Nehalem Timber Co. v. Columbia County , 97 Or. 100 ( 1920 )

BURNETT, J.

1-3. As recited by the complaint, the plain effect of the legislation of Congress as construed by the federal courts was to vest in the railroad companies a title to the land to the extent of $2.50 per acre, and no more, and the balance of the estate remained in the United States government. At the utmost, therefore, the only taxable interest in the realty was that of the Railroad Company at the value mentioned. Section 3551, L. O. L., declares that:

“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 3586, L. O. L., as amended by Section 2 of Chapter 184, Laws of 1913, requires assessments to be made on the lands of each owner named in the roll as of March 1st of each year. In other words, the status of property on that date fixes its assessability. As amended by the same chapter, Section 3552, L. O. L., defines the terms “lands,” “real estate” and “real property” as being so construed as to include:

“The land itself, '* * with 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; * f and all mines, minerals, quarries, fossils and trees, in, under, or upon the land.”

For tax purposes this legislation inseparably yokes the timber to the land on which it is growing. The statute was further amended in 1919, but as only the taxes of 1916 are here involved, no notice will be taken of the latter legislation. It is a general principle that taxes follow the legal title, and this seems to be the sense and spirt 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.

Fletcher v. Alcona Township, 72 Mich. 18 (40 N. W. 36), was a case arising under a tax statute similar to that of this state. The plaintiff had conveyed the land to another, reserving all the pine timber standing thereon. The land was assessed to the grantee and in a separate list the timber was set down as the personal property of the plaintiff. Having paid the resulting tax under protest, the plaintiff sued to recover it. The court sustained his contention, saying:

“The ownership of timber standing and growing on land is an interest in the land itself, and, under this statute, assessable as realty. * * This timber standing and growing upon these lands, for the purposes of the assessment and collection of taxes, was real property, and no valid charge could be created against the plaintiff or lien acquired specifically upon the property by assessing it as personal. * * The tax is on the land, and includes the whole estate. If the land is sold for the tax, the deed conveys the land therein described and is prima facie evidence of title in the purchaser.”

See, also, Clove Spring Iron Works v. Cone, 56 Vt. 603; Williams v. Triche, 107 La. 92 (31 South. 926).

Anderson v. Miami Lumber Co., 59 Or. 149 (116 Pac. 1056), holds that a conveyance of timber growing upon land passes an interest in the real property. But here we have, not a conveyance of the timber, but an executory contract for such transfer of the title, which has an effect to create only an equitable estate in the grantee: Burkhart v. Howard, 14 Or. 39 (12 Pac. 79); Sievers v. Brown, 34 Or. 454 (56 Pac. 171, 45 L. R. A. 642); Higginbotham v. Frock, 48 Or. 129 (83 Pac. 536, 120 Am. St. Rep. 796); Collins v. Creason, 55 Or. 524 (106 Pac. 445).

4-6. Having in mind that this is a suit, not to quiet title, but to remove a cloud, we have recourse to the doctrine of O’Hara v. Parker, 27 Or. 156 (39 Pac. 1004). That case points out the distinction between a suit to quiet title and one to 'remove a cloud. In the former, the plaintiff must either be in possession or at least show that the property is not in the actual possession of another, and, asserting his own title in apt terms, declare that the defendant claims some interest in the estate, without defining it. The latter is then required to declare the nature and extent of his claim by appropriate allegations. In a suit to remove a cloud the plaintiff must set up his own title, declare the asserted estate of the defendant, and disclose the reasons why it is void. In O’Hara v. Parker the court cites with approval this excerpt from Pomeroy’s note to Section 1399, Volume TIT, of his Equity Jurisprudence:

“"When the estate or interest to be protected is equitable, the jurisdiction should be exercised whether the plaintiff is in or out of possession, for under these circumstances legal remedies are not possible; but when the estate or interest is legal in its nature, the exercise of the jurisdiction depends upon the adequacy of legal remedies. Thus, for example, a plaintiff out of possession, holding the legal title, will be left to his remedy by ejectment. * * Where, on the other hand, a party out’ of possession has an equitable title, or where he holds the legal title under such circumstances that the law cannot furnish him full and complete relief, his resort to equity to have a cloud removed ought not to be questioned.”

