Court Opinion

ID: 9719708
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:00:55.822425+00
Date Added: 2024-06-11T18:24:09.345464
License: Public Domain

Knutson, Justice
(dissenting).
I cannot agree that the attempt to tax this property is valid. In the first place, it seems to me that the property was exempt from taxation because it was used for a public purpose.12 Any other conclusion would inevitably lead to the result that the state has expended money to acquire and equip this plant in direct contravention to' Minn. Const, art. 9, § 1. Such conclusion would affect not only this project but many others in which the Iron Range Resources and Rehabilitation Commission has engaged.
The I.R.R.R.C. came into existence by virtue of L. 1941, c. 544, for the purpose of developing and encouraging the use of resources of the state in areas where distress and unemployment exists. Before money appropriated thereunder, or under subsequent amendments to the act, could be devoted to a proposed project, it was necessary that the commissioner determine that distress and unemployment existed by reason of the removal of natural resources and the decrease in employment resulting therefrom.
Funds were allocated by the commission to petitioner after the requisite determination had been made by the commission. Among other things, the commissioner found that distress and unemployment existed within St. Louis County on account of the removal of natural mineral and timber resources and the decrease in employment resulting therefrom and that the area was especially suited to the growing of celery and onions and the raising of poultry. In order to develop an industry which could use such products, the commissioner found:
*391“* * * that it is desirable, necessary and proper that a pilot plant so constructed and equipped as to demonstrate the commercial feasibility of so refrigerating and storing such locally grown celery and onions and the evisceration, dressing and use of such locally raised poultry that the same may, during the growing and production seasons be processed, stored and preserved in quantity sufficient to permit the later use thereof throughout the year as principal ingredients in prepared canned food-stuffs which can be nationally marketed and sold; that if such pilot plant proves the commercial success and feasibility of such operations it will foster and materially increase the use of a large acreage of such land not now productively utilized and the employment of a considerable number of residents of said county in the growing and raising of such products, and that it is in the interest of the State and the welfare of its inhabitants that this be done and that the commercial success and feasibility of such phot plant is reasonably assured; * * (Italics supplied.)
The commissioner further determined that this pilot plant could best be operated by someone experienced in the business as a lessee. He found—
“* * * that it is for the best interests of the State to have such pilot plant operated under appropriate terms and conditions by a lessee qualified by experience in operations of such character rather than by the Commissioner, * * (Italics supplied.)
If the commission had operated the pilot plant directly instead of by a lessee, there could be no doubt as to tax exemption. The fact that a lessee acts for the commission does not destroy the public nature of the project.
It was pursuant to that determination that the plant was leased to Chun King Sales, Inc. At the outset, it is apparent that no one knew whether the experiment would be successful or not. The I.R.R.R.C. has engaged in a great variety of projects. In its biennial report to the governor and the legislature, 1954-1956, for instance, it appears among other things that experimental plants have been established to produce plywood; hardboard from aspen; molded veneer products and other wood products; canning of rutabagas; find uses for peat; use of frozen *392food products; and many others. Some of these plants have been operated, as was the Chun King plant, under a lease of equipment owned by the state.13 It is evident from a reading of the biennial reports of the commission that some of the experimental plants have been much more successful than others. The experiment with peat apparently has been a costly and unsuccessful one. It so happened that the Chun King plant proved to be unusually successful, due probably to. the efficient management of the lessee. But whether the plant was a success or a failure should not be determinative of the question whether the purpose for its establishment was public or private. To justify the expenditure of public money, a public purpose must be found in these activities. The rehabilitation of a distressed area, and the creation of employment therein, seem to be the only legal basis for such expenditures. If we are to hold that this plant was not operated for a public purpose, then clearly the state’s money should not have been invested in it at all. Nor does the mere fact that there was some private interest involved deprive the activity of its public nature if the primary purpose was public.14 It seems to me that this property was used exclusively for a public purpose, as that term has been defined in our cases, and that, so used, it was exempt from taxation.
