itself. The'tax is laid thereon regardless of either the manner or ■extent in which title thereto is divided, and the enforcement statutes are all predicated upon tbe idea that tbe sale is to» cut to tbe bottom, to carry tbe ultimate and fundamental title; and those statutes require that, if there is to be any severance upon tbe sale, it must be of portions of tbe land itself, so that to whatever is sold complete title shall pass. Tbe same suggestion now made by appellants is discussed and disposed of adversely in Baltimore v. Canton Co. 63 Md. 218, 235; Sisters of Charity v. Detroit, 9 Mich. 94, 102; Burroughs, Taxation, 223.

We are convinced that tbe rules of construction heretofore adopted by this court warranted tbe trial court in bolding this parcel of land exempt, and that tbe judgment is right.

By the Court. — Judgment affirmed.