Opinion ID: 1167899
Heading Depth: 1
Heading Rank: 2

Heading: Was Plaintiff Entitled to the Offsets Claimed?

Text: An exhibit attached to and incorporated in the complaint by reference contains the following statement concerning the property of the plaintiff whose character as real or personal property is in question: The buildings in question consist principally of a sawmill, dry kilns, planing mill, factory, warehouse and sorting sheds. These have no solid footings but, for the most part, rest upon concrete posts. There are also about forty temporary dwellings for the workmen. All of these improvements are constructed on Indian lands. The pertinent part of the agreement of December 1, 1947, between Warm Springs Lumber Company and the Confederated Tribes of the Warm Springs Reservation of Oregon, provides that: `c. That at the expiration or termination of the Timber Contract the above described lands shall be surrendered to and in a condition acceptable to the Confederated Tribes and the Superintendent. `d. It is understood and agreed that any buildings or other improvements placed upon said land by the company shall remain its property unless otherwise provided and may be removed by it at any time within two years after the expiration of this lease.' The Commission's demurrer admits the truth of the foregoing averments. The applicable provisions of ORS are as follows: 307.010 (1). `Land,' `real estate' and `real property' include the land itself, above or under water; all buildings, structures, improvements, machinery, equipment or fixtures erected upon, under, above or affixed to the same ; all mines, minerals, quarries and trees in, under or upon the land; all water rights and water powers and all other rights and privileges in any wise appertaining to the land; and any estate, right, title or interest whatever in the land or real property, less than the fee simple. (Italics added.) 307.020. (2) Unless otherwise specifically provided, `personal property' or `personal estate', as used in the laws of this state relating to assessment and taxation of property as such, means `tangible personal property' as defined in subsection (3) of this section. (3) `Tangible personal property' means and includes all chattels and movables, such as boats and vessels, merchandise and stock in trade, furniture and personal effects, goods, livestock, vehicles, farming implements, movable machinery, tools and equipment and all machinery and equipment used in the manufacture of raw or partially manufactured products. 317.085 (3). For the purpose of the offset provided in this section there shall be included only taxes assessed to and paid upon property properly classified as tangible personal property under the definition contained in ORS 307.020, as to personal property locally assessed, and as personal property under the definition contained in ORS 308.510, as to personal property assessed by the State Tax Commission, but taxes paid on property improperly assessed as tangible personal property shall not be included in the offset.   . (Italics added.) 308.115 (2).    whenever any building, structure, improvement, machinery, equipment or fixture is owned separately and apart from the land or real property whereon it stands or to which it is affixed, such building, structure, improvement, machinery, equipment or fixture shall be assessed and taxed in the name of the owner thereof. 1, 2. The meaning of these provisions is entirely clear and it is equally clear that the buildings and structures described in the complaint are erected upon land. They are, therefore, real property within the meaning of ORS 307.010 (1) and not tangible personal property as defined in ORS 307.020 (2), (3). For the purpose of the offset of personal property taxes paid, the definition in ORS 307.020 (1) and (2) determines what is tangible personal property, and the fact that taxes may have been paid on property improperly assessed as tangible personal property is immaterial. Such taxes, the statute says, shall not be included in the offset. ORS 317.085. Consequently, the argument in the Company's brief that the original property tax assessment upon which the taxes were initially paid is presumed to be correct (citing Case v. Chambers et al, 210 Or 680, 703, 314 P2d 256) is without force, as the presumption, if one is to be indulged at all when considering a case like this, can not stand against the clear command of the statute. 3. The Company argues that the parties may agree that the annexation of a chattel to the land shall not deprive it of its character as personalty and, therefore, that the buildings were properly assessed as personal property. The rule invoked is valid as between the parties. But there are numerous instances in which it does not hold good where the rights of third persons are involved. Certainly such an agreement can not control the action of the state when exercising its taxing power. The authorities are reviewed at length in an able opinion by Spence, J., in Trabue Pittman Corp. v. County of L.A., 29 Cal2d 385, 175 P2d 512. In that case, it appears that plaintiff was the owner of a building leased to a national banking association. Under the terms of the lease, it was agreed that certain fixtures installed by the bank, such as vault doors, tellers' cages, etc., might be removed by the lessee upon the termination of the lease. The county assessed the fixtures to the owner of the building as improvements to real property; the owner contended that they were personal property of the bank. As such they would not be taxable at all, because Congress has not consented to the taxation by states of the personal property of national banks. See First National Bank of Portland v. Marion County, 169 Or 595, 597, 130 P2d 9 (1942). The court sustained the position of the county, one of the grounds of decision being that the statute of California declared that real estate shall include improvements, and improvements were defined as including fixtures. It is well settled, the court said, that for purposes of taxation the definitions of real property in the revenue and taxation laws of the state control whether they conform to definitions used for other purposes or not. 29 Cal 2d at 393. Beyond that, it was shown by citation to a wealth of authority and for a variety of reasons (among others, that trade fixtures removable by a tenant are a part of the realty until removed, 29 Cal2d at 395) that for purposes of taxation such fixtures may properly be assessed as real property. In the course of the opinion, the California court commented on First National Bank of Portland v. Marion County, supra, a case cited in the plaintiff's brief and referred to as apparently contrary to the California decision. We think that the two decisions are not inharmonious. The question in First National Bank of Portland v. Marion County was whether fixtures and equipment of a national bank installed in a building occupied by the bank as a lessee were properly assessed as real property to the bank. The lease reserved to the lessee the right to remove the property in question. We held the assessment void for the reason that during the period involved the statutes of Oregon relating to taxation made no provision for the assessment of a leasehold interest of the lessee, or, in other words, that various interests in real property were not, for the purpose of taxation, made severable and assessable in the names of the owners of the respective interests, except in certain instances which did not include owners and their lessees. 169 Or at 612-613. The court expressly refrained from passing upon the question whether the bank's trade fixtures and equipment were real or personal property within the meaning of those terms as used in our tax law. 169 Or at 615. There is nothing, therefore, in this decision, or in the other cases involving trade fixtures cited by the plaintiff, which is inconsistent with what was held in Trabue Pittman Corp. v. County of L.A., supra, or with the view we take of the present case. At the next session of the legislature following the decision in First National Bank of Portland v. Marion County , the statute (OCLA §§ 110-314) was amended so as to provide for separate assessment and taxation of buildings, structures, etc., owned separately from the land whereon they stand or to which they are affixed. Oregon Laws 1943, ch 304, § 2, now ORS 308.115(2), set out supra. In view of this amendment and the definitions of real and tangible personal property adopted by the legislature for tax purposes, it is our opinion that the property here in question must be deemed real property and the taxes paid by the plaintiff thereon were not available as offsets against the plaintiff's corporation excise tax.