Here we have a case - in which the plaintiff contracted for an estate in lands embodied in the ownership of the timber growing thereon. Having paid $30,000 of the purchase price and not having paid the remainder, it had an equitable estate only, which would not ripen into a legal estate until the purchase price was fully paid. It was thus in a position to maintain a suit to remove a cloud.

“A cloud on title is an outstanding claim or encumbrance which if valid would affect or impair the title of the owner of a particular estate, and which apparently and on its face has that effect, but which can be shown by extrinsic proof to be invalid or to be inapplicable to the estate in question”: 11 C. J. 920.

7. The property was assessed directly to the plaintiff, implying that it held the fee to the realty in question. It was assessed at a value greatly in advance of that established by the congressional legislation and the decisions of the Supreme Court of the United States. In very truth, as disclosed by the complaint, the only assessable interest in any event, by whatever name listed, was this $2.50 per acre held by the Railroad Company. Moreover, the assessment of the fee to the plaintiff was untrue, because it had only an equity in the estate covering the ownership of the timber, and that only to the extent of the purchase price it had paid. If the claim of the county as thus asserted in its assessment was carried out to its full fruition, the result would be to deprive the plaintiff of its equity which is subordinate to the legal title, because it would eventuate in the sale of the legal title for the satisfaction of the taxes.

8. It is urged on behalf of the defendants that the filing of the assessment-roll wherein the fee of the property was assessed to the plaintiff was notice to it compelling its appearance before the county board of equalization, where, by petition, it could have secured the proper correction affording it a plain, speedy and adequate remedy at law, which it neglected. Ankeny v. Blakeley, 44 Or. 83 (74 Pac. 485), is cited in support of this contention. In that instance Ankeny held a large block of stock in the First National Bank of Pendleton. The assessor listed all of the stock of the bank to the. bank itself, instead of to the individual holders. Learning of this, the bank, by its officers, appeared before the board of equalization, complaining of the assessment on that ground,' and securfed its cancellation. But the board then assessed Ankeny and other stockholders for the amount of their holdings of the stock, whereupon the suit was instituted to correct the assessment for overvaluation and other alleged defects. The defendants here cite that case as requiring the plaintiff to pursue the remedy of appearing before the board of equalization as the hank did in that instance. That case was made to depend upon the fact that the bank voluntarily appeared before the board and not in response to any compulsory process. The filing of the assessment-roll is indeed notice, but only to those to whom notice is due, that is to say, to owners of property. It is not notice to those who are not concerned by reason of having no taxable interest in the property involved. So here, as we have shown, not having the legal title to the property and not being taxable for it, the plaintiff was not affected, as with notice, by the filing of the assessment-roll. As a consequence it was not compelled to appear before the board of equalization, and it is not concluded by the rule that it had a plain, speedy and adequate remedy at law in that form.

9, 10. It may be contended that the plaintiff has not done equity by paying or tendering the tax computed on a valuation of the property at $2.50 per acre and for that reason is not entitled to relief. We must remember, however, that since it has not a taxable estate in the realty the plaintiff is not obligated to the county for any tax upon it, whatever its liability may be when the timber becomes personalty by severance from the land. True enough, it covenanted with the other contracting party to pay all taxes which may be lawfully assessed against the land until the timber is severed, but the county as a taxing power has no privity or concern with that stipulation. As said in Williams v. Triche, 107 La. 92 (31 South. 926):

“No matter what may be the contract between private individuals, the state_ is not bound thereby, if not in exact accordance with its statutes, any more than are creditors of a succession concerned by any private arrangement made as between themselves by the heirs of the deceased.”

11. “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 1913. In an extended note to Mint Realty Company v. Philadelphia, 218 Pa. St. 104 (66 Atl. 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 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, 27 Or. 156 (39 Pac. 1004), being the owner of an equitable estate which was liable to be defeated by the enforcement of the assessment, it was entitled to maintain the suit to remove the cloud. Its complaint indeed stated a cause of suit and was not amenable to the demurrer. The decree of the Circuit Court is reversed.

Reversed and Remanded.

Benson, Harris and Bean, JJ., concur.

Rehearing denied July 20, 1920.

Department 1.

On petition for rehearing.

Rehearing Denied. Mr. Glen R. Metsker, for the petition. Mr. Richard Sleight, contra.