Land O'Lakes Dairy Co. v. Wadena County
| Decision Date | 22 July 1949 |
| Docket Number | No. 34956.,No. 34955.,34955.,34956. |
| Citation | 229 Minn. 263,39 N.W.2d 164 |
| Parties | LAND O'LAKES DAIRY CO. v. WADENA COUNTY et al. STATE v. LAND O'LAKES DAIRY CO. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Wadena County; D. M. Cameron, Judge.
Action by Land O'Lakes Dairy Company against County of Wadena and State of Minnesota, to enjoin enforcement of a judgment recovered by State against realty of plaintiff for real estate taxes for year 1945, and action by State of Minnesota against Land O'Lakes Dairy Company for personal property taxes for the year 1945. From adverse judgment in each case, the Dairy Company appeals.
Affirmed.
Doherty, Rumble, Butler & Mitchell, Harold Jordan, St. Paul, for appellant.
J. A. A. Burnquist, Atty. Gen., Geo. B. Sjoselius, Dep. Atty. Gen., Charles P. Stone, Asst. Atty. Gen., Charles W. Kennedy, County Atty., Wadena, for respondents.
These two appeals were heard together. One is from a judgment denying an injunction enjoining the enforcement of a judgment recovered by the state against real property of the Land O'Lakes Dairy Company (herein referred to as the "dairy company") for real estate taxes for the year 1945. The other is from a judgment recovered by the state against the dairy company for personal property taxes for the year 1945.
The questions for decision are:
(1) Whether a transaction between the government of the United States and a contractor constitutes a mortgage, where the transaction is evidenced by three written instruments, viz.: A contract, a lease, and a combined warranty deed and bill of sale, which provided in effect that the contractor should acquire land, erect thereon a building and equip it for manufacturing a product to be used for national defense; that, after having completed the erection and equipment of the facility mentioned, the contractor should convey and transfer title thereto to the government for a purchase price to be determined in the manner provided by the contract upon condition subsequent that the title should revert to the contractor upon payment by it, after the President had declared the facility to be no longer needed for defense purposes and while the lease or an extension thereof was in force, of an amount equivalent to the purchase price paid by the government less depreciation of the property computed according to contractual formula; that during the life of the lease the contractor should pay a stipulated rental for occupation and use of the facility; that upon payment of such sum the government would execute written instruments to evidence the reversion of the title; and that, if such payment was not made, the title vested in the government by the warranty deed and bill of sale should become indefeasibly vested in it;
(2) Whether, if such a transaction constitutes a mortgage, the property is immune from state taxation because of the federal government's ownership of an interest therein as mortgagee; and (3) Whether a declaratory judgment, determining that the mortgagor was liable as against the claim of federal immunity from taxation for a personal property tax based on its ownership of personal property, is res judicata in a proceeding to enforce payment of personal property taxes of the question whether the mortgagor is liable for such taxes as against the defense of federal immunity therefrom.
Pursuant to authority granted by 22 U. S.C.A., §§ 411-419, Lend-Lease Act, and 55 U.S.St. 53-55, Defense Aid Supp. Appropriation Act, 1941, the government arranged with the dairy company to have it acquire and operate a milk processing plant for manufacturing nonfat dry milk solids or such other products as might be specified by the government, which were to be first offered for sale to it. The transaction was evidenced by three writings, viz., a contract, a lease, and a combination warranty deed and bill of sale.
The contract (dated June 9, 1944), so far as here material, provided that the dairy company should acquire, if it was not the owner thereof (and it was stipulated that it was not), a tract of land upon which to erect the processing plant; that the dairy company should construct thereon at its own expense the processing plant and equip it according to the government's plans and specifications; that the dairy company should also equip certain creamery receiving stations in the trade area surrounding the plant; that the dairy company, after it had constructed and equipped such property, which it was agreed was to be referred to as the "facility," should convey and transfer title thereto to the government; and that the government should pay the dairy company a price therefor to be determined according to the contract, which afterward was agreed to be $415,285.51. The contract provided that "title to the facility shall however, be subject to the following condition to be provided for, substantially, in each instrument of title or conveyance," viz., that if the President of the United States should declare that the facility was no longer needed for defense purposes and the dairy company should during the lease or a continuation thereof pay a sum of money to the United States equivalent to the total consideration paid by the government for the facility, not including the cost of the land, less an annual depreciation of ten percent thereof, title to the facility should "revert" to the dairy company, but that the government should not be responsible for the condition or state of repair of the facility at the time title thereto "reverts" to the dairy company. It was further agreed that "upon the reverting of the title" as aforesaid the government should execute and deliver to the dairy company written instruments "to evidence the happening of the reversion of title"; that, should the dairy company fail to make the payment within the time specified, "said condition subsequent shall be null and void," and title to the facility "then vested in the Government shall be indefeasible." It was also provided that the dairy company should pay for documentary revenue stamps and filing and recording fees, and that it should bear loss caused by fire prior to the acceptance of the facility by the government.
Simultaneously (on June 9, 1944), the government executed a written lease of the facility to the dairy company for a term of five years for the purposes stated in the contract, reserving an annual rental equivalent to 11 percent of the total consideration paid for the facility. Under the lease, the dairy company was obligated to offer for sale to the government all products processed in the facility; to keep the facility insured at its own expense against loss by fire and other hazards to be specified; and to pay, at least ten days prior to delinquency, "all taxes assessed or other governmental charges that may be legally imposed upon or constitute a lien against the facility or any part thereof." There were covenants against subleasing and subletting by the dairy company. The dairy company was granted the right to renew the lease, as follows: (1) If the President had not made the declaration mentioned and if the lease was still in force, to renew it for another term of five years upon the same terms and conditions as those contained in the original lease; and (2) if at the end of such renewal period the President had not made such declaration and if the lease as renewed was still in force, to renew it for another term of ten years upon the same terms, etc., except that the rental was to be $10 per month. The lease contained provisions authorizing the government to terminate the lease as renewed.
On November 24, 1945, the dairy company, in consideration of $415,285.51, of which $322,810.24 represented the purchase price of the land and the cost of the buildings, including permanent fixtures and installations, by a combination warranty deed and bill of sale conveyed the facility to the government, subject to the condition subsequent, which by the terms of the contract was to be included in the deed and bill of sale and which was set forth therein substantially in the language of the contract.1
By amendments to the contract and the lease executed on November 6, 1945, it was agreed, among other things, that title to the facility should be considered as having vested in the government on April 1, 1945; that the term of the lease should be considered as commencing on April 1, 1945; and that the provision of the lease obligating the dairy company first to offer to the government products processed in the facility be deleted.
The dairy company has been at all times in possession of the facility and has operated it ever since it became capable of use.
On July 31, 1946, the President made a declaration that the government no longer needed the facility for defense purposes.
The dairy company has not exercised its right to terminate the lease and to pay the amount due the government in order to obtain a reversion to it of the title which it conveyed to the government.
Pursuant to M.S.A. cc. 273 and 275, a real estate tax for the year 1945 amounting to $3,249 was assessed against the real estate in question, effective as of May 1, 1945 (May 1 is the tax day), and a personal property tax for the year 1945 amounting to $6,143.33 was assessed against the dairy company effective as of May 1, 1945, based upon its ownership of machinery and equipment in its plant located in the village of Sebeka.
Thereafter, the dairy company commenced a declaratory judgment action to have determined whether it was liable for the taxes in question. The district court sustained demurrers to the complaint upon the ground that, while a taxpayer has a right in such cases to maintain an action for a declaratory judgment to have determined its liability for both real property and personal property taxes, the dairy company upon the merits was liable for...
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