52 Mich. App. 694 | Mich. Ct. App. | 1974
Lead Opinion
This appeal arises from an order of summary judgment granted by the Kent County Circuit Court to defendant city. By so ruling the court affirmed a holding of the State Tax Commission denying to plaintiff its claimed exemption from the personal property tax levied by the city upon certain farm products stored in a warehouse. Plaintiff is the parent corporation of a wholly owned subsidiary which operates the warehouse. The case was submitted to the trial judge on an agreed statement of facts which will be drawn upon as our discussion requires.
The Court is faced with two primary issues which will be dealt with seriatim.
I.
Does the exclusionary language in the definition of a public warehouse of MCLA 211.9(12); MSA 7.9(12) constitute an unreasonable and arbitrary legislative act of classification for tax purposes, thereby rendering the provision invalid and unconstitutional?
MCLA 211.9(12); MSA 7.9(12), as amended by 1964 PA 275,
"The following personal property shall be exempt from taxation, to wit:
"Twelfth, All products, materials and/or goods processed or otherwise and in whatever form * * * located in a public warehouse * * * on December 31 of each year, if such products, materials and/or goods have been designated as in transit to destinations out of state pursuant to the published tariffs of any railroad or common carrier by the filing of the freight bill covering such products, materials and/or goods with the agency*698 designated by such tariffs, so as to entitle the shipper to transportation rate privileges: * * * Provided, That any property located in any public warehouse, * * * on December 31 of each year, which is exempt from taxation under this provision but which is not shipped outside the state of Michigan pursuant to the particular tariff under which such transportation rate privilege was established, shall be assessed upon the next succeeding or any subsequent assessment roll by the assessing officer and taxed at the same rate of taxation as other taxable properties for the year or years for which such property was exempted, to the owner at the time of such omission; or if the owner or person entitled to possession of such products, materials and/or goods shall be a resident of or authorized to do business in Michigan and shall file with the assessing officer, with whom statements of taxable property are required to be filed, a statement under oath that said products, materials and/or goods are not for sale or use in, and will be shipped to a point or points outside the state of Michigan: Provided, That if any person, firm or corporation shall claim exemption by the filing of any such sworn statement, such person, firm or corporation shall append to his statement of taxable property required to be filed in the next year, or if no statement of taxable property is filed for the next year, a sworn statement on a form required by the assessing officer shall be filed showing a complete list of the property for which such exemption was claimed with a statement of the manner of shipment and of the point or points to which said products, materials and/or goods were shipped from said public warehouse, * * * and any such products, materials and/or goods not shipped to a point or points outside the state of Michigan shall be assessed upon the next succeeding assessment roll, or on any subsequent assessment roll by the assessing officer and taxed at the same rate of taxation as other taxable properties for the year or years for which such property was exempted, to the owner at the time of such omission: * * * For the purpose of this section, a public warehouse * * * is defined as any warehouse * * * owned or operated by any person, firm or corporation engaged in the business of storing products, materials and/or goods*699 for hire for profit who issues a schedule of rates for storage of such products, materials and/or goods and who issues warehouse receipts pursuant to the provisions of Act No. 303 of the Public Acts of 1909: Provided, That no portion of a public warehouse * * * leased to a tenant or no portion of any premises owned or leased or operated by a consignor or consignee, or any affiliate or subsidiary of such consignor or consignee shall be deemed to be a public warehouse * * *."
MCLA 211.9(14); MSA 7.9(14), insofar as applicable to the case at bar, provides:
"Fourteenth, Farm products processed or otherwise, the ultimate use of which is for human or animal consumption as food, but expressly excepting wine, beer and other alcoholic beverages, regularly placed in storage in a public warehouse * * * as defined in the twelfth subdivision of this section, shall, while so in storage be considered in transit and only temporarily at rest, and not subject to personal property taxation: Provided, That the assessing officer shall be the determining authority as to what constitutes, is defined as, or classified as, farm products as used in this subdivision: * * * .”
