135 N.W.2d 908
Mich.
1965

Lead Opinion

Souris, J.

In this appeal plaintiff challenges the validity of PA 1959, No 266. Pursuant to legislative authorization purportedly contained in that act, by its amendment of section 14 of the general property tax law,1 the defendant township assessed plaintiff corporation taxes in the amount of $63,000 for the 1961 tax year upon the value of personal property *175consisting of machinery and equipment in plaintiff’s possession on December 31, 1960, the tax day, which it was using in the performance of government contracts, but title to which machinery and equipment was in the United States government. Plaintiff paid the tax thus assessed under protest and commenced an action at law to recover such taxes. Upon adverse judgment below, this appeal was taken.

Act No 266 amended section 14 of the general tax law by adding the words “and personal property not otherwise taxed under this act which is in the possession of any persоn, firm or corporation using same in connection with a business conducted for profit shall be deemed the property of such person for taxation and assessed to him accordingly.”

The subject of Michigan’s taxation of defense production facilities owned by the Federal government but in the possession and use of private contractors and subcontractors of the government has been the subject of much litigation in State and Federal courts and it has generated a substantial volume of judicial and scholarly comment.2 The specific *176issue presented in this appeal relating to the effect of PA 1959, No 266 is, however, a matter of first impression, although some comment by way of obiter dicta was made with respect thereto in Continental Motors Corporation v. Township of Muskegon, 365 Mich 191, and General Motors Corporation v. City of Detroit, 372 Mich 234. Broadly stated, the issues presented in the parties’ oral arguments and in their briefs include the nature of the tax authorized by Act No 266, whether ad valorem or specific; the measure of the tax, whether the true cash value of the prоperty possessed and used or of the right to possession and use; and the constitutionality of the tax the ultimate burden of which, although assessed and initially paid by plaintiff as possessor and user of the government’s personal property, will be borne by the Federal government which itself is constitutionally immune from direct taxation by the States.3

In Continental Motors Corporation v. Township of Muskegon, 365 Mich 191, supra, we held that prior to PA 1959, No 266, our legislature had not authorized a tax on possessory rights or other limited interests in personal рroperty. We said, in Continental, that by enactment of Act No 266 the legislature authorized a tax on beneficial rights in personal property such as were involved there (365 Mich at 199) and as are involved here. Later in the opinion, at p 200, we said that since 1959 possessory interests in personal property, otherwise exempt from taxation, have been made taxable. Now in the case at bar, the issue being squarely before us for decision, we must determine the constitutional validity of that which we said the legislature sought to accomplish by Act No 266.

The major thrust of appellant’s attack against Act No 266 is that it imposes an ad valorem tax upon the *177interest of a possessor and user of another’s tax-exempt tangible personal property measured by the cash value of the tangible property rather than by the cash value of the possessor’s interest therein. Appellee meets this attack princiрally by contending that the possessory interest is an interest in the property which interest is subject to an ad valorem tax and, because such interest includes the right to use the property in a private business conducted for profit, its value for such tax purposes is equivalent to the cash value of the tangible property. Other arguments are advanced, pro and con, but in the view we take of Act No 266 none of the arguments advanced need be considered for purposes of decision.

