Chrysler Corp. v. TOWNSHIP OF STERLING, MACOMB CTY., M.

• Decision Date: 31 March 1969
• Docket Number: 18399.,No. 18393,18393
• Citation: 410 F.2d 62
• Parties: CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellee, United States of America, Plaintiff-Intervenor-Appellee, v. TOWNSHIP OF STERLING, MACOMB COUNTY, MICHIGAN, William Kerner, its Treasurer, Defendants-Appellants. CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellee, United States of America, Plaintiff-Intervenor-Appellee, v. TOWNSHIP OF STERLING, MACOMB COUNTY, MICHIGAN, William Kerner, its Treasurer, County of Macomb, a County of the State of Michigan, and Utica Community School District, a School District of the State of Michigan, Defendants-Appellants. CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellant, United States of America, Plaintiff-Intervenor-Appellant, v. TOWNSHIP OF STERLING, MACOMB COUNTY, MICHIGAN, William Kerner, its Treasurer, County of Macomb, a County of the State of Michigan, and Utica Community School District, a School District of the State of Michigan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

410 F.2d 62 (1969)

CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellee, United States of America, Plaintiff-Intervenor-Appellee, v. TOWNSHIP OF STERLING, MACOMB COUNTY, MICHIGAN, William Kerner, its Treasurer, Defendants-Appellants.

CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellee, United States of America, Plaintiff-Intervenor-Appellee, v. TOWNSHIP OF STERLING, MACOMB COUNTY, MICHIGAN, William Kerner, its Treasurer, County of Macomb, a County of the State of Michigan, and Utica Community School District, a School District of the State of Michigan, Defendants-Appellants.

CHRYSLER CORPORATION, a Delaware Corporation, Plaintiff-Appellant, United States of America, Plaintiff-Intervenor-Appellant, v. TOWNSHIP OF STERLING, MACOMB COUNTY, MICHIGAN, William Kerner, its Treasurer, County of Macomb, a County of the State of Michigan, and Utica Community School District, a School District of the State of Michigan, Defendants-Appellees.

Nos. 18393, 18399.

United States Court of Appeals Sixth Circuit.

March 31, 1969.

COPYRIGHT MATERIAL OMITTED

Berrien C. Eaton, Jr., Detroit, Mich., for Township of Sterling, Macomb Co., Mich., Miller, Canfield, Paddock & Stone, Berrien C. Eaton, Jr., Wolfgang Hoppe, Samuel J. McKim, III, Robert E. Gilbert, Detroit, Mich., on brief.

Patrick J. Ledwidge, Detroit, Mich., for Chrysler Corp., Dickinson, Wright, McKean & Cudlip, Patrick J. Ledwidge, Herbert G. Sparrow, III, Detroit, Mich., on brief.

Stuart R. Smith, Dept. of Justice, Washington, D. C., for United States, Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, William A. Friedlander, Stuart A. Smith, Attys., Dept. of Justice, Washington, D. C., Lawrence Gubow, U. S. Atty., Detroit, Mich., of counsel.

William D. Dexter, Lansing, Mich., for amicus curiae — Dept. of Treasury of Michigan, Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Lansing, Mich., on brief.

Before WEICK, Chief Judge, and PHILLIPS and COMBS, Circuit Judges.

PHILLIPS, Circuit Judge.

The Court is asked in these consolidated cases to declare unconstitutional a Michigan statute which has been upheld twice by the Supreme Court of the United States and three times by the Supreme Court of Michigan.¹

The statute in question is Mich.Comp. Laws 1948, §§ 211.181, 211.182, Pub. Acts 1953, No. 189, M.S.A. (1960) §§ 7.7(5) and 7.7(6). It is referred to in this opinion as "the statute" or "Act 189." The legislation is before this Court as it existed prior to an amendment added by Mich.Pub.Acts 1962, No. 226, effective March 28, 1963, and is as follows:

"§ 7.7(5) Taxation of exempt real property used privately in connection with business conducted for profit; exceptions. When any real property which for any reason is exempt from taxation is leased, loaned or otherwise made available to and used by a private individual, association or corporation in connection with a business conducted for profit, except where the use is by way of a concession in or relative to the use of a public airport, park, market, fair ground or similar property which is available to the use of the general public, shall be subject to taxation in the same amount and to the same extent as though the lessee or user were the owner of such property: Provided, however, That the foregoing shall not apply to federal property for which payments are made in lieu of taxes in amounts equivalent to taxes which might otherwise be lawfully assessed or property of any state-supported educational institution.

"§ 7.7(6) Same; manner of assessment and collection; taxes not to become lien; recovery in assumpsit. Taxes shall be assessed to such lessees or users of real property and collected in the same manner as taxes assessed to owners of real property, except that such taxes shall not become a lien against the property. When due, such taxes shall constitute a debt due from the lessee or user to the township, city, village, county and school district for which the taxes were assessed and shall be recoverable by direct action of assumpsit."

