53 P.2d 33 | Or. | 1935
In Banc. The issue before us is whether a parcel of real property situated in the city of Eugene, improved with an eight-story and a two-story structure used for office and store purposes, is exempt from taxation. The plaintiff claims that it holds title to this property in trust for the state, and that the state is, therefore, the beneficial owner of the property. It uses this alleged circumstance as the basis for a contention that the property is exempt from taxation. The defendants point to the fact that the legal title is not vested in the state, and contend that if the state has a beneficial interest it does not have the sole beneficial interest. They argue that the property is subject to taxation.
A witness, whose testimony is not contradicted, swore that some years ago $340,000 was invested in this property. In 1933 it was assessed on a valuation of *110 $124,265 which was based upon 50 per cent market value.
February 21, 1933, when W.E. Miner, now deceased, owned this property he, as donor, and the plaintiff executed an instrument entitled Indenture of Trust, from which we quote:
"* * * the said Donor desiring to dedicate certain property to public usefulness has this day granted, bargained, sold and conveyed and in consideration of the covenants and agreements herein contained, hereby grants, bargains, sells and conveys to said Trustee and its successors forever, and the said Trustee for itself and its successors accepts the following property, * * * To have and to hold the above-described and granted premises unto the said Trustee, its successors and assigns forever, in trust, nevertheless, for the use and benefit of the state of Oregon, for the following purposes: (a) For the maintenance of a chair of instruction of real estate and insurance in the School of Business Administration of the University of Oregon, the occupant of said chair to be known as the `Miner Professor of Real Estate and Insurance.'"
This paragraph is followed by others which set forth the nature of the educational chair established.
The instrument provides that before anything becomes payable to the state the following items must be paid: (1) expenses incurred in the operation of the properties; (2) the trustee's charges; (3) annuities reserved to W.E. Miner, H.T. Miner (brother of the donor), and Virgie C. Miner (wife of H.T. Miner); (4) monthly installment payments of $312.50 on principal, plus interest, upon a mortgage of $75,000 which encumbered the property; (5) a note for $2,100 payable to Myron Eaton; and (6) a note for $1,200 payable to Henry Slater.
While the deed conveys title to the plaintiff, its authority to administer the property is limited by authority *111 conferred upon four other groups or persons: (1) W.E. Miner and H.T. Miner; (2) the Miner Professor of Real Estate and Insurance; (3) a committee of faculty members of the University of Oregon; and (4) the Board of Higher Education of the state of Oregon. We shall now review the sections of the trust instrument which thus limit the trustee's power. The instrument provides that as long as either W.E. Miner or H.T. Miner live they "shall manage the real property hereinbefore described, and the buildings situated thereon and the business connected therewith". In the event of the destruction of the building by fire during the lifetime of either of the two Miners, the trustee is authorized to expend any fire insurance money received only upon the approval in writing by the Miners. The instrument provides:
"Said real property shall not be sold during the lives of W.E. Miner and H.T. Miner or the survivor without the trustee first obtaining the written approval of such sale from said W.E. Miner and H.T. Miner or the survivor."
These, we believe, are the principal provisions which reserve authority to the Miners.
Next, we shall review the provisions which subject the trustee to the Miner Professor of Real Estate and Insurance. The instrument provides:
"The said Miner Professor of Real Estate and Insurance, or such other person as may be appointed by him with the approval of the Dean of the School of Business Administration * * * shall assist the said W.E. Miner and/or H.T. Miner in the management of said property * * * such services in assisting in the management of said building shall be rendered without compensation."
The instrument provides that the courses taught and the research work done with the funds derived from the *112 trust "shall be under the direction of the said Miner Professor of Real Estate and Insurance". It further provides:
"The application of said funds to the purpose for which this trust is created shall be determined by the Miner Professor of Real Estate and Insurance, with the approval of the president or corresponding administrative head of the University of Oregon, and the dean or corresponding academic head of the School of Business Administration."
We next come to the powers conferred upon the committee of faculty members: the Miner professor, the president of the university, and a dean. These are given power to approve or disapprove expenditures of the proceeds of the trust fund. The instrument provides that the plaintiff's power to sell the property is subject to the approval of this committee. It further provides that in the event the trustee
"shall be in doubt as to the course to be followed in any particular matter under the provisions of this indenture * * * or in case the application of such provisions is doubtful or in case there is an absence of any provision governing its conduct, then the trustee may refer the question to the said committee for decision and direction, and the decisions and directions of said committee shall fully authorize the trustee to proceed."
These are the principal provisions subjecting the trustee's authority to the supervision of the faculty committee. The instrument also subjects some of the trustee's authority to the Board of Higher Education of this state. We quote from the instrument:
"If in the opinion of the committee hereinafter appointed it shall hereafter appear advisable or desirable to convey and/or transfer the property or a part of the property forming the corpus of this trust to the *113 state of Oregon, the committee shall refer the matter to the Board of Higher Education of the state of Oregon or its successors, and the trustee, upon the written application of said State Board of Higher Education, signed by a majority or more of the members thereof, shall thereupon convey and/or transfer said property to the state of Oregon for the purposes hereinabove specified and subject to all of the terms, provisions and conditions of this indenture. * * *"
Due, apparently, to the fact that the building will eventually become valueless, the instrument provides that the trustee shall annually deduct from the amount otherwise payable for the state's benefit a depreciation charge which shall become a "sinking fund". It directs that this fund "shall be invested in such income-bearing securities as are authorized by the laws of the state of Oregon at the time being for the investment of trust funds of trust companies or funds of savings banks".
