Cool Homes, Inc. v. Fairbanks North Star Borough
| Decision Date | 29 October 1993 |
| Docket Number | Nos. S-3995,S-4338 and S-4353,S-4337,s. S-3995 |
| Parties | COOL HOMES, INC., an Alaska Corporation, Appellant, v. FAIRBANKS NORTH STAR BOROUGH, Tax Foreclosure List by the Fairbanks North Star Borough Against Certain Real Property Located Therein and Described in This Petition, Appellee. COOL HOMES, INC., an Alaska Corporation, Appellant, v. FAIRBANKS NORTH STAR BOROUGH, Appellee. COOL HOMES, INC., an Alaska Corporation, and Ben Lomond, Inc., a Utah Corporation, Appellants, v. FAIRBANKS NORTH STAR BOROUGH BOARD OF EQUALIZATION, Appellee. FAIRBANKS NORTH STAR BOROUGH BOARD OF EQUALIZATION, Cross-Appellant, v. COOL HOMES, INC., an Alaska Corporation, Cross-Appellees. |
| Court | Alaska Supreme Court |
Brent M. Wadsworth, Wadsworth & Associates, Anchorage, for appellants/cross-appellees.
Eugene Hardy, Borough Atty., Mark Andrews, Asst. Borough Atty., Fairbanks, for appellee/cross-appellant.
David H. Call, Call, Barrett & Burbank, Fairbanks, for Aetna Life Ins. Co., amicus curiae.
Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.
These cases arise out of the refusal of Cool Homes, Inc. (Cool Homes) to pay property taxes assessed against it by the Fairbanks North Star Borough (Borough). The appeals raise the following separate issues.
The issue in No. S-3995 is whether the superior court erred in granting summary judgment against Cool Homes in the Borough's action to foreclose Cool Homes' interest in its buildings on Eielson Air Force Base. The court ordered the buildings sold and transferred to the Borough for the amount of taxes, penalties, interest, advertising costs and legal fees for which the property is liable.
No. S-4337 arises out of an action by the Borough for a personal judgment against Cool Homes. The Borough sought the personal judgment to recover the property taxes assessed against Cool Homes' leasehold interest in the land, including statutory penalties and interest. The superior court granted summary judgment in favor of the Borough. The issue thus is whether Cool Homes may be held personally liable under the assessment and foreclosure statutes.
Nos. S-4338-4353 raise several discrete issues concerning the reassessment of the Cool Homes' properties, including whether the Borough violated the Open Meetings Act during the reassessment process, the relative burdens on the taxing authority and the property owner, adjustments for lease restrictions and whether the superior court abused its discretion in permitting supplementation of the record on appeal.
The backdrop for these appeals is set forth generally in Ben Lomond, Inc. v. Fairbanks North Star Borough Board of Equalization, 760 P.2d 508 (Alaska 1988). Cool Homes, the successor in interest to Ben Lomond, Inc. (Ben Lomond), owns approximately three hundred units of housing on Eielson Air Force Base. Ben Lomond constructed these houses on land leased in 1985 from the federal government. This Land Lease runs for twenty-three years and provides for a nominal lease rental. The federal government, in turn, leased the housing development and underlying land from Ben Lomond for an annual lease rental of $3,600,000.00 plus an annual maintenance fee. The term of this "Project Lease" is twenty years, running concurrently with the last twenty years of the Land Lease.
The Land Lease is authorized under 10 U.S.C. § 2667, which provides:
(a) Whenever the Secretary of a military department considers it advantageous to the United States, he may lease to such lessee and upon such terms as he considers will promote the national defense or be in the public interest, real or personal property that is
(1) under the control of that department;
(2) not for the time needed for public use; and
(3) not excess property, as defined by section 3 of the Federal Property and Administrative Services Act of 1949 (40 U.S.C. 472).
....
(e) The interest of a lessee of property leased under this section may be taxed by State or local governments. A lease under this section shall provide that, if and to the extent that the leased property is later made taxable by State or local governments under an Act of Congress, the lease shall be renegotiated.
The Project Lease is authorized under the Military Construction Authorization Act of 1984 (Act), Section 801, codified as 10 U.S.C. § 2828. The Act inaugurated a test program "to determine if leasing is more cost effective to the [United States] than the traditional method of constructing [military] housing with appropriated funds." While the Act does not refer specifically to taxation, there is no indication that 10 U.S.C. § 2828 was intended to supersede 10 U.S.C. § 2667, which provides for taxation of private interests.