It cannot be denied that the Legislature has the power to classify subjects for purposes of taxation, and that the Legislature has the power to create, grant, and deny exemptions from taxation. United States Cold Storage Corp v Detroit Board of Assessors, 349 Mich 81; 84 NW2d 487 (1957). Plaintiff, however, objects to the unreasonable classification that arises from the exclusion under subparagraph 12 of farm products stored in a warehouse when such a warehouse is owned or affiliated by a consignor of the products. It is hypothesized that a consignor, who deposits goods in a warehouse owned or operated by him would lose the exemption from tax while another consignor, not having
" 'Granting the power of classification, we must grant government the right to select the differences upon which the classification shall be based, and they need not be great or conspicuous. (Citing case.) The State is not bound by any rigid equality. This is the rule;—its limitation is that it must not be exercised in "clear and hostile discrimination between particular persons and classes”. (Citing case.) Thus defined and thus limited, it is a vital principle, giving to government freedom to meet its exigencies, not binding its action by rigid formulas, but apportioning its burdens, and permitting it to make those "discriminations which the best interests of society require”.’ ”
The discrimination here is not hostile nor arbitrary but would appear to rest on a rational basis in distinguishing "public” warehouses from others for exemption purposes. Subparagraph 14 has been drafted to establish a presumption that farm products stored in public warehouses, as those facilities are defined in subparagraph 12, are conclusively presumed to be "in transit”.
And where administrative expense or convenience is a factor in establishing a classification, the legislative action has ordinarily been upheld. In 51 Am Jur, Taxation, § 520, p 523:
"A legislature is not bound to tax every member of a class, or none. It may make distinctions of degree having a rational basis, and when subjected to judicial scrutiny such distinctions must be presumed to rest on that basis if there is any conceivable state of facts which would support it. * * * Administrative convenience and expense in the collection or measurement of a tax may constitute a valid basis for exemption therefrom.”
II.
Do the terms "Consignor” and "Consignee”, as used in MCLA 211.9(12), include those persons or companies which simply deposit products in a warehouse for storage?
Plaintiff admits that the warehouse is its corporate subsidiary, but contends that the mere act of storage did not cause plaintiff to become a "consignor” or "consignee” as to the farm products. Because the terms are not defined in the statute, we must follow tenets of statutory construction in ascertaining their proper meaning. The parties have referred this Court to MCLA 8.3a; MSA 2.212(1) which directs courts to construe words according to the common usage of the terms except where they have acquired a peculiar meaning in the law. But plaintiff and defendant cannot agree on which of the two directives apply or even as to what "common usage” means. This dilemma is evidence of the fact that "consignor” has not acquired a meaning understood by all segments of the business community. These considerations compel us to use another approach in determining the Legislature’s intent.
In analyzing MCLA 211.9(12), it must be remembered that imposition provisions of a taxing statute are construed in favor of the taxpayer while exemption provisions must be strictly construed in favor of the taxing agency. Evanston YMCA Camp v State Tax Commission, 369 Mich 1; 118 NW2d 818 (1962).
"In mercantile law, the term has a well-defined legal meaning, and signifies to deliver goods to a carrier to be transmitted to a designated factor or agent; to deposit with another to be sold, disposed of or called for, as merchandise or movable property.
"The term implies an agency, and, applied in a commercial sense, means that the property is committed or intrusted to the consignee for care or sale and does not by any express or fair implication mean sale by one or purchase by another. It connotes delivery, and carries decided implication that the property consigned is not the property of the consignee, the title remaining in the consignor, the consignee being his agent.” (Emphasis supplied.)
The term thus encompasses more than entrustment for shipment. It includes delivery of goods for care or storage. Applying the recognized rule that tax exemption statutes are to be strictly construed and exemptions are not lightly given, Detroit v General Foods Corp, 39 Mich App 180; 197 NW2d 315 (1972), we believe the Legislature’s intent was to give "consignor” a broad meaning, thereby limiting the scope of the exemption. Plaintiff was properly denied an exemption from the taxing provisions of MCLA 211.1; MSA 7.1.
Affirmed. No costs, a public question being involved.
Subsequent amendments have not changed the language under discussion here.
