Ken Realty Co. v. State

• Decision Date: 07 March 1946
• Docket Number: 6 Div. 349.
• Parties: KEN REALTY CO., Inc., v. STATE.
• Court: Alabama Supreme Court

25 So.2d 675

247 Ala. 610

KEN REALTY CO., Inc., v. STATE.

6 Div. 349.

Supreme Court of Alabama

March 7, 1946

Rehearing Denied April 11, 1946.

Kenneth Perrine, Ben Leader, Wm. Alfred Rose, Leader, Hill, Tenenbaum & Perrine, and White, Bradley, Arant & All, all of Birmingham, for appellant.

Wm. N. McQueen, Atty.Gen., and Jas. F. Matthews and W. W. Callahan, Asst. Attys. Gen., for appellee.

STAKELY Justice.

This is an appeal from the Circuit Court of the Tenth Judicial Circuit of Alabama. An appeal was taken to that court from the action of the Tax Assessor of Jefferson County in assessing for ad valorem taxes against the appellant, for the year beginning October 1, 1941, certain real estate known as the old post office site in Birmingham, Alabama. The trial court held the property subject to such taxes and held sixty percent of the reasonable market value of the property as of October 1, 1941, to be the assessed value without diminution by reason of any right, title or interest in or to the property belonging to the United States.

The case was tried on an agreed statement of facts. Prior to March 30, 1940, the United States for many years owned the entire interest in the property and used it as a post office site. The duly authorized agency of the United States offered the property for sale. Appellant made a proposal to purchase and the proposal was accepted. According to the contract then made, the purchaser agreed to pay $255,101 for the property. Of this amount one-fifth was paid in cash and the balance was made payable in ten equal annual installments, with interest. Appellant, as purchaser, took possession April 8, 1940. Prior to October 1, 1941, appellant in addition to the cash payment required also paid the first annual installment of $20,400 with interest. Appellant has been in continuous possession since April 8, 1940. The contract provides that on any default in payment the United States may terminate the contract, resume possession, retain payments made, sell the property and secure deficiency from the purchaser. On full payment of the price and full performance of the contract a deed is to be given. At the time the assessment was made appellant had paid $71,402.80, leaving an unpaid balance of $183,607.20 plus accrued interest. Under the contract the purchaser bears the risk of any loss or damage to the property and the purchaser has the right to lease without the government's approval, but in subordination to the government's interest in the property.

The agreed statement of facts also contains the following:

'It is further agreed by and between the parties that 60 percent of the fair and reasonable market value of said real property, including the improvements thereon, on October 1 1941, was $145,000.00. Said valuation refers to and means the whole and complete interest of both the interests of the United States of America and of the Company in said property.

'Notwithstanding said appeal from the assessment by the said Tax Assessor to the Circuit Court, the Tax Assessor proceeded upon his said assessment the same as if no appeal had been taken; and on December 18, 1942, the Ken Realty Company paid to the Tax Collector of Jefferson County, the sum of $5,358.96, that being the amount assessed by said Tax Assessor on or under said assessment.'

The question for decision is whether the state, county and city may assess the property to appellant for ad valorem taxes when the property is in possession of appellant, but when it has not paid the purchase price and become entitled to a deed.

It is a recognized principle of law that not only the instrumentalities of the federal government, but all the properties of the United States, however used, are exempt from state taxation. McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579; Irwin v. Wright, 258 U.S. 219, 42 S.Ct. 293, 66 L.Ed. 573; Van Brocklin v. Tennessee, 117 U.S. 151, 6 S.Ct. 670, 29 L.Ed. 845.

The State of Alabama recognizes this immunity by the provision incorporated in Section 2(a), Title 51, Code 1940, exempting 'all property, real and personal, of the United States.'

