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(161 N.E.)

E. 1165, decided in 1904, which case relates to the same property as involved herein, it appearing in section 5 of the journal entry and finding of facts of that case that:

"Flowing from near the easterly end or angle of the marsh and forming an outlet for the drainage of lands lying further east is a narrow channel, not clearly defined in its beginning, but becoming sharply defined further westward. This channel is referred to in the original surveys as 'the creek flowing through the marsh,' but is now known as Black Channel. It has its course roughly parallel with the sand bar as it flows westward, till by a turn to the north it touches the bar and thence proceeds in a westerly direction and empties its waters into Sandusky Bay."

Again, the map in the case of Lockwood v. Wildman, decided in 1844, appearing in the earlier editions of 13 Ohio, 430, shows a stream marked "Plum brook," taking its course through the marsh.

Having been found to be "natural waterways" by the Court of Appeals, and the record showing that the streams have current and channels well marked, we are of opinion that both streams come within the definition of water courses and neither loses its character as such because at times, when the wind is in the right direction, the waters of these streams may rise with the waters of Sandusky Bay and recede with the change of

wind.

A stream does not become less a water course because at times its banks fill and overflow from freshets, rainfall, flood, or back water. Neither does it lose its character as

a water course by being dry at times, provided it flows ordinarily and permanently for substantial periods of time between recognized banks and in a fixed channel.

The characteristics of the tides of the ocean are not to be attributed to water backed in at irregular and uncertain times, due to the change of the wind and an increase in its velocity sufficient to cause such a result. The alternate rising and falling of the waters of the ocean, and of bays, rivers, etc., connected therewith, caused by the attraction of the sun and the moon, is of regular occurrence, twice each 24 hours, and is necessarily a part of the volume of rivers and streams that empty into the sea. The times of flowing and receding, and the volume of water, are fixed and regular in the one case, and in the other are only of occasional occurrence and of uncertain extent as to amount and volume. The rule of tide waters does not, in our opinion, apply to water courses emptying into Lake Erie and the bays thereof, although outside and beyond such water courses, where the same merge in the waters of Lake Erie, or its bays, "the right of fishing in the waters is as open to the public as if they were subject to the ebb and flow of the tide." Sloan v. Biemiller, supra.

reference to the navigability of the waters of Black Channel and Plum brook. This court has heretofore defined "navigable waters," and in Hickok v. Hine, 23 Ohio St. 523, 527 (13 Am. Rep. 255), it is said:

"A river is regarded as navigable which is capable of floating to market the products of the country through which it passes, or upon which commerce may be conducted; and, from the fact of its being so navigable, it becomes in law a public river or highway. The character of a river, as such highway, is not so much determined by the frequency of its use for that purpose as it is by its capacity of being used by the public for purposes of transportation and commerce."

In Chisolm v. Caines (C. C.) 67 F. 285, we find the following language:

"In determining whether streams and arms of the sea traversing marsh lands are public, navigable waters, the test is whether they are, or are capable of becoming, public highways; that is, a means, open to the public, of passing from one place, where they have a right to be, to another, in which they have the same right. at each end, and hence partially navigable In other words, there must be a public terminus creeks which open upon a bay, but lead merely into private lands, are not public, navigable water."

The same principle is recognized in Schulte v. Warren, 218 Ill. 108, 119, 75 N. E. 783, 785 (13 L. R. A. [N. S.] 745):

"A stream is navigable in fact only where it affords a channel for useful commerce and of practical utility to the public as such. The fact that there is water enough in places for rowboats or small launches answering practically the same purpose, or that hunters and fishermen pass over the water with boats ordinarily used for that purpose, does not render the waters navigable."

While some claim is made that at earlier

times these waters were commercially navigable, we are satisfied that no such condition exists at present as to Black Channel and Plum brook. Defendants in error offered testimony tending to show that fishing boats 35 and more years ago traversed Black Channel and took fish from the vicinity of Ned's pond, and that upon another occasion sand was transported from Black Channel to the city of Sandusky. Other witnesses testify that in 1896, 1905, and other dates, they took fish from Black Channel. We are unable, however, to find that these waters are navigable in a legal sense, under the conditions now existing. The navigability of waters of this character was under consideration before Taft and Lurton, Circuit Judges, and Severance, District Judge, in Toledo Liberal Shooting Co. v. Erie Shooting Club (C. C. A.) 90 F. 680. In the opinion, delivered by Lurton, J., much is said that is applicable to the conditions shown by the record in the instant case: “That the water stands permanently, and that Much is said in the briefs of counsel with it has a deep opening into Lake Erie, does not