We have mentioned the fact that the trust instrument provides that annuities should be paid W.E. Miner, H.T. Miner and the latter's wife. These annuities do not run concurrently, but successively. The instrument provides that there should be paid to W.E. Miner and to H.T. Miner and to their survivor all of the net income from the two-story building and one-half of the net income from the eight-story building. Subsequent paragraphs provide the manner in which the income is payable to the survivors of these two men, and finally makes provision for the payment of the annuity to the survivor of the three Miners. Upon the death of the last of the three the entire net income becomes payable to the state for purposes for which the trust was created. In order to assure the Miners of a sufficient income the instrument provides that during their lives some items of expense may be ignored. For *114 instance, contributions into the sinking fund may be lessened during their lives. It also provides that in the event real property taxes should be exacted they should be paid from the state's portion of the fund, and not out of that payable to the Miners. The same is true of attorneys' fees.
The record does not disclose the age of W.E. Miner when the instrument was executed, but a witness testified that at the time of the trial, one year later, H.T. Miner was 71 years old and that his wife, Virgie, was then 50. About the time the trust instrument was executed the State Board of Higher Education adopted a resolution accepting the provisions of the indenture of trust and expressing the state's purpose to abide by them. Concurrently with the execution of this instrument, the plaintiff assumed charge of the property. About two months later W.E. Miner died.
May 24, 1933, H.T. Miner and the plaintiff executed another instrument which recited that H.T. Miner granted to the plaintiff all other rights, titles, etc., reserved to him by the previous instrument, "but upon the condition that there shall be paid to the donor (H.T. Miner) out of the net income from said properties accruing or to accrue to the donor, pursuant to the terms of said trust agreement, the sum of $250 per month, payable monthly, which sums shall be cumulative; that is to say, any deficiency in any and all monthly payments shall be made good out of any subsequent net income which shall become applicable thereto. * * *"
At the time of the trial in May, 1934, H.T. Miner and his wife were still living. Although approximately $3,000 should have been paid to Miner upon his annuity, only $450 had been paid. He had waived payment of the balance so as to enable the plaintiff to remodel the *115 interior of the building for the occupancy of new tenants. For similar purposes the mortgagee under the aforementioned mortgage had temporarily waived payment to it of approximately $1,500 of monthly installments upon principal. At the time of the trial $58,500 remained unpaid upon the mortgage. The $2,100 Eaton note and the $1,200 Slater note remained unpaid. Of the 1932 taxes $900 has not been paid. The plaintiff insists that the state is now the owner of the property and, hence, that unpaid balance has been cancelled. The 1933 tax amounting to $7,083.11 has not been paid.
According to Professor C.L. Kelly, whom the university assigned to this property, pursuant to the requirements of the trust indenture, the excess of income over expenditures in the 13-month period of March 1, 1933, to March 31, 1934, was $14,359.93. In those expenditures nothing was included for payment of real property taxes, principal upon mortgage, the annuities, remodeling expenses, and contributions to the sinking fund. The 1933 taxes — if their payment is required — amount to $7,083.11. Thirteen monthly payments of $312.50 each upon principal total $4,062.50. Thirteen annuity payments of $250 each aggregate $3,250. The remodeling expenses incurred in this 13-month period aggregated $4,539.94. Contributions to the sinking fund in this 13-month period, as estimated by the building's auditor, amount to $7,366. These sums aggregate $26,301.55 and exceed to the extent of $11,941.62 the aforementioned balance of $14,359.93. But we have included only 12 months' taxes. Taxes accrued in 1933 against this property at the rate of approximately $590 per month, or $7,670 for a 13-month period. If we ignore the tax item and consider remodeling as a capital expenditure, the excess of income over expenditures in the 13-month period is still insufficient to take care of *116 the 13 $312.50 payments upon principal, the annuity and the contributions to the sinking fund.
The defendants' brief, in part, charges that the trust agreement was executed by the donor in an effort to avoid the payment of taxes. It claims that in this manner W.E. Miner sought to appropriate the tax money for annuity purposes. While we believe that the earnings of the property are short of existing needs, we are unwilling to believe that the trust agreement was executed for any improper purpose. We have reviewed the above figures, not for the purpose of determining motives but because they serve purposes which we shall later consider.
The above, we believe, states the essential facts.
Section 69-101, Oregon Code 1930, provides:
"All real property within this state, and all personal property situated or owned within this state, except such as may be specifically exempted by law, shall be subject to assessment and taxation in equal and ratable proportion."
Section 69-104, Oregon Code 1930, provides:
"The following property shall be exempt from taxation: (1) all property, real and personal, of the United States and this state * * *."
