Boeing Aircraft Co. v. Reconstruction Finance Corp.

• Decision Date: 12 August 1946
• Docket Number: 29948.
• Citation: 25 Wn.2d 652,171 P.2d 838
• Parties: BOEING AIRCRAFT CO. v. RECONSTRUCTION FINANCE CORPORATION et al.
• Court: Washington Supreme Court

171 P.2d 838

25 Wn.2d 652

BOEING AIRCRAFT CO. v. RECONSTRUCTION FINANCE CORPORATION et al.

No. 29948.

Supreme Court of Washington, En Banc.

August 12, 1946

Rehearing Denied Sept. 26, 1946.

Action by Boeing Aircraft Company, a corporation, against the Reconstruction Finance Corporation, a federal corporation organized under the laws of the United States, to determine validity of taxes assessed against real property owned by the Reconstruction Finance Corporation and used by plaintiff under lease. From the judgment, King County, a municipal corporation, and Carroll Carter, its Treasurer, appeal.

Judgment reversed with instructions.

Appeal from Superior Court, King County; Robert M. Jones, judge.

Lloyd Shorett, of Seattle, and Jess N. Rosenberg, of Olympia, for appellants.

Holman & Sprague and J. Paul Coie, all of Seattle, for respondent.

Frank A. Grimsdell and Patrick M. Tammany, both of Seattle, amici curiae.

SIMPSON Justice.

Plaintiff brough this action under the provisions of our Uniform Declaratory Judgment Act, Rem.Rev.Stat. § 784-1 et seq., to determine the validity of taxes assessed against certain real property owned by the Reconstruction Finance Corporation, and used by plaintiff under lease which provided that plaintiff should pay all property taxes lawfully assessed or imposed upon real property.

The cause tried to the court resulted in the entry of a judgment declaring the taxes to be invalid. King County and Carroll Carter, its treasurer, have appealed to this court.

The assignments of error call in question the action of the trial court in making its findings of fact, conclusions of law, and the entry of its judgment.

The facts are as follows: Respondent, Boeing Aircraft Company, is a corporation engaged in the manufacture of airplanes. The Reconstruction Finance Corporation is a corporation chartered by the Government of the United States. Its stock is owned by the government and its officers were appointed by the President with the approval of the Senate of the United States.

On or about August 4, 1941, respondent entered into a lease agreement with the Defense Corporation, a division of Reconstruction Finance Corporation. The lease provided, among other things, that respondent would acquire and convey to the Reconstruction Finance Corporation a site near Renton Washington, consisting of approximately seventy-five acres of land suitable as a location for an aircraft manufacturing plant. Respondent complied with that portion of the contract and the land was deeded to Reconstruction Finance Corporation. Respondent in the agreement of lease, agreed to pay an annual rental of one dollar, and in paragraph twenty contracted '* * * to pay to the proper authority, when and as the same become due and payable, * * * all taxes, assessments, and similar charges (other than local improvement assessments) which at any time during the term of this lease or any extension thereof may be lawfully taxed, assessed or imposed upon Defense Corporation or Lessee with respect to or upon the site, buildings or the Machinery, or any part thereof * * *.'

The assessor of King county entered all of the property upon his books for the year 1944-45, and has extended the tax against the same upon the tax rolls of King county in the manner provided by state law. Pursuant to statutory procedure, the assessor certified the tax rolls to the auditor of King county. The rolls were thereafter delivered to the county treasurer.

Respondent has refused to pay the taxes as not being lawfully assessed or imposed upon the property. Reconstruction Finance Corporation has at all times demanded that respondent pay the taxes and has further advised respondent that it will be held responsible for failure to secure all available discounts or rebates, as well as for all penalties which have or may accrue.

The one question Before this court is: Were the taxes lawfully assessed or imposed upon the property in question?

It is a well-recognized rule that grants of immunity from taxation are to be strictly construed and every doubt resolved in the right to collect the tax. Memphis & St. L. Railroad Company v. Loftin, 105 U.S. 258, 26 L.Ed. 1042; Pacific Company v. Johnson, 285 U.S. 480, 52 S.Ct. 424, 76 L.Ed. 893; Hale v. Iowa State Board, 302 U.S. 95, 58 S.Ct. 102, 82 L.Ed. 72.