When Continental Motors Corporation v. Township of Muskegon, 365 Mich 191, supra, was decided, Act No 266 was not before the Court for determination of its constitutional validity. Nonetheless, by way of obiter dictum, we suggested, at p 200, that it was of significance that Act No 266 was cast in the pattern of an ad valorem tax rather than in express language of a specific tax upon possessory interests. Earlier, by separate legislative enactment of PA 1953, No 189,4 the legislature imposed a new tax upon рossessory interests in another’s tax-exempt realty when such realty is used in a business conducted for profit. This new tax has been held to be a specific or excise tax upon the privilege of possession and use and not an ad valorem tax on the realty itself notwithstanding the measure of the tax is the cash value of the realty. United States v. City of Detroit, 345 Mich 601, 608, aff’d 355 US 466 (78 S Ct 474, 2 L ed 2d 424) (1958), and Township of Muskegon v. Continental Motors Corporation, 346 Mich 218, 222, aff’d sub nom United States v. Town*178ship of Muskegon, 355 US 484 (78 S Ct 483, 2 L ed 2d 436) (1958). Instead of enacting a distinctively separate tax to reach possessory interests in another’s tax-exempt рersonal property, as Avas done in PA 1953, No 189 to reach such interests ‍​​‌​‌‌​‌​‌‌​​​​‌​​‌‌​‌‌​‌‌​‌‌​​​‌‌‌‌‌‌​‌‌​​‌‌​‌​‍in realty, the legislature in 1959 sought to accomplish the same result by amendment of the State’s general property tax laAv Avhich theretofore imposed only an ad valorem property tax. See Continental Motors Corporation v. Township of Muskegon, 365 Mich 191, 197. It is our decision that notwithstanding the legislative effort to draw the new tax in the pattern of an ad valorem property tax, it comprises in actuality a specific or excise tax and was, therefore, not an appropriate subject to engraft upon the general property tax laAv by amendment thereof without also amending that laAv’s title to comply with the requirements of article 5, § 21 of our then effective Constitution of 1908.

That a tax upon possessory rights, such as are involved here, is an excise and not an ad valorem property tax seems to us too clear for sustained debate. Just two years ago, in Dooley v. City of Detroit, 370 Mich 194, we had occasion to consider the nature of excises for the purpose of determining the validity of a city ordinance imposing an income tax. In that case, at p 205 et seq., we again defined an excise as “a tax imposed upon the performance of an act, the engaging in an occupation, or the enjoyment of a privilege”, citing 26 RCL, Taxation, § 209, at p 236, which had been relied upon in earlier decisions of this Court. While the legislature in imposing the new tax has utilized the language of ad valorem taxation, the tax nonetheless in its operation and practical effect is a tax upon the privilege of possession and use for profit of another’s tax-exempt personal property and, therefore, it is an excise and not an ad valorem property tax. The importance of this *179distinction lies in the fact that whatever legislative name or trappings a new tax bears it may not be imposed validly by amendment of the general property tax law unless it can be said that that law’s title is broad enough to include within its scope the new tax or, if not, unless the law’s title also is amended to enlarge its scope.

Article 5, § 21 of our Constitution of 1908, effective when amendatory Act No 266 was adopted, read as follows:

“No law shall embrace more than 1 object, which shall be expressed in its title. No law shall be revised, altered or amended by refеrence to its title only; but the act revised and the section or sections of the act altered or amended shall be re-enacted and published at length. No act shall take effect or be in force until the expiration of 90 days from the end of the session at which the same is passed, except that the legislature may give immediate effect to acts making appropriations and acts immediately necessary for the preservation of the public peace, health or safety by a 2/3 vote of the members elected to each house.”

The purpose of such constitutional provision needs no extensive exposition for it has been the subject of many opinions of this Court, among them being People, ex rel. Drake, v. Mahaney, 13 Mich 481; Ryerson v. Utley, 16 Mich 269; Bissell v. Wayne Probate Judge, 58 Mich 237; Brooks v. Hydorn, 76 Mich 273; Vernor v. Secretary of State, 179 Mich 157 (Ann Cas 1915D, 425); MacLean v. State Board of Control for Vocational Education, 294 Mich 45; Leininger v. Secretary of State, 316 Mich 644; and People v. Stanley, 344 Mich 530. It is sufficient to say only that the title of a legislative act must give notice to legislators and others interested of the object of the law thereby assuring them that only matters germane to the object expressed in the title will be enacted into law.

*180The title of the general property tax law, as it had been amended prior to 1959, stated its object as follows:

“To provide for the assessment of property and the levy and collection of taxes thereon, and for the collection of taxes heretofore and hereafter levied; making such taxes a lien on the lands taxed, establishing and continuing such lien, providing for the sale and сonveyance of lands delinquent for taxes and for the inspection and disposition of lands bid off to the State and not redeemed or purchased; to define and limit the jurisdiction of the courts in proceedings in connection therewith; to limit the time within which actions may be brought; to prescribe certain limitations with respect to rates of taxation; to provide penalties for the violation of this act; and to repeal all acts and parts оf acts in anywise contravening any of the provisions of this act.”

