Court Opinion

ID: 9686843
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:09:08.911919+00
Date Added: 2024-06-11T18:18:22.472161
License: Public Domain

Knutson, Chief Justice.
This is an appeal from an order denying a motion for amended findings of fact, conclusions of law, and order for judgment or, in the alternative, for a new trial.
The case arises out of a mining lease entered into between the State of Minnesota and the copartnership of Rhude and Fryberger on May 13, 1952. The lease is drawn in accordance with the provisions of Minn. St. 1949, § 93.20, as amended by L. 1951, c. 616. It purports to lease for a period of 50 years the following described land in Itasca County, to wit: SW 1/4 NW 1/4 and SE 1/4 NW 1/4 sec. 24, T. 57 N., R. 22 W.
As far as the terms of the lease have a bearing on the issues presented here, all that needs to be said is that the property was leased to the partnership for the purpose of “exploring for, mining, taking out and removing the iron ore found on or in said land,” together with the right to construct facilities necessary or suitable for such purpose. The lease required payment of minimum rentals and royalties, which royalties were to be computed on the basis of an agreed formula.
The crucial portion of the lease giving rise to the dispute involved here is paragraph 18, which provides:
“Lessee To Pay All Taxes. The party of the second part further covenants and agrees to pay all taxes, general and specific, which may be assessed against said land and the improvements thereon made, used or controlled by said party of the second part, and the iron ore product thereof, and any personal property thereat owned, used, or controlled by the party of the second part in all respects as if said land was owned in fee by the party of the second part.” (Italics supplied in part.)
This provision is in the same language as prescribed by § 93.20, subd. 27.
Either party had a right to terminate the lease. The lessee’s right is found in paragraph 24 and reads as follows:
*18“Lessee’s Right To Terminate Lease. The party of the second part shall have the right at any time to terminate this lease in so far as it requires the party of the second part to mine ore on said land, or to pay royalty therefor, by delivering written notice of such intention to terminate to the commissioner of conservation, who shall in writing acknowledge receipt of such notice, and this lease shall terminate sixty days after such delivery unless such notice is revoked by the party of the second part by further written notice delivered to the commissioner before the expiration of said sixty days, and all arrearages and sums which shall be due under this lease up to the time of such termination shall be paid upon settlement and adjustment thereof by the party of the second part.”
The lessor’s right to terminate the lease is found in paragraph 25 and, as far as material here, reads:
“Lessor's Right To Terminate Lease Upon Default. This lease is granted upon the express condition that if any sum owing hereunder by the party of the second part for rental, royalty, taxes, or otherwise shall remain unpaid after the expiration of sixty days from the time when the same became payable as herein provided, * * * or in case the party of the second part shall fail to perform any of the covenants or conditions herein expressed to be performed by said party of the second part, then it shall be the duty of the commissioner of conservation to cancel this lease, first having mailed or delivered to the party of the second part at least twenty days notice in writing thereof, whereupon this lease shall terminate at the expiration of said twenty days, and the party of the first part shall re-enter and again possess said premises as fully as if no lease had been given to the party of the second part, and the party of the second part and all persons claiming under such party shall be wholly excluded therefrom except as hereinafter provided, but such termination and re-entry shall not relieve the party of the second part from any payment or other liability thereupon or theretofore incurred hereunder.”
Paragraph 26 provides that upon termination of the lease the lessee shall have 90 days’ time in which to remove equipment, et cetera.
*19These provisions likewise are taken from § 93.20, as amended.
In accordance with the termination provisions, the lessee terminated the lease by serving notice upon the commissioner of conservation on April 15, 1954. Upon receipt of the required notice, the lessor wrote a letter to the lessee under date of April 28, 1954, over the signature of the director, Division of Lands and Minerals, Department of Conservation, stating:
“* * * The termination of this lease will become effective sixty days after the receipt of your notice, or on June 16, 1954.
“We wish to advise that the amount of royalty due under this lease for the second quarter, to the date of termination is $1057.69.
“The formal receipt and acceptance by the Commissioner of Conservation of your notice to surrender this lease will be forwarded to you after we have received your check for the above amount of royalty which is due to and including June 16, 1954.”
It is admitted that the lessee paid accrued rental by check dated June 15, 1954.
On May 1, 1953, ad valorem taxes were assessed against the land covered by the lease in the sum of $11,782.89, and on May 1, 1954, ad valorem taxes were assessed against the land covered by the lease in the sum of $12,426.41.
