NELSON MACHINERY COMPANY v. Yavapai County

UDALL, Justice

(dissenting).

I am unable to concur with the result reached by the majority in this case. . In my opinion, it is contrary to the law, not only in this jurisdiction, but in the majority of jurisdictions in this country. The Court’s reasoning allows a kind of “Back door legislation” whereby a statute is extended by this Court to cover an exemption not contemplated by the legislature :when it originally enacted that law.

The Constitution of Arizona was adopted in 1910. Article 9, Section 2 -at that time contained some four exemptions from taxation: (1) federal, state, county and municipal property; (2) educational, charitable, religious property; (3) public debts; (4) widows’ and veterans’ property. In 1929, the' legislature enacted § 42-274 requiring an affidavit to be filed by. any “ * * * person claiming exemption from taxation under the provisions of § 2, article 9, constitution of Arizona.” By specifically mentioning Article 9, Section 2, § 42-274 incorporated the list of four exemptions into its provisions. Since the inventory exemption was not added until 1964, § 42-274, when enacted and later amended in 1951, specifically incorporated Article 9, Section 2 as it was at that time, when no inventory exemption existed.

The rule in most jurisdictions as well as in Arizona is clear. When one statute specifically incorporates the provisions of another statute (the “adopted statute”), the adopting statute (here § 42-274) “must read as if the provisions” of the adopted statute or constitutional provision (here Article 9, Section 2 of the Arizona Constitution) “had been bodily incorporated into *11it at the time of its enactment.” (Emphasis supplied). Dairy and Consumers Co-op’ Ass’n v. Arizona Tax Commission et al., 74 Ariz. 35, 243 P.2d 465 (1952); in accord with this: Clements v. Hall, 23 Ariz. 2, 201 P. 87 (1921); Maricopa County v. Osborn, 60 Ariz. 290, 136 P.2d 270 (1943), 168 A.L.R. at 631. Section 42-274, therefore, reads the same as if it had specifically enumerated the four exemptions existing in 1929 and made them subject to the affidavit provision. Furthermore, when one statute incorporates a part or all of another as it exists at that time, the subsequent amendment or repeal of the adopted statute (Art. 9, Section 2 of the Constitution) has no similar effect upon the adopting statute (§ 42-274). The amending of the Constitution to add the inventory exemption could not have amended § 42-274 to make the affidavit apply to this new exemption. Cases in Arizona are in accord with this position and have held that where a reference .statute specifically incorporates another, “a subsequent repeal [and impliedly • — a subsequent amendment]” of one “has no effect .whatever upon” the other. Dairy and Consumers Co-op Ass’n v. Arizona Tax Commission, 74 Ariz. at 38, 243 P.2d at 467. The reason for this is clear. The legislature conceivably had no way of anticipating subsequent additions to the list of exemptions. For this reason this Court should not infer a legislative intent to impose such an affidavit requirement on the inventory exemption when such an inventory exemption did not exist in 1929, the time the legislature enacted § 42-274, nor in 1951 when it was amended. Furthermore, Art. 4, pt. 2 § 14 of the Arizona Constitution specifically prohibits any revision or amendment of a statute without specifically enumerating its title and substance. For this reason, it is generally held that reference statutes such as § 42-274 are not amendatory, but are complete in themselves.

In State v. Allred, 67 Ariz. 320, 195 P.2d 163 (1948), this Court held that the legislature can provide a procedure to properly administer these exemptions. Section 42-274 provides such a procedure and clearly under Allred, an affidavit may be required to take advantage of "the four original éxemptions. But, before • the affidavit requirement of § 42-274 can be applied to a subsequent unqualified amendment to the Constitution (the inventory exemption), clear legislative intent must be found. This is especially true here since a constitutional right is deemed waived- by- the failure to file the affidavit.

Reliance by the majority on Fry v. Mayor and City Council of Sierra Vista, 11 Ariz.App. 490, 466 P.2d 41 (1970), is inappropriate for a number of reasons.