As was noted in Knott v. City of Flint, 363 Mich 483, at 495, the language of the title relates “solely to the taxation of property and the procedure to be followed with reference thereto.” Nothing in the title would so much as suggest that excise taxes, such as our corporate franchise tax,5 our sales6 and use7 taxes, or a tax on possessory rights to use another’s tax-exempt property, would be found in the act to which the title relates.

A basic' distinction between an ad valorem property tax and an excise tax is that the former is regarded as primarily in rem in nature while the latter is regarded as in personam in nature. See United States v. County of Allegheny, 322 US 174, 184 (64 S Ct 908, 88 L ed 1209) (1944); Park Building Co. v. George P. Yost Fur Co., 208 Mich 349, 361; Dooley v. City of Detroit, 370 Mich 194, 204.

*181This being so, an act entitled “An Act to provide for the assessment of property and the levy and collection of taxes thereon, * * * making such taxes a lien on the lands taxed” may not be amended to provide for excise taxation unless the title is also amended to indicate that a fundamentally different type of tax is being imposеd, one which is not, viewing the cases and statutes of this State, subsumed under the rubric of a property tax. As further demonstrating the crucial significance ‍​​‌​‌‌​‌​‌‌​​​​‌​​‌‌​‌‌​‌‌​‌‌​​​‌‌‌‌‌‌​‌‌​​‌‌​‌​‍of the distinction between a property tax and an excise or privilege tax, see Esso Standard Oil Co. v. Evans, 345 US 495 (73 S Ct 800, 97 L ed 1174) (1953).

Thus, just as a tax upon possessory interests in another’s tax-exempt realty has been held to be in the nature of an excise tax rather than an ad valorem property tax, so, analogously, do we hold that a tax upon possessory interests in another’s tax-exempt personalty is an excisе tax. Being an excise tax rather than a property tax, it may not, consistently with article 5, § 21 of the 1908 Constitution, be included in an act whose title imports that it deals only with property taxes. The decision of the court below is reversed and this cause is remanded thereto for entry of a judgment in favor of plaintiff and against defendant for the 1961 taxes and collection fee paid under protest together with interest thereon as provided by law. No costs may be taxed, a constitutional question involving the validity of a tax statute being involved.

Dethmers, Kelly, Black, and O’Hara, JJ., concurred with Souris, J.

Notes

Section 14 of PA 1893, No 206, as amended (CL 1948, § 211.14, as amended [Stat Ann 1960 Rev § 7.14]).

United States v. City of Detroit, 345 Mich 601, aff’d 355 US 466 (78 S Ct 474, 2 L ed 2d 424); Continental Motors Corporation v. Township of Muskegon, 346 Mich 141; Township of Muskegon v. Continental Motors Corporation, 346 Mich 218, aff’d sub nom United States v. Township of Muskegon, 355 US 484 (78 S Ct 483, 2 L ed 2d 436); City of Detroit v. Murray Corporation of America (CA 6, 1956), 234 F2d 380, rev 355 US 489 (78 S Ct 458, 2 L ed 2d 441); Continental Motors Corporation v. Township of Muskegon, 365 Mich 191; General Motors Corporation v. City of Detroit, 372 Mich 234; Continental Motors Corporation v. Township of Muskegon, 375 Mich 13; Kurth, The Aftermath of the Michigan Tax Decisions: State Taxation of Federal Property and Activities Today, 13 Military L Rev 167 (1961); Keesling, Property Taxation of Leases and Other Limited Interests, 47 Cal L Rev 470 (1959); State and Local Taxation of the United States and Its Contractors, 29 Law and Contemporary Prоblems 160 (1964); Van Cleve, States’ Rights and Federal Solvency, 1959 Wis L Rev 190; Whelan, Government Contract Privileges: A Fertile Ground for State Taxation, 44 Va L Rev 1099 (1958); comment, 36 U Detroit LJ 323 (1959); note, 21 U Pitt L Rev 697 (1960); note, 27 U Cinc L Rev 315 (1958); note, 1958 U Ill LF 305; note, 32 Temp LQ 110 (1958); note, 11 Vand L Rev 1440 (1958); note, 61 W Va L Rev 53 (1958); note, 30 Miss LJ 80 (1958).

