*1 12
From we hold language policy, our construction of of this any duty claims existed remaining no defend and suits here, reversing trial Appeals Court erred and that upon dismissal of petition court’s demurrer. unnecessary pass upon This view makes whether a con- requiring a exhaustion of struction further defend after duty agreement policy limit would sanction an liability part corporation practice law in defense cases corporation or financial pecuniary interest, which the had no State. of our statutes contrary thus Candler, Judgment except All the Justices concur, reversed. who dissents. J.,
21988. DELTA LINES, AIR INC. v. COLEMAN,
Tax Commissioner, et al. Argued May 11, Rehearing 9, March 1963 Decided 1963 May 29, denied
Powell, Goldstein, Frazer & Murphy, B. D. Murphy, John T. Marshall, plaintiff James N. Frazer, for in error. McCannon,
John B. Kemp & Watson, John L. Watson, Jr., contra.
Ellsworth Robert Hall, Jr., George Culpepper, Jr., P. Dillard, Herbert 0. Robert E. Edwards, Mozley, Edward B. Liles, B. N. Harold Nightingale, Sheats, J. C. Murphy, Standish Thompson, party at interest to record party for rehearing. motion for Justice. The owns a tract of land Candler, Clayton County, Georgia, approximately contains payable annually, it acres. For stated amount, corporation years Inc., private tract to Delta Air Lines, right January 1, with renew an lease agreed so. city elects to do if the lessee years additional 20 *2 improvements to construct or cause to be constructed certain the premises consisting generally space leased of office hangars, storage use, maintenance and the lessee’s facilities the for probable agreed the cost of which be lessee $6,500,000, would it specified use of an amount at times for pay additional the improvements. years such the 1962 the lessee re- For for property interest the ad valorem taxes turned its leasehold in Clayton $100,000. tax at County purposes in valued it in- years county’s -tax assessors For each those the board changed by substituting lessee’s return creased or the tax following: it its interest the value at which returned leasehold May $40,900 Del- 31,1961, On “$1,625,000 Buildings, —Land.” — Superior Clayton Court Lines, Air Inc. filed a suit ta in of that Coleman, tax commissioner against Robert E. County L. S. A. W. Wells and Black, F. W. against also county; and board of tax assessors. county’s of that the members Terrell, as so above, petition, stated its facts addition to the amended alleges: from out, The property it leased pointed need far as is being such, it public property; City Atlanta is only petitioner interest ad valorem taxation. exempt from acquired interest premises the leased is leasehold has in in being only a leasehold of Atlanta It subject taxes. petitioner which if the leasehold alleged further taxa- subject ad valorem acquired from only to taxation Clayton County, tion in and such unexpired term the lease value of the market in it for taxes returned $400,000. Petitioner not exceed does market its actual’ which was $100,000, and 1962 25% Clayton assessors defendant which the basis on value, real estate. all assess other regularly County customarily its value year increased each tax assessors The defendant times four is more than which $1,665,900, $100,000 fair market value leasehold interest in Since the defendant tax assessors for taxes the entire interest assessed part leased effort on the property, an defendants’ an interest in petitioner does not which petition own and it has interest. The only alleges further that there large are a number leasehold estates Clayton County and the defendants have respect properties with those assessed the entire for taxation against fee interest respective private owner thereof no effort has made defendants to tax the leasehold estates properties. those The property here involved and a tract of land which is by the United owned States and as the known Conley Atlanta General Depot, or Depot, corporation on which private General lease, holds a exceptions only defendants’ systematic intentional and practice assessing for taxation the entire fee interest in the against respective thereof owner and making no assessment owner leasehold interest therein. *3 petitioner’s Such assessments for ad valorem taxation official of $1,665,900 at the are the leasehold interest sum violative of equal protection clause of the fourteenth amendment Con- stitution the United such States and the action of defendant tax assessors is equal violative protection of such clause because the have intentionally defendants and systematically assessed other similar at true market whereas value, 25% against petitioner the the a assessments at rate more than four true market times the of the For the official reason, assessments the the and action of defendants I, are violative Art. Sec. Par. II of the the I, Constitution of provides Georgia, that, person State “Protection which and paramount duty property is the of government, and shall be complete.” 