Section 69-102, Oregon Code 1930, provides:
"The terms `land', `real estate' and `real property,' as used in this act, shall be construed to include the land itself, whether laid out in town lots, or otherwise, above and under water, all buildings, structures, substructures, superstructures and improvements erected upon, under or above, or affixed to the same, and all rights and privileges thereto belonging or in any wise appertaining; also any estate, right, title or interest whatever in land or real property, less than the fee simple; * * *" *117
Section 35-4701, Oregon Code 1930, provides:
"The general powers and duties of the board of regents [state board of higher education] shall be as follows: * * * (2) To manage, control and apply all property, of whatever nature, which may hereafter be given to or appropriated for the use, support or benefit of the university, according to the terms and conditions of such gift or appropriation. Legal title to all real property acquired by the University of Oregon shall be taken and held in the name of the state of Oregon. Legal title to all real property heretofore or hereafter conveyed to the regents or board of regents of the state university or University of Oregon, or to the University of Oregon, or to the state university, is and shall be deemed to be conveyed to and vested in the state of Oregon. * * *"
The plaintiff contends that in the contemplation of a court of equity the state is the owner of this property and that, therefore, the property is exempt from assessment for taxes. The defendants contend that since the legal title is not reposed in the state the property is not exempt.
As is evident from the above facts, the legal title to this property is vested in the plaintiff, a corporation organized for profit, and which, therefore, is not exempt from the payment of taxes. While the state has a beneficial interest in the property, its beneficial interest is not the only one created by the indenture of trust. An annuity of $3,000 is payable to H.T. Miner who, according to the American Experience Table of Mortality, has a life expectancy of eight years, and, upon his death, an annuity of $2,400 becomes payable to his widow who has a life expectancy of 20.91 years. In the meantime, $3,300 must be paid to the holders of the two notes which apparently are overdue. A sum in *118 excess of $500 per month must be paid upon the mortgage note to take care of the installments of principal and interest. Eventually, the property may yield an income to the state, but if before that day the mortgage should be foreclosed or H.T. Miner should revoke the trust for the state's failure to conform to the provisions of the trust instrument, as he has a right to do under its express provisions, the state would receive nothing. These are not remote possibilities. It will be recalled that it recently became necessary to omit a series of payments to H.T. Miner and to the mortgagee. It is apparent from the data reviewed in the preceding paragraph that there is no immediate prospect for the state to receive an income from the property. In the meantime, the state must provide at its own expense for the management of the building a faculty member of the university. In short, neither the property nor its income is now being devoted to a public use. It is now serving only the purposes of the Miners and their creditors. Further considering the nature of the state's interest, if any, in this property, it will be borne in mind that the state has virtually no voice in the management of the property nor control over the disposition of the income — unless we deem the authority which the committee of faculty members and the board of regents may occasionally exercise as being the voice of the state. Even this limited authority amounts to virtually nothing so long as H.T. Miner lives. Control over the disposition of the funds is given to the Miner Professor of Real Estate and Insurance virtually free from restraint. The board of regents is responsible for his appointment, but having been appointed the Miner fund is under his control. In short, the state has really no control over the fund or the real property. It is a mere conduit through which the *119 net income of the property, if there ever is any, passes to the ultimate beneficiaries of the trust.
In determining suits concerning the taxation and exemption from taxation of property, some courts declare that if the legal title is vested in a non-exempt individual or entity, the property is subject to taxation. They express an unwillingness to consider equities, stating that tax assessors are not equipped to assess such estates. They declare that the equitable doctrine of conversion is not employed by the law of taxation. This rule received recognition by this court in Nehalem Timber Co. v.Columbia County,
"It is a general principle that taxes follow the legal title, and this seems to be the sense and spirit of this statute. It refers to the land itself, which includes the growing timber thereon. The taxing power is not concerned with indefinite equities. It is said in Section 3586, L.O.L., as so amended, that `No assessment shall be invalidated by a mistake in the name of the owner of the real property assessed, or by the omission of the name of the owner, or the entry of a name other than that of the true owner, if the property be correctly described.' All of which indicates that the legal estate alone is the subject of taxation. * * * `All property, real and personal, of the United States and of this state, except land belonging to this state held under a contract for purchase thereof,' is exempt from taxation: Section 3554, L.O.L., as amended by Chapter 4, Laws of 1913. In an extended note to Mint Realty Company v. Philadelphia, 218 Pa. Sta. 104 (66 A. 1130, 11 Ann. Cas. 388), the doctrine is established that until full completion of a contract to purchase realty from the United States, the land is not taxable as against the purchaser. The doctrine of that case and its note is applicable to the interest of the United States in the realty here *120
involved, so far as the same is affected by the executory contract to purchase the timber. On the principle that the legal title alone is subject to taxation, and the only semblance of it being the $2.50 per acre already mentioned, vested in the Railroad Company, the effort to tax the plaintiff at the largely increased value upon its bare equity was, pro tanto at least, a cloud upon its title and under the authority of O'Hara v. Parker,
In that case the facts were that the plaintiff had a contract to purchase from the United States, at a price of $192,498.13, a parcel of real property in which a railway company had an interest to the extent of $2.50 per acre. After the plaintiff had made a substantial payment upon the purchase price the county in which the land was situated undertook to tax the plaintiff's interest. The plaintiff then instituted a suit similar to the one which we are now considering to remove the assessment on the theory that it constituted a cloud upon the plaintiff's title. In holding that the plaintiff had no assessable interest, this court employed the language above quoted. In Pacific SpruceCorporation v. Lincoln County,
The courts generally hold that property of the United States under contract of sale is not taxable unless nothing remains to be done except to deliver to the purchaser his instrument of conveyance. Nevertheless, in the decisions of the above two cases our court and the federal district court placed upon the sections of our code with which we are concerned the interpretation above noted.
