Pan American Sulphur Co. v. State Department of Assessments & Taxation

Barnes, J.,

dissenting:

I dissent because in my opinion Ordinance No. 1340 of the Mayor and City Council of Baltimore, approved April 7, 1958 (Ordinance 1340) provides in clear and unambiguous language for the exemption from personal property taxation of the liquid sulphur storage facility in question which is “used entirely or chiefly in connection with manufacturing in Baltimore City.” The same facility in my opinion is also exempt from State taxation by the clear and unambiguous provision of Code (1965 Repl. Vol.) Article 81, § 9 (23) as being “used in manufacturing.” Pan Am, as I see it, is entitled to the tax exemption for the facility under both statutory provisions.

In considering the factual background, it should be observed that prior to the construction of the facility in 1962, Kerr McGee would unload dry sulphur from the hold of a ship by the use of grab-bucket cranes. These cranes would dump the dry sulphur into hopper cars, which after they were weighed, ran along the main pier trestle to a spur trestle leading to the factory building which housed the sulphur burners. When the *630overhead hopper cars arrived in the building, these loads were dumped on to the floor of the building where approximately 5000 tons of dry sulphur could be stored. If the storage area was filled to capacity, the excess dry sulphur would then be stored in the open area within the enclosure where the present sulphur storage tanks are now located. From this open storage area, dry sulphur would be transported to the factory storage area by the use of dump trucks. Workmen using wheelbarrows and hand shovels would then transport the dry sulphur from the storage pile to each of the two sulphuric acid plants where the dry sulphur would be dumped into a bucket elevator which would then transport it into a hopper. Gravity fed lines ran from each hopper to the three sulphur burners comprising the plant and, in this way, a continual supply of dry sulphur to each sulphur burner was assured. When the liquid sulphur storage facility was constructed, the spur line trestle, bucket elevators and gravity fed hoppers were dismantled, but the main trestle and the grab-bucket cranes are still being used by Kerr McGee in the unloading of phosphate rock.

It is thus seen that the importation of sulphur in the liquid form and its transportation to Kerr McGee and to AAC by the use of the liquid sulphur storage facility, resulted in a more efficient operation and a cost saving, primarily by the elimination of the need for man-power in handling the dry sulphur.

It is also important to note that prior to dismantlement, the spur trestle, the bucket elevators and the gravity fed elevators —whose function was replaced by the erection of the liquid sulphur storage facility—were considered by Kerr McGee to be entitled to the manufacturer’s exemption and, except during the short period when the manufacturer’s exemption was repealed, no tax was paid on them. There is nothing in the record which indicates that the State Department of Assessments and Taxation (the Department) has ever contended that Kerr McGee was not so entitled.

Of importance also is the testimony of John J. Rauh, employed for 20 years by the Department as an assessor of foreign corporations and called as a witness by Pan Am before the Maryland Tax Court. Mr. Rauh is familiar with the policies and the practices of the Department in regard to the manufacturer’s *631tax exemption in Baltimore City. He testified that raw material storage facilities were, and had been, considered by the Department to be a part of the manufacturing process, stating: “If storage tanks are owned by a corporation engaged in manufacturing, they are exempt by local ordinances as tools and machinery used in manufacturing.” He further stated that if the liquid sulphur were owned outright by Kerr McGee and used to supply liquid sulphur to its sulphuric acid manufacturing operation, the Department would afford Kerr McGee the benefit of the manufacturer’s tax exemption.

