Summary
In Continental Motors Corporation v. Township of Muskegon, 365 Mich. 191, supra, we held that prior to PA 1959, No 266, our legislature had not authorized a tax on possessory rights or other limited interests in personal property.
Summary of this case from Continental Motors Corp. v. Township of MuskegonOpinion
Docket No. 10, Calendar No. 49,003.
Decided December 28, 1961.
Appeal from Muskegon; Beers (Henry L.), J. Submitted June 6, 1961. (Docket No. 10, Calendar No. 49,003.) Decided December 28, 1961.
Action by Continental Motors Corporation, a Virginia corporation, against the Township of Muskegon, a constitutional body corporate, to recover sums paid under protest for tax assessed against it as user of personal property in 1959. United States of America, owner of property, intervened as party plaintiff. Orchard View School District No. 13 and the County of Muskegon intervened as parties defendant. Judgment for defendants. Plaintiff and intervening plaintiff appeal. Reversed and remanded for entry of judgment for plaintiff.
Joseph T. Riley ( Butzel, Eaman, Long, Gust Kennedy and Clifford W. Van Blarcom, of counsel), for plaintiff.
Louis F. Oberdorfer, Assistant Attorney General, Abbott M. Sellers, Acting Assistant Attorney General, Lee A. Jackson, I. Henry Kutz, and Joseph Kovner, Attorneys, Department of Justice, and Robert J. Danhof and George E. Hill, United States Attorneys, for intervening plaintiff United States of America.
Charles A. Larnard, for defendant township.
Harry J. Knudsen, Prosecuting Attorney, for intervening defendant county.
Poppen, Street Sorensen, for intervening defendant school district.
Harold M. Street, of counsel for defendant and intervening defendants.
Amici Curiae: Nathaniel H. Goldstick, Corporation Counsel, and Julius C. Pliskow, Assistant Corporation Counsel, for City of Detroit.
Samuel H. Olsen, Prosecuting Attorney, Aloysius J. Suchy and William F. Koney, Assistant Prosecuting Attorneys, for Wayne County.
Challenged here is a 1959 Muskegon township ad valorem tax levied against Continental Motors Corporation as possessor and user of machinery and other equipment, title to which was in the Federal government. City of Detroit v. Murray Corporation of America, 355 U.S. 489 ( 78 S Ct 458 and 486, 2 L ed 2d 441 and 460), reversing (CCA 6) 234 F.2d 380, stands at the threshold of this case, for the defendant township relies upon the authority of that decision to support its contention that Michigan's general property tax act authorized in 1959 a tax upon the right to possess or use property owned by another measured by the value of the property possessed.
PA 1893, No 206, as amended (CL 1948, § 211.1 et seq., 25 amended [Stat Ann 1960 Rev § 7.1 et seq.]).
Continental attacks the construction placed upon our general property tax act by the United States supreme court in Murray. Continental claims the tax was invalid because in 1959 the general property tax act did not (contrary to the ruling in Murray) authorize a specific tax on the privilege of possessing or using tangible personal property but authorized only an ad valorem tax on the ownership of such property.
Defendant township, on the other hand, urges us to adopt the Federal supreme court's construction in Murray of our general property tax act and refers to various subsections of section 14 and to section 24 of the act for support of its contention that taxation of possessory interests and interests other than full ownership of tangible personal property was authorized in 1959.
Ours is the primary duty to construe acts of the Michigan legislature, to determine the extent and the scope of their application. When a State court of last resort authoritatively construes a State statute, Federal courts, including the supreme court, are bound by that construction. Alabama State Federation of Labor v. McAdory, 325 U.S. 450, 470, 471 ( 65 S Ct 1384, 89 L ed 1725); Ryerson Son v. Peden, 303 Ill. 171 ( 135 N.E. 423, 24 ALR 1273); and 27 RCL, p 44. But when a Federal court, even the supreme court, construes a State statute, the courts of that State are not bound to follow the Federal court's construction. Alabama State Federation of Labor v. McAdory, supra; Smithpeter v. Wabash R. Co., 360 Mo 835 ( 231 S.W.2d 135, 19 ALR2d 950); State, ex rel. Nelson, v. Meek, 127 Ark. 349 ( 192 SW 202, LRA 1918F, 642); and Parsons v. Federal Realty Corp., 105 Fla. 105 ( 143 So. 912, 88 ALR 275). Mr. Justice BUTZEL had occasion to express for this Court its recognition of this basic principle in Detroit Trust Co. v. Detroit City Service Co., 262 Mich. 14, 36:
"Notwithstanding the profound respect we have for the opinions of the United States supreme court, we are not bound thereby in the construction of a Michigan statute."
Even if not controlling, such opinions often are highly persuasive. However, with all due respect, we are not persuaded that the construction placed upon our general property tax act in the Murray Case is correct.