In The People v. University of Illinois,
"The property of the state, counties and other municipal corporations, both real and personal, * * * may be exempted from taxation."
A statute exempted from taxation "all property of every kind belonging to the State of Illinois". In holding that this property did not belong to the state of Illinois, within the contemplation of these constitutional and statutory provisions, and that it was therefore subject to taxation, the supreme court of Illinois held:
"From these authorities the rule is to be deduced that ownership of property in the State, such as exempts that property from taxation, must be exclusive and free from any kind of legal or equitable interest in anyone else. If the State holds property as trustee, not for the public but for the benefit of specified private persons, such property cannot be said to belong to the State so as to exempt it from taxation. It seems clear that the State does not have exclusive ownership of the property involved here. It may not sell it except under the terms, in the manner and for the purposes indicated in the trust. It may not exercise complete control over it even for the purposes set forth in the deed of trust, since that deed specifies the management of the farms shall be by a committee consisting of members of the *123 faculty of the university who are not a part of the board of trustees, and not, therefore, a part of the body corporate of the university. It further appears in the application of this test, that, acting as trustee, the State, through the board of trustees of the university, does not hold the property in trust for the public, but that a certain class of specified private persons are the only ones to receive beneficial interest therefrom. The state cannot, therefore, be said to own the property to the exclusion of any legal or equitable interest in anyone else. Nor can it be said that the property belongs to the State by reason of the provisions of clause 17 of the articles of trust permitting the use of surplus income, on order of the circuit court, for the purpose of conducting agricultural or home economics research work. * * * the application of such surplus income is not left to the exclusive control of the university but can be so used only on order of the circuit court; and second, it is not at all probable that in carrying out this trust there will ever be such a surplus. There are 350 acres of this land. From facts of common knowledge it is readily determined that the net income of this land can scarcely be said, with any certainty, to be sufficient to permit a surplus * * *. This provision is contingent and its application so very uncertain that it cannot be said to bring the property within the rule. Even though there should be such a surplus, the State in receiving the same for the purposes of the university would be receiving but a part of the benefit of the fund, as the balance, and by far the larger part, would still be devoted to the benefit of private persons."
After that decision had been announced the legislature enacted the following statute:
"Within the intent and meaning hereof, all property whatsoever, real and personal, whether held in trust or absolutely, heretofore or hereafter transferred, donated to or held by the State, or any public educational institution thereof, for the encouragement of education, shall be deemed property of the State of Illinois." *124
In The People v. University of Illinois,
"It is beyond the power of the legislature to add to or broaden the exemptions which the constitution thus permits it to provide * * *. Our holding in People v. University of Illinois, supra, that the property in question did not belong to the State within the meaning of the act, was as well a holding that it was not property of the State within the meaning of the constitutional provision authorizing exemptions."
See also Trustees etc. v. Champaign County,
In Grand Lodge of Maryland K.P. v. Mayor etc. of Baltimore,
"The provisions of this sub-title shall not apply to * * * buildings, equipments and furniture of hospitals, asylums, charitable or benevolent institutions or to the grounds appurtenant thereto in any city or incorporated town in this state which are necessary to the respective uses thereof."
In 1926 a lodge authorized the purchase of a site and the construction of a lodge building thereon and appointed a building commission. The latter, in order to facilitate the program, incorporated the Maryland Pythian Castle Building Commission possessed of a capital stock of $50,000. Only two shares of a par value of $10 each were issued. It at once proceeded with the performance of the program assigned to it and never undertook anything else. It purchased a site, erected *125 a lodge structure thereon and then delivered possession to the grand lodge. In holding that the property was subject to taxation during the year in which title was vested in the commission, the court declared:
"The general rule is that unless otherwise prescribed by statute the trustee, as the owner of the legal estate, would be assessed with the value of the land * * *. This rule is commended by its utility, simplicity and universality; and so makes for the certainty and prompt collection of taxes upon real estate. * * * The petitioners, however, ask that the court disregard this established rule upon the theory that the beneficial owner is the real and substantial owner; * * * The argument is that the taxes paid by the trustee are actually borne by the beneficial owner since the estate of the trustee was wholly legal although its trust was an active one until possession and title were taken by the grand lodge. To reach this conclusion it is however, necessary to abandon a principle of taxation without any sanction from the legislature and to ignore a construction of the tax laws of the state which the court has consistently applied."