The primary source for determining the legislative intent in a statute is the language used in the statute itself. As we stated in Maryland Medical Service, Inc. v. Carver, 238 Md. 466, 477-78, 209 A. 2d 582, 588 (1965) :

“The cardinal rule of construction of a statute is to discover and to carry out the real legislative intention. Barnes v. State, ex rel Pinkney, 236 Md. 564, 574; 204 A. 2d 787, 792 (1962). Casey Development Corp. v. Montgomery County, 212 Md. 138, 129 A. 2d 63 (1957). The legislative intent is to be sought in the first instance in the words used in the statute and if there is no ambiguity or obscurity in the language used in the statute, there is usually no need to look elsewhere to ascertain the intent of the legislature. Board of Supervisors of Election of Baltimore City v. Weiss, 217 Md. 133, 141 A. 2d 734 (1958). See particularly the comprehensive review of the prior Maryland cases at pages 136 and 137 of 217 Md. If the legislative intent is expressed in clear and unambiguous language, this will be carried into effect by this Court even if this Court might be of the opinion that the policy of the legislation is unwise, or even harsh or unjust, if no constitutional guarantees are impaired by the legislation. Schmeizl v. Schmeizl, 186 Md. 371, 46 A. 2d 619 (1946).”

Turning to a consideration of the language used in Ordinance 1340, one finds that in order to encourage the growth and development of manufacturing industries in Baltimore City and *632thus promote the general welfare of the City’s inhabitants “all personal property of every description used entirely or chiefly in connection with manufacturing in Baltimore City * * * shall be exempt from taxation * * * (emphasis added).” There is no language indicating that the personal property used in connection, with manufacturing must be owned by the manufacturer. If this had been intended, the language would doubtless have been “all personal property of every description owned by the manufacturer and used entirely or chiefly by the manufacturer entirely or chiefly in connection with manufacturing in Baltimore City,” etc. The plain fact is that the italicized words were not used by the City Council in Ordinance 1340 and it should be assumed that the legislative body had full knowledge of the existing law on the same subject and the absence of these words was deliberate and not inadvertent. See Maryland-National Capital Park and Planning Comm. v. Silkor Development Corp., 246 Md. 516, 524, 229 A. 2d 135, 140 (1967).

The words used in subsection (a) are entirely clear to me and establish the test as “use” and not “ownership” of the personal property. To obtain the tax exemption, it is only necessary under the wording of Ordinance 1340 to establish that the personal property in question was “used entirely or chiefly in connection with manufacturing in Baltimore City,” as this is what, in my opinion, the language of the Ordinance plainly states. The language is clear and unambiguous and expresses clearly the legislative intent that the establishment of “use” is the sole element to be established in order to obtain the tax exemption. This being the case, our search for the legislative intent is ended. Our duty is then to carry this legislative intention into effect. We have held that we are not at liberty under the guise of construction to amend or change the legislation before us. As Chief Judge Prescott said, for the Court, in Amalgamated Cas. Ins. Co. v. Helms, 239 Md. 529, 535-36, 212 A. 2d 311, 316 (1965) :

“[T]he courts, in the absence of ambiguity, should, as a general rule, confine themselves to a construction of a statute as written, and not attempt, under the *633guise of construction, to supply omissions or remedy possible defects in the statute, or to insert exceptions not made by the Legislature [citations omitted]

As I see it, the result of the majority opinion is to add by construction, language which is not present in the Ordinance. This we should not do.

If it be assumed, arguendo, that the language were ambiguous (which I do not think is the case), the legislative intent is also established that “use, entirely or chiefly in connection with manufacturing,” and not “ownership of the personal property” is the test.