The United States Government, through its Department of the Army, during all times relevant in this litigation owned 314 acres of land and the buildings, machinery and equipment affixed thereto, known as the Michigan Ordnance Missile Plant located in Sterling Township, Macomb County, Michigan. Pursuant to contracts between it and the United States, Chrysler Corporation (Chrysler) during the tax years here involved, 1960-63, occupied and used part of the Missile Plant in the manufacture of weapons for the Department of the Army. All the production and other work at the Missile Plant during the tax years at issue was for the United States.

By authority of Act 189 appellant Township of Sterling annually assessed Chrysler for the tax years 1960, 1961, 1962 and 1963 on account of its use and occupancy of the plant. The assessed taxes for each year were as follows: 1960 — $373,088.69; 1961 — $284,031.40; 1962 — $233,230.43; and 1963 — $233,662.50.

Chrysler paid the taxes under protest, conforming strictly with all Michigan procedural requirements which are prerequisite to litigation, and filed separate refund suits for each tax year. The four suits were consolidated for trial. The United States was permitted to intervene as plaintiff, because under its contract with Chrysler it is obligated to reimburse Chrysler for the taxes in issue. The burden of the taxes fell upon the United States although the legal incidence was on Chrysler.

The District Court held Act 189 invalid under the Constitution of the United States as applied to Chrysler and the United States and therefore that Chrysler and the United States were entitled to recover the taxes sued for. The Township of Sterling appeals. The Michigan Department of Treasury was granted leave to file a brief and to participate in the oral argument as Amicus Curiae. The District Court also allowed recovery of interest at five per cent from the date of judgment.²

We hold that Act 189 is a constitutional statute, that the taxes sued for were legally assessed and collected by the Township, and that the judgment of the District Court must be reversed.

The District Court held that the statute discriminates against the United States and in favor of the State of Michigan in a manner forbidden by the decision of the Supreme Court in Phillips Chemical Co. v. Dumas Independent School District, 361 U.S. 376, 80 S.Ct. 474, 4 L.Ed.2d 384, rehearing denied, 362 U.S. 937, 80 S.Ct. 749, 4 L.Ed.2d 751, and confirmed in Moses Lake Homes, Inc. v. Grant County, 365 U.S. 744, 81 S.Ct. 870, 6 L.Ed.2d 66, rehearing denied, 366 U.S. 947, 81 S.Ct. 1671, 6 L.Ed.2d 858.

The statute contains three exemptions. It does not apply: (1) to "property of any state-supported educational institution;" (2) to any use which is in the nature of "a concession in or relative to the use of a public airport, park, market, fair ground or similar property;" or (3) to "federal property for which payments are made in lieu of taxes in amounts equivalent to taxes." These three exemptions were in the statute at the time its validity was upheld in the two opinions of the Supreme Court of the United States and the three opinions of the Supreme Court of Michigan. (See n. 1, supra).

At the outset it should be made plain that this Court agrees with the District Court on three holdings: (1) the express finding of fact made by the District Judge that discrimination against the United States in the administration of the statute by State and local officials has not been established by Chrysler and the United States; (2) that the 1962 amendment to Act 189 has no application in the present cases; and (3) that the concessions exemption standing alone does not result in unconstitutional discrimination against the United States.

The decision of the District Court holding the statute to be unconstitutional is based on two grounds: (1) the exemption in favor of lessees of state-supported educational institutions; and (2) an exemption which the District Court construed to arise from the interaction of Act 189 and Comp.Laws 1948, §§ 211.581, 211.582, Chapter 116, Mich.Pub.Acts 1917, as amended,³ when coupled with the education and concessions exemptions. Under the latter statute the State of Michigan made contributions during the years here involved to local governments in lieu of other taxes at the rate of fifteen cents per acre upon state-owned conservation lands.

We disagree with the District Court on both of these two latter issues.

THE EXEMPTION OF MICHIGAN STATE-SUPPORTED EDUCATIONAL INSTITUTIONS

In Phillips Chemical Co. v. Dumas Independent School District, 361 U.S. 376, 80 S.Ct. 474, the Supreme Court struck down as discriminatory a Texas statute which on its face differed substantially from Act 189. The Texas statute operated so as to single out for taxation users of tax-exempt federally-owned property. Unlike the situation in Michigan, a separate Texas statute imposed a distinctly lesser tax burden on similarly situated lessees of exempt property owned by the State of Texas or its political subdivisions. The Supreme Court held that the tax imposed by a Texas School District upon the lessee of property owned by the United States and leased under the Military Leasing Act of 1947 was unconstitutional, saying: "it does not seem too much to require that the State treat those who deal with the Government as well as it treats those with whom it deals itself." In commenting upon its two earlier decisions in the Michigan cases (See n. 1, supra), the Court said:

"Nevertheless, it is claimed that the classification here is supported by our decision in United States v. City of Detroit, supra, because of the assertedly similar nature of the classification created by the statute involved in that case. The Michigan statute, although applicable generally to lessees of exempt property, contained an exception for property owned by state-supported educational

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