From Hill v. Williams,
"As the fee simple title remained in the Slingluff estate the land was properly assessed to that estate. It was no part of the duty of the Appeal Tax Court to inquire into or separately value the interest or easement which Mrs. Hill secured under the deed. And there is nothing in our general tax system which compels the collector to examine what title a party has to land with which he is assessed. The assessments are made by other officers, and he is not required to review or to verify their proceedings before making a sale. Cooper v. Holmes,
In Latta v. Jenkins,
"No part of said property was owned or occupied during the year 1928 by the beneficiaries of the trusts established by said will. * * * None of said beneficiaries own or occupy said property or any part thereof, for religious, educational, or charitable purposes. * * * The instant case is distinguishable from Central Bank Trust Co. v. Commissioners of Yancey County,
From Michigan Trust Co. v. City of Grand Rapids,
262 Mich. 547 (247 N.W. 744 , 89 A.L.R. 840), we quote:
"Personal property in the hands of a trustee is assessed to the trustee and not to the beneficiaries of the trust, for the reason the legal title is in the trustee and not in the beneficiaries of the trust."
In addition to citing the authorities just reviewed, the defendants, in support of their contention that the property under consideration is not exempt from taxation, cite several decisions which hold that property owned by the federal government, subject to the rights of a purchaser or a prospective donee, is not taxable by a state unless there remains nothing to be done except to deliver the patent or other instrument of conveyance. Illustrations of these authorities are Mint RealtyCo. v. Philadelphia,
In support of its contention that the limited beneficial interest which the state has in this property is sufficient to exempt it from taxation, the plaintiff cites decisions which we shall now review.
In State Land Settlement Board v. Henderson,
"Property * * * such as may belong to the United States, this State, or * * * shall be exempt from taxation."
The court held:
"We have no doubt but that property acquired by the board for the purpose of carrying out the objects of the act belongs to the State within the intent and meaning of the constitutional provision."
It held the land exempt from taxation.
In Board of Regents v. Hamilton,
"All property belonging exclusively to this state or to the United States"
shall be exempt from taxation. In holding that the property was not taxable, the court stated:
"It will be noticed that this subdivision refers to actual ownership, and not to the mere location of the legal title. The controlling question in matters of taxation is, who in fact owns the property, and not where rests the mere legal title. * * * The Kansas state agricultural college is a state institution; it is absolutely and exclusively under the control of the state; its properties belong to the state. * * * It is enough to know that the properties are the properties of the state; and while to-day it may place the control of such properties in the hands of one party, to-morrow it may place such control in the hands of another. * * * This agricultural college is not a private college, nor a mere institution organized under the general corporation laws, whose existence the state by virtue of its control over the general corporation laws controls, but is on the contrary a mere instrument created directly by the state, and by which it manages the properties conveyed to it by the United States. It is in fact simply an arm by which the state holds and controls the properties given to it by the United States. * * *"
In both the California and Kansas decisions the name of the state agency was merely a different appellation for the state. The agency was not trustee for the state, but was a part of the state itself.
In Litz v. Johnston,
One of the statutes construed and applied in Watson v. City ofBoston,
"The whole beneficial interest is in the institution. * * * Nor can it be material that the property is by law assessable to the trustee and not to the person entitled to the beneficial interest. The exemption is based upon the use which is presumed to be made of the fund, namely, for an educational purpose, and not upon the persons in whom stands the legal title."
The court held that the equitable interest of the Wentworth Institute in the trust fund was property within the meaning of the exemption clause of the statute and that it was exempt from taxation. It will be observed that no one but the institute shared in the beneficial interest, and that the court construed the statute as making exemption dependent upon the use to which the property was being applied, and not to the status of the title.
Sargeant Lahr v. Herrick Stevens,
In State v. Watkins,
"* * * If the whole income of the property to be set aside had been given to Dr. Appleby for life or so long as he remained unmarried, it may be conceded that his interest would have been taxable, and that it would have been the duty of the executors or trustees to pay the taxes assessed upon his interest and deduct the amount thereof from the income. But such is not the case, for, as we have stated, the gift to Dr. Appleby was a conditional annuity of $10,000. Such being the case, he had no taxable interest in the property (Rev. Laws 1905, § 797, subsec. 7), and any tax levied thereon could not be deducted from his annuity, but would have to be paid out of the property constituting the endowment of the nontaxable charity corporation. * * * The annuity, however, in this and in all similar cases, would not be a charity, and the statute expressly provides for the taxation of the income of every annuity, *132 unless the capital of the annuity be taxed within this state. Rev. Laws 1905, § 797, subsec. 7. It is clear that the part of the residue of the estate which was set apart for the Dr. Appleby Trust was exempt from taxation on May 1, 1907, for the same reason that the rest of the estate was so exempt. Any attempt to tax either was an attempt to tax the property of a public charity."
The court repeatedly mentioned the fact that "the gift to Dr. Appleby was a conditional annuity of $10,000". It pointed out that "he had no taxable interest in the property" and stated that any tax levied upon the securities set apart to produce his annuity "would have to be paid out of the property constituting the endowment of the nontaxable charity corporation". It will be observed that in that case the securities were in the possession of the charity's trustees.
In People ex rel. Crook v. Wells,
"* * * That the corporation at the time of the assessment was the absolute owner of the $85,000 in personal property assessed is, I think, too clear for controversy. The residuary estate vested in the corporation at the moment of the death of the testator, and *133 at no time since his death was the property bequeathed to the charitable corporation subject to taxation."