2-102. impartial Code and petition prayed process service; The amended and for a for judgment adjudicating declaring and that the leasehold acquired City exempt from the petitioner from the of Atlanta injunction taxation; per- for an temporarily valorem and ad restraining and manently prohibiting collection of taxes acquired interest it from the against City leasehold assessed judgment adjudicating peti- Atlanta; declaring that for and if leasehold, to ad valorem must be taxed taxes, tioner’s on the of its fair market value like other similar basis and taxes; judgment for for assessed adjudicating declaring that the official assessments made against petitioner’s leasehold interest at valuation of than more intentionally its actual while the defendant assessors value, including property, similar real assess other systematically 25% pro- estate, value, equal of its violative true amendment the Constitution tection clause of fourteenth of the States Art. II United Sec. Par. Constitution I, I, judgment declaring and for a Georgia; adjudicating assessing defendant assessors’ official action for petitioner’s systemati- leasehold, intentionally while cally refraining assessing estates in other leasehold equal of the property, protection violative clauses of Georgia. and the United States Constitution Constitution petition admitted The defendants answered amended subject property; that Atlanta is owner of the period city petitioner it to the peti- alleged denied that petition; but consideration exempt from ad leasehold interest tioner’s stipu- The petitioner. parties valorem taxes as claimed except those plaintiff’s petition allegations all lated were true and answer denied defendants’ were which stipulated that required. They thereof also proof would no estates ac- assessments were made separate no County. Clayton. lands privately owned quired lease- adjudicating that the declaring judgment in a resulted of At- acquired petitioner hold *4 County; that subject Clayton taxes was lanta against petitioner’s leasehold made the assessments of Atlanta were acquired it from property set aside should be vacated and reason null and void and estate petitioner’s leasehold assessments new and later tax assessors of be made should determining fixing and specified and date; a than might they consider the leasehold petitioner’s estate value buildings value of the land cost of including thereon improvements placed fixtures and also facts which thereon and peti- whether operated show or not the thereon business profitable any other factors as as relevant tioner is well circumstances, only used course illustrating throwing on the light interest, report- leasehold petitioner valuation to the before a date. ing such stated excepted The plaintiff judgment.
All
public property
exempt
(Code
from
Ann.
Ga. L.
92-201;
p. 12);
exempt
long
but
only
it
so
as
§
it
public
remains
ownership.
put
When it is sold and
into
private
hands,
implication
natural
goes
is that it
there with
the ordinary incidents
private property
therefore
is sub
ject
being
taxed.
State there
separate
can
several
and distinct
parcel
estates in the same
land,
Code 92-104
§
requires the
any
owner of
estate
less
fee to
land
than
it for
taxes
it
property.
return
taxes and
as on other
A
pay
fee;
an
estate in
than the
it
severed
leasehold is
land less
the fee and classified
tax purposes
realty.
Ann.
as
Code
92-114. When
conveyed
the City
the Delta
Corporation a
estate in
involved,
leasehold
here
it com
land
pletely disposed of
distinct
estate in
land for
valuable
consideration,
acquired
Delta
a private
it and
it as
holds
owner.
any
public property
disposed
When
estate in
of,
identity
public
loses its
being
subject
property and is
taxes
just
any
while in
ownership
privately
other
owned
Private
becomes
when
passes
public ownership;
public property
into
pri
becomes
passes
vate
private OAvnership.
when it
A
into
this court
property,
Georgia
Davison,
State
v.
Ga. 27
225), held
SE2d
estate which
a leasehold
had
been conveyed
Georgia
in the State’s University
Athens was
to taxes.
In that case
were
dis
there
two
relating sents
character of the instrument which
had
lessee.
given
Four
members
court
construed
opinion
be a leasehold and
were
that it
two
only
was
Henry Grady
And in
usufruct.
Hotel
Atlanta,
Co.