Fry bases its decision — that § 42-274 applies to inventory — on the rule of law that when a court views two statutes in pari materia it will presume that the legislature is aware of one when it enacts the other and will interpret them consistently. This reason seems inapplicable to the facts in. this case. First, § 42-274 is a reference statute incorporating a Constitutional provision and the two should not be viewed as two independent statutes in pari materia. Secondly, Fry holds that the electors were aware of the existence of § 42-274 when they amended the Constitution to add the inventory exemption. Such a presumption might be reasonable as applied to the legislature when it enacts a statute in pari materia with another existing statute. Such a presumption cannot be made when refer-, ring to the electorate. I find no case which holds this, nor would I advocate such a rule which might enable courts to enact or extend laws based upon such a presumption. A finding that the electorate was aware, of § 42-274 when it added the inventory exemption to the Constitution— which on its face was unqualified and “self-executing” — is inherently unreasonable.

It is argued that legislative intent can.be-derived from the subsequent re-enactment of § 42-275 after the -inventory exemption, had been enacted. For two reasons this is not persuasive. First, the main question is whether the affidavit, requirement of § 42-274 applies, not whether § 42-275 applies Legislative intent as to § 42-274 *12cannot be derived from a re-enactment of § 42-275. Secondly, the legislature re-enacted § 42-275 simply to change the time provision for filing the affidavit from “April 30” to “March 1” of the tax year, and not for the purpose of extending the affidavit requirement to the inventory exemption.

It is contended by the majority that legislative intent is expressed in the 1968 household goods exemption, which specifically states that “no specific action” is needed to qualify for that exemption. It is argued that “fhjad the legislature in drafting the inventory clause wanted to dispense with the affidavit requirement as they did in the household exemption, they would have included such language in the provision for inventory exemption.” This, though, assumes that the “no specific action” language can only refer to the affidavit requirement of § 42-274. But this language might reasonably refer to and limit § 42-632 which requires affirmative action in relation to the in transit and transitory household goods exemption under § 42-631. Without this language requiring no affirmative action the affidavit required by § 42-632 might be interpreted to apply. This negates that possible interpretation. If what is required is clear legislative intent, this does not comply.

Even a finding of legislative intent should not. change the result. Arizona seems to follow the rule that the amendment of an adopted statute without qualification does not affect the adopting statute. Maricopa County v. Osborn, supra, relying upon Kendall v. United States ex rel. Stokes, 12 Pet. 524, 9 L.Ed. 1181; some other states in accord with this position are California, People v. Whipple, 47 Cal. 592, and New York, Wick v. Ft. Plain & R.S.R. Co., 27 App.Div. 577, 50 N.Y.S. 479. Other states appear to follow the rule that the adopting statute is unaffected by an amendment of the adopted statute, absent contrary legislative intent. This is the position the majority has taken; and as heretofore stated, I fail to find the clear legislative intent.

Finally, a result in favor of the County, would result in an injustice to the petitioner. The majority holds that § 42-274 and § 42-275 are procedural statutes and do not affect the petitioner’s constitutional rights, yet this decision against Nelson Machinery Company results in a judgment of over $15,000 in assessed taxes on property the Constitution specifically exempts from-taxation. Furthermore, the majority says:.

“There is nothing in Article 9, § 2 to indicate that the legislature or the people intended that the exemptions granted by that section should not be subject to reasonable legislation to provide for an orderly process by which a person claiming an exemption could obtain one.”

This is true, but the language is misleading. The question should be: Is there anything in Art. 9, Section 2 to indicate to the taxpayer that such a restriction is imposed upon him in order to take advantage of his constitutional tax exemption? A look at Article 9, Section 2, reveals a number of unqualified exemptions enacted by the people. It specifically provides that “this section shall be self-executing,” i. e. these rights are immediately effective'; without the necessity of ancillary legislation. No reference is made in the body of this section, Historical Note, Cross-References, nor Notes of Decision to either § 42-274 or § 42-275. One might easily rély upon a reading of this Constitutional provision and take no further action. It is hard to imagine why Nelson Machinery Company would voluntarily and knowingly fail to file its affidavit since failure to do so is a waiver of its exemption, resulting in this case, in an assessed tax in excess of $15,000. There is no benefit to be derived from a failure to file the affidavit. .Theobvious reason for this failure to file is that petitioner was unaware of .the requirement that the majority herein holds to ex-, ist. The purpose of § 42-274 is merely, to 'provide an orderly system of accounting for tax exempt property. It -is not, nor should it be, to catch the unwary and compel them to pay taxes on property that undisputedly exempt from such taxation.