It is of some significance, we believe, that the Murray decision was reached on the same day decision was reached in United States v. City of Detroit, 355 U.S. 466 ( 78 S Ct 474, 2 L ed2d 424), affirming our decision in 345 Mich. 601; and United States v. Township of Muskegon, 355 U.S. 484 ( 78 S Ct 483, 2 L ed2d 436), affirming our decision in Township of Muskegon v. Continental Motors Corporation, 346 Mich. 218. It is significant because the supreme court's opinion in Murray states that the practical operation and effect of the tax there in question were identical to those upheld in the other 2 cases from Michigan decided that day. The other 2 cases, however, involved a specific statutory authorization for imposition of a tax upon the right to use real property the ownership of which is for any reason exempt from taxation whenever such real property is leased, loaned or otherwise made available for use in connection with a business conducted for profit. PA 1953, No 189 (CLS 1956, §§ 211.181, 211.182 [Stat Ann 1960 Rev, §§ 7.7(5), 7.7(6)]). We are unable to adopt the supreme court's construction in Murray of our general property tax act as it then related to personal property because there was then no specific statutory authorization for imposition of a tax upon the right to use another's tax exempt personal property comparable to PA 1953, No 189, and because our prior decisions tend to support a contrary construction. City of Detroit v. Phillip, 313 Mich. 211, 213; In re Ever Krisp Food Products Co., 307 Mich. 182, 196; Crawford v. Koch, 169 Mich. 372, 379; and Pingree v. Auditor General, 120 Mich. 95, 102 (44 LRA 679).
As this Court noted in C.F. Smith Co. v. Fitzgerald, 270 Mich. 659, 672, citing Pingree v. Auditor General, supra, the Constitution of this State (Const 1908, art 10, § 3) authorizes only 2 general methods of taxation, ad valorem and specific. The tax here involved was levied by the township pursuant to authority claimed to be found in the general property tax act before its amendment by PA 1959, No 266 (amending CL 1948, § 211.14 [Stat Ann 1960 Rev § 7.14]). The first section of that act (CL 1948, § 211.1 [Stat Ann 1960 Rev § 7.1]) declares that all property in the State, real and personal, unless expressly exempted, shall be subject to taxation. The exemptions are not, at this point in our discussion, relevant. Section 13 provides that the taxable situs of personal property, with certain exceptions hereafter noted, shall be the township in which the owner resides.
Neither of those 2 sections of the act authorizes taxation of other than the owner of personal property. However, section 14, which deals with the exceptions to the previously stated general rule as to taxable situs of personal property, provides the basis for the township's claim that taxation of possessory interests is authorized. We do not read section 14 as authorizing anything but the assessment of an ad valorem tax upon personal property and its collection from one other than the owner in certain specified circumstances. For example, the third subsection of section 14 provides that personal property of minors and others under guardianship shall be assessed to the guardian, and subsection 4 provides for the assessment of personal property belonging to decedents' estates to the executors, administrators, or trustees thereof. In subparagraph 5, personal property under the control of a trustee or agent may be assessed to such trustee or agent. Each of these examples provides also for the taxable situs of such property, generally other than the township of the owner of such property. Each subsection of section 14 refers to a situation where possession or control of tangible personal property by other than the owner thereof results from a legal relationship between the possessor and the owner which is for the benefit of the owner. In other words, in each instance, possession of the tangible personal property by a guardian, executor, administrator, trustee, or agent is not for the possessor's benefit but is, rather, for the benefit of the owner of the personal property. Under such circumstances, it hardly can be said that anything contained in section 14 of the act, before the act's amendment by PA 1959, No 266, authorized the taxation of such possessory rights, there being an absence of any benefit to the possessor from such possession.
Section 18 of the act provides for a written statement, under oath, of all tangible property of every person, firm or corporation having property not exempt from taxation, together with a statement indicating whether the property is owned by such person, firm, or corporation or "held for the use of another." See, also, section 19.
See CL 1948, § 211.19, as amended by PA 1958, No 209 (Stat Ann 1960 Rev § 7.19). — REPORTER.
Section 24 provides for the preparation of an assessment roll and requires that where property is assessed to one other than the owner, it shall be assessed separately from his property and shall show in what capacity it is assessed to him, "whether as agent, guardian or otherwise."
As amended by PA 1949, No 285, see CLS 1956, § 211.24 (Stat Ann 1960 Rev § 7.24). — REPORTER.
From all of the foregoing, it seems quite apparent to us that the general property tax act as it related to tangible personal property, until passage of PA 1959, No 266, imposed a tax only upon the ownership of such property; in other words, imposed only the ordinary ad valorem personal property tax and did not provide for taxation of limited interests in such property. This conclusion is supported by provisions which subsequently appear in the act. Specifically, section 40 provides, in pertinent part:
"All taxes shall become a debt due to the township * * * from the owner or person otherwise to be assessed on the tax day. * * * And all personal taxes hereafter levied or assessed shall also be a first lien, prior, superior and paramount, on all personal property of such persons so assessed * * * and so remain until paid." CL 1948, § 211.40, as amended by PA 1958, No 209 (Stat Ann 1960 Rev § 7.81).
