Holman Transfer Co. v. City of Portland

LUSK, J.

This is a suit for a declaratory decree brought to determine whether certain real property owned by the *554defendant, City of Portland, and leased by tbe city to the plaintiffs, Holman Transfer Company, a corporation, and Budie Wilhelm Warehouse Company, Inc., a corporation, is exempt from taxation for the fiscal year 1948-49 under the provisions of an act of the legislature passed in 1947 hereinafter set out. Defendants are the City of Portland, Multnomah County and others. The court entered a decree declaring that the property was not exempt from taxation for the year in question and that the tax levied for that year was lawful and valid. Plaintiffs appeal.

The relevant facts were stipulated by the parties as follows:

“That it is admitted for all purposes in this suit that prior to January 1,1947, the defendant City of Portland, acting by and through its Commission of Public Docks, entered into a lease in writing with Pope & Talbot, Inc. whereby all of the property involved in this suit was leased to said Pope & Talbot, Inc., and, pursuant to said.lease, said Pope & Talbot, Inc. entered into possession of all of the said property and continued in such possession as lessee from the City of Portland under said lease until on or about October 14,1947, and that prior to July 1,1947, the plaintiffs subleased said premises from said Pope & Talbot, Inc. and thereafter occupied the premises as such subtenants until October 14, 1947, and that on or about October 14, 1947, the plaintiffs, as lessees, and the Defendant City of Portland, acting through its Commission of Public Docks, as lessor, entered into a lease in writing by the terms of which said premises were leased to plaintiffs for a term of years; that a copy of said lease is attached to, as a part of, plaintiffs’ complaint; that subsequent to October 14, 1947, plaintiffs were in possession of said premises as lessees under said lease of October 14, 1947.”

*555The only provision of the lease material to the controversy reads:

“The Lessees agree, upon billing by Lessor, promptly to pay to Lessor all taxes that may be levied against the demised premises under authority of Chapter 382, Oregon Laws, 1947, or any other law or statute, from the time that the Lessees take possession thereof until the expiration of this lease, or any renewal thereof; taxes for fractional parts of fiscal years shall be pro-rated.”

The legislation to be construed is found in Secs. 1 and 2, ch 382, Oregon Laws 1947. Section 1 is a new provision, and Sec. 2 amends Sec. 110-201, OCLA, as amended by ch 296, Oregon Laws 1945. So far as now material they read:

“Section 1. All real property of this state or any institution or department thereof or of any county or city, town or other municipal corporation or political subdivision of this state, held under lease or rented by any person, corporation or association whose real property, if any, is taxable, shall be subject to assessment and taxation for the true cash value thereof uniformly with real property of non-exempt ownerships; provided, however, that real property owned by any city or town, or any dock commission or port, and held under a lease heretofore executed, or rented under an agreement heretofore executed, by any person, corporation or association, whose real property, if any, is taxable, shall not become subject to assessment and taxation for the fiscal year 1947-1948, and for the fiscal year 1948-1949; * * *
“Section 2. That section 110-201, O.C.L.A., as amended by chapter 296, Oregon Laws 1945, be and the same hereby is amended so as to read as follows:
“Sec. 110-201. The following property shall be exempt from taxation:
*556“(3) All public or corporate property of the several counties, cities, towns, school districts irrigation districts, drainage districts, ports, water districts and all other public or municipal corporations in this state used or intended for corporate purposes, except real property belonging to any such public or municipal corporation and held under a contract for the purchase thereof, and except, further, real property held under a lease or other interest or estate in such real property less than the fee simple; provided, however, that real property owned by any city or town or any dock commission or port, and held under a lease heretofore executed, or rented under an agreement heretofore executed, by any person, corporation or association, whose real property, if any, is taxable, shall not become subject to assessment and taxation for the fiscal year 1947-1948, and for the fiscal year 1948-1949”. (Italics added.)

We have italicized the provisos in both sections as the case concerns itself primarily with their construction. As they are couched in identical language, we shall speak simply of “the proviso”.

