Daugherty v. Thompson

Stayton, Chief Justice.

The appellee leased the four leagues of school lands belonging to Frio county. The lease commenced in June, 1880, and ends in June, 1890. On June 16, 1886, he rendered his leasehold to the assessor of the county for assessment for taxes for that year, valuing it at two thousand dollars; but he declined to render for taxation the land at its value, as under the law he should have done had he been the owner of the fee. The board of equalization was then in session, and the assessor submitted the rendition offered by appellee to it. The assessor did not receive the rendition made by the appellee, when offered, but stated that he would lay the matter before the board of equalization, which he did; but it seems not to have acted up"on the matter. One member of the board, however, stated, when the matter was presented, that nothing could be done by the assessor other than to follow the instructions given by the Comptroller. The assessor then assessed the land against appellee as though he had been its absolute owner, and valued it at twenty-six thousand five hundred and eighty-six dollars, on which the taxes, State and county, amounted to two hundred and nineteen dollars and eighteen cents. The assessment was made as of unrendered land, and there was no application made by appellee to have it corrected, as to valuation or otherwise, by the board of equalization, The appellee tendered to the tax collector the sum of sixteen dollars and fifty-six cents, which he deemed to be the sum due for taxes on his leasehold estate, which was refused, and the tax collector then levied upon personal property supposed to be sufficient to pay the taxes claimed.

To restrain him from selling the property so seized this suit was brought, in which an injunction was granted that on final hearing was perpetuated, the appellee having paid into court seventeen dollars and fifty cents, the sum found to be due by him on his leasehold interest in the four leagues of laud.

The assessment complained of was made in pursuance of general instructions from the Comptroller to assessors; and the tax roll, which showed the assessment as of unrendered lands, was approved by the county commissioners court.

The appellee owned other property in the county subject to taxation, but it does not appear whether he had paid the taxes on that or not. As to this no question was made by the pleadings of either party, but no relief is asked except such as is claimed by reason of the fact that the tax collector was seeking to collect a tax based on the valuation of the leased land and not on the value of the leasehold.

No demurrer to the petition was urged, and in this state of the record no other question than that of the liability of the appellee to pay taxes on the land, for the year, as absolute owner, need be considered. That is the question in the case, and its solution depends upon the construction of articles 4691 and 4692, Revised Statutes.

Article 4691 provides that “property held under lease for a term of three years or more, or held under a contract for the purchase thereof, belonging to this State, or that is exempt by law from taxation in the hands of the owner thereof, shall be considered for all purposes of taxation as the property of the person so holding the same, except as otherwise specially provided by law.”

The fourth subdivision of article 4692 provides that “taxable leasehold estates shall be valued at such price as they would bring at a fair voluntary sale for cash.”

There is but one other provision of the statute having application to the taxation of leaseholds, and that is found in article 4673, Revised Statutes, which relates to exemptions from taxation. That article is as follows: “The following property shall be exempt from taxation, to-wit: 1. Public school houses and houses used exclusively for public worship; the books and furniture therein, and the grounds attached to such buildings necessary for the proper occupancy, use and enjoyment of the same, and not leased or otherwise used with a view to profit; all public colleges, public academies, all buildings connected with the same, and all the lands immediately connected with public institutions of learning; and all endowment, funds of institutions of learning not used with a view to profit; and all buildings used exclusively and owned by persons, or associations of persons, for school purposes. This provision shall not extend to leasehold estates of real property held under the authority of any college or university of learning.” * * *

“6. All buildings belonging to institutions of purely public charity, together with the lands belonging to and occupied by such institutions, not leased or otherwise used with a view to profit, and all moneys and credits appropriated solely to sustaining such institutions.”

All these statutory provisions must be construed in the light of the constitutional provisions applicable to taxation. Article 4673, was doubtless enacted under power expressly conferred oh the Legislature to exempt certain property from taxation, by section 2, article 8, of the Constitution. That section of the Constitution seems to apply to property owned by persons or corporations in private right, but which from the use to which it is applied is in a qualified sense deemed public property. Leases of such property for a purpose not carrying the exemption from taxation, would doubtless be embraced in article 4691, Revised Statutes, and therefore subject to taxation against the holder of the leasehold if it be for a term of three or more years. Such property, if leased for a term less than three years, for a purpose not carrying the exemption, would be subject to taxation, but in the absence of a statute so directing, such a leasehold would not be taxable against the lessee.

The general rule is that the owner of real estate leased is taxed upon the entire value of the property and this satisfies the constitutional requirement that " all property in this State, whether owned by natural persons or corporations, other than municipal, shall be taxed in proportion to its value.”

While such property leased for a term of three or more years, for a purpose not carrying the exemption, would become subject to taxation at its full value, yet the Legislature has power to impose the tax on the value of the leasehold on the lessee; but, in such case, in valuing the real estate for taxation against the owner it would seem that the value of the leasehold should be deducted, for otherwise there would be double taxation which, if permissible, will not be presumed to have been intended in the absence of a law that will not bear any other reasonable construction. Property exempted from taxation in the hands of its owner while used for the purposes on account of which the exemption is given, will doubtless become subject to taxation, if leased, for any period, to be used for a purpose which does not itself give the exemption, unless in eases in which the exemption is given by the Constitution or under a contract that would be impaired by taxation.