U.S.C.A., Title 15, Commerce and Trade, § 610, provides:

'Any and all notes, debentures, bonds, or other such obligations issued by the corporation shall be exempt both as to principal and interest from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority, except as provided in section 742a(a) of Title 31. The corporation, including its franchise, its capital, reserves, and surplus, and its income shall be exempt from all taxation now or hereafter imposed by the United States, by any Territory, dependency, or possession thereof, or by any State, county, municipality, or local taxing authority; except that any real property of the corporation shall be subject to State, Territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed. The exemptions provided for in the preceding sentence with respect to taxation (which shall, for all purposes, be deemed to include sales, use, storage, and purchase taxes) shall be construed to be applicable not only with respect to the Reconstruction Finance Corporation but also with respect to (1) the Defense Plant Corporation, the Defense Supplies Corporation, the Metals Reserve Company, the Rubber Reserve Company, and any other corporation heretofore or hereafter organized or created by the Reconstruction Finance Corporation under section 606b of this title, as amended, to aid the Government of the United States in its national-defense program, (2) The RFC Mortgage Company, the Federal National Mortgage Association, and any other public corporation heretofore or hereafter organized by or at the instance of the Reconstruction Finance Corporation, and (3) the Disaster Loan Corporation, and any other public corporation which is now or which may be hereafter wholly financed and wholly managed by the Reconstruction Finance Corporation. Such exemptions shall also be construed to be applicable to the loans made, and personal property owned, by the Reconstruction Finance Corporation or by any corporation referred to in clause (1), (2) or (3) of the preceding sentence, but such exemptions shall not be construed to be applicable in any State to any buildings which are considered by the laws of such State to be personal property for taxation purposes. As amended June 10, 1941, c. 190, § 3, 55 Stat. 248.' See City of Clifton v. State Board of Tax Appeals, 126 N.J.L. 205, 17 A.2d 476.

In addition to the above statute, we must, in arriving at a decision in this case, examine the enabling act, and the constitutional and statutory provisions of this state. Our Enabling Act, § 4, provides in part as follows:

'And said convention shall provide, by ordinances irrevocable without the consent of the United States, and the people of said states:---- * * *

'Second. That the people inhabiting said proposed states do agree and declare * * * that no taxes shall be imposed by the states on lands or property therein belonging to or which may hereafter be purchased by the United States, or reserved for its use. * * *'

The constitution of the state of Washington, Art. XXVI, provides:

'Compact With the United States--The following ordinance shall be irrevocable without the consent of the United States and the people of this state:----

'* * * that no taxes shall be imposed by the state on lands or property therein belonging to or which may be hereafter purchased by the United States or reserved for use: * * *.'

Constitutional amendment 14 contains the following provisions:

'Property of the United States and of the state, counties, school districts and other municipal corporations, and credits secured by property actually taxed in this state, not exceeding in value the value of such property, shall be exempt from taxation.'

Rem.Rev.Stat. § 11111, states, among other things, that the following property shall be exempt from taxation:

'All property, whether real or personal, belonging exclusively to the United States, the state, any county or municipal corporation.'

Rem.Supp.1945, § 11150-1, provides:

'Notwithstanding anything to the contrary in the laws of the State of Washington, expressed or implied, the United States and its agencies and instrumentalities and their property are hereby declared to be taxable, and shall be taxed under the existing laws of this state or any such laws hereinafter enacted, whenever and in such manner as such taxation may be authorized or permitted under the laws of the United States.'

It is clear that the last mentioned statute repealed by implication the first statute set out above.

Although Congress does not have the power to compel the state to tax Federal property, it certainly has the constitutional right to say what United States property, if any, may be taxed by the states. Owensboro National Bank v. City of Owensboro, 173 U.S. 664, 19 S.Ct. 537, 43 L.Ed. 850, 852; Baltimore Nat. Bank v. State Tax Com'n., 297 U.S. 209, 56 S.Ct. 125, 80 L.Ed. 586; Pacific Coast Dairy v. Dept. of Agriculture, 318 U.S. 285, 63 S.Ct. 228, 87 L.Ed. 761.

In this case, Congress said real property shall be taxed, and personal property shall be exempt.

In appellant's brief, we find the following:

'It is unthinkable that, under a system of government such as we have...