As the stipulation shows, the property was in possession of Pope & Talbot, Inc. from some time prior to January 1,1947, until about October 14, 1947, under a lease from the City of Portland. We may observe in passing that nothing is claimed for the fact mentioned in the stipulation (and we deem it immaterial) that the plaintiffs were in possession of the property for a period as sublessees under Pope & Talbot, Inc. The plaintiffs’ lease from the city commenced October 14, 1947, at which time they entered into possession of the property and so continued through the fiscal year 1948-49.

We shall assume for the purposes of this opinion, what probably is the law, that the word “heretofore” *557in the phrase “under a lease heretofore executed” refers to the effective date of the Act, which was July 5, 1947.

The precise question is whether real property of the city, held by the plaintiffs under a lease which was executed after the Act had become effective, is exempt from taxation for the year in question because, at the time of the effective date of the Act, it was held by a different party under a different lease theretofore executed. Plaintiffs assert that the proviso creates such an exemption. We do not agree.

The theory behind the legislation, it may be reasonably assumed, is that even publicly owned property should pay its share of the cost of government when in the hands of a private person and devoted to a private use. The legislature, however, evidently deemed it expedient to provide that during the two fiscal years following passage of the Act property then held under a lease executed before adoption of the new taxing policy should be exempt, for the obvious reason that such leases had been entered into at a time when the property was exempt from taxation, and, of course, took no account of a tax liability which then did not exist. After the Act became effective, however, the municipality and the prospective lessee could make their agreement with the knowledge that the property was subject to taxation. The municipality would be enabled, as the City of Portland did in this ease, by a provision in the lease to pass on the obligation to pay the tax to the lessee. No doubt such agreements were very much in the minds of the legislature. While it is true that the tax is not against the owner but against the property, still we are dealing with a statute which makes the question of exemption or no *558exemption dependent upon whether or not the property is held under lease by a person whose real property is taxable. The courts have more than once observed that taxation is an exceedingly practical matter. In Knapp v. Josephine County, 192 Or 327, 353, 235 P2d 564, this court said, “we think that all tax statutes should be construed in as practical a manner as possible.” In most instances the owner does pay the tax, and taxes are an important consideration in agreeing on the terms of a lease of taxable land. The legislature, of course, was not unaware of these facts. Indeed, an amendment passed in 1949, and which we shall again have occasion to mention, indicates very clearly that the legislature by then had concluded that the respite for only two years was not sufficient, and that the exemption should continue during the full term of leases executed prior to the effective date of the 1947 Act — undoubtedly because of hardships which would otherwise result in cases of leases executed before adoption of the Act and not yet expired.

The argument has centered upon the meaning of the phrase “held under a lease heretofore executed” in the proviso. Plaintiffs’ contention involves the somewhat remarkable proposition that although the property was held by them during the fiscal year 1947-48 under a lease executed after the Act became effective, the legislature intended that it should be exempt from taxation during that year because, before the Act became effective, it had been leased to a different person; or, in other words, that the question of exemption of leased property was to be wholly dependent on its status prior to, or at the time of, the effective date of the Act. Underlying this contention are two fundamental errors. One results from a failure to read correctly and grammatically the phrase just quoted; the other is the as*559sumption that the phrase is plain and unambiguous, that it can have but one meaning, and that is the meaning which the plaintiffs ascribe to it, and therefore that it is not open to construction.

The former of these errors is revealed in the following quotation from the plaintiffs’ brief:

“* # # The word‘held’, in this case, is modified by the phrase ‘heretofore executed’. The trial court ignored such modifying words. If the modifying words had not been ignored, we submit that the court could not have arrived at the decision reached.”

This is a misreading of the phrase. The word “heretofore” does not modify “held”. It modifies “executed”. The legislature did not'speak of property “heretofore held”. It spoke of a lease “heretofore executed”. Property can be held two or ten years hence under a lease heretofore executed. The time when the property must be held under a lease heretofore executed in order to receive the benefit of the exemption is not expressly stated. The word “held”, as used here, has no connotation of time and is therefore ambiguous. It must be construed in its context and with reference to the legislative purpose and intent.

