Trimble v. City of Seattle
1914 U.S. LEXIS 1442 · 231 U.S. 683 · 34 S. Ct. 218 · 58 L. Ed. 435
January 5, 1914 · Docket 108
Headnotes
Generated summaries- Headnote 1
Washington lessees of state tide lands argued that later statutes authorizing local improvement assessments violated their leases. The state court admitted the general private-lease rule but held it inapplicable to state leases for taxation purposes.
- Headnote 2
The implied lessor obligation to pay taxes and assessments is a rule of legal policy, not a necessary meaning of the words lease, demise and let, so the rule may be limited by special considerations.
The federal court analyzed whether the lease words created an express or implied covenant protecting state lessees from later special assessments. It treated the tax-payment rule as doctrinal rather than fixed by the lease language alone.
- Headnote 3
When the law creates an obligation outside the expressed intent of the parties, courts must consider all circumstances and the effect of imposing that obligation.
The court decided whether to overturn the state court holding that a state lease does not carry a constructive obligation to indemnify lessees against later exercises of the state taxing power. It emphasized the need to weigh the public effects of implied obligations.
- Headnote 4
The leases were made by the State of Washington. Subsequent statutes authorized cities to assess those leaseholds for local improvements. The court held that the state court was not clearly wrong in refusing to read an anti-tax covenant into the state lease.
- Headnote 5
The plaintiffs argued that the state leases implied a covenant of quiet enjoyment and that later assessment statutes unconstitutionally impaired their rights. The federal court rejected that implication in the absence of an express covenant to refrain from taxing.
- Headnote 6
The federal court reviewed whether the Supreme Court of Washington erred in excluding the implied lessor tax-payment rule from state leases. It declined to substitute its own construction of state law for the state court's judgment.
- Headnote 7
The opinion noted that the state court had decided in direct response to the lessees' argument that the state's contract made the land free of all charges. The federal court therefore declined to go behind the state court's judgment on subsidiary statutory points.
- Headnote 8
The court considered the constitutional implications of state-owned leaseholds held by private lessees. It treated the passage of a leasehold interest into private ownership as bringing the normal incidents and burdens of private property.
- Headnote 9
The plaintiffs in error argued that their leases contained an implied covenant for quiet enjoyment. The Washington court recognized the general private lease rule but held it did not apply to state leases.
- Headnote 10
The court examined whether the words lease, demise and let necessarily imposed a state promise to shield the lessee from later local improvement assessments.
- Headnote 11
When the law creates an obligation outside of the expressed intent of the parties, it must consider all the circumstances and the effect with reference to them.
The court used this standard in deciding whether state law should imply a constructive duty to protect leaseholds from the exercise of state taxing power.
- Headnote 12
The court distinguished ordinary private leases, where the burden of a tax is not of public concern, from leases made by the state itself.
- Headnote 13
The Washington court held that state policy excluded a constructive obligation to protect state leases from local improvement assessments. The Supreme Court affirmed.
- Headnote 14
The Washington court recognized the ordinary lease rule but said it did not apply, for taxation purposes, to leases made by the state. That rule was described as a policy rule rather than a fixed meaning of the lease words.
- Headnote 15
The court explained that the obligation implied by lease language is imposed by legal doctrine rather than by ordinary interpretation. Because it is doctrinal, the rule may be confined where special public policy considerations require a limit.
- Headnote 16
The court applied this principle to the implied obligation to pay taxes in leases. It considered whether implying a state promise not to tax would create a public restriction on the state's taxing power.
- Headnote 17
Unlike private leases, where tax responsibility is generally a private matter, a state lease carrying a promise not to tax would create a public restriction on the state's taxing authority. The court declined to impose such a restriction without clear authority.
- Headnote 18
The 1905 and 1907 statutes permitted assessments of leaseholds within local improvement districts. The court held that those statutes did not impair the lessees' contractual rights or violate constitutional prohibitions.
- Headnote 19
The court rejected the idea that taxability was an anomaly. Once a leasehold or other property interest becomes private property, it naturally takes the ordinary incidents of private property, including exposure to public taxation.
Opinion
delivered the opinion of the court.
This is an attempt to reverse a judgment confirming an assessment on certain leaseholds of tide lands. The leases were executed by the State in 1899. Subsequent statutes of 1905 and 1907 respectively, authorized the assessment of such leaseholds for local improvements specially benefiting them, and the inclusion of them within local improvement districts by cities of the first class. The City of Seattle made a plank roadway, created an improvement district, levied an assessment which failed, Coast Land Co. v. Seattle, 52 Washington, 380, and then in due form levied the reassessment that is in question here. The plaintiffs in error argue that the leases contained an implied covenant for quiet enjoyment and that the subsequent laws that authorized the assessment impair their constitutional rights. Art. I, § 10. Amendment XIV, § 1. The Supreme Court of Washington, admitting the general rule as to leases, held that so far a.s concerns taxation, it did not apply to leases made by the State. 64 Washington, 102.