17 cor Georgia belonging to the State which a property subject taxes which poration acquired from State was had agree not it. we do against While assessed Henry in given judgment for the or follow the reason nevertheless judgment Grady case, Hotel Co. estate which correct since holds a leasehold had public property fee taxed. this severed could be Corp. v. 211 835 Conley Housing Coleman, see Ga. connection, Wright R. 482); Co., SE2d v. Central Ga. Ga. State, R. 54 Ga. 471); SE and Western &c. Co. v. court found and held assessments Since the trial Delta’s county’s made board tax assessors which for the were null void and years leasehold 1961 and 1962 and aside that Delta’s that reason be vacated and set and should it is years, for those tax be reassessed leasehold should respecting question not for this court to consider necessary validity. their
The assessors employed which should be tax by formula purpose ascertaining determining of a value purposes which we question leasehold for tax is the next must All to taxation decide. must consider and market value. fair returned and assessed for taxes at its be 92-5701. “The intent tax laws of Code § subjects of taxation State are to this have all by realized therefrom cash which be assessed at would not subjects sold, are but sale, usually value,’ market when used thereof, sale words ‘fair forced what the to mean be and deemed laws, tax shall held when subjects sold bring would at cash sale property and subjects which such usually the manner in years 92-5702. sold.” Code For 1961 and 1962 Delta acquired returned of Atlanta $100,000 each defendant tax year. The assessors increased larger amount. Delta its value to a much was dissatisfied with litigation prayed assessment and instituted adjudicating declaring, (1) judgment whether for a (2) subject and, its leasehold employed determining value for which should formula tax purposes, if it in fact taxable. trial court held that it was taxable agree ruling. and we It correctness of that not agree did with the valuation at which been assessed had Clayton County’s board assessors set vacated and aside assessment which board had made for each *6 year and ordered reassessment those involved a of it for each of years. The court found Clayton County’s and declared that board tax assessors their and office, successors in in ascertain- ing fixing and the value tax purposes, of Delta’s leasehold for “may the value buildings including consider land the and improvements and cost fixtures placed therein, and also such facts that operated show not whether or the business thereon profitable as well any as other relevant factors and circumstance, only purpose used of course for the and light to illustrate throw upon the excepts value the leasehold interest.” Delta to this argues and determining that value leasehold for tax a purposes, the tax only assessors consider should fair market value the unexpired required term of the lease less the rents paid to be the lessee. Georgia
We find no
prescribes
rule for fixing the
a
fair market value of a leasehold for tax purposes, but as to such
an interest
land,
the rule of “fair market value”
always
should
applied.
be
(26
Pause v.
Atlanta,
privately buildings have Clayton County owned lands or private corporations; and, or individuals alleged it is properties, stipulated prac those assess all taxes Clayton County tice of tax assessors of against properties, fee. due thereon owner of the As those fee is allegation owner there is no proof or The record also paying the full due entire belonging shows this and certain as the States known Depot, United Atlanta General Con private corporation ley Depot, lease, which a holds a General only where the properties assessors county taxes the holder of the leasehold of that assessed alleges asserts that this therein. Delta dis equal protection against it clauses and violates crimination position Federal of the State Constitutions 781); SE2d Montgomery Sutiles, v. 191 Ga. relies on 734). SE2d true It is Montgomery, Ga. 128 Suttles *7 enjoined this court the them, like col and others cases, in those not taxed property like either other of taxes because lection the or valuation. While different rate materially at a taxed or controlling this in sound, they are not are rulings those cases in pri leased shows, owners of other Here, the record case. as to required County were Clayton in vately properties owned premises entire fee interest the tax leased on pay properties that those were not is no taxed there contention paying the fee all full, value, fair market owner thereof their in In this interest only thereon. the leasehold due taxes Delta for ad valorum taxation and we was returned the fee taxable basis its fair market value. that is on have held equal which the protection in clauses taxation discrimination to tax like taxing all is the failure of authorities forbid equally prop to tax to which exempt like property belonging another erty one to owner that the owners of The fact owner. or some interest property, it, their have leased who fee in interest which tax on entire required pay to
are require interest therein not does cludes course lease prohibited to that to court hold would be a discrimination require Delta, as the holder leasehold estate and owner of a public property pay its to a tax basis As privately fair market value. those properties owned which lease given, fee, deducting a estate has been if after interest, only the value of the leased were the which had imposed on different them, ruling one here made required; but, would be pointed we have the fee owners out, leased premises those were required pay all of the imposes which the law on the entire fee interest in them imposition of an additional tax on interest those properties would be double tax on same property, permissible. If the privately owners of owned in Clayton County being required pay tax on entire fee interest conveyed where have they a leasehold another, only matter which affects owners. this, As error. record shows no
Judgment All concur, except Almand, the Justices affirmed. J., who dissents. Presiding Justice, concurring. I concur in the opinion
Head, of Mr. judgment Justice Candler and the holding of the court that the lease Delta Air Lines, Inc., It my opinion is taxable. judgment no other could properly be rendered.
There is authority some general but it contrary, country exemption rule in this enjoyed from taxation by governmental agencies respect to lands owned them with does not extend the leasehold of a tenant those 248, lands. 23 ALR seq., et and citations. See also 51 Am. Jur. 536, Taxation, 535; Taxation, 84 CJS §
Under
common law a leasehold
real.
remains
chattel
State,
contrary
The
however, may by statute declare its nature
the common law for the
Wright
of taxation.
v. Cen
(91
tral
R. Co.,
Ga.