establish that this shallow body of water is capable of sustaining commerce, or is burdened with a public use. It is nothing more or less than a marsh opening into the lake. To be navigable in law, it must be navigable in fact; that is, capable of being used by the public as a highway for the transportation of commerce. "None of the characteristics of commercial navigability are shown here. It is the natural feeding ground of the duck and other water fowl. In their pursuit by canoe and flatbottomed ducking boats the water may be navigated. That is not commerce, and proves nothing. The same test would convert every pond and swamp capable of floating a boat into a navigable stream or lake. This bay, is not a highway, never has been, and can never be. At the common law the term 'navigable' had a technical meaning, and was applied to all streams or bodies of water in which the tide ebbed and flowed. All such waters were public. That definition is not applicable in this country, and all waters are held navigable in law, and subject to a public use, which are by their character capable of use as highways, for purposes useful to trade or agriculture. It is the capability of being navigated for useful purposes, which is the test."

We deem the above-cited case to be so applicable to the facts and conditions shown by this record as to justify our adoption of the above rule upon the point of the navigability of the waters of Black Channel and Plum brook, described in the plaintiff's petition.

In Bodi v. Winous Point Shooting Club, supra, this court held that the circuit court erred in holding that the navigable waters in dispute in that case formed a part of Sandusky river and Mud creek instead of a part of a public bay, and modified the judgment accordingly. Upon the same principle we find that in the instant case the Court of Appeals should have found that Black Channel and

Plum brook were water courses running through the property of plaintiff in error, rather than that the same were parts of Sandusky Bay. Hence to that extent we are required to modify the decree of the Court of Appeals.

[4] The validity of the title of plaintiff in error to the property described in the petition up to the west line of Huron township is conceded. While the ownership of this property up to the west line of Huron township is recognized in both Teasel v. West Huron Sporting Club and West Huron Sporting Club v. Stroud, supra, neither of said cases denies the right of fishing or navigation in the waters of the bay lying east of such line. This right of private ownership in land. covered by the waters of a navigable landlocked bay or harbor, connected with Lake Erie, subject to the public rights of navigation and fishery, provided the owner derives

his title from express grant made or sanctioned by the United States, is recognized in Hogg v. Beerman, 41 Ohio St. 81, 52 Am. Rep. 71, so that, if it be conceded that the plain

tiff in error is the owner of the land under the water of Sandusky Bay up to the west line of Huron township, under this rule announced in the Beerman Case the rights of the public and the defendants in error of fishing are preserved, in so far as such waters form a part of Sandusky Pay. This distinction between the rights of fishing in the waters of the open bay and in waters which flow into said bay over the land of private owners is recognized in the case of Winous Point Shooting Club v. Slaughterbeck, supra, wherein Johnson, J., in discussing the case of Bodi v. Shooting Club, supra, says:

"We think it is clear from a reading of the record in that case that the insertion of the word 'navigable' in the entry of this court was made so as to prevent the implication that the defendants were held to be entitled to fish on the premises of the plaintiff in portions of the Sandusky river outside of the open public bay, or in the creeks and ponds on the territory of the club adjoining the bay. But it is clear that the specific thing that the court decided, and the navigable waters in dispute form part of a which is the important point in this case, is that public bay and not part of Sandusky river and Mud creek, and that the circuit court erred in holding otherwise upon the facts found in that court."

Our conclusion, therefore, is that the decree of the Court of Appeals, in so far as it recognizes the rights of navigation and fishing in said triangular shaped body of water, should be affirmed; but, being of opinion that the law of nonnavigable water courses whose bed and banks have a common owner should have been applied to Plum brook and Black Channel, so much of the decree of the Court of Appeals as pertains to such water courses is reversed, and the defendants, and those claiming with them, should have been enjoined from trespassing upon the premises of plaintiff or fishing in the waters of Black Channel and Plum brook eastward from the mouth of said Black Channel, which point is determined to be the western shore of the island formed by the waters of said Black Channel and the dredged canal at the point where the same enters Sandusky Bay. In all other respects the judgment of the Court of Appeals is affirmed.

Judgment modified and affirmed.

MARSHALL, C. J., and ALLEN, KINKADE, ROBINSON, and MATTHIAS, JJ.,

concur.