The concession of the court was that in private contracts “in the absence of a covenant or condition to the contrary, it is an implied covenant in every lease that the lessor shaíl pay all taxes and assessments levied on the leased land during the term.” Stated in this form, the rule appears to be a rule of policy to which special considerations may set a limit. But it might be suggested that if the State should expressly covenant against such assessments it could not impair the obligation of its contract by a subsequent law. The words used in these leases are ‘lease, demise and let,’ and from Spencer’s Case, 5 Co. Rep. 16a, 17a, down to the present day these words have been said to imply a covenant. 1 Wms. Saund. 322, n. 2. Mostyn v. West Mostyn Coal & Iron Co., 1 C. P. D. 145, 152. Mershon v. Williams, 63 N. J. L. 398, 406. Words express whatever meaning convention has attached to them, and so it may be argued that the State has covenanted against this tax in express terms.
Nevertheless it is obvious that the supposed meaning was not reached by simple interpretation. There is no suggestion of warranty, in dedi or demisi by any usage of speech alone. The warranty was what Lord Coke called a warranty in law, Co. Litt. 384a, an institution, not depending upon an expression of intent, not arising because the words mean warrant, but imposed from without by the law. In Butler’s note to this page the lessor’s obligation is put as reciprocal to the tenant’s obligation to pay rent, (compare 5 Co. Rep. 17a), just as the warranty in dedi in some cases was a consequence of tenure. One may wonder whether in fact the warranty incident to a sale in early law before the machinery of implied contracts was thought of (Glanv. VII, c. 2; X, c. 15; Lex. Sal. c. 47; 1 Löning, Vertragsbruch, 103; 2 Inst. 274, 275), was not given a scholastic turn, extended, limited and embodied in sacramental words — whether Glanville’s Donatores, grantors, did not suggest the special effect of dedi in the Statute de Bigamis as interpreted by Lord Coke. (The Statute itself says that the feoffor is held ratione doni proprii. 4 Ed. I., c. 6.) But whatever may be the history, it is plain, as we have said, that the rule is not the result of interpretation but of doctrine; and hence it is that very commonly the rule is stated as expressing the general operation of a lease and not as depending upon the use of a particular word. 64 Washington, 102, 104. J. W. Perry Co. v. Norfolk, 220 U. S. 472, 477. Duncklee v. Webber, 151 Massachusetts, 408, 411, and cases cited in 24 Cyc. 1057; 18 Am. & Eng. Encyc. of Law, 2d ed. 650. . It has come back to what it started as being, a construction of the law; and since, notwithstanding its age, the special effect of demisi has not entered into speech so far as to reach popular understanding, the rule still may be construed as extending no further than reason dictates. Indeed warranties in law always have been dealt with on this principle. See e. g. Brett v. Cumberland, Cro. Jac. 521, 523. Therefore we may consider the question before us on the footing upon which it was discussed by the Supreme Court of the State.
The question is, then, whether our duty requires us to overthrow a decision that the policy of the state law excludes a constructive obligation to indemnify against the exercise of the sovereign power of taxation from leases by the State. Put in this form, it is not hard to answer. When the law creates an obligation outside of the expressed intent of the parties, it must consider all the circumstances, and the effect with reference to them. In ordinary cases the whole property is taxed and which party shall bear the burden is not a matter of public concern. But when the State makes the lease, the supposed obligation would be an obligation not to tax — a restriction of public import not lightly to be imposed. Providence Bank v. Billings, 4 Pet. 514, 561. Wells v. Savannah, 181 U. S. 531, 539, 540. St. Louis v. United Railways Co., 210 U. S. 266, 273, 274. J. W. Perry Co. v. Norfolk, 220 U. S. 472, 480. It is urged that to deny the State’s obligation discriminates unconstitutionally against this class of lessees, since all others are free from the burden. But that is not true. Whether landlord or tenant shall pay a tax is a matter of private arrangement, and the practice one way or the other has no bearing on the matter. The argument from inequality really works the other way. If these leaseholds are not taxable, they are a favored class of property; for ordinarily leaseholds are taxed even if they are lumped and included in the value of the fee. When an interest in land, whether freehold or for years is severed from the public domain and put into private hands, the natural implication is that it goes there with the ordinary incidents of private property and therefore is subject to being taxed. See New York ex rel. Metropolitan Street Ry. Co. Metropolitan Street Ry. v. New York State Board of Tax Commissioners, 199 U. S. 1, 38.
The plaintiffs in error think that thus far there has been a failure to understand their contention that these assessments aré against the land, and therefore are met by the supposed contract of the State, that the lessees should have the land free of all charges. The court below appears to us to have decided in direct' response to that argument that the contract of the State did not go so far, and we are of opinion that we ought not to pronounce the decision wrong. There was some subsidiary discussion of the meaning and operation of the Statutes, but upon those matters we do not go behind the judgment of the Supreme Court of the State. '
Judgment affirmed.