It held that this was true even though a New York statute provided that if a person hold taxable property as agent, trustee or executor he shall be assessed therefor. The court construed this statute to mean that the property is assessable only in the event that it is taxable property; that is, property not employed for charitable or benevolent purposes.
In Ellsworth College v. Emmet County,
"The following classes of property are not to be taxed * * * all grounds and buildings used for public libraries * * * and for literary, scientific, charitable * * * institutions * * * moneys and credits belonging exclusively to such institutions * * * provided, however, that real estate owned by an educational institution of this state as part of its endowment fund shall not be taxed."
In holding that this land, apart from the $25,000 portion reserved to the home for the aged, was not subject to taxation, the court said:
"That statute does not require that the college be the owner of the legal title to the property. It says that real estate owned by an educational institution as a part of its endowment fund shall not be taxed. The word `owned' is broad, and undoubtedly comprehends *134 equitable, as well as legal, ownership, and the question of exemption, so far as the interest of the college is concerned, depends primarily upon whether or not the college is the equitable owner of the property devised and of the income derived therefrom while the property is in the name of the testamentary trustees. * * * Of course, the doctrine of equitable conversion does not apply to revenue statutes and convert real estate into personalty or personalty into real estate; but in dealing with the subject of taxation and construing exemption statutes, the doctrine of equitable conversion may be resorted to in order to ascertain the nature of the equitable ownership of the beneficiary. * * * The gift to the home was quite as specific as to the college, and each has an equitable ownership in the lands; the home to the extent of $25,000, and the college to the remainder. No sound legal or equitable reason appears why the lands should be wholly exempt because the college is entitled to the larger share of the funds. Its equities are no greater than those of the home for the aged, and neither the money nor the property given to the home is exempt under any statute to which our attention has been called. The result of the whole matter is that the lands were exempt from taxation in the hands of the trustees, save as to the amount given in trust for the establishment of the home for the aged, to-wit, the sum of $25,000. To that amount, and to that only, should the lands have been assessed. In other words, there should have been deducted from the total value of the lands assessed all in excess of $25,000. All this was not done, but the lands were decreed to be assessable to their full value without any exemption."
In Williston Seminary v. County Commissioners,
"Personal property placed in the hands of a corporation or individual, as an accumulating fund for the future benefit of heirs or other persons, shall be assessed to such heirs or persons, if within the commonwealth." *135
Property was being held by a trustee which would eventually become the property of the seminary, but which was charged with some annuities payable to non-exempt individuals. These annuities, according to the decision, "would be but a small proportion of the income from the fund; and other funds were also charged with the payment of them, and were more than sufficient for such payment". A statute provided that the personal property of literary institutions was exempt from taxation. The seminary was not now entitled to receive the property thus held in trust, and, that being true, the tax officials proposed to exact a tax from the seminary. The court, in holding that the property was exempt, declared the statute of exemption was not limited to personal property in possession. We quote from the decision:
"But especially in the present case the property held in trust is to all practical intents and purposes the property of the seminary. The legal title is in the trustees; but the whole beneficial interest, unless, indeed, the annuitants are to be taken into account, is in the seminary. It would be a strained construction of the statutes to hold that this fund is to be considered as property of the seminary for the purpose of taxation but not for the purpose of exemption."
Apparently the interests of the annuitants were deemed inconsequential. It will be observed that they were also a charge upon other property which was more than sufficient in value to discharge them.
In Norton's Ex'rs v. City of Louisville,
"In the case at bar it is admitted that the entire proceeds of the property sought to be taxed, and the income arising therefrom, will go to the orphans' home under the will. * * * When one is the equitable owner of property and is entitled to the income from it he has the enjoyment of every benefit that could come to anyone who might own the property. To hold that the property should be taxed because of its control by others than the trustees of the orphans' home for a specified period is giving effect to the shadow and not the substance."
It made no mention of the two incidental trusts except to state that other property in the possession of the executors was sufficient to establish them.
Other authorities cited by the parties we deem it unnecessary to review herein although we have studied them carefully. Their relationship to the issue before us is remote.
