John Hancock Mutual Life Insurance v. Ford Motor Co.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] John Hancock Mutual Life Insurance Company, herein referred to as Hancock, is entitled to the decree of specific performance prayed for in its bill of complaint. It has the right and power to construct, maintain and operate a housing project on the land it seeks to purchase from defendant, Ford Motor Company, and to hold such land while it is thus being used for a period of time in excess of 10 years.

As stated in the foregoing opinion, the Michigan insurance code (3 Comp. Laws 1929, §§ 12298, 12312, 12313) was recently amended by Act No. 45, Pub. Acts 1948 (Ex. Sess.)^* to empower foreign insurance companies doing business in this State to invest their funds "in housing projects including incidental retail and service facilities within the State of Michigan, if such investment is within the franchise of such insurer under the laws of the State or country under which such insurer is organized." There is no question but that under its franchise from the State of Massachusetts Hancock is authorized to purchase real property in any State of the United States in which it is authorized to transact business and to construct, maintain and operate thereon a housing project.

The net effect of Act No. 45, Pub. Acts 1948 (Ex. Sess.) is to grant to domestic and foreign insurance companies the privilege and right to engage in the business of owning, operating and maintaining housing projects within the State of Michigan. The Constitution of our State contains no prohibition against the granting of such privilege to a corporation formed for the purpose of engaging in that business, nor is there any reason why such privilege may not be granted to an existing corporation, specifically, to an insurance company.

The only question to be disposed of is whether or not article 12, § 5, of our State Constitution, which provides that "no corporation shall hold any real estate for a longer period than ten years, except such real estate as shall be actually occupied by such corporation in the exercise of its franchises," prevents a corporation which has been empowered by the legislature to engage in the business of owning, operating and maintaining a housing project from holding the real estate necessary for the carrying on of such business for a longer period than 10 years.

We take judicial notice of the fact that at the present time a critical shortage of adequate housing facilities exists in our State, particularly in the county of Wayne, and that the derivative social implications thereof are a matter of public concern, having a profound effect upon the health, morals and welfare of the community. We also take notice of the fact that large amounts of capital will have to be attracted to investments in housing facilities if the presently existing condition is to be alleviated, and that such capital as a rule cannot or will not be furnished by individuals, but only by or through corporations formed for that purpose or having funds to invest. Needless to say, such corporations will hesitate to make such investments if their right to hold them for a longer period than 10 years may be challenged by the State.

In the foregoing opinion, the cases of Detroit Young Men'sSociety v. Mayor, etc., of Detroit, 3 Mich. 172, and GrandRapids Indiana Railway Co. v. City of Grand Rapids,137 Mich. 587 (4 Ann. Cas. 1195), are relied upon to support the interpretation placed upon the term "actually occupied" as used in article 12, § 5, of the Constitution. In each of these cases the Court was called upon to construe a statute which granted exemption from taxation to certain institutions and corporations as to lands actually occupied by them in the exercise of their privileges and franchises. In Grand Rapids Indiana RailwayCo. v. City of Grand Rapids, supra, we held that land owned by a railroad but in the possession of private individuals who used it in their individual businesses for lumber and coal storage yards, grain elevators, et cetera, was not actually occupied by the railroad so as to be exempt from taxation under the statute. The Court said on page 591:

"When, by the consent of a railway company, its land is exclusively devoted to a business in which it cannot lawfully engage — a business foreign to the purpose of its organization — such land is not, in my judgment, `actually occupied' by it, and is `not necessary or in use in the proper operation of its road,' and is, therefore, under the statute, * * * taxable `like other real estate.'"

Here, Hancock may lawfully engage in the business of operating a housing project — the legislature has granted it this privilege. Therefore, the test applied in the cited case, i.e., whether or not the land is devoted to a business in which the corporation can lawfully engage, only operates to sustain the power of Hancock to hold the real estate for a longer period than 10 years.