Once products of a state are committed to a common carrier for transportation out of the state, or once those products have started their ultimate passage to another state, they are no longer taxable as part of the general mass of property in the original state. Diamond Match Co v Village of Ontonagon, 188 US 82; 23 S Ct 266; 47 L Ed 394 (1902).
Dissenting Opinion
(dissenting). I am in respectful but none the less vigorous disagreement with my colleagues whom I hold in the highest esteem.
True it is that, given a few assumptions made by the majority and reliance by them upon several general statements in legal encylopedias, their logic seems flawless.
The opinion, however, at least to me, does not solve the dilemma created by controlling Michigan Supreme Court precedent which we simply cannot blink away. This dilemma was the cornerstone upon which appellant’s counsel rested his argument.
As noted by the majority, perforce we start with certain absolutes.
The amount of the assessment is not challenged. The character of the farm products admittedly falls within the claimed exemption. It is not disputed, and this issue was narrowed and precisely delineated on oral argument, that had plaintiff stored the involved products in a public warehouse other than this one, which is operated by its totally owned subsidiary, the tax levied could not have been collected. Further, it is conceded that had a different owner of the same products stored them in the warehouse here involved those products would have been exempt as to him.
The stipulation recites that the warehouse with which we are concerned was, before its acquisition by plaintiff, operated as a public warehouse under a different name. It is still available to and used by many others who rent warehouse space. Plaintiff pays the same rate for its space as do the other customers. Plaintiff’s rental payments account for about 30% of the warehouse income.
The agreed statement further points out that plaintiff lost its prior privately-owned warehouse
MCLA 211.9(12); MSA 7.9(12), as amended by 1964 PA 275, provides in relevant part:
"The following personal property shall be exempt from taxation, to wit:
"Twelfth, All products, materials and/or goods processed or otherwise and in whatever form * * * located in a public warehouse * * * on December 31 of each year, if such products, materials and/or goods have been designated as in transit to destinations out of state pursuant to the published tariffs of any railroad or common carrier by the filing of the freight bill covering such products, materials and/or goods with the agency designated by such tariffs, so as to entitle the shipper to transportation rate privileges: * * * Provided, That any property located in any public warehouse, * * * on December 31 of each year, which is exempt from taxation under this provision but which is not shipped outside the state of Michigan pursuant to the particular tariff under which such transportation rate privilege was established, shall be assessed upon the next succeeding or any subsequent assessment roll by the assessing officer and taxed at the same rate of taxation as other taxable properties for the year or years for which such property was exempted, to the owner at the time of such omission; or if the owner or person entitled to possession of such products, materials and/or goods shall be a resident of or authorized to do business in Michigan and shall file with the assessing officer, with whom statements of taxable property are required to be filed, a statement under oath that said products, materi*706 als and/or goods are not for sale or in use, and will be shipped to a point or points outside the state of Michigan: Provided, That if any person, firm or corporation shall claim exemption by the filing of any such sworn statement, such person, firm or corporation shall append to his statement of taxable property required to be filed in the next year, or if no statement of taxable property is filed for the next year, a sworn statement on a form required by the assessing officer shall be filed showing a complete list of the property for which such exemption was claimed with a statement of the manner of shipment and of the point or points to which said products, materials and/or goods were shipped from said public warehouse, * * * and any such products, materials and/or goods not shipped to a point or points outside the state of Michigan shall be assessed upon the next suceeding assessment roll, or on any subsequent assessment roll by the assessing officer and taxed at the same rate of taxation as other taxable properties for the year or years for which such property was exempted, to the owner at the time of such omission: * * * For the purpose of this section, a public warehouse * * * is defined as any warehouse * * * owned or operated by any person, firm or corporation engaged in the business of storing products, materials and/or goods for hire for profit who issues a schedule of rates for storage of such products, materials and/or goods and who issues warehouse receipts pursuant to the provisions of Act No. 303 of the Public Acts of 1909:1 Provided, That no portion of a public warehouse * * * leased to a tenant or no portion of any premises owned or leased or operated by a consignor or consignee or any affiliate or subsidiary of such consignor or consignee shall be deemed to be a public warehouse * * * >>
MCLA 211.9(14); MSA 7.9(14), insofar as applicable to the case at bar, provides:
"Fourteenth, Farm products processed or otherwise,*707 the ultimate use of which is for human or animal consumption as food, but expressly excepting wine, beer and other alcoholic beverages, regularly placed in storage in a public warehouse * * * as defined in the twelfth subdivision of this section, shall, while so in storage be considered in transit and only temporarily at rest, and not subject to personal property taxation: Provided, That the assessing officer shall be the determining authority as to what constitutes, is defined as, or classified as, farm products as used in this subdivision; * * *
Plaintiffs position is that defendant city is hopelessly pinioned on the horns of a dilemma. It argues that since it is conceded that the warehouse involved is a public warehouse as defined in the twelfth subsection as to all others except plaintiff the classification of non-public as to plaintiff alone runs squarely into the interdiction of United States Cold Storage Corp v Detroit Board of Assessors, 349 Mich 81; 84 NW2d 487 (1957).