(161 N.E.)

(27 Ohio App. 156)
STATE v. UNION TRUST CO. et al.
Court of Appeals of Ohio. Cuyahoga County.
June 20, 1927.

I. Taxation 895 (1)—Statute providing meth-
od for valuing property for inheritance tax ap-
plies to incorporeal property, including in-
comes, interests, and annuities, and not to un-

divided interest in realty incumbered by long term lease (Gen. Code, § 5342).

Gen. Code, § 5342, providing that value of future or limited estate, income, interest, or annuity for life or lives in being or of any dower interest or other estate or interest, for inheritance tax purposes, shall be determined by specified method, held applicable to incorporeal property, such as incomes, interests, and annuities, and not applicable to undivided one-half interest in real estate the whole of which is incumbered by a long term lease.

2. Taxation 895 (3)-Statute requires county auditor to appraise property for inheritance tax at true market value and to report finding (Gen. Code, § 5341).

Gen. Code, § 5341, providing that county auditor shall be inheritance tax appraiser, and that probate court may direct him to fix actual market value of property for inheritance tax purposes, requires county auditor, on having his attention called to property, to appraise it at its true market value in money at time of devolution of assessment of tax and to report finding to probate court.

3. Taxation

895 (3)—Method by which county auditor should value property for inheritance tax rests in his discretion (Gen. Code, § 5341).

Method by which county auditor should determine valuation of property for inheritance tax purposes, under Gen. Code, § 5341, is left to' his discretion, and he can capitalize income from property on basis of 6 per cent. and consider all things influencing value of estate, if he arrives at true value thereby.

4. Taxation 895 (3)—Undivided interest in realty subject to long term lease should be valued for inheritance tax as realty under statute, not as annuity under another statute (Gen. Code, §§ 5341, 5342).

Undivided half interest in realty, the whole of which is incumbered by leases for 80 years, should be valued for inheritance tax purposes as real and corporeal property, under Gen. Code, § 5341, and not as an annuity and incorporeal property, under section 5342.

Tax proceeding between the State and the Union Trust Company, executor under the last will and testament of Levi Doan Johnson, deceased, and others. From a finding assessing property for inheritance tax purposes, the Union Trust Company, as executor, appealed to the court of common pleas. To review a judgment there rendered, assessing the property, the State brings error. Affirmed. [By Editorial Staff.]

Griswold, Green, Palmer & Hadden, of
Cleveland, Edward C. Turner, Atty. Gen., and
John A. Elden, of Cleveland, for the State.
T. G. Thompson, of Cleveland, for defend-
ant in error.

VICKERY, J. This cause comes into this court on a petition in error to the common

pleas court of Cuyahoga county, and from the

record we learn that Levi D. Johnson died on the 12th day of February, 1924, testate, leaving an undivided one-half interest in a parcel of real estate situated in the city of Cleveland, at the northwest corner of Fourth street and Prospect avenue N. E. The Union Trust Company, under the last will and testament, was appointed the executor of the estate of the said Johnson, and duly qualified as such.

The questions in the instant case grow out of the inheritance tax laws of Ohio, and involve the proper application of them to the instant case and the construction of the statutes relating to the same.

From the agreed statement of facts we learn that exceptions were filed to the finding of the probate court assessing an undivided one-half interest for inheritance tax purposes; that the probate court making the assessment adopted the rule laid down in section 5342 of the General Code in capitalizing the income from said estate on a 5 per cent. basis. By such method the estate amounted, for taxation purposes, to $271,858. The Union Trust Company, as executor, took an appeal from the finding of the probate court to the common pleas court, where the case was heard upon an agreed statement of facts, and the common pleas court arrived at a different conclusion and assessed the property for taxation purposes at $222,620, as the sum upon which the inheritance tax should be figured. Whereupon the state tax commission filed a petition in error in this court.

We have heard the case upon the error proceedings, and the only question to be determined is the proper method for arriving at the value of the estate; that is, Did the probate court, or the common pleas court, adopt the right method?

The two statutes to which we must address ourselves are sections 5341 and 5342, General Code, and, if the contention of the state tax commission is correct, section 5342 is the proper statute, and not section 5341.

