Gunderson Bros. Engineering Corp. v. State Tax Commission

DENECKE, J. The issue is whether certain personal property of the plaintiff taxpayer is exempt from the assessment of a personal property tax because of the Oregon Free Port Act. The principal section of the Act (OB.S 307.810) provides: “(1) Personal property in transit through this state is goods, wares and merchandise destined for sale in the ordinary course of trade or business, manufactured or produced outside the state and brought into the state for transshipment to an out-of-state destination (other than the county of origin), while being so shipped or while held in public or private storage awaiting further shipment. Such property is deemed to have acquired no situs in Oregon for purposes of taxation. Such property shall not be deprived of exemption because while in the warehouse the property is assembled, bound, joined, disassembled, divided, cut, broken in bulk, labeled, packaged, relabeled or repackaged. The exemption granted shall be liberally construed to effect the purposes of OPS 307.810 to 307.990.”① [100] The facts were largely stipulated. The taxpayer brought wheels, axles, frames and springs into Oregon and put them together to form trucks for railroad cars. The components of -the trucks were held together largely by pressure from the weight of the components. Railroad car frames were placed on the trucks where they were held only by the weight of the frames. The railroad cars were destined for and were shipped out of state. The tax court held the component parts of the trucks and the trucks were entitled to the free port exemption and not subject to personal property tax. 3 OTR 315 (1969). If we were to interpret these facts and the statute, apart from any stipulation, we would have grave doubts whether the taxpayer is entitled to the free port exemption; however, the Commission has stipulated that certain crucial facts are within the purview of the statute, and on this basis we conclude that the taxpayer is entitled to the free port exemption. The Commission argues that it did not intend to “stipulate itself out of court.” We are quite certain that was not the Commission’s motive. When the Commission, however, stipulates, for example, that the component truck parts were “assembled, bound and joined,” the precise phrase of the statute, we will not consider its contention made initially on oral argument in this court that the component parts were not “assembled, bound and joined” within the contemplation of the statute. The most pertinent parts of the stipulation which we conclude foreclose the Commission are as follows: “II “On January 1, 1966, plaintiff was the owner [101] of certain wheels, axles and other personal property, all of which will hereinafter be referred to as the Subject Property. The Subject Property was goods, wares and merchandise manufactured or produced outside the State of Oregon, purchased by plaintiff outside the State of Oregon and brought into the state by plaintiff. ii* # * * # “IV “At all times material herein, the Subject Property was held in private storage in segregated lots, was designated as being £in transit’ upon the books and records of the warehouse wherein the same was located, and, while being so held, was assembled, bound and joined to railroad car frames manufactured by plaintiff and destined for sale in the ordinary course of trade or business. “V “At all times material herein, plaintiff manufactured railroad cars for railroad companies, including Southern Pacific Company, Union Pacific Bailroad Company, Great Northern Bailway Company, and St. Louis Southwestern Bailway Lines. Title to the railroad cars was transferred to financial institutions, whose offices were located outside the State of Oregon. All of the railroad cars, including the Subject Property which was assembled, bound and joined thereto, were delivered by plaintiff to the railroad company on the tracks at plaintiff’s plant in Portland, Oregon. The railroad cars, including the Subject Property which was assembled, bound and joined thereto, were destined for shipment and were forthwith shipped to out-of-state destinations [other than the counties of origin of the Subject Property] by the railroad company to whom plaintiff delivered the same.” We respectfully take issue with the statement in the dissent that making the stipulation the basis for [102] our affirmance will come as a surprise to the parties. Upon reargument, counsel for the taxpayer stated without contradiction, that after the stipulation was entered into, which was after the Commission hearing but before the tax court hearing, he relied upon the stipulation as evidencing an abandonment by the Commission of its previous position that the assembly of the component parts of the trucks was manufacturing. The dissent’s interpretation of the stipulation, that it only admits that the truck parts were “assembled, bound and joined” to the railroad car frames, and not that it admits that the component truck parts themselves were “assembled, bound and joined,” is not the interpretation which the Commission places upon its stipulation. In oral argument the Commission stated that by the stipulation it intended to admit that according to definitions in Webster’s Dictionary the component parts of the truck were “assembled, bound and joined” together but it was not intending to thereby admit that they were “assembled, bound and joined” as that phrase is used in the statute. Affirmed. Footnotes [①] Weyerhaeuser Co. v. Tax Comm., 244 Or 561, 419 F2d 608 (1966), construed this statute; however, the issues therein are not comparable to those in this case. We did note that the [100] statute states that the exemption stated shall be liberally construed.