We do not believe that the above-reviewed decisions are in serious conflict when the nature of the local statutes is considered. All seem to recognize the same general principle of law. They may be summarized thus: In the two Illinois decisions concerning the farms bequeathed to the University of Illinois, the court held that the state's equitable title was insufficient to exempt *137 the property from taxation; but the state's equitable interest was not the equivalent of sole beneficial ownership. The immediate beneficiaries were students in need of financial assistance. Only in the event a surplus remained after their needs have been satisfied could the state derive any direct benefit from the trust. In the Maryland case the court applied the rule stressed in the Illinois decisions, that the status of the ownership of the fee, rather than the nature of the use, determines the issue of exemption. However, it must be borne in mind that when the Maryland tax was imposed the property was not being used for benevolent purposes. Hence, in that case when the tax was imposed the fee was not vested in the benevolent association, and the property was not being used for a tax-exempt purpose. In the annotation appearing at page 671 of Volume 34 A.L.R., the editor cites several authorities holding that land on which buildings to be used for charitable purposes are in course of erection is not exempt from taxation. In Latta v. Jenkins, supra, the fact that 55 per cent of the proceeds derived from the sale of a business building must be paid to a charitable institution was held insufficient to exempt 55 per cent of the property's value from taxation. Here, as in the Maryland case, the present status of use determined the issue of exemption and taxation. Present use, rather than ultimate use, settled the issue. The decisions concerning the taxation of property, the legal title to which reposes in the United States, hold that as long as the federal government possesses any interest whatever in the property it is not taxable locally. In other words, as long as the government can declare a forfeiture, the state can not impose a tax. The converse of this rule is not questioned in any of the authorities reviewed above; that is, if the state's equitable title is not exclusive the *138 property is not exempt. State Land Settlement Board v.Henderson, supra, and Board of Regents v. Hamilton, supra, merely found that the title was vested in the state under an assumed name. In those two cases no trustee had been injected between the state and the fee. In State v. Johnston, supra, since the statute provided that the test of exemption was the nature of use, and not the character of ownership, the court held that the property, which was being used for purposes "exclusively charitable", was exempt from taxation. The same was true inWatson v. City of Boston, supra. There a Massachusetts statute, according to the court's interpretation, based exemption "upon the use" to which the property was being applied. In both of those instances the property at the time the tax was imposed was being applied to a tax-exempt purpose; and in both instances no one but the exempt institution had any interest whatever in the beneficial ownership. State v. Watkins, supra, raised the question of what should be done when the charity's beneficial interest in part of a fund is postponed through necessity of paying an annuity. The charity was the owner of the entire fund and had all of it in its possession. In those particulars the situation differed from the facts present in Latta v. Jenkins. Since the charity owned the fund, and the annuity owned none of it but was required by another statute to pay a tax upon his annuity, the court held that the fund was tax exempt. The fact that the charity would not acquire the beneficial interest in the part segregated to assure payment of the annuity until the annuitant's marriage or death, was deemed unimportant. Somewhat similar is People ex rel. Crook v. Wells, supra. Here, while the portion of the estate which would eventually become the property of the Masonic Guild was in the custody of the executors it could not be *139 applied to charitable purposes. But no one except the guild had any beneficial interest in it. The fact that its charitable use was postponed while the estate had been fully probated was deemed unimportant under the New York statute regulating exemption. Substantially the same situation existed in Ellsworth College v.Emmet County, supra. There the proceeds derived from the sale of a parcel of land were to be distributed thus: $25,000 to a non-exempt organization, and the balance (by far the larger part) to a college. In the meantime, the income from the property was to be credited to the college. Although the latter would not acquire the residue at once, nevertheless its interest in that part of the fund was exclusive and was returning to it a present benefit — income. In part, these two decisions seem to be in conflict with Latta v. Jenkins, but it is well to note that in these two cases the properties had moved further in the direction of the charities than in the Latta case. In the first of these two cases the court spoke of the guild as being already "the absolute owner of the $85,000 in personal property" then in the custody of the executors, and in the other case the court stressed the fact that the three trustees charged with the sale of the land were also trustees of Ellsworth College. WillistonSeminary v. County Commissioners, supra, and Norton's Ex'rs v.City of Louisville, supra, are very similar to the two decisions just mentioned. In each of them an additional feature was present — the trustees were required to pay small annuities. But in each instance the testator had provided sufficient other property to amply take care of the annuities. The annuity features were treated in the decisions as unimportant.
From those of the above decisions in which exemption was sought on the theory that the state owned the property, it will be observed that the exemption was *140 recognized when it appeared that the fee was vested in the state's name. But when a trustee intervened between the state and the fee, and the trustee was required to devote the income to special purposes with only a remote interest available to the state, the exemption was refused. In the decisions where the exemption was claimed under the provisions of statutes granting it to charities and educational institutions, the exemption was allowed if the title was vested in the name of the charity, and if the property or fund was being used for tax-exempt purposes. But if a trustee held title and the beneficial interest of the tax-exempt institution was free of other equities, the property or fund was held exempt from taxation, unless local legislation required that the property must be devoted to charitable uses at the time the tax was imposed and it was not being so employed. These are the rules which we deduce from the foregoing authorities.
In Moorman's Exr. Trustee v. Board Supervisors,
The legal principles employed in the above decisions may be succinctly stated thus: Real property, the title to which is vested in the state, whether in its *141 name or in the name of a state agency, is exempt from taxation. It is also exempt if the state possesses the sole beneficial interest, the title being vested in a trustee. Property of charitable, educational and benevolent societies is exempt from taxation if the local statute so authorizes. The exemption of such institutions is purely statutory and, hence, the provisions of the statute govern the nature and extent of the exemption. If title to the property is not vested in the charity, and if the statute grants exemption only when title is vested in the name of the charity, the property is subject to taxation. But, if the position of the title is immaterial and the nature of the use governs exemption, the property will be held exempt from taxation if it is being devoted to a charitable use, even though the title is vested in some third person, or if the property at the time is in the custody of the executors of the estate of the deceased benefactor. Likewise, if the property is being liquidated by a trustee under the provisions of a will or trust indenture, whereby the proceeds are payable to the charity, the property will be held exempt from taxation while under liquidation.