But, section 47 of the act provides, in pertinent part, that:
"When any person having possession of the personal property of any other person, firm or corporation shall be assessed for such property and shall be obliged to pay the taxes thereon, such person, firm or corporation so paying the taxes, may recover of the person, firm or corporation for whose benefit the taxes were paid, the money so paid, with the interest thereon in an action of assumpsit." CL 1948, § 211.47 (Stat Ann 1960 Rev § 7.91).
The scheme of assessment and collection of taxes disclosed by the foregoing is consonant only with an ad valorem tax on the ownership of property ( City of Detroit v. Phillip, supra, and Pingree v. Auditor General, supra), the possessor being assessed only as a collection agent for the taxing authority with the statutorily granted right to reimbursement from the owner whose primary duty it is to pay the tax ( Crawford v. Koch, supra). See Mr. Justice Frankfurter's opinion dissenting from the supreme court's denial of rehearing in the Murray Case, at 357 U.S. 913 ( 78 S Ct 1145, 2 L ed2d 1164).
We thus conclude that Michigan's general property tax act did not, prior to PA 1959, No 266, authorize taxation of possessory interests in personal property legal title to which is in one other than the possessor, as that act was construed by the Federal supreme court in the Murray Case.
Prior to the 1959 amendment, our law authorized only an ad valorem tax on the personal property itself without providing for taxation of possessory interests or, indeed, of any other limited interests in the property separate and distinct from the property itself. Only in 1959, by enactment of PA 1959, No 266, did the legislature authorize a tax on beneficial rights in personal property such as are here involved. The supreme court's opinion in Murray (p 493) recognized that Michigan's law then in force, and in force at the time Continental was here taxed, did "not expressly state that the person in possession is taxed `for the privilege of using or possessing' personal property." Its decision was based, instead, on its erroneous conclusion that the practical operation of our law, as then written and applied, had effected the same result. Indeed, the opinion of the supreme court even suggests (p 493) that "the State could obviate such grounds for invalidity by merely adding a few words to its statutes."
This, in 1959, our legislature did by adoption of PA 1959, No 266. By that act, our legislature for the first time provided, in section 14 of the general property tax act, that "personal property not otherwise taxed under this act which is in the possession of any person, firm or corporation using same in connection with a business conducted for profit shall be deemed the property of such person for taxation and assessed to him accordingly." Like the Maryland court in Martin Company v. State Tax Commission, 225 Md. 404 ( 171 A.2d 479), we acknowledge the authority of the Murray Case to the extent of its holding that a State has the power to tax the interest of a possessor of government-owned property even though the economic burden of the tax falls ultimately (because of contractual relations between the possessor and the owner) upon the government. It is our conclusion, however, that the supreme court erred in the Murray Case in holding that this State had, prior to the 1959 amendment, invoked such power.
We now turn to an alternative contention urged by the defendant township as a ground for upholding the validity of the tax here imposed. The township claims that the tax should be upheld as a tax upon Continental's "beneficial ownership" of the personal property, citing American Motors Corporation v. City of Kenosha, 274 Wis. 315 ( 80 N.W.2d 363), aff'd per curiam in 356 U.S. 21 ( 78 S Ct 559, 2 L ed2d 578), rehearing denied in 357 U.S. 912 ( 78 S Ct 1147, 2 L ed2d 1163). The same contention was made in Martin Company v. State Tax Commission, supra, and in General Dynamics Corp. v. County of Los Angeles, 51 Cal.2d 59 ( 330 P.2d 794). Both the Maryland and the California courts rejected it, Maryland on the ground that its laws did not provide for the taxation of Martin's right to use and possess personal property belonging to the United States, and California on the ground that General Dynamics had not secured or retained indicia of ownership sufficient to support its taxation as the owner of such property. We reject the contention, as did Maryland, on the ground that our law, prior to the 1959 amendment, authorized only an ordinary ad valorem tax on tangible personal property without providing for the taxation of intangible interests in such property. Since the 1959 amendment, it is true that possessory interests in personal property otherwise exempt from taxation, as a practical matter, have been made taxable. However, it is significant that even in the 1959 amendment our legislature did not expressly state that possessory interests as such are taxable. Instead, the legislature preserved our historically consistent pattern of ordinary ad valorem personal property taxation by using the familiar legal fiction of "deeming" such otherwise exempt property as the property of the person in possession for taxation and assessment purposes.
Judgment reversed and remanded for entry of judgment in favor of Continental. No costs, a public question being involved.
DETHMERS, C.J., and CARR, KELLY, BLACK, EDWARDS, and KAVANAGH, JJ., concurred.
OTIS M. SMITH, J., took no part in the decision of this case.