See US Const, Art 1, §§ 2, 8, 9.

CLS 1961, §§ 211.181, 211.182 (Stat Ann 1963 Cum Supp § 7.7[5] and Stat Ann 1960 Rev § 7.7 [6]).

CL 1948 and CLS 1961, § 450.301 et seq. (Stat Ann 1963 Rev and Stat Ann 1963 Cum Supp § 21.201 et seq.).

CLS 1961, § 205.51 et seq. (Stat Ann 1960 Rev § 7.521 et seq.).

CLS 1961, § 205.91 et seq. (Stat Ann 1960 Rev § 7.555 et seq.).



Dissenting Opinion

Adams, J.

(dissenting). The line between property and privilege taxes, although visible, is “drawn *182by an unsteady hand.” City of Detroit v. Murray Corporation of America, 355 US 489, 510 (78 S Ct 486, 2 L ed 2d 441, 460). On this appeal we decide upon which side of the line to place PA 1959, No 266.1

The act deems personal proрerty used in connection with a business conducted for profit to be the property of the person using it. Use of property gives rise to the legal concept of “deeming” ownership and to the constitutional objection that Act No 266 creates a tax on the privilege of use. The use is not taxed. The right to use gives rise to the legal concept of ownership. This is the “property” that is taxed.

This is a fine line, but it accords with the facts. Property, as the word is commonly used, denotes an entire object. In its legal sense the object is broken down into various attributes — such as the right to use, the right to mortgage, the right to lease, et cetera. These rights, viewed together, are referred to as the bundle of rights involved in the ownership of property. 1 Powell (1949), Real Property, § 7, pp 9, 10; 1 Thompson (1964 Replacement), Real Property, § 1, p 2. The rights are property since the object has no significance except аs it is utilized in the manner which these rights describe. 1 Tiffany, Real Property (3d ed), § 2, p 4.2

*183“It is strongly urged that property rather than being an indivisable entity is instead an aggregate or bundle of rights and powers and that anyone having any of such rights and powers should properly be considered an owner of property.” Keesling, Conflicting Conceptions of Ownership in Taxation, 44 Cal L Rev 866. (Emphasis supplied.)

Act No 266 is nothing more, or less, than a tax on a possessor’s interest. Such taxes have beеn characterized, unquestioningly, as property taxes. See annotation, 84 ALR 1310; Keesling, supra, p 868. In the usual case the possessor pays rent directly to the owner. But simply because the appellant possessor pays his rent in the form of sales to the owner at reduced prices should not obscure the fact that he possesses, and pays for, something of value.

Here, because of the importance of the right and because of the limited period the tax covers (1 year), *184the law equates the total bundle with possession and use. The tax is not laid upon the privilege of severing the bundle of rights. It is not measured by the fact or amount of use or severance. ‍​​‌​‌‌​‌​‌‌​​​​‌​​‌‌​‌‌​‌‌​‌‌​​​‌‌‌‌‌‌​‌‌​​‌‌​‌​‍The law finds ownership in the right to use. In doing so, it pierces to the reality of the situation and attaches the tax to the person who has the beneficial use and enjoyment of property.

The tax, in both method and object, is properly a part of the general property tax law. Act No 266 provides for assessment in the usual method of the general property tax law — by ad valorem property assessment. Its announced object is to reach “personal property not otherwise taxed.” This lends fulfillment to the object expressed in the title of the general property tax law which is “to provide for the assessment of property and the levy and collection of taxes thereon.”

Act No 266 speaks in the historic ad valorem property tax tradition:

“Personal property * * * which is in the possession of any person, firm or corporation using same in connection with a business conducted for profit shall be deemed the property of such person for taxation and assessed to him accordingly.” (Emphasis supplied.)

