Board of Com'rs of Madison County v. Midwest Associates, Inc.

Decision Date03 March 1970
Docket NumberNo. 568,568
Citation255 N.E.2d 807,253 Ind. 551
PartiesBOARD OF COMMISSIONERS OF the COUNTY OF MADISON, Indiana, Roy L. Boicourt, Auditor of Madison County, Indiana, Horace W. Hays, Treasurer of Madison County, Indiana, Appellants, v. MIDWEST ASSOCIATES, INC., Appellee. A 95.
CourtIndiana Supreme Court

Walter C. Dietzen, Richard E. Kreegar, Anderson, for appellants.

Arch N. Bobbitt, Ruckelshaus, Bobbitt & O'Connor, Indianapolis, Harold J. Anderson, Schrenker & Anderson, Anderson, Theodore R. Dann, Dann, Backer, Pecar & Newman, Indianapolis, for appellee.


Appellee has filed a petition to transfer this appeal from the Appellate Court as a result of an opinion by that court holding that the real estate purchased on an installment contract from the U.S. Government was taxable as to the interest held by the purchaser. (See Appellate Court Opinion at 245 N.E.2d 853.)

We have come to the conclusion that the transfer should be denied not only for the reasons given in the Appellate Court opinion but for the reasons which we desire to elaborate more fully.

The Appellate Court opinion is based upon the proposition that the buyer on contract of real estate from the United States has an equitable interest of real value that should be taxed, and as a matter of law, this is correct. The Federal Government apparently felt the same way about it when it provided in the contract with this purchaser that he should pay all taxes, to wit: 'Buyer will, while any of the indebtedness secured hereby remains unpaid pay before they become delinquent all taxes, both general and special, assessments and governmental charges lawfully levied or assessed against the above-described property or any part thereof * * *' That contract for the benefit of governmental taxing units is a third party beneficiary contract which the taxing units have a right to enforce against the appellee, and therefore the trial court had no right to issue an injunction against the enforcement of such a contractual right; nor may a party come to a court of equity and in the face of such a promise ask for a restraining order against the enforcement of his own promise to pay the taxes.

Further, all property should be taxed under our state law unless there is a special exemption provided by statute. This statute on exemption being Burns' Ind.Stat.Ann. § 64--201 reads as follows:

'Exemptions enumerated--The following property shall be exempt from taxation:

First. The property of this state; and the property of the United States, its agencies and instrumentalities to the extent that this state is prohibited by law from taxing said property of the United States, but any right, title, interest, lien, claim or lease held in, on, to or of said property shall be assessed and taxed as other property is assessed, and taxed to the extent that this state is not prohibited from taxing the same by the Constitution of the United States.' (Emphasis added)

It will be noted that no property is exempt unless constitutionally it has to be. There is no provision in the Constitution of the United States that prevents taxation in this case. Therefore that provision has no relevancy here. At the same time it will be noted that this statutory provision does say in mandatory language 'but any right, title, interest, lien, claim or lease held in, on, to or of said property shall be assessed and taxed as other property is assessed, and taxed * * *.' (Emphasis added)

This language is the answer to the case and sustains the Appellate Court's position that this property and any right therein, including contract rights, or equitable title shall be taxed. The taxing authorities were merely following the mandatory provisions of this statute.

The contention that the legislature should pass a law providing for the taxation of equitable interests owned by persons in U.S. lands is not sustainable, since the legislature has done that very thing under the statute cited above.

Finally, we point out that appellee has not exhausted its administrative proceedings and remedy before coming into court. Burns' Ind.Stat.Ann. § 64--501 et seq. provide for filing applications for tax exemptions with the county auditor and for filing applications for tax exemptions with the county auditor and for appeals and review thereof before the County Board of Review and the State Board of Tax Commissioners. This was not done by the appellee. All appellee did was file an untimely petition before the State Board 'To establish 1/3 of true value', not for an exemption from taxation.