From the agreed statement of facts we learn that Levi D. Johnson died seized in fee simple of an undivided one-half interest in the real estate in question. That real estate was subject to a lease, which, we learn from the record, had been extended about 8 days before the death of Johnson, the original lease having 5 years still to run at a rental of $8,500 a year, which was renewed or extended shortly before Johnson died for a further period of 75 years, the whole lease having

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 161 N.E.-2

80 years to run at the time of his death, 5 years at the rental of $8,500 per year and the sum of $15,000 per year for the remaining 75 years.

[1] Now the probate court seems to have got the notion that, inasmuch as this fee was incumbered by a lease, the value of the prop erty left by Johnson should be assessed for inheritance tax purposes under the rule laid down in section 5342, General Code, which is, in part, as follows:

"The value of a future or limited estate, income, interest or annuity for any life or lives in being, or of any dower interest or other estate or interest upon which any estate or interest the succession to which is taxable under this chapter is limited, shall be determined by the rule, method and standard of mortality and value employed by the superintendent of insurance in ascertaining the values of annuities for the determination of liabilities of life insurance companies, except that the rate of interest shall be five per centum per annum."

Now an examination of this statute will at once convince one that it refers to incorporeal property, such as incomes, interests, or annuities, but we have nothing of this kind in this case. We do not have here a future or limited estate, income, interest, or annuity for any life or lives in being, or any dower interest, or any estate or interest upon which an estate or interest is limited. We have simply an undivided one-half interest in real estate, the whole of said real estate being incumbered by a long term lease. It is perfectly clear, then, that this statute does not apply to the estate as left by Johnson upon his demise.

[2] Section 5341, in so far as it relates to the present inquiry, is as follows:

"The county auditor shall be the inheritance tax appraiser for his county. The probate court, upon its own motion may, or upon the application of any interested person, including the tax commission of Ohio, shall by order direct the county auditor to fix the actual market value of any property the succession to which is subject to the tax levied by this subdivision of this chapter."

It is manifest from this section of the statute that it was the duty of the county auditor, upon having his attention called to the property, to appraise it at its true market value in money, and then report that finding to the probate court, from which finding the probate court should determine the amount of taxes that ought to be levied against the inheritor of this property as an inheritance tax.

[3] As indicated in the briefs of the various parties, the quarrel seems to be between the methods used to ascertain the value. The county auditor capitalized the yearly income from this property on a 6 per cent. basis, and from his computation on that basis the value of the estate was determined to be $222,620. Therefore the question that we must determine, and the only question that we need to

determine, is, Does section 5341 or section 5342 govern in the instant case? In other words, Does the fee, or does the income from the fee, descend by the inheritance?

We think that section 5341 is unambiguous and gives a plain, decisive method for arriving at the value of the estate left by the decedent, subject to inheritance taxes. In other words, it is the duty of the county auditor to appraise the property at its true market value in money at the time of the devolution of the assessment of the tax. There is nothing in the statute which indicates the way or the manner in which this value should be arrived at. The method is left to the county auditor's discretion, and if he can arrive at the true value by capitalizing the income from the property on a basis of 6 per cent., and adopts that method in arriving at the true value of the estate, taking into consideration all the things which influence the value of the estate, such as location, the value of the surrounding property, the leasehold value, or the rental, if there be a leasehold and if there be a rental, or any other thing which influences the value of property, we say he could take them into consideration, and, after he has considered them all, he can form his opinion as to what the real market value of the property is, and, when he has determined that, he reports that to the probate court, upon which the probate court must determine how much inheritance tax must be

paid by those who inherited the property.

This method, we understand from the arguments of counsel and from the briefs in this case, was adopted by the county auditor. Apparently men skilled in the value of downtown real estate were called in by the county auditor, and, after considering all of these elements, they reported the true value in money. They could just as well have reported the true value in money, or the market value, without detailing the method by which they arrived at their conclusions, and it would have been just as legal and just as binding. So, then, it was not because the county auditor adopted the capitalization at 6 per cent., instead of 5 per cent., that he is right and the probate judge is wrong.

[4] If you will examine the brief of the state tax commission, you will see that it is urging that this property be assessed not as real property, but as an annuity, not as corporeal property, but as incorporeal property, and we do not think that that method is right.

We are referred to several cases, and it may be interesting to analyze those cases and show how they are not applicable to the instant case.