On July 3, 1957, the State of Minnesota, through its Department of Conservation, filed a claim in the Probate Court of St. Louis County against the estate of Robert M. Fryberger, a former partner of Rhude and Fryberger, the lessee defendant, for the amount of the ad valorem taxes assessed against said premises and interest and penalties. The probate court denied the claim. An appeal to the District Court of St. Louis County was consolidated with an action commenced August 28, 1958, by the state against the copartnership and against J. O. Rhude, the surviving partner, for the same taxes, with interest and penalties, as were included in the claim against the estate. The district court held that the claim was a valid obligation of the estate and the surviving partner and ordered judgment against them. This appeal raises the question whether ad valorem taxes assessed against the leasehold interest of state-owned land under such mining contract constitute a personal *20obligation of the lessee. It is the contention of the state that under paragraph 18 of the lease and the corresponding provision of § 93.20, as amended, the lessee personally agreed to pay ad valorem taxes assessed against the land during the continuance of the lease.
At the outset it must be apparent that the agreement to pay taxes is limited by the language of the lease and the statute. The lease must be read as an entirety. The agreement is to “pay all taxes, general and specific, which may be assessed against said land * * * in all respects as if said land was owned in fee by the party of the second part.” (Italics supplied.) It is only by ignoring the italicized portion above that the position of the state would be tenable. When it is given effect, the question becomes: What is the obligation of an owner of land in fee to assume personal liability for the payment of ad valorem taxes against his land?
While the question has arisen in a variety of types of cases, we have from the beginning consistently adhered to the rule that ad valorem taxes assessed against real estate are a charge against the land and do not create a personal liability on the part of the landowner.
In the early case of Martin v. Lennon, 19 Minn. 45 at 52 (67 at 78), we said:
“* * * in one sense, it may be said that this was a tax which the owner ought to have paid, for, as a good citizen, he ought to pay his taxes at the day appointed. He incurs no personal liability to the state, however, by letting his land go to sale. The taxes are a charge on the land merely, which land he may lose by persistent delinquency; but that is a matter between himself and his own pocket. It is not in the sense of any such moral obligation as that of the citizen above mentioned that the statute uses the expression ‘ought to pay.’ The relation between the occupant and the owner must be such as to raise an obligation, as between them, on such owner’s part, to pay such tax.”
In Washburn v. Gregory Co. 125 Minn. 491, 493, 147 N. W. 706, 707, L. R. A. 1916D, 304, we quote with approval from Ballard v. Hunter, 204 U. S. 241, 258, 27 S. Ct. 261, 267, 51 L. ed. 461, 473, as follows:
*21“* * * As stated in the Ballard case [p. 258] with reference to the statutes of Arkansas, our statutes ‘virtually make the land a party to the suit to collect the taxes. It is from the lands alone, and not from their owner, that the taxes are to be satisfied.’ ”
In Weberling v. Bursell, 180 Minn. 283, 285, 230 N. W. 654, 655, we said:
“Taxes upon real estate are a charge and lien upon the land in favor of the state but are not a personal obligation of the landowner under our laws. If the taxes are not paid the state may enforce collection by sale of the land but cannot recover any personal money judgment against the landowner.”1
In State ex rel. Vossen v. Eberhard, 90 Minn. 120, 123, 95 N. W. 1115, 1116, we point out the difference between the liability for taxes assessed against personal property and that assessed against real estate. We there said:
“* * * The proceeding for the collection of taxes upon personal property is one in personam, and not in rem. This radical distinction must be kept in mind: In the one case the tax is against the person, although estimated in amount according to the value of the personal property possessed, and is never a lien upon the property assessed; in the other the tax is against the land, and becomes a lien thereon, but is never made a personal obligation against the owner.”2
The extent to which we have gone in holding that there is no personal liability for the payment of ad valorem taxes against real estate is aptly *22illustrated in Independent-Consol. School Dist. No. 27 v. Waldron, 241 Minn. 326, 63 N. W. (2d) 555. In that case it was contended that the state’s lien for real estate taxes could be collected out of an award in condemnation proceedings on the theory that the award stood in place of the land. We held to the contrary, saying (241 Minn. 328, 63 N. W. [2d]558):
“In Minnesota, real estate taxes do not constitute a personal obligation of the landowner but are a lien in favor of the state on the land only. * * * The duration and extent of such a lien is controlled exclusively by statute. * * * Generally, tax statutes are to be construed strictly against the taxing authority. * * * The state suggests nothing to indicate that the legislature intended the lien for taxes to extend not only to the land but also to an award made for its condemnation. We conclude that the legislature has in fact indicated that that was not its intention.”
The right to assess ad valorem taxes against the leasehold interest of land owned by the state was derived from Minn. St. 1957, § 273.19, which, at the times involved here, read as follows:
“Property held under a lease for a term of three or more years, or under a contract for the purchase thereof, when the property belongs to the state, or to any religious, scientific, or benevolent society or institution, incorporated or unincorporated, or to any railroad company or other corporation whose property is not taxed in the same manner as other property, or when the property is school or other state lands, shall be considered, for all purposes of taxation, as the property of the person so holding the same.”3