While this is true it does not follow that a lessee will be liable to pay taxes on the leasehold unless the law so provides.

The only law providing that a lessee shall pay taxes on leased property is found in article 4691, Revised Statutes, which determines what leasehold estates shall be taxable.

Subdivision 4, of article 4692, Revised Statutes, can have application to no other leasehold estates than such as are made taxable by the preceding article, for in all other cases, in the absence of a statute directing to the contrary, the owner of the real estate must pay taxes on the entire value of the land, whether leased or not.

In cases to which article 4691 is applicable it must be held that it was the intention of the Legislature only to impose on the lessee a tax based on the value of the “taxable leasehold estate” and not to impose upon him a tax based on a sum equal to the full value of the real estate, to be ascertained, as provided in 1, 2 and 3, subdivisions of article 4692, Revised Statutes.

If article 4691, Revised Statutes, has application to school lands granted to the several counties in this State, this view would be conclusive of the rights of the parties to this suit; for the assessment made against the appellee was upon property which he did not own and for taxes for which he was not liable.

He proposed to assess for taxation the property—the taxable leasehold estate—for which it is assumed he was liable, and this assessment was rejected.

The assessor then proceeded to assess against him the land itself at its full value, and for this there was no authority..

There is another view of the question, however, which, to our minds, is conclusive that county school lands are not embraced in article 4691, Revised Statutes.

The language of that statute is broad enough to embrace leases of lands owned by counties and held for school purposes, known as county school lands; and the power of the Legislature to impose a tax upon them, whether leased or not, unless restrained by the Constitution, could not be questioned', even though the declaration that “all property in this State, whether owned by natural persons or corporations, other than municipal, shall be taxed in proportion to its value,” does not make such taxation mandatory, for section 17 of the same article declares that “the specification of the objects and subjects of taxation shall not deprive the Legislature of the power to require other subjects or objects to be taxed in such manner as may be consistent with the principles of taxation fixed by this Constitution.” (Const., art. 8, secs. 1 and 17.)

It will be observed that section 1, article 8, of the Constitution does not require property belonging to municipal corporations to be taxed, and both the Constitution and statutes recognize counties as municipal corporations. (Constitution, art. 11; art. 676, Rev. Stat.) As before said, section 2, article 8, of the Constitution, gave to the Legislature power 'to exempt property held in private ownership but used for purposes which give to it a public character. Section 9 of article 11, however, exempts from taxation “property of counties, cities and towns owned and held only for public purposes, such as public buildings and sites therefor, fire engines and the furniture thereof, and all property used or intended for extinguishing fires, public grounds, and all other property devoted exclusively to the use and benefit of the public.” What the Constitution exempts from taxation the Legislature has no power to require to be taxed.

The Constitution declares that “all lands heretofore or hereafter granted to the several counties of this State for educational purposes, are of right the property of said, counties respectively to which they were granted, and title thereto is vested in said counties, and no adverse possession or limitation shall ever be available against the title of any county. Each county may sell or dispose of its lands, in whole or in part, in manner to be prescribed by the commissioners court of the county. * * * Said lands and the proceeds thereof, when, sold, shall be held by said counties alone as a trust for the benefit of public schools therein; * * * and the counties shall be responsible for all investments; the interest thereon and other revenue, except the principal, shall be available fund.” (Const., art. 7, sec. 6.)

In view of the provisions made by the Constitution of this State for the establishment and maintenance of public free schools, no one would contend that lands held by counties for that purpose were not held solely for a public purpose. Lands so set apart and solemnly appropriated for a purpose so essentially public as is the maintenance of public free schools, must be said to be “property devoted exclusively to the use and benefit of the public.” Such property the Constitution exempts from taxation.

The provisions of the Constitution to which we have referred bear evidence of an intention that the counties should sell or otherwise dispose of their school lands so as to raise, if they deem it proper, a revenue otherwise than through the interest that would accumulate on the principal for which the lands-might sell; and that this revenue, whether by way of interest or otherwise derived, should from year to year constitute an available school fund; the lands, or the price for which they should sell, to remain a permanent fund.

County school lands, when leased to raise an available school-fund, are as exclusively devoted to the use and benefit of the public as would they be if covered with school bouses; and the Constitution forbids the taxation of the means through which such lands may be made to yield a revenue, without sale, as fully as does it forbid the taxation of the lands. Forbidding the taxation of the lands, it forbids the taxation of an estate less than the fee, whether imposed on the county or its lessee.

If the constitutional provisions to which we have referred did not exist, looking to the policy which this State has steadily pursued in granting lands to counties for educational purposes, it could not well be held that the Legislature intended, by article 4691, Revised Statutes, to impose a tax on school lands owned by counties, even when leased; for taxes levied on such lands while owned by counties, whether imposed on the counties or their lessees, would but diminish the rental value of such lands, which it is not reasonable to suppose was intended, when the sole purpose for which such liberal donations were-made was to furnish the counties with a school fund.

We are of the opinion that lands granted to the several counties of this State for school purposes are not subject to taxation while owned by the counties, and so whether they be leased or not; and the judgment rendered by the court below must be affirmed.

It is so ordered.

Affirmed.

Opinion delivered June 12, 1888.