Appellee says the attempt to tax is entirely 'void' in this case and not merely voidable, and therefore it had the right to go directly into court and enjoin the act without following the administrative remedy first. To say that an act is void or voidable is a far too frequent refuge for an easy decision which has no real substance. No court or judge has yet been able to satisfactorily define adequately the distinction between these terms. To a large extent the attempt degenerates into a question of semantics and not law. Here the statutes cited above gave jurisdiction to hear petitions for exemptions to the tax boards and they certainly had jurisdiction of the subject matter. There proceedings certainly had some validity and were not totally void. For the reasons stated the petition to transfer is denied.

GIVAN and DeBRULER, JJ., concur.

JACKSON, J., concurs in result.

HUNTER, C.J., dissents with opinion.

HUNTER, Chief Justice (dissenting).

I dissent from the denial of transfer in this cause.

This is an appeal from the Superior Court of Madison County, brought by appellants, Board of Commissioners of that county, which appeal stems from the issuance of a restraining order without notice and a temporary injunction enjoining appellants from selling certain real estate at a tax sale. The appellee, Midwest Associates, Inc., an Indiana corporation and owner of the said real estate, filed a verified petition to prevent its sale on the grounds that it owed no property taxes thereon and therefore was not in default of payment. Appellee contends that the tax sale would be illegal. The trial court found for appellee and issued the requested orders. Appellants appealed the decision to the Appellate Court, Board of Commissioners of the County of Madison v. Midwest Associates, Inc. (1969), Ind.App., 245 N.E.2d 853. That court reversed the judgment of the trial court with instructions to dissolve the injunction thereinbefore granted.

The questions presented by this petition to transfer may be summarized as follows: (1) Under Indiana law, may real propery the legal title to which is held by the United States Government, be taxed against a buyer thereof under an executory contract to purchase where the buyer has the beneficial use and enjoyment of the property? (2) Can the courts of this state, consistent with our tax statutes, order a sale of real property to satisfy delinquent real estate taxes, which sale preserves the fee of the United States in a position of priority over all other interests transferred by the sale?

The property in question, formerly known as Air Force Plant #46, was purchased from the United States of America, acting by and through the General Services Administration by appellee, Midwest Associates, Inc. Said purchase was evidenced by a 'Contract for Deed', executed on February 17, 1960, by and between the U.S. Government, and individuals operating as a partnership, which later incorporated as Midwest Associates, Inc., hereinafter referred to as 'buyer'. The contract provided that if the buyer shall make payments and perform the covenants mentioned on their part to be made and performed, then the United States covenanted and agreed to convey, without warranty, express or implied, said property by quitclaim deed to buyer. The agreed purchase price for said real estate and personal property was $340,000, of which $34,000 was to be paid at the time of the execution of the contract, and the sum of $3,825 every three months thereafter, together with interest on the unpaid balance, until one-third of the purchase price and all accrued interest have been paid. When the above sum had been so paid, the U.S. Government agreed to deliver to the buyer its quitclaim deed without representation or warranty of any kind or nature, together with a bill of sale for the personal property involved, and the buyer agreed to execute and deliver to the U.S. Government a promissory installment note for the remaining balance of the purchase price together with a purchase money mortgage on the real property and a chattel mortgage on the personal property to secure the payment of said note. On February 22, 1960, the U.S. Government notified the buyer to take possession of the land and its appurtenances and certain personal property and the same was done.

On June 15, 1965, the Government, pursuant to the contract, delivered to the buyer a quitclaim deed to the land, which was duly entered for taxation and recorded September 8, 1965. Although title to the property had been since August 20, 1953, until June 15, 1965, in the name of the U.S. Government, taxes have been assessed against it by appellants beginning with the year 1962 and continuing through June of 1965. The tax liability (and penalty for non-payment) for this period is $73,158.17, which amount, appellee contends, should not have accrued since the owner of the property was the U.S. Government, it (appellee) only entitled to the use thereof. In short, appellee argues that since the property in question was owned by the U.S Government until June 15, 1965, it should have been, up until that time, exempt from taxation under Ind.Ann.Stat., § 64--201:

'Exemptions enumerated.--The following property shall be exempt from taxation: First. * * * the property of the United States, its agencies and instrumentalities, to the extent that...

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