It so happens that substantially the identical question of interpretation was presented in the case of Starr v. Case, 59 Ia 491, 13 NW 645. There the court was called upon to construe a provision in articles of co-partnership which excepted from the obligation of each partner to give his whole time and attention to the interest of the firm “such time as may be proper for the fulfilling of the duties of any office or agency held individually by either partner” (italics added). *560A contention similar to that of the plaintiffs here was thus answered by the court (59 Ia 495):

“* * * Appellants insist that the word held is in, past and present tense, and applies only to offices or agencies held by a partner when the co-partnership was formed. This we think is not the proper construction of the exception. The word held is the perfect participle of the verb hold.
“ ‘Participles have no reference to time, they simply show the action, being or state of the verb from which they are derived as finished or unfinished.’ See Welch’s Analysis of the English Sentence, page 87. It is evident from the context that the members of the partnership contemplated their probable future as well as their present relations, when they provide, that ‘neither partner shall accept or continue to hold any office or agency unless by the consent of his co-partners.’
‘ ‘ The meaning of the word held is not to be determined simply from its form, but from its relation to other parts of the contract, and it must be so construed, if possible, as to give force and effect to all parts of the agreement. The word, whether considered grammatically or in relation to other parts of the contract, cannot legitimately be limited to an office or agency in the possession of one of the partners when the contract was formed, but includes any office or agency of which a partner might become possessed at any time during the continuance of the co-partnership.”

Here the legislative purpose was to subject to taxation municipally owned leased property. The Act looks to the future, not to the past. It lays down a taxation policy for the years to follow its passage. The exemption in the proviso, like the rest of the Act, has to do with the status of the property with respect to a lease at the time that the tax is levied (see Oregon Laws 1941, ch 440, Secs. 21, 22, Sec. 110-829, OCLA, *561as amended by ch 357, Oregon Laws 1945); not at some other time utterly irrelevant to any conceivable legislative purpose. The word “held” in the proviso, as the circuit court correctly declared in its decree, means “held at the time that the tax was levied and * * * not * * * held at the time of the effective date of the act.” As applied to this case the entire phrase is intended to exempt “property of the City of Portland held during the fiscal year, 1948-49, under a lease executed before July 5,1947.” So construed, the proviso has sense and purpose; as construed by the plaintiffs, it has neither, and no one contends that it has.

Other considerations emphasize the correctness of this view. In construing particular words or phrases in a statute courts do not treat them as though they stood alone, but examine the entire statute to ascertain the sense in which the particular words are used.

It is to be observed that the word “held” is used more than once in the 1947 Act. Section 1 provides for the taxation of property of states and municipalities “held under lease”, etc. Section 2 amends the exemption statute by removing the exemption theretofore enjoyed by real property of muncipial corporations “held under a lease”. We take it no one would argue, or even suggest, that the word “held”, as used in these two provisions of the Act, means “held at the time that this Act takes effect”. Obviously the legislature had in mind the status of the property at the time of the levy of a tax. That, indeed, is what the statute is all about. Will it be said that the legislature intended that municipally owned property under lease on July 5, 1947, the effective date of the Act, was intended to be subjected to taxation for the fiscal year 1948-49, although it was then not under lease? We believe that all would agree that this would be an absurdity.

*562Or would any one apply the rule to the enacting clause, which is invoked in the ease of the proviso, that the legislature is deemed to be making use of its words as of the date the Act becomes effective? Surely not, for the reason that such an application of this rule would make the entire statute meaningless. The same thing could be affirmed of Sec. 1, ch 202, Oregon Laws 1947, which subjects to taxation real property of the United States held “under contract of sale, lease”, etc. Obviously the word “held” in that statute refers to the time when a tax is levied and not to some time irrelevant to the legislative purpose. What reason, then, can be brought forward for attaching to the word “held” in the proviso a different meaning than it bears in the enacting clause? No reason has been suggested, and we think that none can be found. Indeed, if the view which the plaintiffs take is correct it follows that the words “heretofore executed” are surplusage. They were not needed at all, because in every case of property held under a lease on the effective date of the Act such lease was necessarily “heretofore executed”. It would be impossible on July 5, 1947, the effective date of the Act, to hold property under a lease which was not executed until after July 5, 1947. It must be presumed, however, that these words were used with a purpose. That purpose was to distinguish between property held at the time of levy of the tax under a lease hereafter executed and property held under a lease heretofore executed, not to distinguish between property held on July 5,1947, and property thereafter held.

