City of Detroit v. Murray Corporation of America

• Decision Date: 16 June 1956
• Docket Number: No. 12678.,12678.
• Citation: 234 F.2d 380
• Parties: CITY OF DETROIT and County of Wayne, Appellants, v. The MURRAY CORPORATION OF AMERICA, a Delaware corporation, Appellee, and United States of America, Intervenor.
• Court: U.S. Court of Appeals — Sixth Circuit

234 F.2d 380 (1956)

CITY OF DETROIT and County of Wayne, Appellants, v. The MURRAY CORPORATION OF AMERICA, a Delaware corporation, Appellee, and United States of America, Intervenor.

No. 12678.

United States Court of Appeals Sixth Circuit.

June 16, 1956.

Thomas J. Foley, Detroit, Mich., Gerald K. O'Brien, Hobart Taylor, Jr., Philip A. McHugh, Detroit, Mich., on brief, for Wayne County.

Julius C. Pliskow, Detroit, Mich., Paul T. Dwyer, Bert R. Sogge, Vance G. Ingalls, Detroit, Mich., on brief, for City of Detroit.

Victor W. Klein, Detroit, Mich., Wm. M. Saxton, Butzel, Eaman, Long, Gust & Kennedy, Detroit, Mich., on brief, for Murray Corp.

Lyle M. Turner, Washington, D. C., Charles K. Rice, Lee A. Jackson, Hilbert P. Zarky, Erwin A. Goldstein, Washington, D. C., Jerome S. Hertz, Mount Rainier, Md., Fred W. Kaess, John L. Owen, Detroit, Mich., on brief, for the United States.

Before ALLEN and MARTIN, Circuit Judges, and STARR, District Judge.

MARTIN, Circuit Judge.

In three separate actions consolidated on this appeal, brought by The Murray Corporation of America in which the United States of America intervened, the District Court awarded summary judgments in favor of the plaintiff in the total amount of $76,748.47 against the City of Detroit covering personal property taxes illegally collected in two installments for the year 1952 and for $14,116.30 against the County of Wayne, Michigan, for personal property tax illegally collected.

The intervention of the United States was permitted for the reason that the Government claimed ownership of the personal property upon which the tax assessments were made by the City and the County respectively. Concededly, no genuine issue on any material fact was presented, and therefore summary judgment was the proper proceeding for disposition of the issues of law involved.

The assessment of more than $2,000,000.00 in controversy was made against The Murray Corporation of America on personal property in its possession under two letter sub-contracts respectively with "Kaiser" Corporation and "Wright" Corporation, each under and pursuant to letter prime contracts between the United States Government and Kaiser and Wright corporations respectively. These letter sub-contracts covered the manufacture of specified parts and assemblies required under the prime contracts for the United States Air Force for the national defense. These sub-contracts and amendments thereto were approved by a contracting officer of the United States Air Force in accordance with the requirements of the prime contract.

Included in these letter sub-contracts, by amendment, was a partial payment clause which, as stated by the District Judge, presents the nub of the present controversy. This clause in substance provided that upon the making of any partial payment, title to all parts, materials, inventories, work in process, and non-durable tools theretofore acquired or produced by the contractor for the performance of the contract and properly chargeable to the contract under sound accounting practices should forthwith vest in the Government; and title to all like property thereafter acquired or produced by the contractor for performance of the contract and properly chargeable as aforementioned should vest in the Government forthwith upon such acquisition or production.

The assessment date under Michigan law with which we are concerned was January 1, 1952, Comp.Laws Supp.1954, § 211.13. During 1951, the Murray Corporation upon its several requests, audited and approved by a contracting officer of the United States Air Force, received partial payments from Kaiser of more than $163,000.00 and from Curtis Wright (successor to Wright Aeronautical Corporation) of more than $510,000.00.

In his clear-cut opinion, District Judge Thornton analysed the respective positions of the contending parties. The important points made by Murray were that the taxes assessed were ad valorem taxes upon property and not privilege taxes assessed against the taxpayer; that property owned by the federal Government is immune from local ad valorem property taxes; that a federal question is presented for determination under federal and not under state law; that the partial payment clauses vesting title in the federal Government were fully authorized and effective; that under the partial payment clauses title to the property in question was vested in the United States on the assessment date, and that this is an absolute and not a bare lien or security title; that Murray is the real party in interest and so entitled to bring the actions; and that the equitable arguments advanced by the City and County have been entirely rejected by the Supreme Court of the United States.

The United States took substantially the same position and contends that the assessment was upon its property and therefore invalid under the federal Constitution, art. 6, cl. 2.

The position of the City of Detroit was in effect that the partial payment and transfer of title clause was not authorized nor in conformity with federal statutes; that the inclusion of the clause would not defeat an ad valorem tax on personal property in the hands of an independent sub-contractor acquired in the course of carrying out the provisions of a sub-contract for defense production; and that the course of action and dealing with the property was inconsistent with the vesting of absolute title in the United States and the Government therefore acquired merely a lien or title for security purposes leaving Murray vested with an equitable title to the personal property subject to an ad valorem property tax.

The County of Wayne took the same position assumed by the City of Detroit with the added contention, which is clearly not meritorious, that the Murray Corporation is not the real party in interest.

We agree with the finding of the District Court that the partial payment clauses are not invalid for want of authority or for non-conformity with the federal statutes. We concur also in the conclusion of the trial court that "a reading of the Partial Payment Clause leaves no doubt that, upon the making of a partial payment, title to parts, materials, etc., acquired for the performance of the contract vests in the United States Government as does title to all property...