Court Opinion

ID: 9545342
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:10:22.216949+00
Date Added: 2024-06-11T15:14:33.231919
License: Public Domain

SUTIN, Judge (specially concurring). I specially concur. In 1906 Justice Holmes began a dissent as follows: I do not suppose that civilization will come to an end whichever way this case is decided. But as the reasoning which prevails in the mind of the majority does not convince me, . . [and as I believe that the airlines are not subject to property taxation], I think it proper to express my views. Haddock v. Haddock, 201 U.S. 562, 628, 26 S.Ct. 525, 551, 50 L.Ed. 867 (1906). Prior to 1976, airlines were not subject to property taxation in their operations at the International Airport by reason of leases entered into with the City of Albuquerque. In 1976, the legislature enacted Laws 1976, ch. 61, which created “fractional interests” in real property. As applied to airlines, the Act exempted from property taxation, “fractional interests” that the airlines held in the City’s airport. Nevertheless, based upon this Act, after hearing, the Property Tax Department Director entered “Special Order No. 470”. It concluded that the taxpayers’ fractional interests were subject to property taxation and evaluated for property taxation the fractional interests of the airlines as taxpayers. I disagree because (A) taxpayers’ fractional interests in the improvements are not “property” as defined, taxpayers are not “owners” of those fractional interests as defined and (B) taxpayers’ fractional interests are specifically exempt from property taxation. A. Taxpayers’ fractional interests are not “property” as defined, and taxpayers are not “owners” of fractional interests as defined. The Director concluded: 2. Taxpayers’ fractional interests in the improvements located at Albuquerque International Airport are within the definition of “property” found in subsection G of Section 72-28-2 NMSA 1953 (Supp. 1975) of the Property Tax Code, and that taxpayers are “owners” of those fractional interests pursuant to subsection E of Section 72-28-2, supra. Section 72-28-2(G) and (E) defines “property” and “owner”: G. “property” means tangible property, real or personal. [Emphasis added] E. “owner” means the person in whom is vested any title to property. Section 72-29-2.2(A) (1976 Interim Supp.) defines “fractional interest”: A. “fractional interest” means a tangible interest in real property [Emphasis added] Taxpayers’ fractional interests are not tangible real property, and taxpayers are not “owners” of those fractional interests. The buildings and runways constructed and built by the City on its land are permanent improvements on the land owned by the City. A permanent improvement becomes a part of the realty, Bloch Pitt Invest. v. Assessor of Bernalillo Cty., 86 N.M. 589, 526 P.2d 183 (1974), so that real property, as used in this Act, is all inclusive and contemplates both land and improvements. Krouser v. San Bernardino Cty., 29 Cal.2d 766, 178 P.2d 441 (1947); Strobel v. Northwest G. F. Mutual Insurance Co., 152 N.W.2d 794 (N.D.1967). See Dona Ana Develop. Corp. v. Commissioner of Revenue, 84 N.M. 641, 506 P.2d 798 (Ct.App.1973). “Tangible Property” means “That which may be felt or touched, and is necessarily corporeal, although it may be either real or personal.” Black’s Law Dictionary, at 1627 (Rev. 4th Ed. 1968). See, 73 C.J.S. Property, § 5 (1951). “Intangible Property” — “Used chiefly in the law of taxation, this term means such property as has no intrinsic and marketable value, but is merely the representative or evidence of value, such as certificates of stock, bonds, promissory notes, and franchises.” Black’s Law Dictionary, supra, at 946. See 73 C.J.S. Property, § 5 (1951). We have held that shares of bank stock are intangible. First State Bank of Mountainair v. State Tax Commission, 40 N.M. 319, 59 P.2d 667 (1936). “It is obvious of course that improvements, which regardless of who made them are nevertheless part of the real estate and are tangible property, constitute a different class of property from the leasehold interest which, being a contract right, theoretically is intangible personal property, often called a ‘chattel real’ [Emphasis added] Kentucky Tax Commission v. Jefferson Motel, Inc., 387 S.W.2d 293, 295 (Ky.1965). Taxpayers’ leasehold interests in the improvements are not “tangible property, real or personal”. The fractional interests created by the leases are “tangible interests in real property”. [Emphasis added] Taxpayers are not the “owners” of fractional interests as defined. In order to be “owners” of fractional interests, taxpayers must be “vested in title to the real property.” “The term ‘vested,’ as used in the law of property, signifies that there has been the fixation of a present right to either the immediate or future enjoyment of property.” Reese v. Reese, 190 Md. 311, 58 A.2d 643, 647 (1948). The term “title” in real property, in common and legal speech, signifies “ownership.” Restatement, Property, § 10, Note, at 28. Any interest less than the complete