In Detroit Young Men's Society v. Mayor, etc., of Detroit,supra, it was held that that portion of a building owned by a charitable institution which was rented to a commercial enterprise was not exempt from taxation under the statute, the Court reasoning that the actual occupancy contemplated by the statute must be "exclusive." The Court said:

"Exemption laws of this character, though beneficent in their objects, are in derogation of equal rights, and must be construed strictly."

This reasoning has no application in the instant case, as here we are not confronted with a statute which must be strictly construed, but rather with a constitutional provision, a part of our fundamental organic law, which should be given a reasonable and practical interpretation which gives effect to the intent and purpose of its framers and the persons who adopted it. Words used therein are to be given their natural, obvious and ordinary meanings and not a technical meaning. In M'Culloch v. Maryland, 4 Wheat. (17 U.S.) 316, 414 (4 L.Ed. 579), Chief Justice Marshall said in discussing the interpretation to be placed upon a word used in the Federal Constitution:

"Such is the character of human language, that no word conveys to the mind, in all situations, one single definite idea; and nothing is more common than to use words in a figurative sense. Almost all compositions contain words, which, taken in their rigorous sense, would convey a meaning different from that which is obviously intended. It is essential to just construction that many words which import something excessive should be understood in a more mitigated sense — in that sense which common usage justifies."

The Constitution is a living instrument, and should be interpreted in such a manner that it will remain adaptable to the necessitudes of changing conditions. In 11 Am. Jur., Constitutional Law, § 51, p. 660, it is said:

"A Constitution usually announces certain basic principles to serve as the perpetual foundation of the State. It is not intended to be a limitation on its healthful development nor an obstruction to its progress. Accordingly, the courts are not inclined to adopt such a technical or strained construction as will unduly impair the efficiency of the legislature to meet responsibilities occasioned by changing conditions of society. It is proper to assume that a Constitution is intended to meet and be applied to new conditions and circumstances as they may arise in the course of the progress of the community. The courts in this country have shown a determination to give our written Constitutions, by interpretation, such flexibility as will bring them into accord with what the courts believe to be public interest. Their terms and provisions are being constantly expanded and enlarged by construction to meet the advancing and improving affairs of men."

The constitutional provision in question first appeared in our Constitution of 1850. At that time we were emerging from an agrarian era and there were but few corporations in existence. No need had yet arisen for the many large structures and buildings which have since been built with corporate capital. There was a universal distrust of large corporations because of their monopolistic tendencies. Past history had demonstrated that when corporations accumulated vast tracts of agricultural land and held them for purposes of speculation, the progress of settlement and improvement in the State was retarded. Undoubtedly the framers of the Constitution had these things in mind when the provision was drafted.

In the Constitutional Convention of 1867 there was a lengthy debate regarding the purpose and meaning of the provision. It seems clear to us that those delegates to the convention who advocated the inclusion of the provision in the new Constitution were primarily concerned over the accumulation of vast tracts of lands by corporations for which they had no use in the carrying on of their corporate business. They were not concerned about the acquisition of lands by corporations for purposes consistent with the objects for which they were organized. Thus, Delegate Chapin, a proponent of the provision, said (1 Constitutional Convention Debates, 1867, p. 211 et seq.):

"We are suffering all over the State in consequence of the monopolizing of land by wealthy individuals as well as by corporations. I would not give corporations the right to hold these lands ANY LONGER THAN IS ABSOLUTELY NECESSARY TO ENABLE THEM TO REALIZE THEIR VALUE FOR THE PURPOSE FOR WHICHTHEY WERE GRANTED."

Delegate McKernan, an opponent of the provision in the form in which it had been presented, said:

"I am opposed to this whole section, for I really consider that there is no necessity for it.