The legislature has thus characterized Act No 266. While not conclusive, the courts do seek to give effect to the characterization of a tax in a statute. See annotation, 103 ALR 18, 19. That there is a valid basis for such characterization is indicated by the following quoted from 103 ALR 19, citing as authority Society for Savings v. Coite, 6 Wall (73 US) 594 (18 L ed 897):

“An excise and a property tax, when the two approach each other, ordinarily may bе distinguished by the respective methods adopted of laying them *185and fixing their amounts. If a tax is imposed directly by the legislature without assessment, and its sum is measured by the amount of business done or the extent to which the conferred privileges have been enjoyed or exercised by the taxpayer, irrespective of the nature or value of the taxpayer’s assets, it is regarded as an excise; but if the tax is computed upon a valuation of property, and аssessed by assessors either where it is situated or at the owner’s domicile, although privileges may he included in the valuation, it is considered a property tax.”

• A tax so characterized is not inimical to the Federal Constitution:

“We see no essential difference so far as constitutional tax immunity is concerned between taxing a person for using property he possesses and taxing him for possessing property he uses when in both instances he uses the prоperty for his own private ends.” City of Detroit v. Murray Corporation of America, supra, p 493.

Appellant reasons that some portion of the bundle of rights comprising the sum total must he attributed to the United States, and, if so, uniformity and cash value requirements must be violated by a measure which includes the entire bundle. However, the fairest value that can he placed upon the worth of such a possessory interest, during the period in which that interest is used in a business conducted for profit, is the current value of the property. Thе single, the most important incident of ownership of industrial goods is possession and the right to use them in a business conducted for profit. That right is coextensive with other forms of ownership if it is borne in mind that the tax covers but a one-year period.

Plaintiff’s dominion over the property — machinery and equipment — for plaintiff’s purposes is as great as if it were the owner. Through its possessory interest it reaps as much benefit as others using like *186property who are owners and pay an identical tax. The observation mаde in United States v. City of Detroit, 355 US 466, 470 (78 S Ct 474, 2 L ed 2d 424), relative to PA 1953, No 189 (CLS 1961, § 211.181 [Stat Ann 1960 Rev §7.7(5)]), applies here:

“Public Act 189 was apparently designed to equalize the annual tax burden carried by private businesses using exempt property ‍​​‌​‌‌​‌​‌‌​​​​‌​​‌‌​‌‌​‌‌​‌‌​​​‌‌‌‌‌‌​‌‌​​‌‌​‌​‍with that of similar businesses using nonexempt property. Other things being the same, it seems obvious enough that use of exempt property is ivorth as much as use of comparable taxed property during the same interval.” (Emphasis supplied.)

Appellant complains that its possession and use of the рroperty could be terminated by the government at will shortly after tax day with the effect that it would not receive the full benefit of its possessory interest. This is a common hazard. A merchant whose entire stock is destroyed by fire or flood shortly after tax day suffers a similar misfortune. So does an owner whose property is repossessed because of his inability to meet mortgage payments. A machine may be ruined by careless operation. The examples could be multiplied. Actually, appellant enjoys some advantages over taxpayers who own their machinery. If Continental loses its contract, its tax liability ceases. An oioner of similar machinery, even though it stands idle, remains subject to the tax.

Pursuant to a rational measure, the appellant’s possessory interest was assessed in uniformity with all other property. Appellant, possessed of the complete beneficial enjoyment of the proрerty, has been deemed the owner for tax purposes. There is nothing unreasonable about such criteria.

Justice Souris concedes that by enacting a distinctively separate tax to reach possessory interests *187in another’s tax-exempt personal property, as was done in PA 1953, No 189, to reach such interests in realty, the result sought here can be achieved; but holds the present tax to be a specific or excise tax and, therefоre, inappropriate for the general property tax law. This is tweedle dum and tweedle dee. Tweedle dee, the taxpayer wins; tweedle dum, the township and the school district win. I choose tweedle dum because:

Legislation should be saved from unconstitutionality whenever possible by reasonable and permissible interpretation.