The appropriate function of a proviso is to restrain or modify the purview of a statute in which the proviso is found. Olson v. Heisen, 90 Or 176, 178, 175 P 859. In this instance the function of the proviso was *563to restrain the purview of the enacting clause which subjected to taxation municipally owned property held under a lease at the time the tax was levied, to the end that this provision would not apply in the case of leases “heretofore executed”.

It is the words “heretofore executed” which define the limits of the proviso. The words “held under a lease” in the proviso do not have a different meaning from those words in the enacting clause. The rule on that subject, as stated in 59 CJ 1003, Statutes, Sec. 597, was quoted by this court with approved in In re Norton’s Estate, 177 Or 342, 347, 162 P2d 379, 161 ALR 439, as follows:

“In the absence of anything in the statute clearly indicating a contrary intent, where the same word or phrase is used in different parts of a statute, it will be presumed to be used in the same sense throughout ; and where its meaning in one instance is clear, this meaning will be attached to it elsewhere, * # * ?>

See, to the same effect, Lasene v. Syvanen, 123 Or 615, 624, 257 P 822, 263 P 59. The sense in which the word “held” is used in the enacting clauses of the statute is clear. We are not at liberty to say that it is used in a different sense in the proviso, especially when to do so is to impute to the legislature a purpose to do a nonsensical thing.

It is urged by plaintiffs that property belonging to the state and its municipalities and which is held by them for public purposes is presumptively exempt from taxation (citing Portland v. Multnomah County, 135 Or 469, 296 P 48; Cooley on Taxation (4th ed), Sec. 621), and therefore that a strict rule against taxation is to be applied. Whether this is so when the legislature has adopted a policy of taxation of state and mu*564nieipally owned property, not devoted to a public use but held in private hands under lease, is a highly debatable question. We shall not stop to examine it. It is sufficient to say that rules of the kind invoked are mere aids to construction and come qualified with the rule “that that sense of the words is to be adopted which best harmonizes with the context, and promotes in the fullest manner the policy and object of the Legislature.” Endlich, Interpretation of Statutes, 466, Sec. 337. “The paramount object”, says the learned author in the same section, “in construing penal as well as other statutes, is to ascertain the legislative intent; and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention.” The rule of strict construction, even though it were conceded to be applicable here, cannot be so used as to defeat the apparent legislative purpose. Swift & Co. v. Peterson, 192 Or 97, 123, 233 P2d 216.

Much is said in argument about the evils of judicial legislation. We are repeatedly reminded of the duty of courts to refrain from construction when the language of a statute is plain and unambiguous, and we are told that the circuit court’s decision violates the rule against inserting in a statute what has been omitted. Sec. 2-216, OCLA. We have already seen that the proviso is not unambiguous. Plaintiffs’ own construction, indeed, can only be reached by reading into the proviso, after “held”, the words “at the time that this Act takes effect”, or similar language.

Plaintiffs’ argument throughout ignores the cardinal rule of stautory construction that it is the court’s duty to pursue the legislative intent, if possible. Sec. 2-217, OCLA. If it is necessary to import words *565into the statute in order to give effect to the obvious and plain meaning of the legislature that will be done. Cabell v. Cottage Grove, 170 Or 256, 272, 130 P2d 1013, 144 ALR 286; Barrett v. Union Bridge Co., 117 Or 566, 570, 245 P 308, 45 ALR 527. When a literal application of the language produces an absurd or unreasonable result it is the duty of the court to construe the act, if possible, so that it is a reasonable and workable law and not inconsistent with the general policy of the legislature. Swift & Co. v. Peterson, supra at 111, Fox v. Galloway, 174 Or 339, 347, 148 P2d 922, and Oregon cases there cited. A statute is to be construed with reference to its manifest object, and, if the language is susceptible of two constructions, one which will carry out and the other defeat such manifest object, it should receive the former construction. 2 Sutherland, Statutory Construction (3d ed), 338, Sec. 4704. And, as stated in Endlich, op. cit., 399, Sec. 295:

“Where the language of a statute in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it, which modifies the meaning of the words, and even the structure of the sentence.”