Take for example Stephenson v. Haines, 16 Ohio St. 478. This is quoted by the state tax commission's attorneys as an authority for the rule that they are contending for here. In that case, land was conveyed in fee

(161 N.E.)

subject to payment of annual sums by the grantee to the grantor. The question in that case was whether the grantee had more than a leasehold interest. From that case we learn that the grantor sold this property in fee to the grantee, reserving to himself a certain stipend to be paid, and providing that, in case this stipend was not paid, the rights of the lessee should terminate. This was nothing more than the conveying of a piece of real estate in fee which might be terminated by a condition subsequent, which might or might not happen. In any event, the fee had passed from the grantor and the fee was in the grantee, subject, of course, to be defeated by the condition subsequent.

How unlike that is the instant case. In the instant case the fee of this property remained in Johnson, and the reversion belonged to Johnson, and it was simply incumbered by two leases, first, one for 5 years at $8,500, and, second, one for 75 years at $15,000 a year. This makes it entirely unlike the case in 16 Ohio St. supra.

Again, they cite the case of Worthington v. Hewes & McCann, 19 Ohio St. 66. An examination of this case will show, however, that this, although a 99-year lease, was a 99year lease renewable forever. It is true that the lease contained provisions that there should be a reappraisal at intervals, and higher rental should be charged, but the lease was a 99-year lease renewable forever. Such leases by all the authorities have always been regarded as transmitting to the lessee the fee, because 99 years renewable forever has been interpreted as the equivalent of a fee, and so that case ceases to be an authority when it is compared with the instant case, and is upon a parity, and follows the same rule laid down in 16 Ohio St., supra, to wit, that the fee had passed from the grantor, subject to be defeated by the failure to comply with the terms of the lease; the fee, however, being out of the lessor for all intents and purposes, the same as though he had absolutely transferred the fee.

In the instant case, one need but remark again that no such condition pertained. This was a lease, first, for 5, and then for 75, years, a total of 80 years, and there is nothing in the lease which provides for its renewal, and the reversion as well as the fee belonged to the lessor, and always remained with him, but out of the fee is carved a certain estate for years, and it depends upon the character of the lease as to whether the lessee has a good bargain or the lessor has a good bargain.

Suppose, for example, in the instant case, Levi D. Johnson had, in the first instance, made the lease run for the entire 80 years upon the basis of $8,500. It is manifest then that the lessee would have gotten a very good bargain, and that the lease may have been worth more than the fee. For example: Sup

pose at the corner of Fourth and Prospect. where this property is located, the land had become so valuable that the lessee could have leased this property for a period of 75 years at $20,000 rental, and he had a lease for $8,500 and I take it, in view of the history of long leases in Cleveland, that this is not a very violent presumption-then, if such a thing occurred, the lessee could have leased the remainder of his term for $20,000 a year, having all the charges carried by the sublessee, and all he would have to pay the lessor would be $8,500. In that case the lease would be more valuable than the fee. Would that tend to lessen or destroy the value of the property in Johnson for taxation purposes? Not a whit. The real estate would be worth just as much in one case as in the other. The income, however, would go to different persons. I take it, if the lessee, after the sublease had been executed, had died, his interest in that lease would not be real estate. It would be an annuity or an income that would be taxable under section 5342, and the inheritance tax upon the lease might be more than the inheritance tax upon the fee.

A simple illustration of this kind will suffice to show that it is not the income, but is the fee, that should be taxed in the instant

case.

We are also referred to the case of Ralston Steel Car Co. v. Ralston, 112 Ohio St. 306, 147 N. E. 513, 39 A. L. R. 334. An examination of that case will show that it sought to fix the interest of the lessee rather than that of the lessor. It was sought to provide for a dower interest of the wife of the lessee, and the question involved in the instant case was not in that case at all. In that case there was a 99-year lease renewable forever, and as we have pointed out, the effect of such a lease was to create a fee, and the court there simply followed the uniform line of decisions that in such a lease a wife was endowable, but that is not a case parallel with the instant case, as I have already pointed out. Consequently it, as an authority, ceases to exist.

We have no quarrel with the Supreme Court in any of the cases cited by the state tax commission in the instant case, but we simply say that they are not applicable because the facts are entirely different.

We have, then, a plain, distinct, unambiguous statute, which provides that the county auditor shall appraise the decedent's property for the inheritance tax, at its market value, and the method that he adopts to arrive at that conclusion is utterly and absolutely immaterial.

We therefore, in reviewing this whole record, and giving weight to the arguments and briefs of counsel on both sides, are constrained to come to the conclusion that the decision of the common pleas court is right and that the appraisement of the county au

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