“All doubts must be resolved in favor of the validity of the action of the legislature. In Cady v. City of Detroit, 289 Mich 499, 505, it was said:
“ ‘A statute will be presumed to be constitutional by the courts unless the contrary clearly appears; and in case of doubt every possible presumption not clearly inconsistent with the language and the subject matter is to be made in favor of the constitutionality of legislation. Scott v. Smart’s Executors, 1 Mich 295; Sears v. Cottrell, 5 Mich 251; Thompson v. Auditor General, 261 Mich 624. Every reasonable presumption or intendment must be indulged in favor of the validity of an act, and it is only when invalidity appears so clearly as to leave no room for reasonable doubt that it violates some 'provision of the Constitution that a court will refuse to sustain its validity. A statute is presumed to be constitutional and it will not be declared unconstitutional unless clearly so, or so beyond a reasonable doubt. Attorney General, ex rel. Barbour, v. Lindsay, 178 Mich 524; Bowerman v. Sheehan, 242 Mich 95 (61 ALR 859).’
“The foregoing language was quoted with approval in 1426 Woodward Avenue Corp. v. Wolff, 312 Mich 352, 369, 370. See, also, Naudzius v. Lahr, 253 Mich 216 (74 ALR 1189, 30 NCCA 179); People *188v. Victor, 287 Mich 506 (124 ALR 316); 16 CJS, p 542.” People v. Piasecki, 333 Mich 122, 143.

If it may be construed in two ways, that which is consistent with its constitutionality should be chosen. See People v. Dubina, 304 Mich 363, 369 (145 ALR 1235), and cases therein cited.

The judgment should be affirmed. Costs to appellees.

T. M. Kavanagh, C. J., and Smith, J., concurred with Adams, J.

PA 1893, No 206. § 14, as amended (CLS 1961, § 211.14 [Stat Ann 1960 Rev § 7.14]). This section has since been amended by PA 1964, No 275 [Stat Ann 1965 Cum Supp § 7.14]), which has no bearing upon this ease except as it may indiсate that the legislature has again looked at this statute and has again been content with its characterization of it.

American Law Institute, Restatement of the Law, ch 1, § 5, comment e:

“Complete property. The totality of these rights, privileges, powers and immunities which it is legally possible for a person to have with regard to a given piece of land or with regard to a thing other than land, that are other than those which all other members of society have as such, constitutes сomplete property in such land or thing other than land. This totality varies from time to time, and from place to place, either because of changes in the common law, or because of alterations by statute. Thus if the law should come to be that no person could build a five-story building on his land, the totality of *183privileges that every person has who owns land would be correspondingly diminished. So if a zoning ordinance were passed, the totality of interests would be affected, to the extent of the ordinance, for persons owning land within the district to which the ordinance applied. At ‍​​‌​‌‌​‌​‌‌​​​​‌​​‌‌​‌‌​‌‌​‌‌​​​‌‌‌‌‌‌​‌‌​​‌‌​‌​‍any one time and place, however, there is a maximum combination of rights, privileges, powers and immunities in the land that is legally possible, and which constitutes complete property in the land, or thing other than land.”

For a discussion of the term “property” by the United States Supreme Court in a condemnation proceeding, see United States v. General Motors Corp., 323 US 373, 377, 378 (65 S Ct 357, 359, 89 L ed 311, 318, 156 ALR 390, 393):

"The critical terms are ‘property/ ‘tаken’ and ‘just compensation.’ It is conceivable that the first was used in its vulgar and unteehnieal sense of the physical thing with respect to which the citizen exercises rights recognized by law. On the other hand, it may have been employed in a more accurate sense to denote the group of rights inhering in the citizen’s relation to the physical thing, as the right to possess, use and dispose of it. In point of fact, the construction given the phrase has been the latter. When the sovereign exercises the power of eminent domain it substitutes itself in relation to the physical thing in question in place of him who formerly bore the relation to that thing, which we denominate ownership. In other words, it deals with what lawyers term the individual’s ‘interest’ in the thing in question. That interest may comprise the group of rights for which the shorthand term is ‘a fee simple’ or it may be the interest known as an ‘estate or tenancy for years,’ as in the present instance. The constitutional provision is addressed to every sort of interest the citizen may possess.”