Here it is unnecessary to modify the meaning of words or the structure of the sentence, but only to read the sentence correctly and grammatically and to interpret the word “held” to harmonize with the legislative purpose. It may be added that we have yet to hear from those supporting the plaintiffs’ view any contention that the meaning they place upon the proviso brings about a reasonable result or tends to carry out, rather than defeat, the object of the statute.

*566We have referred to an amendment to the Act under consideration adopted in 1949. This is found in ch 395, Oregon Laws 1949. So far as now pertinent, it exempts from taxation: “Real property owned by any municipality, or any dock commission or port organized under the laws of this state, to the extent to which such property is either (a) * * *, (b) held under a lease or rental agreement executed for any purpose prior to July 5, 1947, provided that this exemption shall continue only during the term of such lease or rental agreement in effect on said date, or (c) * *

The defendants say that the amendment tends to support their position as a legislative construction of the 1947 Act.

This court, in common with others, has held that an amendment to an act may be resorted to for the discovery of the legislative intention in the enactment amended. Layman v. SIAC, 167 Or 379, 400, 117 P2d 974. See, also, 50 Am Jur 328, Statutes, Sec. 337. As stated in the discussion of this subject in 2 Sutherland, op. cit., Sec. 5110, “it is just as probable that the legislature intended to clear up uncertainties, as it did to change existing law where the former law is changed in only minor details.” And this eminent authority approves the following test for determining the question from People v. Davenport, 91 NY 574, 591-592:

“The force which should be given to subsequent, as affecting prior legislation, .depends largely upon the circumstances under which it takes place. If it follows immediately and after controversies upon the use of doubtful phraseology therein have arisen as to the true construction of the prior law it is entitled to great weight. * * * If it takes place after a considerable lapse of time and the intervention of other sessions of the legislature, a radical change of phraseology would indicate an intention *567to supply some provisions not embraced in the former statute.”

As is apparent from a comparison of the 1949 amendment with the 1947 Act, one purpose of the amendment was to prolong the exemption granted by the proviso in the 1947 Act in favor of property held under unexpired leases executed before July 5, 1947, the effective date of the latter Act. It was evidently the judgment of the legislature that the same reasons which suggested the propriety of such an exemption for the fiscal years 1947-48 and 1948-49, required that the exemption should continue as long as the terms of such leases continued. The legislature expressed that purpose in this language, “Provided that this exemption shall continue only during the term of such lease or rental agreement in effect on said date” (that is, July 5, 1947). Another apparent purpose was to remedy a defect in the 1947 Act by limiting the exemption to the term of the pre-existing lease. Under the 1947 Act it would seem that the property was not taxable for the fiscal year 1947-48 since it was held under a preexisting lease to Pope & Talbot, Inc. in July, 1947, when the tax for that year was levied, Oregon Laws 1941, ch 440, Secs. 21, 22, and when the tax, if valid, would have become a lien on the property, ch 357, Oregon Laws 1945.

The amendment makes no other changes in existing law, and it is arguable that it was adopted with the further purpose of “clearing up uncertainties” about the question now before us. The amendment was adopted at the next ensuing session of the legislature after the enactment of ch 382, Oregon Laws 1947. It was approved by the governor April 14, 1949. This suit was commenced July 26, 1949, a little more than three months later. It is not a rash assumption that *568the controversy over the construction of the statute to which Multnomah County, the City of Portland, the Commission of Public Docks of the City of Portland, and the Attorney General were parties had already arisen when the 1949 Act was introduced, considered and passed. These circumstances, under the authorities cited, tend to support the defendants’ view of the matter. At best, however, any inference of this sort attempted to be drawn from the language of the 1949 amendment is based in large measure on speculation. Once the statute whose construction controls decision of this case is carefully analyzed in all its parts and as a whole, and with due regard to its manifest object, its meaning becomes so clear that resort to subsequent legislation as an aid to interpretation is unnecessary.

The judgment of the circuit court is affirmed.