ownership, such as those of a lessee for a limited period, are in the nature of a privilege or license emanating from a grant by the owner and it neither constitutes property nor gives rise to ownership. In common understanding, the person named as the owner in a deed is considered the sole owner even though the property is in the possession of someone else pursuant to a lease. Keesling, Property Taxation of Leases and Other Limited Interests, 47 Cal.L.Rev. 470 (1959). The phrase, “vested in title to real property” means that taxpayers, as owners, have a present right to the immediate enjoyment of the realty. Are the taxpayers “owners” of the realty? The answer is “No”. ' New Mexico adopted a rule from Florida, that “During the life of a lease the lessee holds an outstanding leasehold estate in the premises, which for all practical purposes is equivalent to absolute ownership.” [Emphasis added] Tri-Bullion Corp. v. American Smelting & Refining Co., 58 N.M. 787, 794, 277 P.2d 293, 297 (1954). “Equivalent to ownership” means “like ownership”, and “for all practical purposes”, means those purposes for which the landlord-tenancy relationship was created. When the Florida rule is traced backwards, “equivalent to ownership” means that the title to the property remains in the lessor and the possession of the lessee cannot be disturbed by the lessor. The tenant is estopped to deny the title of the landlord. The estate of the lessor during such time is limited to his reversionary interest, which ripens into perfect title at the expiration of the lease. Rogers v. Martin, 87 Fla. 204, 99 So. 551 (1924). Rogers reliance is on Stern v. Sawyer, 78 Vt. 5, 61 A. 36, 112 Am.St. Rep. 890, 6 Ann.Cas. 356 (1905). Stern holds that a lessor cannot, by a sale of a part of the property, disturb the lessee’s possession and enjoyment of the premises during the term. “Equivalent to ownership” is “like ownership” for the practical purposes of the landlord-tenancy relationship to preserve the lessee’s right to possession against the whims of a lessor or his progeny. A lessee cannot commit waste, nor grant perpetual rights in the property to others, nor transfer title to the property by deed. “Equivalent to ownership” is not “ownership” in the legal sense of the word, because the title to the property, “title” meaning “ownership”, remains in the lessor. To define a lessee as being “vested in title to property”, is opposed to our property tax system. It would permit all lessees as well as deed holders to be taxed on the same property. That is neither the intent of the legislature nor the Property Tax Department. No explicit provision in the Code imposes the tax liability on the “owner”, but the obvious underlying assumption throughout the Code does, indeed, burden the “owner” not the lessee. Property taxes are assessed against the real owner of the property, not one who is in possession thereof. The conclusion of the Property Tax Department is erroneous. B.' Fractional Interests of Taxpayers are Exempt from Property Taxation. The Director also concluded: 1. Taxpayers’ fractional interests in the improvements located at Albuquerque International Airport are not exempt by reason of Section 72-29-2.4 NMSA 1953 (1976 Interim Supp.) of the Property Tax Code or Article VII, Section 3 of the New Mexico Constitution. The Property Tax Department relies primarily on § 72-29-2.4 (1976 Interim Supp.) to tax the fractional interests of taxpayers. In § 72-29-2.3(B)(1), the legislature said: B. In the enactment of section 72-29-2.4 NMSA 1953, it is the expressed legislative purpose that: (1) fractional interests of a nonexempt entity in real property of an exempt entity be exempted from property taxation subject to the limitation contained in that section; . . . [Emphasis added] Section 72-29-2.4 reads: Fractional interests of nonexempt entities in real property of exempt entities are exempt from property taxation under the Property Tax Code . . . Nothing contained in this section shall affect the liability for tax of improvements located upon the real property of exempt entities. [This second sentence is the limitation]. [Emphasis added] “Exemption from taxation must be expressed in the clearest and most unambiguous language, and not left to implication or inference. (Citation omitted) Exemptions from the taxation are regarded as in derogation of the sovereign and of the common right and therefore, not to be extended beyond the exact and express requirements of the language used strictissimi juris.” Territory v. B. and L. Ass’n, 10 N.M. 337, 343, 62 P. 1097 (1900). In conformity with the above language, § 72-29-2.4 makes fractional interests of taxpayers specifically exempt from taxation. By giving § 72-29-2.4 a literal, strict construction, whatever interests taxpayers have that can be felt or touched in the improvements are specifically exempt from property taxation. A “fractional interest is a tangible interest in real property.” What is a tangible interest in real property? It is an interest that can be felt or touched. The leases created a “possessory interest” in