It is the insistence of appellant that there are but two exceptions to the general rule of immunity of property belonging to the United States from taxation imposed by the state or a subdivision thereof. First, when Congress has given its consent to such taxation; a situation, we add, that all agree does not exist in the case at bar. Second, when the United States holds the legal title to the property, but a perfect equitable interest therein is privately owned, because all conditions precedent to conveyance of the legal title have been complied with. In the case at bar appellant cannot demand a deed because the purchase price has not been fully paid. There is substantial authority to support the second exception as stated. City of Springfield v. United States, 1 Cir., 99 F.2d 860, certiorari denied 306 U.S. 650, 59 S.Ct. 592, 83 L.Ed. 1049; Irwin v. Wright, 258 U.S. 219, 42 S.Ct. 293, 66 L.Ed. 573; Kansas Pacific Ry. v. Prescott, 16 Wall. 603, 83 U.S. 603, 21 L.Ed. 373; Van Brocklin v. Tennessee, 117 U.S. 151, 6 S.Ct. 670, 29 L.Ed. 845; United States v. Allegheny County, 322 U.S. 174, 175, 64 S.Ct. 908, 88 L.Ed. 1209; Lincoln County v. Pacific Spruce Corp., 9 Cir., 26 F.2d 435; Clallam County v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328; Hussman v. Durham, 165 U.S. 144, 17 S.Ct. 253, 41 L.Ed. 664; ABR Corp. v. City of Newark, 131 N.J.L. 147, 35 A.2d 473; Copp v. State, 69 W.Va. 439, 71 S.E. 580, 35 L.R.A.,N.S., 669.

But in the case of City of New Brunswick v. United States, 276 U.S. 547, 48 S.Ct. 371, 372, 72 L.Ed. 693, after supporting the rule above referred to, the Supreme Court of the United States provided a plan, when the state law permits, whereby the state taxing authorities can assess and collect the taxes without infringing federal immunity from such taxation. In this connection the Supreme Court of the United States said:

'We see no reason, however, if the New Jersey law permits, why the City may not assess taxes against the purchasers upon the entire value of the lots and enforce collection thereof by sale of their interest in the property. With that the Corporation and the United States have no concern. * * *

'We conclude that, although the City should not be enjoined from collecting the taxes assessed to the purchasers by sales of their interests in the lots, as equitable owners, it should be enjoined from selling the lots for the collection of such taxes unless all rights, liens, and interests in the lots, retained and held by the Corporation as security for the unpaid purchase moneys, are expressly excluded from such sales, and they are made, by express terms, subject to all such prior rights, liens, and interests. This, we think, will meet the equities of the case as between the Corporation and the City, and fully protect the paramount right of the United States.'

In the case at bar, the entire value of the property was assessed against appellant, as the owner of the property, although appellant had paid only a part of the purchase price and was not entitled to demand a deed. Accordingly, if we would uphold the validity of the assessment here made, we must be able to say that the Alabama taxing statutes permit the plan authorized in the case of City of New Brunswick v. United States, supra, and which was followed in the case at bar. To meet this requirement we think that three tests must be met, which may be stated as follows:

(1). Was it correct to assess the taxes against appellant as owner within the meaning of Sections 79 and 80, Title 51, Code 1940? These sections show that the property must be assessed against the owner. Whatever may be the rule in other states, it is clear from our decisions that, appellant is the owner within the meaning of the Alabama taxing statutes.

'Our assessment statutes take no account of qualified or conditional estates in personal property, and with respect to the duty of, and liability to, assessment for taxation they make no reference to legal and equitable, or general and special owners. * * *

'So, when a statute requires that property be assessed to the owner, we think it means the general and beneficial owner--that is, the person whose interest is primarily one of possession and enjoyment in contemplation of an ultimate and absolute ownership--and not the person whose interest is primarily in the enforcement of a collateral pecuniary claim, and does not contemplate the use or enjoyment of the property as such.

'It is well settled that when the vendee of real property is in possession under an executory contract of sale, he is liable to be taxed as the owner. Bowls v. Oklahoma City, 24 Okl. 579, 104 P. 902, 24 L.R.A.,N.S., 1299, and note collecting many authorities. The case of Tracy v. Reed, C.C., 38 F. 69, 2 L.R.A. 773, cited to the contrary in 26 R.C.L. 358, § 315, is opposed to the overwhelming weight of authority.

'In 27 A. & E. Ency. Law (2d Ed.) 678, it is said that:

"Assessments in the name of a person as owner who holds the equitable title to property and is in possession have been generally upheld as valid'--for which many authorities are cited.

'It is, of course, to be conceded that the equitable ownership of an executory purchaser of realty is of a higher nature than is a like interest in personalty, and is more favored by the law; but for the purpose of taxation it is difficult to find any valid distinction.' State v. White Furniture Co., 206 Ala. 575, 90 So. 896.

In Crow, Tax Collector, v. Outlaw, 225 Ala. 656, 657 145 So. 133, this court said: 'The bill as originally filed sought injunctive relief against the sale for taxes of the real estate therein described, upon...