The terms of the lease between the federal government and Ben Lomond specifically address Ben Lomond's responsibility for taxes assessed against the property. Condition 13 of the Land Lease provides:
That the Lessee [Cool Homes] shall pay to the property authority, when and as the same become due and payable, all taxes, assessments, and similar charges which, at any time during the terms of this lease, may be taxed, assessed, or imposed, upon the Lessee's interest in the leased premises. In the event any taxes, assessments, or similar charges are imposed, with the consent of Congress upon property owned by the Government and included under this lease (as opposed to the leasehold interest of the Lessee therein), they shall be paid (1) by the Government, in which event this lease shall then be renegotiated to increase the consideration provided above in the amount of such taxes, assessments, or similar charges paid by the United States, or (2) at the option of the Government, by the Lessee.
Article VII of the Project Lease provides, in pertinent part:
Lessor [Cool Homes] shall pay all taxes, general or special, all public rates, dues, and special assessments of every kind which shall become due and payable or which are to be assessed against or may be levied upon said Premises during the terms of this Lease.
The Borough assessed the property for the years 1986, 1987 and 1988. Although the Borough mailed property tax bills to Cool Homes for each of these years, the corporation has paid no part of the property taxes. Pursuant to AS 29.45.210(d), Cool Homes sought judicial review of each assessment. The superior court upheld the Borough's right to tax Cool Homes' interest, but remanded all of the assessments to the Borough Board of Equalization (Board) for recalculation of the amount based on a twenty-three year lease, rather than on a forty-year lease.
In affirming Cool Homes' obligation to pay property taxes, we held that "Lomond's [now Cool Home's] twenty-three year leasehold interest in land at Eielson Air Force Base and its twenty year interest in the improvements it constructed upon the land are both taxable interests under the Borough's real property taxation statutes." Ben Lomond, 760 P.2d at 513.
The exact amount Cool Homes owed was still in dispute following our decision. The Board reassessed the property in May 1989. The superior court affirmed these assessments. Cool Homes, Inc. v. Fairbanks Northstar Borough Board of Equalization, No. 4FA-89-1078 Civ. (Alaska Super., November 19, 1990). This proceeding was a consolidated appeal of the 1986-89 assessments. Cool Homes appealed. See Nos. S-4338, 4353.
The Borough also filed an action for a personal judgment against Cool Homes. The superior court granted the Borough summary judgment in that case as well. Fairbanks Northstar Borough v. Cool Homes, Inc., No. 4FA-89-1415 Civ. (Alaska Super., November 19, 1990). Cool Homes appealed. See No. S-4337.
Prior to the superior court's decision in the reassessment proceeding, the Borough filed a petition for judgment of foreclosure against Cool Homes. The petition was part of the Borough's annual general in rem foreclosure action. The Borough submitted its delinquent tax foreclosure list and published the list for four consecutive weeks in a newspaper of general circulation. Cool Homes filed an answer and objection to the foreclosure action. Pursuant to AS 29.45.390(a), the court separated Cool Homes' property from the in rem proceeding and dealt with it separately. The Borough filed a Motion for Summary Judgment as to Cool Homes. Following briefing and oral argument, the court granted the Borough's Motion for Summary Judgment and ordered Cool Homes' interest foreclosed. Cool Homes appealed. See No. 3995.
"When reviewing a grant of summary judgment, this court must determine whether there was a genuine issue of material fact and whether the moving party was entitled to judgment on the law applicable to the established facts." Merdes v. Underwood, 742 P.2d 245, 248 (Alaska 1987) (quoting Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1280 (Alaska 1985)). The court considers matters of law de novo and adopts rules of law which are most persuasive in light of precedent, reason and policy. Guin v. Ha, 591 P.2d 1281, 1284 n. 6 (Alaska 1979).
Cool Homes distinguishes its two interests that have been taxed. First, it has a leasehold interest in the land upon which it constructed military housing. 1 Second, it has an ownership interest in the buildings it constructed. Cool Homes argues that the buildings cannot be considered real property absent any connection to the land. According to Cool Homes, its interest in the buildings is not subject to real property taxes since the federal government owns the underlying land. Cool Homes concedes that the buildings are taxable as personal property, but maintains that they are not subject to foreclosure.
The Borough asserts that governments traditionally enforce liens on taxable interests in...
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