It is evident that the decisions which deal with exemption of charitable, benevolent and educational institutions are not entirely in point. The exemption of such institutions is purely statutory and is governed by the provisions of the exemption statute. The exemption of property owned by the state is inherent and is withheld only when a constitutional provision or a statute in unmistakable language withholds it: City of Portland v.Multnomah County,
"Independent of any other consideration, property can not escape taxation on the ground that it is public property unless it is in fact owned by the public as represented by the state or some local subdivision or representative thereof. However, title need not be in the name of the state or local subdivision if it is really owned by it or if it is held in trust for it. * * * On the other hand, the exemption does not extend to land or other property not belonging to the public as represented by the state, local subdivision or the like, or in which it has only some indirect or expectant interest, such as mortgagee.
"If there is no constitutional or statutory provisions expressly exempting state or municipal property, it is taxable where not devoted to public uses, although it would not be taxable if devoted to public uses. The ultimate test is not municipal ownership but public use. On the other hand, if such property is expressly exempted by the constitution or a statute, and there are no qualifying words used, the property is exempt regardless of its use; and a constitutional provision forbidding exemption of property used for private or corporate profit does not include public property." *143
From a comprehensive annotation appearing in 132 Am. St. Rep. 330, we quote:
"Where land equitably and in fact belongs to the state or some agency of the state, it is exempt from taxation, notwithstanding that the title thereto rests in some individual, board or commission: * * * The exemption from taxation will not be extended to property in which the interest of the state is not immediate, but very remote and contingent: Thomson v. Union Pac. R. Co., 9 Wall. 579,
From 26 R.C.L., Taxation, p. 331, § 290, we quote:
"The property of a state is exempt from taxation because, as the sovereign power, it receives the taxation through its officers, or through the municipalities it creates, that it may, from the means thus furnished, discharge the duties and pay the expenses of government. Its property constitutes one of the instrumentalities by which it performs its functions. As every tax would to a certain extent diminish its capacity and ability, the courts have generally been unwilling to hold that such property was subject to taxation in any form, unless it were made so by express enactment or by clear implication. The exemption of state property extends to the property of all public departments of the state even though the title is in a board of trustees or in a separate corporation, as is often the case with a state university or other state institution. It does not extend to property which belongs to a private corporation, though used for strictly public purposes."
There can be no doubt that the University of Oregon is a state agency and, therefore, any property owned by it, in the absence of qualifying language forming a part of the instrument of conveyance, is owned by the state. However, it will be observed from § 35-4701, *144
Oregon Code 1930, previously quoted, that the board of regents is authorized to accept on behalf of the state conveyances of property only when the deed reposes title in the name of the state. It will be recalled that § 69-104, Oregon Code 1930, previously quoted, exempts from taxation "all property, real and personal, of the United States and of this state". Section 2 of the same act exempts from taxation the public or corporate properties of counties and cities "used or intended for corporate purposes". No such qualifying words are attached to the exemption recognized in state-owned property. Therefore, it is not essential to the exemption claimed by the plaintiff that the Miner buildings "should be used or intended for corporate purposes" of the state if it is true, as the plaintiff contends, that the state owns that property. Therefore, the question that confronts us is not one of use, but of ownership. The best definition that has come to our attention of what constitutes state ownership within the contemplation of such requirements is that given by Mr. Justice Cobb in Board of Trustees of Gate CityGuard v. Atlanta,
"Public property within the meaning of that clause of the constitution which authorizes the general assembly to exempt from taxation `all public property' embraces only such property as is owned by the state or some political division thereof, and title to which is vested directly in the state or one of its subordinate political divisions, or in some person holding exclusively for the benefit of the state or a subordinate public corporation."
We also quote from Ryan v. Gallatin County,
"The fifth point is, that the state is a stockholder in the bank, and therefore the owner of the property taxed in such a sense as to bring it within that provision of the statute which exempts from taxation the real and personal property of the state. The state was not in any sense the owner of the property taxed, but the title to the same was either in the bank or the assignees. It is only property which the state owns that is exempt from taxation, not that in the avails of which she may, or may not ultimately be entitled to share."
In the instant case the title to this property is not vested in the state nor in any state agency. The state is not even the party-plaintiff in this suit. There is no immediate prospect that the state will derive any benefit from the property; in fact, there is no certainty that it will ultimately receive any income from it. The state's beneficial interest is not exclusive, but must be shared with others whose equities are superior to the state's. The income from the property, if any should ever be received by the state, will not be subject to the control of any agency created by the legislature, but will be under the control of a committee *146 created by the trust indenture. In fact, nothing is really given to the state. The moment the state receives anything it is required to pass it on to the committee. Next, as we have already pointed out, the state and the trustee have virtually no control over this property. For instance, if the buildings should be destroyed by fire or other casualty, the disposition of the insurance money will be determined by H.T. Miner, and not by the trustee nor by the state.
Applying the principles of law expressed in the above authorities, it is our belief that the exemption claimed in this suit can not be granted under our statute unless (1) the fee is vested in the state, or (2) the state's beneficial interest is exclusive of all equities of non-exempt persons. It is clear that these conditions are not present. Therefore, the property is subject to taxation.
The cause will be remanded to the circuit court with instructions to enter a decree in favor of the defendants. Costs and disbursements will not be awarded.
CAMPBELL, C.J., and KELLY, BELT, BEAN, BAILEY and RAND, JJ., concur. *147