Life Insurance Co. v. Ford Motor Co. , 322 Mich. 209 ( 1948 )

The bill in this case was filed to enforce specific performance of a contract to convey lands. From a decree for defendant, the plaintiff appeals.

The facts are set forth in the pleadings. On November 20, 1947, plaintiff John Hancock Mutual Life Insurance Company (hereinafter referred to as Hancock), a Massachusetts corporation, entered into a land contract with the defendant Ford Motor Company (hereinafter referred to as Ford), providing for Hancock's purchase of land in Wayne county, upon which Hancock proposed to build a housing project. A condition of Ford's obligation to convey the land to Hancock was that Hancock should have the right to own and operate the project for 30 years or more and should not be subject to any requirement of the State of Michigan to divest itself of such ownership (except by an exercise of the power of eminent domain). On November 26, 1947, Ford wrote Hancock of its decision not to convey the property to Hancock, Ford being of the opinion that Hancock could not comply with the above-mentioned condition of the agreement. On December 12, 1947, Hancock filed its bill of complaint against Ford for specific performance of the land contract. In its answer, Ford alleged Hancock's inability to comply with the condition.

Defendant Ford asserted that plaintiff Hancock could not own and operate the housing project for 30 years or more for two reasons; First, that the statutes of the State of Michigan do not permit a foreign insurance company to invest its funds in such enterprise, such investment being forbidden to a Michigan insurance company; and second, that article 12, § 5, of the Michigan State Constitution of 1908, does not permit plaintiff to hold such real estate more than 10 years, the project being for rental and income purposes, and the lands not to be actually occupied by Hancock in the exercise of its franchise.

Since this case was submitted in this Court, the State legislature has enacted Act No. 45, Pub. Acts 1948 (Ex. Sess.),^* approved May 14, 1948, to take immediate effect. Defendant Ford concedes that as amended by said Act No. 45, Pub. Acts 1948 (Ex. Sess.), the provisions of the insurance code of Michigan (3 Comp. Laws 1929, §§ 12298, 12312, 12313) do not prohibit insurance companies from owning housing projects in Michigan, if permitted to do so by their domiciliary laws. The first question raised by defendant therefore needs no further consideration at our hands.

The second question, however, still remains for our determination. That question involves a construction of article 12, § 5, of the Michigan State Constitution of 1908, which is as follows:

"No corporation shall hold any real estate for a longer period than ten years, except such real estate as shall be actually occupied by such corporation in the exercises of its franchises."

We are not concerned in this case with the question of who may enforce the provisions of this section, for which see PereMarquette Railroad Co. v. Graham, 136 Mich. 444, and GermanCorporation v. Negaunee German Aid Society, 172 Mich. 650. So long as any authority exists which could enforce a limitation of plaintiff's ownership to a 10-year period, plaintiff could not comply with the terms of its agreement to own, operate and manage the housing project for a period of 30 years or more and not be subject to any requirement to dispose of the lands prior to the expiration of 30 years.

The above quoted section in the Constitution of 1908 omits the words, "hereafter acquired," which words appeared in a section (otherwise identical) in the Constitution of 1850 following the words, "any real estate." Plaintiff claims that the section in question was without much thought and "out of historical inertia" carried from the Constitution of 1850 into the draft of the Constitution of 1908, but that in the meantime the midwest had been settled and developed and that "apprehended evils attendant [upon] the corporation holding of land" have become "largely — if not entirely — historical." However, the framers of the Constitution of 1908 took pains to eliminate the two words, "hereafter acquired," thus demonstrating that they were carefully considering the provisions of the section in question.

This Court has in Thompson v. Waters, 25 Mich. 214, 228 (12 Am. Rep. 243), determined in 1872 as follows:

"The main, if not the only, evils to be apprehended from allowing corporations, domestic or foreign, to take, hold or convey lands are: 1st, — The danger of their becoming speculators in lands to large amounts, keeping them unimproved and thereby retarding the progress of settlement and improvement, or, if improved, preventing settlers from obtaining clear or independent titles, and introducing a system of tenancies inwhich the tenants would be, in a great measure, dependent uponsuch corporations; 2d, — The holding of such lands for a long period of time, as they pass by perpetual succession without any change or break by death, as in the case of natural persons; and 3d, — The influence which wealthy corporations, holding large bodies of land in the State, might exercise upon the legislature." (Italics supplied.)

It can be considered that some such matters as above expressed were the considerations for the reincorporation (with the exception of the two words above noted) of the section in question in our State Constitution in 1908.