First of all, the general purpose of the legislation indicates this. We are entitled, in the case of ambiguous language, to consider the general legislative purpose of the legislation to ascertain the meaning of the language. Cooley v. White Cross Health and Beauty Aid Discount Centers, Inc., 229 Md. 343, 350, 183 A. 2d 381, 385-86 (1962). The City Council has aided us in this consideration by plainly stating in subsection (a) the general purpose of the legislation, i.e., “to encourage the growth and development of manufacturing industries in Baltimore City,” with its attendant beneficent results of increased employment, greater economic security for the people of the city and the increase of commerce generally in the city. This growth and development is to be aided by the tax exemption so that the uneconomic expense of personal property taxation will not be integrated into the ultimate cost of the manufactured product, thus enabling the manufacturing industry to compete more successfully with competing industries in other political entities which, perhaps, have not had the wisdom and foresight to provide such an exemption. When this general purpose is kept in mind, it seems clear to me that the “use” of all personal property of every description in the manufacturing process is the important consideration to accomplish the general purpose and “ownership” of that personal property is entirely irrelevant to its accomplishment. Indeed, an additional supposed (but nonexistent) requirement of “ownership” of the personal property used in the manufacturing process limits the full economic purpose intended, and thereby frustrates, pro tanto, the general *634purpose. In short, as I see it, the general purpose of the Ordinance is advanced by the literal meaning of the words used; the words, in effect, inserted by construction, frustrate and partially defeat the general purpose.

Secondly, if the words were ambiguous, we are entitled to consider the legislative background or history of the legislation in question. Baltimore Transit Co. v. Metropolitan Transit Authority, 232 Md. 509, 513, 194 A. 2d 643, 644-45 (1963).

When the legislative history is considered, it is obvious to me that the choice of language making the “use” in connection with manufacturing the sole test was deliberate. In 1912, the City Council enacted Ordinance No. 140 of the Mayor and City Council of Baltimore, approved July 6, 1912 (Ordinance 140) providing for a manufacturer’s exemption, in which the following language was used:

“[U]pon the application * * * of any individual firm or corporation actually engaged in the business of manufacturing articles of commerce in the City of Baltimore, to abate any and all personal taxes * * * for any of the corporate uses thereof, upon any mechanical tools or implements, * * * or upon any machinery or manufacturing apparatus owned by such individuals, firm or corporation and actually employed and used in the business of manufacturing articles of commerce in the said city; * * * (emphasis supplied) .”

Ordinance 140, which, as indicated, preceded the passage of Ordinance 1340, clearly and without ambiguity established two criteria, i.e., (1) ownership by the manufacturer in Baltimore City and (2) use in the manufacturing process. In view of this legislative background, when the City Council did not use the language requiring ownership, but used only the language requiring use in the manufacturing process, it is clear to me that this choice was deliberate and the City Council did not intend to establish “ownership” as one of the criteria by Ordinance 1340, but did intend to establish “use” in connection with manufacturing as the sole test. In summary, the legislative body did indeed mean what it said.

*635Thirdly, if the words were ambiguous, we may consider the Ordinance as a whole and other provisions in the Ordinance. Shreve v. Mayor & City Council of Baltimore, 243 Md. 613, 619, 222 A. 2d 59,62 (1966).

The majority states that it finds support for its construction by the provisions of subsection (d) which provides :

“(d) In case any person, firm, corporation or other legal entity engaged in manufacturing in Baltimore City shall also be engaged in the business of a jobber or wholesaler, nothing in this section shall be construed to exempt from taxation the personal property, other than goods of his own manufacture, used in connection with said business of jobber or wholesaler (emphasis supplied in the majority opinion).”

The majority emphasizes the words “engaged in manufacturing,” and apparently infers that these words in some way indicate a legislative intent that the language in subsection (a) of Ordinance 1340 “is directed toward manufacturers and property used by the manufacturer.” Subsection (d) indicates to me, that the language of subsection (a) means what it states, i.e., “used * * * in connection with manufacturing” and that such “use” is the sole test. Subsection (d) is one of four subsections which follow the general provisions of subsection (a) and which deal with certain special situations— subsection (b) relating to manufactured products held for sale at retail, subsection (c) setting forth the method of establishing the fair average value of inventory, and subsection (e) exempting ores and unrefined metals shipped into the city for processing or refining purposes and metals derived therefrom in the hands of the refiner. Subsection (d) has to do with the special situation when the person, firm or corporation is engaged in manufacturing in Baltimore City who is also engaged in business as a jobber or wholesaler, and provides that the goods other than goods of his own manufacture, and used in connection with the business of jobber or wholesaler, shall not be exempt from taxation as personal property. It will be noted that subsection (d) is specifically limited to those engaged in manufacturing “in Baltimore City” and who are also operating as jobbers and *636wholesalers. Its purpose is to indicate in this special situation, that the personal property used in connection with the alternative business is not included in the general exemption. The special limitation, limited to manufacturers in the city who have the dual business, rather emphasizes the generality of the language of subsection (a) and, in my opinion, does not indicate any limitation on the generality of that language other than as specifically set forth in subsection (d).

