Indian Head Nat. Bank of Portsmouth v. City of Portsmouth, 7837

• Decision Date: 16 November 1977
• Docket Number: No. 7837,7837
• Citation: 117 N.H. 954,379 A.2d 1270
• Parties: INDIAN HEAD NATIONAL BANK OF PORTSMOUTH v. CITY OF PORTSMOUTH.
• Court: New Hampshire Supreme Court

Page 1270

379 A.2d 1270

117 N.H. 954

INDIAN HEAD NATIONAL BANK OF PORTSMOUTH v. CITY OF PORTSMOUTH.

No. 7837.

Supreme Court of New Hampshire.

Nov. 16, 1977.

Shaines, Madrigan & McEachern, Portsmouth (Gregory D. Robbins, Portsmouth, orally), for the plaintiff.

Peter J. Loughlin, City Sol., Portsmouth, by brief and orally, for defendant city of Portsmouth.

PER CURIAM.

Petition for declaratory judgment and injunctive relief whereby the plaintiff seeks to have the taxation of its building and leasehold interest in land at Pease Air Force Base declared illegal and unconstitutional. The case was submitted to the court on an agreed statement of facts and was reserved and transferred without ruling by Goode, J.

The sole question before us is whether a municipality may tax land, and a building built thereon, to a private party leasing from an instrumentality of the federal government.

Briefly, the facts are as follows: Plaintiff entered into a lease agreement with the Secretary of the United States Air Force for the purpose of erecting and operating a branch bank at the military installation in defendant city. It is noted that at the end of the leasehold term (fifteen years subject to a ten-year extension) title to all improvements would vest in the United States (at its option) without any compensation to the lessee. Construction was completed; the land and building appraised in the sums of $29,500 and $116,500, respectively; and a tax of $6,424 assessed. As scheduled, but under protest, the plaintiff paid one-half of the taxes and then refused to pay the balance when it became due.

Plaintiff's contention that the building is not taxable is foreclosed by our holding in Lin-Wood Development Corp. v. Lincoln, 117 N.H. ---, 378 A.2d 741 (1977).

However, although under federal law and the terms of the lease the leasehold interest in the land might be subject to taxation, there is no authority in this state for the taxation of ordinary leasehold interests. In this state, taxation must be authorized by statute. King Ridge, Inc. v. Sutton 115 N.H. 294, 299, 340 A.2d 106, 109-110 (1975); Verney Corporation v. Peterborough, 104 N.H. 368, 371-372, 188 A.2d 50, 53-54 (1963). Only real estate has been made subject to tax under RSA 72:6. Leaseholds for a time of years are considered personalty and not taxable to the lessee. Gowen v. Swain, 90 N.H. 383, 10 A.2d 249 (1939). Swan v. Bill, 95 N.H. 158, 59 A.2d 346 (1948); see Piper v. Meredith, 83 N.H. 107, 139 A. 294 (1927). Although leaseholds in perpetuity may be taxed as real estate (Piper v. Meredith, supra ) no such lease exists in this case. We conclude therefore that the leasehold interest may not be taxed to the plaintiff in this case.

We also hold, as the city properly argues, that plaintiff's claim of over-valuation of the property, advanced only in its brief and on oral argument, should have been raised in a petition for abatement of the taxes imposed and not by a proceeding for declaratory judgment and injunctive relief.

We conclude that under the facts of the instant case only the building in issue is properly taxable.

Plaintiff's appeal reversed in part and sustained in part.

LAMPRON, J., did not participate in the decision of this case.

BOIS, J., dissents in part.

BOIS, Justice, dissenting in part.

I respectfully dissent from that part of the opinion that holds the leasehold interest in the land to be not taxable.

Generally, "(i)n the absence of a contrary agreement, and in the absence of 'over-balancing considerations,' the mere relationship of landlord and tenant ordinarily gives rise to no duty requiring the lessee to pay real-estate taxes or assessments levied against the leased...