In that case the Supreme Court quoted approvingly the following language:
" 'This is the rule;—its limitation [the government’s power of classification] is that it must not be exercised in "clear and hostile discriminations between particular persons and classes”.’ ” 349 Mich at 92; 84 NW2d at 493.
So plaintiff says the classification in this case of a public warehouse as defined in subsection 12 that exempts the farm products of another is a classification that is of necessity, a fortiori, and inescapably a clear and hostile discrimination between particular persons and classes and not of products.
On the other hand, continues plaintiff, if subsection 14 stands on its own subsectional feet, and the language of subsection 12 which creates the hostile
Defendant city by its able counsel has striven mightily to avoid being boxed into this corner. I see no way out.
Mr. Justice Edwards writing for the minority in the Cold Storage case pointed the way in his well reasoned dissent. He simply held the statute unconstitutional. However, the opinion collected only two other signatures. The majority opinion prevails and we are bound by it.
I believe that the legislative intent of subsection 12 was to eliminate the danger of the holding that Michigan was placing an unreasonable burden on interstate commerce, which, of course, is proscribed under the commerce clause of the Federal Constitution.
In the case at bar plaintiff did none of the things which would place it in the category of a consignor. It did not designate the goods as in transit to destinations out of state pursuant , to the published tariffs of any common carrier. It filed no
The learned trial judge in his well written opinion relied heavily upon Frigid Food Products, Inc v Detroit, 31 Mich App 402; 187 NW2d 916 (1971). In discussing that case he made the following observation:
"On the other hand, the court is faced with the case of Frigid Food Products, Inc v City of Detroit, 31 Mich*710 App 402 (1971), a case made available to the bar by publication after the plaintiff filed its brief in this matter and long after this case was started. No matter how I try, I cannot distinguish Frigid Food Products from the factual situation at hand. That decision talks only about a definitional issue not before this court, the meaning of 'affiliate’ in MSA 7.9. On the other hand, it refuses the personal property tax exemption to a farm products owner who places it in an 'affiliated’ public warehouse. Here we clearly have a 'subsidiary’ warehouse, for which the statute holds the same consequences. Frigid Food Products is silent on whether or not the farm products owner, apparently in the identical situation with respect to its goods as the plaintiff here, was a 'consignor’ or 'consignee’. To ignore the effect of that decision on the dispute at hand would be to say a decision by an appellate court should not be followed by the trial court unless the trial court assures itself that the appellate court has touched all logical bases on its way to final decision. I don’t think the appellate court has to do that, and to ignore this decision, I think, would mean that someone in the identical position as plaintiff in Detroit could come out with a different result than if he were operating here in Grand Rapids. If Frigid Food Products is to be restricted in its application, it must be done by the Court of Appeals or by the Michigan Supreme Court.”
I am compelled to disagree both with the general principle expressed and with the specific application of that opinion of the trial judge to the case at bar.
It is not my understanding that appellate courts do, or should adjudicate questions not raised, argued, and briefed in the court below. A contrary concept would constitute üs as "second-guess” trial courts and not courts of review. This I think would be mildly disastrous for both categories of courts.
