Chief Seattle Properties, Inc. v. Kitsap County

• Decision Date: 23 October 1975
• Docket Number: No. 43601
• Citation: Chief Seattle Properties, Inc. v. Kitsap County, 541 P.2d 699, 86 Wn.2d 7 (Wash. 1975)
• Parties: CHIEF SEATTLE PROPERTIES, INC., a Washington Corporation and James P. Jensen, et ux., Appellants, v. KITSAP COUNTY, State of Washington, et al., Respondents.
• Court: Washington Supreme Court

Page 7

86 Wn.2d 7

541 P.2d 699

CHIEF SEATTLE PROPERTIES, INC., a Washington Corporation and James P. Jensen, et ux., Appellants, v.KITSAP COUNTY, State of Washington, et al., Respondents.

No. 43601.

Supreme Court of Washington, En Banc.

Oct. 23, 1975.

Rehearing Denied Jan. 7, 1976.

Philip P. Malone, Poulsbo, for appellants.

John C. Merkel, Kitsap County Pros.Atty., Port Orchard, for respondents.

HOROWITZ, Associate Justice.

We are here principally concerned with the validity of the annual personal property tax imposed by RCW Title 84 from 1969 through 1972, upon a nonIndian's leasehold interest in Indian tribal land.Chief Seattle Properties, Inc., appeals a judgment upholding the validity of a proposed personal property tax against it on its lease and leasehold interest and on improvements on the land leased whether placed thereon or owned by the lessee, the transferee of the lessee's improvements or lessee's sublessees.

AppellantChief Seattle Properties, Inc., (hereinafter also referred to as CSP), a Washington corporation, and the Suquamish Indian tribe of the Port Madison Indian Reservation, entered into a master lease in June 1967, covering approximately 36 acres of Indian tribal land.The fee to the land was vested in the United States, but held in trust for the Indians.The Suquamish Indian tribe was able to lease the land pursuant to 25 U.S.C. § 403a(1964), because the land was reserved to the Indian tribe from the conveyance of the fee to the United States of America, pursuant to the Treaty of Point Elliott (1855).

The lease provided for a term of 25 years, renewable for an additional 25-year term together with a number of detailed provisions generally protective of the tribe.These included provisions: (1) the lessee could sublease all or part of the lease premises; (2) all improvements placed upon the land by or for the lessee, its sublessees or assigns respectively, were to remain the property of the lessee, its sublessees or assigns as the case might be; (3) a sublessee had the right to remove his improvements within 60 days after the expiration of the term of his sublease; (4) the lessee had the right to remove its improvements within 60 days after the expiration of the term of its lease; (5) lessee improvements were not removable without approval of the Secretary of the Interior if the lease were terminated for cause prior to the expiration of the lease term; (6) the lessee agreed to pay when due and payable all taxes upon or against the leased land, the improvements, and all interest therein; (7) there were certain prohibitions against assignment of the lessee's interest.

In 1968 lessee began subdividing the lease premises and subleasing the lots to various private individuals.The subleases contained various provisions protective of the lessee-sublessor and sublessee including provisions that (1) all improvements placed on the land by the sublessee were to remain the latter's property except as otherwise provided; (2) the sublessee had the right to remove his improvements within 60 days after the expiration of the sublease but such improvements, exclusive of removable personal property, could not be removed without the written consent of the sublessor if the sublessee was in default under the sublease; (3) the sublessee would pay, when due and payable, all taxes levied upon or against all or part of the subleased land or interest therein, and improvements thereon, for which either the sublessee or lessee-sublessor became liable; (4) certain restrictions were placed on the assignment of the sublessee's interest.

In developing the leased land, CSP added improvements, including roads, water system, park, paths, dock and bulkheads.Later CSP transferred these improvements to Chief Seattle Maintenance Co., (hereinafter referred to as CSM), a nonprofit corporation composed of the sublessees of the various lots.CSM was empowered to maintain the improvements acquired and pay taxes thereon.An annual fee was payable by the respective sublessees to CSM.

The assessing and billing practices of the respondentsKitsap County Assessor and Kitsap County Treasurer are described in the court's findings.They show that in 1969 the assessor assessed the leasehold, allocating the value between CSP and the sublessees.In 1970 CSP was tax billed on the value of its 'sandwich' lease and on the value of unleased lots; sublessees were billed individually on the value of their subleased lots and value of improvements thereon.

