Dade County v. Pan Am. World Airways, Inc., 41536

• Decision Date: 07 February 1973
• Docket Number: No. 41536,41536
• Citation: 275 So.2d 505
• Court: Florida Supreme Court
• Parties: DADE COUNTY, a political subdivision of the State of Florida, et al., Appellants, v. PAN AMERICAN WORLD AIRWAYS, INC., a New York corporation, Appellee.

Page 505

275 So.2d 505

DADE COUNTY, a political subdivision of the State of Florida, et al., Appellants, v. PAN AMERICAN WORLD AIRWAYS, INC., a New York corporation, Appellee.

No. 41536.

Supreme Court of Florida.

Feb. 7, 1973.

Rehearing Denied April 5, 1973.

Stuart Simon, Dade County Atty., and Murray A. Greenberg, Asst. County Atty., for appellants.

Richard H. Hunt, Jr., Steven A. Schultz, and Smathers & Thompson, Miami, for appellee.

William G. Bell, Jr., Bradford, Williams, McKay, Kimbrell, Hamann & Jennings, Miami, and Gambrell, Russell, Killorin, Wade & Forbes, Atlanta, Ga., for Eastern Air Lines, Inc. and Delta Air Lines, Inc., amici curiae.

Woodrow M. Melvin, Jr., Karl B. Block, Jr., and Mershon, Sawyer, Johnston, Dunwody

& Cole, Miami, for Marine Exhibition Corporation, amicus curiae.

Darrey A. Davis of McCarthy, Steel, Hector & Davis, Miami, for National Airlines, Inc., amicus curiae.

DEKLE, Justice.

This cause is before us on direct appeal from the Circuit Court, Dade County. The decision sought to be reviewed expressly construes several provisions of the Florida Constitution, thereby vesting jurisdiction of the appeal in this Court under Fla.Const. art. V, § 3(b)(1), F.S.A.

The facts, as stipulated by the parties, are that plaintiff-appellee, a commercial airline, brought suit against defendants-appellants, Dade County and the Board of County Commissioners acting as the Dade County Port Authority, challenging the legality of the 1970 ad valorem tax assessment of its leasehold interests at Miami International Airport. The trial court granted plaintiff's motion for summary judgment, declared the 1970 ad valorem tax assessment against plaintiff's leasehold interests invalid, and enjoined defendants from collecting 1970 ad valorem taxes. We affirm these conclusions.

Appeal was originally filed in the District Court of Appeal and then transferred to this Court since construction of the constitution was involved below. The case is one of first impression.

The Port Authority (County) controls, maintains and operates the Miami International Airport; all of the real property, both improved and unimproved, located within and upon the airport is owned by Dade County. The airline leases from the county certain of the airport property and maintains on the leased premises an operations and aircraft overhaul base, an airline terminal facility, executive reservations and accounting offices and a flight simulator building and warehouses. All of the airline's leasehold interests in the real property involved were placed on the Dade County real property assessment roll and assessed for taxation by the county for the first time in 1970 in the aggregate amount of $14,866,490.00, indicating a tax liability of $299,336.78.

The construction of some, but not all, buildings leased by the airline, and the improvements or additions to certain other leased buildings, were financed through the issuance and sale of revenue bonds. Revenue bond financing of buildings leased by the plaintiff, Pan American World Airways, totalled.$7,032,863.71. These 'bond revenue properties' (though some had only additions which were bond financed) were assessed at $7,780,537.00 of the above aggregate amount of $14,866,490.00 of both the revenue bond properties and the nonrevenue bond properties. As of the relevant taxing date, January 1, 1970, the principal amount of the revenue bonds had been reduced from said.$7,032,863.71 to a total balance of $6,485,000.00 by virtue of lease rental payments made by the airline, which payments were directly applied to retire the bonded indebtedness.