The trial judge took judicial notice of a general housing shortage in Michigan. Plaintiff asks us to construe the section in question (Const. 1908, article 12, § 5) liberally so as to enable plaintiff to invest capital in Michigan. Plaintiff argues that the evils against which the section in question was framed have become historical and are no longer existent. We do not assume that the evils before mentioned or dangers therefrom do not now exist in the same form or in a modern equivalent thereof. The Constitution provides a method for amendment and we are concerned here only with giving to the Constitution the effect intended by its framers. We do not undertake to alter the Constitution to suit a supposed present necessity for permitting corporate capital to own residential buildings in Michigan for more than 10 years.

Plaintiff claims that the words "actually occupied" in the section in question would admit of plaintiff's operation of a housing project because the occupation by the tenants in the housing facilities would be the occupation of plaintiff as landlord and because maintenance and repair employees in discharge of their duties would have access to the various buildings of the project and thus characterize the relationship of the owner to the property as that of an actual occupant.

It is of primary importance in this case to determine the meaning of the words "actually occupied," appearing in the section in question. This Court has had occasion to construe the meaning of those words in Detroit Young Men's Society v.Mayor, etc., of Detroit, 3 Mich. 172. In that case the words, "actually occupied," occurred in an act for assessing property and collecting taxes, which (among other things) provided that "the personal property of all library, benevolent, charitable and scientific institutions, incorporated within this State, and such real estate belonging to such institutions as shall be actually occupied by them, for the purposes for which they were incorporated," are exempt from taxation. In that case the plaintiff owned a building on Jefferson avenue in Detroit. The lower or first story (not being required for the uses of the society) was finished into two stores, which, with the cellars below them, were leased by the society for business purposes, for a given rent, as were, also, two small offices in the second story. The remainder of the building was used entirely for the purposes of the society, and as to the remainder of the building, the society was found exempt, the words of the opinion decreeing the exemption being, page 184, "subject to a deduction of the value of the tenements actually used and occupied by them for the purposes for which they were incorporated." It will thus be seen that this Court has decided that at least under the statute giving a certain exemption from taxation, the words, "actually occupied," do not include portions of buildings or parts of real estate rented.

We have further to consider the case of Grand Rapids Indiana Railway Co. v. City of Grand Rapids,137 Mich. 587 (4 Ann. Cas. 1195), quoting from the syllabus (2),

"Lands owned by a railroad, but in possession of private individuals, and used exclusively by them in their individual business for wood and coal yards and sheds and storage of grain, etc., are neither `actually occupied' by the railroad nor `necessary or in use in the proper operation' of the road within section 6277, 2 Comp. Laws 1897,^** and are therefore properly taxable as other real estate under the general law."

The supreme court of Oregon in the case of HibernianBenevolent Society v. Kelly, 28 Or. 173 (42 P. 3, 30 L.R.A. 167, 52 Am. St. Rep. 769), was considering a subdivision of a taxation statute which provided that "the personal property of all literary, benevolent, charitable, and scientific institutions, incorporated within this State, and such real estate belonging to such institutions as shall be actually occupied for the purposes for which they were incorporated," shall be exempt from taxation. The court said, pages 193, 194:

"It is the actual occupancy of the property which determines its right to exemption, and not the use made of its proceeds. The plain and obvious meaning of the statute is that only the real estate actually occupied and in use by these different institutions for the purposes for which they were organized shall be exempt from taxation. While so occupied and used, it does not come in competition with the property of other owners; and the purpose for which it is used was supposed by the legislature to be a sufficient benefit to the public to justify its exemption from the burdens of taxation imposed upon other property. But, when such property is used for the purpose of accumulating money, the law imposes upon it the same burden of taxation as it imposes upon other property similarly situated." (Italics supplied.)

It is apparent that the Oregon court construed the words, "actually occupied," to designate the unrented portions or descriptions of real estate in the direct control and possession of the owner as distinguished from portions or descriptions of real estate rented and used "for the purpose of accumulating money," but occupied by the owner's tenants.

In the case at bar, so far as plaintiff proposed to construct for rental purposes, or income-producing purposes, a housing project, including apartment or tenement buildings and dwellings or other buildings, the section of the Constitution (article 12, § 5) forbids plaintiff holding such lands for a longer period than 10 years.

The decree appealed from made reference to a written opinion filed in the cause, "with the same force and effect as if the same were herein word for word set out." The written opinion contains reasoning and conclusions of law with which we are not in accord, especially as to the construction of the State Constitution. The decree appealed from is to be considered as modified for that reason.

The Constitution of the State forbids the holding of the lands by plaintiff under the conditions and for the purposes contemplated for a period longer than 10 years. The decree appealed from should be affirmed for the reasons set forth in our opinion herein. Costs to defendant.

SHARPE, J., concurred with REID, J.

^* See Stat. Ann. 1948 Supp. §§ 24.77, 24.91, 24.92. — REPORTER.

^** This is 2 Comp. Laws 1929, § 11166 (Stat. Ann. § 22.257). — REPORTER.