The same assessment and allocation method was used in 1970, and in 1971 CSP was tax billed for the value of the unleased lots and for the value of the 'sandwich' lease, while sublessees were again billed for the value of their respective lots and improvements placed thereon.In 1971 the same assessment value was used in assessing the value of the leasehold, but the 'sandwich' lease was not assessed.The 1972 tax bill to CSP was based on the value of all the land whether subleased or not.Sublessees were tax billed only on the value of the improvements placed on their respective lots.The 'sandwich' lease was not taxed in 1972.

In 1973 the Kitsap County Assessor took steps to tax bill CSP for the value of all lands and improvements, including sublessee improvements.

On April 13, 1972, CSP and the sublessees filed an application for alternative writ of mandamus to compel respondents to refrain from the listing, assessing or collecting all personal property taxes upon any leasehold interest and/or improvements owned by CSP and others on the land leased by CSP from the Suquamish Indian tribe, or to show cause why a writ of mandamus should not be issued and damages awarded.The county answered.Respondents later filed a motion to join CSM as a partyplaintiff and a motion for leave to amend the answer to assert an affirmative defense, a counterclaim for damages, and for declaratory relief concerning the validity of taxing the leasehold estate in Indian tribal lands and the method of such taxation.Both motions were granted over objection.On April 27, 1973, and again on May 22, 1973, a judgment and summary judgment were respectively entered naming CSP as the proper taxpayer in 1969--1972, inclusive, for payment of the personal property tax on the value of CSP's lease and leasehold interest, together with the improvements upon the lease and subleased lands.The summary judgment ordered a refund of personal property taxes paid by sublessees eligible for such refund and again named CSP as the proper taxpayer.Only CSP appeals the judgment as the aggrieved party.

CSP assigns a number of claimed errors.We limit ourselves to those arguments we deem controlling.Basically CSP principally argues: (1)the state lacks jurisdiction to impose the challenged personal property tax pursuant to RCW Title 84;(2)RCW Title 84 does not purport to impose the challenged personal property tax upon CSP at all; (3) the assessed values are erroneous; (4)the court erred in granting respondents' motion to permit joinder of CSM as an additional party and to permit respondents to plead an affirmative defense, and counter-claim for damages and declaratory relief.Respondents disagree with the arguments CSP advances to support reversal of the judgments below.We shall consider the arguments in the order as stated.We do not find the arguments persuasive and affirm the judgments entered.

CSP contends the state of Washington lacks jurisdiction to impose the challenged personal property tax under RCW Title 84, during the four year period 1969--1972 because CSP's lease and the improvements taxed are on Indian tribal land.Its basic supporting arguments are: (1)the state, by Const. art. 26, has disclaimed the power to impose this personal property tax without Congressional consent and that no such consent has been given; (2) independently thereof, the state lacks power to tax Indian tribal lands because the tax (a) interferes with Indian tribal sovereignty, (b) interferes with United States sovereignty, (c) unlawfully encumbers Indian tribal land by virtue of Washington's lien and distraint laws governing the collection of the personal property tax, (d) taxes property located outside of Kitsap County, (e) is a forbidden tax on CSP, a federal instrumentality.

Indian tribal property in its various forms is property in which an Indian tribe has a legally enforceable interest.As used in this context the term refers to real property, the title to which is vested in the United States but held in trust for the Indian tribe.Such property, depending on the context in which the term is used, may or may not be 'public property' of the United States.Indian tribal property is to be distinguished from real property allotted to individual Indians subject to a restraint against alienation or held in fee free from such restraint, or rights of Indians in personalty.United States Department of Interior, Federal Indian Law 583--92, 746, 773, 785, 818(1958).F. Cohen, Handbook of Federal Indian Law, 183, 195, 287--91(1971).

The Suquamish Indian tribe was organized under the laws of the United States.48 Stat. 984(1934).The tribe's Indian tribal land had long before been conveyed to the United States pursuant to the Treaty of Point Elliott of 1855. 12 Stat. 927.Article 2 of the treaty reserved a portion of the land conveyed for the use and occupation of the tribe.The tribe, pursuant to federal statutes identified in the master lease, leased a part of its reserved land to CSP.Federal Indian Law, supra, 687--706;Handbook of Federal Indian Law, supra, 325--32.The parties agree that the entire property conveyed and leased is and has been held in trust by the United States for the Suquamish Indian tribe.

The question of state jurisdiction to tax reservation Indians has been a continuing problem.The rationale by which specific problems in this area have been resolved has changed.This change has reflected...