21 passes realty. Code, as this State Civil 3685 85-801]. § [now It interest go analysis an necessary is not into lease, to created determine whether the leasehold by it realty; is to regarded personalty either, be as or as if be shall be requires The taxation Constitution relatively all exempted, not expressly difference of taxation it makes no substantial question realty beneficial owner classed as property of the be whether Wright of this personalty.” or the decision court While Court States Supreme of the United was reversed (Central 181, 63 525, R. U. S. Wright, of Ga. Co. v. 248 39 SC upon a between reversal contract 401), LE was based for the taxation of its railway company State and and not because the leasehold interest the railroad was subject to taxation. Supreme Seattle, The United States Court Trimble v. (34 218, 435), 231 LE held: U. S. 683 SC 58 “When an in land, years, passes whether freehold or private implication there is hands, domain into a natural goes ordinary with the sub- incidents ject Metropolitan v. Railway be taxed.” See also Street Co. New York State Tax U. 1 Commissioners, Board of 199 S. 65); Norfolk, LE J. 705, Perry SC W. Co. 548). 465, 55 LE U. S. 472 SC one years “An provides part:
Code estate for 85-801 § may period in its duration or which which is limited fixed passes realty.” If lands, fixed certain. is in made as (and of 1877 section, This under Constitution Code 1945) require the the lease Constitution would Lines, realty. Wright v. Central Inc., Air held Delta whether supra, this court said that Co., 406, Ga. R. 146 Ga. required its lease realty personalty, Constitution taxation. (Code Sec. Par. VII, I,
Art. Ill of the Constitution of 1945 Assembly the General 2-5403), Ann. which authorizes came into amend classify property existence as an taxation, (Ga. L. by ment act of 1937 Constitution p. 39), 8, which was Constitu ratified June *9 22 (Code 2-5001)
tion 1877 as thus is amended identical § language present provision with the of the Constitution of 1945 (Code 2-5403). Ann. § authority
Pursuant to the constitutional the amendment - 8, 1937, ratified June at Assembly General the 1937-38 extraordinary classifying property session enacted statute L. Sess., p. for taxation. Ga. Ex. Section 2 of this 1937-38, provides act classifies leaseholds as real that real property, and shall taxed property, including as now leaseholds, provided Code Ann. by law. 92-114. §
The rule Line Martin, stated Greene Terminal Co. v. (1) 901), city-owned W. Va. 483 “a SE2d leasehold on a exempt wharf is taxation, operates where the lessee personal profit though wharf basis, public on a convenience is thereby served,” applicable operation Although is here. Inc., great public Delta Air Lines, convenience, if not necessity, operation personal basis, profit is on a and under applicable rules of law its leasehold interest taxation. Justice, dissenting. The Atlanta Air- Municipal
Almand, port operated owned, and maintained under the provisions (Title Airports Uniform 1933). Law 11-2 of the Code Under municipality this law a “separately authorized or jointly, acquire, establish, construct, expand, lease, own, control, equip, improve, maintain, operate, regulate police airports and landing fields for use aircraft, either within or geographical without the limits of such [municipality] . . . may for purpose purposes use or any available property may any that is now or time hereafter be owned or controlled by such [municipality].” Code Ann. 11-201. Code 11-202 § provides: “Any lands acquired, owned, leased, controlled, or occupied by such . . . purpose [municipality] purposes or 11-201, enumerated section shall and hereby declared be acquired, owned, leased, occupied controlled, public, governmental, municipal purposes.” Sigman This court (2) (104 Brunswick Port Authority, Ga. 332 467), SE2d “Property held: public used for the convenience and welfare public in the matters of travel transportation port operation, as a dock or public transportation and facilitate port may lease, the users of provide buildings which water, transported by commodities process to store and promotion commerce, is in the aid may general welfare, and public commerce, and transportation, *10 exempt therefore public property be classified properly from taxation.” permit Airlines under or license
Delta
operation
airline
airport
Atlanta uses
of its
service
transportation
freight. Many
of the
passengers and
essential
airport,
and services on
facilities
operation
persons
are carried
airport,
by private
permit
city. The
corporations
lease,
under
or license from the
repair
airplanes
just
maintenance
as essential
airport as the maintenance of
operation
passenger
of an
planes.
landing
the takeoff and
runways
terminal and
Haines,
590),
City Dayton
See
22000. ISLEY May Argued April 9, 8, 1963 Decided Rehearing May 29, Denied