But even if we assume that the property was taxable under M. S. A. 273.19,15 it seems to me that there is another obstacle to the collection of this tax at the present time. It must be conceded that at the time the tax should have been assessed, assuming the property was taxable, the state was the owner of the property and petitioner was a lessee with an option to purchase it at the highest price obtainable on competitive bids. The property was carried on the tax rolls as belonging to the state. While respondents rely to some extent upon Land O’ Lakes Dairy Co. v. County of Wadena, 229 Minn. 263, 39 N. W. (2d) 164, I think that the facts! in that case and in this are so clearly distinguishable that nothing need be said about the case. In the opinion *393above, that case is not discussed, apparently for the same reason, so I shall refrain from doing so.
Beginning, then, with the proposition that the state was the owner and Chun King was the holder of a leasehold interest, there are certain fundamental rules of law pertaining to the assessment and collection of real estate taxes that prevent the collection of this tax at the present time which are being completely ignored. In the first place, real estate taxes are not charges against the person. They are assessed and enforced against the land; they are a lien against the land. Proceedings to enforce them are strictly in rem.16 For a nonpayment of the tax, the state can enforce it only against the interest which the taxpayer has in the land at the time the tax is assessed.
Applying these rules to the facts of this case, at the time the taxes the state now seeks to collect should have been assessed Chun King had nothing more than a leasehold interest in the land. The tax lien could be enforced only against that interest. Upon nonpayment of the tax, the most the state could do would be to cancel the leasehold interest or probably sell it to' a purchaser if such could be found. In discussing this proposition in In re Petition of S. R. A., Inc. 213 Minn. 487, 497, 7 N. W. (2d) 484, 489, we said:
“* * * If there be tax default where no one is willing to take over the tax interests of the state, the practice is to cancel the contract. If it be land owned by the state, all taxes are cancelled and the land reappraised and sold anew.”
Again assuming this tax to be valid, the state now seeks to' enforce the lien it had on petitioner’s leasehold interest against the fee which the state owned at the time the tax was assessed. This, it seems to me, cannot be done. If petitioner had chosen not to exercise its option to purchase, or a third party had bid more than petitioner was willing to pay and the property had been sold by the state to' such third party, no one would claim, I should think, that the tax lien which the state had acquired would follow the fee into the hands of such third party. If that is true, petitioner, as the purchaser of the fee, stands *394in exactly the same position as. such third party would. The leasehold interest against which the state could have enforced its tax lien passed out of existence upon conveyance of the fee to petitioner. There is now nothing against which the state may enforce its lien.
It seems obvious that neither the state nor petitioner contemplated an attempt to tax this property when it was leased to petitioner. It was carried on the tax records as property owned by the state and as exempt from taxation. Now, apparently because petitioner has successfully accomplished what both parties sought to do, and as a result the state has been completely reimbursed, it seeks to recover still another bite. In the report of I.R.R.R.C., 1956-1958, p. 58, we find the following:
“Chun King and its related firms employ upwards to 1,000 persons a good share of the year. Complete recovery of the IRRRC funds became a reality on May 29, 1957.
“At that time Chun King Sales, Inc., according to the provisions of the contract with the State of Minnesota, asked that the plant be put up for sale. Chun King was awarded the bid for the plant and all IRRRC expenditures for this project were returned to the General Revenue Fund.”
It seems to me that both from a standpoint of law and equity this decision should be reversed and the property held to be free from the tax which the state now seeks to impose.

Minn. Const, art. 9, § 1.

See report of I.R.R.R.C., 1954-1956, p. 12, et seq.

Burns v. Essling, 156 Minn. 171, 194 N. W. 404; Visina v. Freeman, 252 Minn. 177, 89 N. W. (2d) 635.

That section does not apply if the property is used for a public purpose.

 18 Dunnell, Dig. (3 ed.) § 9114a; In re Petition of S. R. A., Inc. 213 Minn. 487, 7 N. W. (2d) 484.