"This section looks to me like an attempt to discriminate against corporations. I am one of those who are not willing to go into class legislation, or to make any particular distinction for or against corporations. * * *

"I am willing to allow them (meaning corporations) all the privileges that should properly belong to them in the exercise of their franchises, and to allow them to hold the real estate necessary to enable them to carry on their business. That is as far as I am willing to go; I am not in favor of allowing them special privileges. * * *

"Our mining companies, more especially our iron companies, must possess a large amount of land in order to obtain the necessary fuel and timber to enable them to carry on their operations successfully. Some of them own as much as 10,000 acres of land, and use probably 10,000 cords of wood a year. And consequently, in order to carry on their business successfully for any length of time, they must own a large amount of land. But by the section here proposed to be inserted in the Constitution, they will be obliged to sell their land at the end of 10 years."

Delegate Morton answered this argument by saying:

"I think the words at the close of this section will cover all the cases in the Lake Superior country which have been referred to. The words I allude to are these:

"`Except such real estate as shall be actually occupied by such corporation in the exercise of its franchises.'

"These iron companies desire the use of 200 or 300 acres of woodland a year in the transaction of their business; and in the course of 10 or 15 years would consume all the timber upon the land they now have. And under that portion of this section which I have read, they will, even at the end of 10 years, be allowed to continue in possession of their lands, to any amount, when `actually occupied by them in the exercise of their franchises.'"

The conclusion is inescapable that Delegate Morton understood the provision to mean that where a corporation uses the land which it has acquired for corporate purposes under its franchise, it "occupies" the land within the meaning of the provision. The full purpose of the provision is further demonstrated by the statement of Delegate Conger, another proponent of it, that

"It is desirable that there should be a limitation with regard to corporations holding lands not necessary for the exercise oftheir franchises. The Constitution should contain a provision to remedy this evil."

The matter was again debated in the Constitutional Convention of 1907-1908. Needless to say, conditions had changed in many respects since 1850. Many corporations were in existence, and it had become the usual and proper thing for large office buildings, hotels, apartments, et cetera, to be erected and owned by corporations formed for that purpose. In no other way could the vast amounts of capital which were required to make such improvements have been accumulated. This undoubtedly must have been known to the delegates to the Convention, for many of them were lawyers who practiced in this Court. At the Convention, a motion was made that the provision in question be deleted from the new Constitution on the ground that it no longer served any useful purpose. (Proceedings and Debates of Constitutional Convention of 1907-1908, pp. 337, 338.) Delegate Pratt, in making this motion, pointed out that corporations had been formed for the purpose of dealing in real estate, and that such corporations should be allowed to hold their property until they were ready to sell it. Delegate Heckert, a proponent of the provision, said in answer to this argument:

"The reason that limitation is in there is to prevent corporations from buying all the land lying adjacent to them and whatever land would be adjacent to that, and holding it indefinitely. * * * There should be a limit placed somewhere on corporations, engaged in other business, not that of buying or selling real estate. * * * Corporations engaged in another kindof business ought not to be allowed to buy and hold indefinitely all the land they are able to pay for."

Delegate Townsend, another proponent of the provision, said:

"It (meaning the provision) certainly is nothing unreasonable, and there are reasons why corporations should not extend theirpowers outside of their general business, and engage in abusiness in which they could accumulate or own and occupy andcontrol large tracts of real estate."

Delegate Hawkins, also a proponent of the provision, said:

"This provision of the old Constitution, providing that corporations should not hold real estate except that used bythem in the exercise of their corporate powers, is salutary and wholesome. It has been a part of our elementary law, of our Constitution, for upwards of 50 years. Now, the only right by which they may acquire and hold real estate, outside of that used, is inherent, and comes to them because of the fact that they may be compelled to take property by way of foreclosure, or to secure a debt in one form or another, or property which at the time they be in need of, but which when they are vested with their full powers and in the exercise of their full corporate powers theydo not need."

