Ken Realty Co. v. Johnson

• Decision Date: 19 January 1944
• Docket Number: No. 10544.,10544.
• Citation: 138 F.2d 809
• Parties: KEN REALTY CO., Inc., v. JOHNSON, Tax Assessor of Jefferson County, Ala.
• Court: U.S. Court of Appeals — Fifth Circuit

138 F.2d 809 (1943)

KEN REALTY CO., Inc., v. JOHNSON, Tax Assessor of Jefferson County, Ala.

No. 10544.

Circuit Court of Appeals, Fifth Circuit.

November 29, 1943.

Rehearing Denied January 19, 1944.

Benj. Leader, Kenneth Perrine, and Wm. Alfred Rose, all of Birmingham, Ala., for appellant.

W. W. Callahan, William N. McQueen, and James F. Matthews, all of Montgomery, Ala., and Harvey Deramus, of Birmingham, Ala., for appellee.

Before SIBLEY, McCORD, and WALLER, Circuit Judges.

SIBLEY, Circuit Judge.

This case involves the liability to State taxation of property sold by the United States to a private corporation with possession given and the purchase money partly paid, but with the legal title retained to secure the balance due. An injunction and a declaratory judgment were sought by Ken Realty Company against the State Tax Assessor, to stop the assessment against itself of any tax in respect of the site of the former postoffice in Birmingham, Alabama. The District Court sustained a motion to dismiss the complaint on its merits, filing an opinion, 46 F.Supp. 408, in which he adopted the view that the entire value of the land was taxable to Ken Realty Co., since no interest of the United States would be prejudiced thereby. Ken Realty Company appeals.

The material facts are these: The United States desired to dispose of the old postoffice site, and on March 30, 1940, accepted a written bid made therefor by Ken Realty Company. According to the written contract thus made the property was purchased for $255,010, of which $12,750.50 was paid down, and the balance was payable in ten equal annual installments. The purchaser was to take immediate possession and assume all risk of loss or damage to the property. On any default in payment the United States by notice in writing might terminate the contract, reassume possession, retain payments made, and sell the property and recover any deficiency from the purchaser. On full payment a deed was to be made to the purchaser or its nominee. Portions of the property might be sold off on payment of such sums as would leave the security unimpaired. Leases might be made without the approval of the United States, but "subordinate to the Government's interest in the property." The contract has been carried out in all respects, three of the ten installments having now been paid. In July, 1941, the Attorney General of Alabama rendered an opinion that the property was assessable for ad valorem taxation against Ken Realty Company, and the Tax Assessor notified the Company that he was going to assess it at a value of $130,000. Plaintiff admits that to be a fair tax value of the unincumbered fee, but denies that the property is taxable at all until it shall receive or become fully entitled to a deed from the United States.

The District Judge thought the case similar to any other in which a purchaser on instalments, having possession, with title retained to secure the purchase money, is taxed for the full value of the property, and the seller is taxed on what is the equivalent of a mortgage held by him; except that of course the United States is immune from taxation on its mortgage. The Attorney General contends that the full value is assessable as the court held, but that the proposed assessment at $130,000 is not on the full value of the property, but only on the Ken Realty Company's present interest in it, which is measured by the full value less the amount of the balance of purchase money.

Everyone recognizes that not only the instrumentalities of government but all the property of the United States, however used, are exempt from State taxation, by reason of a mutual immunity implied in the Federal Constitution, and first stated in McCulloch v. State of Maryland, 4 Wheat. 316, 4 L.Ed. 579. See also Van Brocklin v. State of Tennessee, 117 U.S. 151, 6 S.Ct. 670, 29 L.Ed. 845; Clallam County v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328. The Alabama Code also, Title 51, § 2(a), exempts "all property, real and personal, of the United States." This mutual immunity is to be given a practical application so as to attain its purpose, but without unnecessary interference with the right of taxation. It is personal to the government, State or federal, and is not transferable to or to be used for the special protection of the citizen. An indirect and remote advantage to government, such as the probability that the services of contractors may be gotten by government for less if their pay is untaxed, or that public property may be sold for more if exempted from taxation for a time, will not justify the extension of the immunity to the contractor or purchaser. Metcalf & Eddy v. Mitchell, 269 U.S. 514, 515, 523, 46 S.Ct. 172, 70 L.Ed. 384; Willcuts v. Bunn, 282 U.S. 216, 231, 51 S.Ct. 125, 75 L.Ed. 304, 71 A.L.R. 1260; Group No. 1 Oil Corp. v. Bass, 283 U.S. 279, 282, 51 S.Ct. 432, 75 L.Ed. 1032.

By Alabama Code, Title 51, § 21, the subjects of taxation, except as exempted, are declared to include "(a) Every piece, parcel, tract or lot of land in the State, including therein all things pertaining to such land * * * and every separate or special interest in any land, such as mineral etc. * * * or any other interests when such interests are owned by persons other than the owner of the surface or soil, except growing crops. * * * (n) All other property real, personal or mixed not hereinbefore specified." This language reaches every interest in land not exempt from taxation, and whose owner is not immune. Special interests may be separately valued and taxed whenever they ought to be.

When no exemption of the property or immunity of the owner thereof is involved, but all interests, though separately owned, are taxable, it is usual to fix the value of the whole lot or parcel of land and assess the tax against that owner who is in possession and receiving the rents, issues and profits of the land. Thus in case of a life estate and remainder the owner of the life estate is assessed. Where title is conveyed to secure a debt, the debtor in possession is assessed. Where land is sold with title retained to secure purchase money, the purchaser in possession is assessed. Recognizing...