the realty and by giving some added meaning to the words, “fractional interests”, we can say that “possessory interests” are “fractional interests”. Whether the fractional interest is real or personal property, the legislature is authorized by Article VIII, § 3 of the New Mexico Constitution (Repl.Vol. 1, 1975 Supp.) to grant such exemptions from ad valorem taxes. We now turn to the “limitation” placed on this exemption. Nothing contained in this section shall affect the liability for tax of improvements located upon the real property. [Emphasis added] . “Liability for tax of improvements” is meaningless. To determine what it does mean requires the dexterity of Houdini. To me, it can mean only one thing. It requires an insertion as follows: Nothing contained in this section shall affect the liability for tax of improvements [owned or used by nonexempt entities] located upon the real property of exempt entities. This insertion flows from the finding of the legislature set forth under § 72-29-2.-3(A)(1): ' A. In the enactment of section 72-29-2.4 NMSA 1953, the legislature finds that: (1) it has legislative authority and should exercise it to impose the state’s property tax on improvements owned or used by a nonexempt entity when the improvements are on the land of an exempt entity; [Emphasis added] The airlines do not “own” the improvements. They do “use” the improvements. Section 72-29-2.4 means that fractional interests of the airlines in the real property of the airport are exempt from property taxation, but improvements “used” by the airlines are not exempt from property taxation. Perhaps, the legislature sought to overcome the rule that “Improvements affixed to the land are not separately assessable.” Bloch Pitt Invest., supra 86 N.M. at 591, 526 P.2d at 185. I am not, presently, concerned with the answer to that problem. The airlines are liable for a property tax on the “use” of improvements, if the “use” is declared to be taxable property under the Code. A “use” of improvements is not subject to a property tax. It is subject to a “use” tax. The legislature desired to tax for “use”, but it did not accomplish its purpose. It did not declare that a “use” of improvements was taxable property. It did not impose a tax on “use” of improvements, and the Property Tax Department did not assess a tax on the value of the “use”. The value of being able to use a runway is not coincident with value of the runway as property. If the legislature were to tax a trucking firm for its use of New Mexico highways, the State would calculate what the cost would be for such things as maintenance, air pollution, traffic control per mile per ton. Yet the value of being able to use New Mexico highways may be far in excess of the State borne costs. It is questionable whether the State may enact a “use” tax under the guise of a “property” tax unless it declares that the “use” of improvements is subject to property taxation. A leasehold is an estate in land less than a fee. In order to tax a leasehold estate as property, the statute must require the owner of any estate in land less than the fee to return it for taxes and pay taxes on it as on other property. By this means, the fee interest of the governmental body is severed from the leasehold estate, and the leasehold estate is classified as realty for tax purposes. Delta Airlines, Inc. v. Coleman, 219 Ga. 12, 131 S.E.2d 768 (1963), cert. denied 375 U.S. 904, 84 S.Ct. 195, 11 L.Ed.2d 145 (1963). The Property Tax Code did not create this severance of the fee interest of the City and the leasehold interest of the taxpayers. For a collection of cases on the subject, see Annot: Comment Note: Availability of Tax Exemption to Property Held on Lease from Exempt Owner, 54 A.L.R.3d 402, § 15 et seq, “Exemption of lessee.” Absent a specific exemption, “It is generally held that the exemption from taxation enjoyed by governmental bodies with respect to lands owned by them does not extend to the leasehold interest of a tenant of those lands, . . ” (54 A.L.R.3d at 519). This conclusion is reached by various definitions of words in the statute and the language of leases. Exemptions are denied lessees where a statute expressly provides for taxation of land held under a lease, or for taxation of possessory interest, and as to improvements erected by a lessee on exempt property. See also, Annot: Property Tax: Exemption of Property Leased By and Used for Purposes of Otherwise Tax-Exempt Body, 55 A.L.R.3d 430 (1974).  The limitation in § 72-29-2.4, supra, is vague, ambiguous and uncertain in its meaning. If there is ambiguity or doubt, it is not the fault of the taxpayer and he should not be harassed by the language used in a statute. “Strict construction does arise against the state where the applicability of the tax statute is ambiguous or doubtful in meaning . . . ” Westland Corporation v. Commissioner of Revenue, 83 N.M. 29, 32, 487 P.2d 1099, 1102 (1971) A fair reading of the 1976 Act that created the imposition of property taxation of fractional interests, exempted the taxpayers of liability for such tax.