The majority correctly observes that in construing an ordinance an interpretation “should be given to statutory language which will not lead to absurd consequences” citing B. F. Saul Co. v. West End Park North, Inc., 250 Md. 707, 246 A. 2d 591 (1968) and other earlier Maryland cases. Again assuming, for the argument, that the language of subsection (a) is ambiguous and needs construction, in my opinion, the language used does not by any means lead to absurd consequences. As has already been pointed out there is really no doubt in this case that the liquid sulphur storage facility is “used in manufacturing.” It is also clear to me from the testimony that but for the “ownership” of the facility by Pan Am, that facility would be exempt from taxation under Ordinance 1340 and under Article 81, § 9 (23). Then too, it is also clear that the new facility supersedes in function in the manufacturing process, personal property which for years received, without objection of the Department, the exemption from taxation under Ordinance 1340. It is not necessary to consider in this case how far and to what extent the manufacturer’s exemption may possibly extend. The language of subsection (a) extends to all personal property used entirely or chiefly in connection with manufacturing in Baltimore City and it should be determined on a case to case basis as to whether this test has been met. There is no question in my mind that the facility in this case is so used and is a step in the manufacturing process, “rather than the last step or ‘tail end’ of a selling and distributing process.” Our inquiry in the present case should end with that determination. If it be thought that additional limitations should be applied to the granting of the manufacturer’s exemption, the City Council of Baltimore City meets weekly (except during the summer recess and holiday seasons) and appropriate legis*637lation could doubtless be drafted to supply such limitations. It is a legislative, not a judicial, function to supply additional limitations.

Finally, the majority correctly indicates that tax exemptions are to be strictly construed in favor of the taxing authority and against the taxpayer and if “there is real doubt on the subject, that doubt must be resolved in favor of the State.” As I see it, however, there is no doubt in regard to the language used in Ordinance 1340 and Pan Am is clearly entitled to the exemption. As Chief Judge Bruñe, for the Court, aptly said in Armco Steel Corp. v. State Tax Comm., 221 Md. 33, 40-41, 46, 155 A. 2d 678, 681, 684 (1959)—a case involving the exemption granted by a similar provision in subsection (e) of Ordinance 1340:

“The usual rule in tax exemption cases is that the exemption is to be strictly construed, but it should not be so strictly construed as to defeat the intent of the enacting body [citations omitted]. However, ‘strict construction does not require that an unreasonable or unusual meaning must be given to the words used in exemption statutes.’ State Tax Commission v. Whitehall Foundation, Inc., 214 Md. 316, 320, 135 A. 2d 298. * * *
“Where the language of a statute or ordinance is clear and unambiguous resort may not be had to extraneous considerations for its construction. County Treasurer v. State Tax Comm., 219 Md. 652, 150 A. 2d 452; Board of Supervisors of Elections of Balto. v. Weiss, 217 Md. 133, 141 A. 2d 734; Bouse v. Hutzler, 180 Md. 682, 26 A. 2d 767. That is the situation here. The exception says nothing about limiting the exception to ores or unrefined metals ‘owned by others.’ Such a clause cannot be read into it.”

See also Fair Lanes, Inc. v. Comptroller of the Treasury, 239 Md. 157, 162, 210 A. 2d 821, 823 (1965).

For these reasons, I would reverse the order of the lower court. I am authorized to state that Judge Marbury concurs in the views herein expressed.