Delegate Pratt's motion was lost. However, on a subsequent reading of the provision, a motion that it be stricken out of the Constitution was again made by him. (Proceedings and Debates, p. 1345.) Delegate Townsend replied:

"I cannot understand why the motion was made. It is a provision that is in the old Constitution. It was evidently thought at the time the old Constitution was framed that it was important to limit the time real estate could be held by corporations. I do not know why the same reason does not exist today as it did then."

And upon being asked what this reason was, he said:

"The only reason we can give is that corporations are created only by law, and only exist by virtue of the law. This is one of the restrictions it has always been thought wise to place upon them, that they shall not accumulate or rather purchase a quantity of real estate and hold it, except for the purposes oftheir business. Now, why we should strike this provision out I cannot see. If it ever had any use it certainly has the same use today."

Delegate Pratt then argued:

"What possible good is to be conserved by this provision? I cannot explain why the framers of the Constitution of 1850 put it into the Constitution, unless it was born of the universal distrust of corporations at that time. At present we are beyond that distrust. There are corporations organized and created under the laws of this State for the purpose of buying and selling real estate. Now, why those corporations should not be allowed to hold their real estate until they get ready to sell it, I cannot conceive. Why a railroad company which thinks that at some time it may have to use a certain piece of property for a siding, should not be allowed to buy it and keep it I cannot understand."

To which Delegate Townsend replied:

"In answer to that I would say that so far as buying and selling real estate is concerned there is certainly no question but that they have authority to buy and sell real estate when that is their business under their charters; it never has been questioned that they have that right. This provision is here for the purpose of preventing them from owning real estate in large tracts, for which they have no use at all in the exercise oftheir franchises, and which they do not use in their business."

It was thus recognized in the discussions that the provision was intended only to prevent corporations from accumulating real estate which they had no use or need for in the carrying on of their business. It was not asserted by any of the proponents of the provision that land, to be "actually occupied" by a corporation, had to be occupied in an exclusive physical sense. To the contrary, it was admitted that corporations should have the power to own and hold such real estate as is necessary for the carrying on of the business which they have been authorized to engage in by the legislature.

It should be pointed out that in 1947 an effort was made to amend article 12, § 5, supra, to read as follows:

"No corporation shall hold any real estate for a longer period than 10 years, except such real estate as shall be actually occupied by such corporation in the exercise of its franchises: Provided, That in cities or villages with populations in excess of 5,000 as determined by the last Federal decennial census or any Federal decennial census thereafter taken, and including an area not exceeding 2 miles distant from the boundary limits of such cities or villages, a corporation may hold any such real estate as shall not be actually occupied in the exercise of its franchises for a period of not to exceed 30 years."

This proposed amendment did not present to the people of our State the same issue which now confronts this Court. The question presented to the voters was whether or not the period of time during which corporations may hold lands in urban areas, not actually occupied by them in the exercise of their franchises should be extended from 10 to 30 years. The question presented to this Court is entirely different: Does a corporation which has been enfranchised to own, operate and maintain a housing project actually occupy the land necessary for the carrying on of such business within the meaning of the phrase as it is used in the constitutional provision? If the proposed amendment had been adopted, which it was not, the issue in a case such as the present one would have been the same, as it is the interpretation which is to be made of the phrase "actually occupied" which determines whether or not the corporation is limited in its right to hold the real estate in question to the period of time specified in the provision.

How does a corporation occupy real estate? We may take judicial notice of the fact that corporations, in carrying on their affairs, must act through agents and employees, and that in the operation and maintenance of a housing project a corporation must necessarily have such agents and employees upon the premises. In its capacity as landlord, and through its agents and employees, it exercises dominion over the premises sufficient, in our opinion, to constitute actual occupancy thereof within the meaning of the constitutional provision.

A decree will be entered in accordance with this opinion but without costs, a public question being involved.

BUSHNELL, C.J., and BOYLES, NORTH, DETHMERS, and CARR, JJ., concurred with BUTZEL, J.

^* See Stat. Ann. 1948 Supp. §§ 24.77, 24.91, 24.92. — REPORTER.