It must be apparent that the intention of the legislature under this statutory provision was to place the leasehold interest of state-owned land on a par with land privately owned. There is no indication anywhere in the statute that the holder of such interest should assume an obligation for the payment of such taxes far greater than that of a fee owner, nor have we ever so held.
It is probably true that if the state had chosen to do so it could have *23made the assumption of personal liability for taxes an obligation of the lessee. As a matter of fact, Ex. Sess. L. 1959, c. 1, § 1, which is inapplicable here, amended Minn. St. 1957, § 272.01, to do that very thing as to future leases of state-owned land. Minn. St. 272.01, subd. 2, now provides:
“When any real or personal property which for any reason is exempt from ad valorem taxes, and taxes in lieu thereof, is leased, loaned, or otherwise made available and used by a private individual, association or corporation in connection with a business conducted for profit; * * * there shall be imposed a tax, for the privilege of so using or possessing such real or personal property, in the same amount and to the same extent as though the lessee or user was the owner of such property. Taxes imposed by this subdivision shall be due and payable as in the case of personal property taxes and such taxes shall be assessed to such lessees or users of real or personal property in the same manner as taxes assessed to owners of real or personal property, except that such taxes shall not become a lien against the property. When due, such taxes shall constitute a debt due from the lessee or user to the state, township, city, village, county and school district for which the taxes were assessed and shall be collected in the same manner as personal property taxes.” (Italics supplied.)
It is argued by the state that, unless the contract is so construed as to make the obligation to pay ad valorem taxes a personal liability, the state has no remedy by which to collect these taxes. The fallacy of this argument is that it ignores the fact that the state has a more expeditious remedy in this situation than it has to collect real estate taxes assessed against property owned by a private individual. Under the terms of the lease itself, if the taxes remain unpaid for 60 days, it is the obligation of the state to cancel the lease and take its land back. In that case it reacquires possession of its land much more quickly than it could acquire privately owned land by tax-forfeiture proceedings. The remedy of the state in a case of this kind was discussed in In re Petition of S. R. A., Inc. 213 Minn. 487, 497, 7 N. W. (2d) 484, 489, where we said:
“* * * If there be tax default where no one is willing to take over the *24tax 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.”
Some reliance has been placed on the case of Chun King Sales, Inc. v. County of St. Louis, 256 Minn. 375, 98 N. W. (2d) 194. That case did not deal with the question involved here. Inferentially at least, we recognized in that case too that the tax liability was not a personal obligation of the landowner or lessee. What we did hold was that the leasehold interest could be taxed and that upon sale of the land by the state to the lessee the lien of the tax continued with the land.4
Both parties discuss Fryberger v. Inland Steel Co. 174 Minn. 139, 218 N. W. 553. That case involved a royalty tax, not an ad valorem tax. However, we did say (174 Minn. 141, 218 N. W. 554):
“The purpose of that tax assumption clause was made as far-reaching and inclusive as could be. It was to put the lessee in the position, with respect to all taxes, of an owner in fee. The state did not purpose to permit its lessee to participate in nor derive any benefit from the immunity of its own property from taxation. * * * With respect to the incidence of taxes on the leasehold, the lessee was to be dealt with as an owner in fee.” (ItaEcs supplied in part.)
This language can hardly be reconcüed with the result sought by the state. Instead, the holder of the leasehold is treated the same as an owner in fee.
It therefore seems plain to us that under the language of the lease and the statute upon which it is based the obligation to pay ad valorem real estate taxes assessed against the property involved here stands on exactly the same footing as the obEgation of a fee owner. There being no personal liability on the part of a fee owner to pay such taxes, there is none upon the lessee. There is no ambiguity in this contract, and the lessor, as weE as the lessee, ought to be bound by the language chosen by the state in drafting and executing this lease.
In view of our decision on the main issue, it is not necessary to determine other questions raised by the appeal.
*25Reversed with instructions to enter judgment for defendants.

See, also, State v. Board of Education, 133 Minn. 386, 158 N. W. 635, L. R. A. 1916F, 861; Falvey v. Board of County Commrs. 76 Minn. 257, 79 N. W. 302; Maxwell v. Hatherly, 170 Minn. 27, 211 N. W. 963; Nortmann-Duffke Co. v. Federal Crushed Stone Co. 172 Minn. 567, 216 N. W. 250; State, by Burnquist, v. Barrett & Zimmerman, Inc. 228 Minn. 96, 36 N. W. (2d) 590; Land O’Lakes Dairy Co. v. County of Wadena, 229 Minn. 263, 39 N. W. (2d) 164, affirmed, 338 U. S. 897, 70 S. Ct. 251, 94 L. ed. 552, rehearing denied, 338 U. S. 945, 70 S. Ct. 428, 94 L. ed. 583; 18 Dunnell, Dig. (3 ed.) § 9281.

See, also, Land O’Lakes Dairy Co. v. County of Wadena, supra.

The statute was am'ended by Ex. Sess. L. 1959, c. 1, § 2.

See dissent by the author of this opinion.