The airline's leasehold interests in the revenue bond properties were created by leases (leases #4 and #5), containing the following provision:

'No rentals, fees, licenses, excise or operating taxes, tolls or other charges except those expressly provided in this Supplemental Agreement, and charges for utilities mentioned in the Lease Agreement, shall be charges by the Authority against or collected from, directly or indirectly, Pan American for any of the facilities, rights, licenses and privileges granted by this Supplemental Agreement. It is expressly understood and agreed that the Authority shall, if not prohibited by law, assume and pay any and all taxes or improvement charges of any nature whatsoever which may be levied or assessed against the New Facilities, or the leasehold interest of Pan American therein.' (emphasis ours)

Leases on the other properties contain the following provision:

'The Authority agrees that no rents, fees, charges or tolls, other than those expressly provided in this Lease, shall be charged or collected by it from Lessee or from Lessee's employees, suppliers of materials or furnishers of service for the use of any of the premises, facilities, licenses and privileges expressed in or reasonably inferred from these presents or for any of the services required to be performed hereunder by the Authority, The rents, fees, and charges expressly provided herein being full and complete consideration and compensation to Lessor for the use of said premises, facilities, licenses and privileges and the performance of said services.' (emphasis ours)

The airline contends that by virtue of the foregoing provisions in its various leases, the leasehold interests owned by it may not be taxed, either by the County or by any State agencies such as the Board of Public Instruction, Central and Southern Flood Control District, or by the Florida Inland Navigation District. Alternatively, the airline contends that if any ad valorem taxes are assessed against its leasehold interests, the county has agreed to pay, and is liable for, all such taxes.

In one sense, the leases in question are really ones in which the county obligated itself in effect to a 'net rental' contract which apparently took into consideration the non-payment of taxes. In this manner if viewed in a posture of the leaseholds 'having' to be taxed (under appellant's contention), any 'tax' is in effect included in the net rental payments.

The county argues that all of the leasehold interests in question are subject to ad valorem taxation for the 1970 tax year by virtue of Article VII, § 10(c), of the Florida Constitution, which became effective January 7, 1969. ¹ Article VII, § 10, provides in pertinent part as follows:

'Neither the state nor any county, school district, municipality, special district, or agency of any of them, shall become a joint owner with, or stockholder of, or give, lend or use its taxing power or credit to aid any corporation, association, partnership or person; but this shall not prohibit laws authorizing:

'(c) the issuance and sale by any county, municipality, special district or other local governmental body of (1) Revenue bonds to finance or refinance the cost of capital projects for airports or port facilities, or (2) revenue bonds to finance or refinance the cost of capital projects for industrial or manufacturing plants to the extent that the interest thereon is exempt from income taxes under the then existing laws of the United States, when, in either case, the revenue bonds are payable solely from revenue derived from the sale, operation or leasing of the projects. If any project so financed, or any part thereof, is occupied or operated by any private corporation, association, partnership or person pursuant to contract or lease with the issuing body, the property interest created by such contract or lease shall be subject to taxation to the same extent as other privately owned property.' (emphasis ours)

The airline contends, and the trial court held, that the foregoing provision of the constitution requires implementation by the Legislature before it can become effective. It well may so require, and there may, as the county contends, already exist appropriate implementing statutes to fulfill such requirement. In either instance, however, art. VII, § 10(c), does not apply here. The leases here involving revenue bond properties were created prior to the effective date of this constitutional provision and in this respect we affirm the able trial judge's conclusion that the leaseholds are not taxable under Article VII, § 10(c), because it is patently prospective in its application; and this prospective application only is spelled out in the schedule following this constitutional provision in Article XII, §§ 7(a) and (b), which states:

'(a) All actions, rights of action, claims, contracts and obligations of . . ., corporations and public bodies . . . existing on the date this revision becomes effective shall continue to be valid as if this revision had not been adopted. . . .

'(b) This revision shall not be retroactive so as to create any right or liability which did not exist under the Constitution of 1885, as amended, based upon matters occurring prior to the adoption of this revision.'

In this connection we recognize that Lease No. 2 pertaining to non-revenue bond properties is dated subsequent to the effective date of Article VII, § 10(c). Nevertheless, this new constitutional provision applies to properties financed by revenue bonds only and accordingly Article VII, § 10(c) does not affect Lease No. 2.

At this point we turn to the remaining questions of whether the leasehold interests are taxable without regard to Article VII, § 10(c). Leasehold interests in Private property with certain exceptions ² are not subject to ad valorem taxation under Florida law. However, the Legislature in 1961 ³ decided to impose ad valorem taxes upon public property which was exempt or immune from taxation but being Used by private interests in connection with a Profitmaking venture. The leaseholds here in question were generally made in 1962 and subsequent years; thus they were subject to such law and its exemptions. The 1961 statute (§ 192.62) was not expressly directed toward leaseholds by name but imposed a tax 'whether such use . . . is by Lease, loan,...