Frigid Food Products decided what it decided and nothing more. The Frigid Food panel stated:
*711 "The issue before the circuit court was whether General Cold Storage Warehouse was an affiliate of Frigid Food Products so as to exclude plaintiff from the personal property tax exemption.
"The trial court found that Frigid and General were affiliated and that the assessment was proper. This decision was based upon a determination that 'affiliated’ means 'connected’ and that plaintiff did not establish its right to an exemption by a preponderance of the evidence.” 31 Mich App at 404-405; 187 NW2d at 917.
In this case no such question is presented. The agreed statement clearly concedes that Triple Temp Storage Company is a wholly owned subsidiary of plaintiff. The trial judge correctly notes, as seen in the prior quotation from his opinion, that "Frigid Food Products is silent on whether or not * * * plaintiff * * * was a 'consignor’ or 'consignee’ ”. That, however, is precisely what this lawsuit is all about.
Upon the answer to that question depends the answer to whether the exemption clearly denied to a consignor or consignee or a subsidiary or affiliate of such consignor or consignee, should be properly denied to plaintiff herein. I repeat, at the peril of repetition, that in the court below and again in this Court, plaintiff has insisted it is neither. If it is neither, the proviso relating to those two terms does not apply to it, and the constitutional dilemma is avoided.
This is the question which the Frigid Food panel directly and emphatically declined to adjudicate. I quote from Frigid Food, at 31 Mich App 405; 187 NW2d 917-918:
"Plaintiff attempts to raise the constitutional issue again on appeal. This Court will not entertain a question which was not raised in the pleadings, was specifically withdrawn by plaintiff at the pretrial conference, and where it is apparent on the record that plaintiff not*712 only could but did decide to proceed without reference to the principles of constitutional law. Mitchell v Grewal, 338 Mich 81, 87; 61 NW2d 3 (1953); Ridenour v County of Bay 366 Mich 225, 243; 114 NW2d 172 (1962); Azzaro v Stupar, 17 Mich App 170, 172; 169 NW2d 151 (1969).”
It seems to me that Frigid Food is not only not controlling, it is not even decisionally relevant to plaintiff’s first stated question for review.
By holding for plaintiff in this case I disturb not one iota the decisional holding in Frigid Food.
I hold further that the exclusion of any portion of a public warehouse owned by a consignor or consignee or any subsidiary thereof does not exclude plaintiff from the exemption for the reason that plaintiff is neither one nor the other by any known definition or usage of those terms (except as hereinbefore noted).
If the Legislature in subsection 14 had meant that anyone who merely stores farm products in a public warehouse by doing so becomes a consignor or consignee it would have been a simple matter to have said so. Instead it created an express presumption in order to bring products simply stored by one neither a consignor nor a consignee within the exemption. It did so by providing that farm products so stored should be "considered in transit and only temporarily at rest, and not subject to personal property taxation”. By this presumption they placed such products for tax purposes within the concept of the interstate commerce exemption. It is extremely significant, I think, that they made the exemption permanent by omitting from subsection 14 the right of the taxing authority to reassess them in any subsequent year which is provided for in subsection 12.
As I view the situation the taxing authority’s
For the reasons herein stated I would vacate the order granting defendant’s motion for summary judgment. I would direct the entry of a summary judgment for plaintiff as moved for in the trial court and award no costs.
Repealed by PA 1962, No. 174, § 9992, effective January 1, 1964. See, now, MCLA 440.7101 et seq.; MSA 19.7101 et seq. The change is irrelevant to the issues herein.
Art I, § 8.
I am not unmindful of the definitions of "consignor” and "consignee” contained in article 7 of the Uniform Commercial Code. MCLA 440.7102; MSA 19.7102. These provisions do not mandate a contrary result. I am here concerened with ordinary usage, not the usage- dictated by a definition contained in a specific statute for application to cases involving that statute. The UCC did not suddenly wipe out the longstanding ordinary usage definition of consignor and consignee for general purposes.