Owen v. Fletcher Savings & Trust Building Co.

• Decision Date: 07 March 1934
• Docket Number: 14,358
• Citation: 189 N.E. 173,99 Ind.App. 365
• Parties: OWEN v. FLETCHER SAVINGS & TRUST BUILDING COMPANY
• Court: Indiana Appellate Court

189 N.E. 173

99 Ind.App. 365

OWEN v. FLETCHER SAVINGS & TRUST BUILDING COMPANY

No. 14,358

Court of Appeals of Indiana

March 7, 1934

Rehearing denied June 28, 1934.

Transfer denied November 19, 1934.

From Marion Superior Court; Joseph R. Williams, Judge.

Action by Fletcher Savings & Trust Building Company and another against Mabel Talbott Owen for a declaratory judgment construing the terms of a 99-year lease. From a judgment in favor of plaintiffs, defendant appealed.

Affirmed.

Samuel Ashby, W. H. Thompson, A. L. Rabb, and T. D. Stevenson, for appellant.

Baker & Daniels, Joseph J. Daniels, Donald S. Morris, and Paul N Rowe, for appellees.

OPINION

WOOD, C. J.

May 10, 1912, the appellant entered into a written contract with Stoughton A. Fletcher and Albert E. Metzger under the terms of which she leased to them certain described real estate in the city of Indianapolis for a term of ninety-nine years. June 27, 1912, Fletcher and Metzger, by a writing executed on that date, assigned their interest in said lease to the appellee Fletcher Savings and Trust Building Company. February 12, 1919, the Fletcher Savings and Trust Building Company sublet the real estate and building which it had erected thereon, to its co-appellee, Fletcher Savings and Trust Company, for a period of fifteen years or until January 1, 1934.

Paragraph six of said lease provided in part as follows: "Sixth: That it is further covenanted and agreed that the lessee shall bear, pay and discharge, in addition to the rent and other payments herein agreed to be paid, all taxes, assessments, benefits, rates, and levies of any name, nature and kind whatsoever, which may by any law of the United States of America, or of the State of Indiana, or by order, resolution, ordinance, or other exercise of authority of the City of Indianapolis, or other municipality, or of any county or township, or of any board, department, commission or officer or body authorized so to do under any law of the United States of America, or of the State of Indiana, or otherwise, legally authorized, or in any other lawful manner whatsoever, be taxed, charged, assessed, levied, or imposed on said real estate, or on any and all buildings, or improvements thereon or that at any time during this lease may be thereon, or which may be assessed upon the right of the lessor to receive the rentals hereunder during this lease, and including taxes imposed upon said real estate and buildings and improvements thereon for the year 1912, and the last half of the taxes for the year 1911; and that the lessees are to obtain and deliver to said lessor original or duplicate tax receipts of all taxes, assessments and other payments required to be made by this item, of every kind and nature whatsoever, paid on said real estate or buildings, or improvements at any time thereon; that all such taxes, assessments and other payments required to be made by this item shall be paid and made out in the name of the lessor or her heirs, executors, administrators, or assigns, and said original or duplicate tax receipts shall be sent by mail to said lessor or to whomever she may direct in writing, not later than ten (10) days before the last day on which such taxes, assessments or other payments required to be made by this item are payable without being delinquent."

October 3, 1913, Congress, pursuant to authority vested in it by the 16th Amendment to the United States Constitution, enacted an income tax law, levying a tax upon certain incomes therein designated from March 1, 1913. By the terms of this law, and the subsequent income tax laws enacted by Congress, the rent paid to appellant under the lease above referred to is income, on which an income tax must be paid.

After the 1913 income tax law was enacted a controversy developed between the appellant and the appellees pertaining to the construction to be placed upon the sixth paragraph of the lease; whether by its provisions, the duty rested upon the appellant to pay the income taxes charged against the rent paid to her by the appellees, or whether the appellees should in addition to paying the rent, also pay the income taxes charged against it, thereby indemnifying and saving the appellant harmless from any liability therefor.

For the purpose of obtaining a declaratory judgment or decree of the court respecting the duties and obligations of the appellant and appellees under the sixth paragraph of the lease, the appellees filed complaint under the "Uniform Declaratory Judgment Act," Acts 1927, p. 208, alleging facts as above briefly summarized.

Appellant filed a demurrer to this complaint alleging as causes therefor, (1) want of jurisdiction of the court over the subject matter of the action, and (2) insufficiency of facts to state a cause of action. The first six paragraphs of memoranda in support of this demurrer questioned the constitutionality of the "Uniform Declaratory Judgment Act." Appellant does not discuss any of the questions presented by these paragraphs of memoranda in her brief so they are waived. The remainder of the paragraphs of memoranda are as follows:

"7. The lease and written instrument set out in and made a part of plaintiff's complaint requires the payment by the lessees therein named and their assignees, of all income taxes levied or assessed pursuant to any law of the United States of America on account of the real estate therein demised and the rent to be received under the terms of said lease; and the complaint therefore shows on its face that under no circumstances could the plaintiffs be entitled to any judgment or decree establishing any right to exemption from the payment of such income taxes.

"8. The averments of plaintiff's complaint show that they are obligated to pay all Federal income taxes on account of rentals due or received by the defendant on account of the real estate described in said written lease and that therefore the plaintiffs are not entitled to any judgment which would relieve them from the payment of such income taxes or any part thereof.

"9. The income tax which is imposed under the Federal Income Tax Law is in effect an assessment or tax against the real estate itself and under the terms of the lease referred to in plaintiff's complaint, they are liable for such income tax.

"10. The facts alleged in plaintiff's complaint show that the plaintiffs are liable to the defendant for all income taxes imposed or assessed by the United States against the defendant on account of rent received under the lease referred to in plaintiff's complaint.

"11. Plaintiff's complaint contains no averment of fact showing any liability whatever on the part of the defendant to the plaintiffs or either of them for any reason."

This demurrer was overruled.

Appellants filed an answer in four paragraphs, the first was a general denial, the second paragraph alleged that the court had no jurisdiction of the subject matter of the action; that there was no existing controversy between the parties; that the appellees did not seek the redress or prevention of a wrong or the enforcement of a right; that there had been no violation of any of the terms of the contract; that it had been fully carried out and that there was no threatened breach by any of the parties thereto. The third paragraph alleged the execution of the lease and its assignment by the original lessees to the Fletcher Savings and Trust Building Company; that under the terms of the lease and its assignment to said appellee, it should be adjudged and decreed by the court that the Fletcher Savings and Trust Building Company was liable to pay the income tax. The fourth paragraph alleged that at the time of the execution of the lease in question the 16th Amendment to the Constitution of the United States was in process of adoption and became effective February 25, 1913; that at the time of the execution of the lease it was not known whether the amendment would be adopted or what form legislation enacted by Congress would take; that prior to the execution of the lease it was agreed by the parties that the written lease should be drafted, so that the lessees and their successors or assignees would be obligated to pay any federal income tax on account of rentals due or received by terms of said lease; that if there was any ambiguity in said lease, particularly as to paragraph six, it should be construed and interpreted pursuant to said oral contract between the parties.

Appellees filed a demurrer to the second, third, and fourth paragraphs of said answer for insufficiency of facts to constitute a defense to their complaint. The memorandum in support of the demurrer to the second paragraph of answer alleged, in substance, that no affirmative facts were set out, but the paragraph of answer was only a statement of legal propositions, arguments, and conclusions, in reality a demurrer seeking to raise the question of jurisdiction of the court, which had already been presented by appellant's demurrer to the complaint and passed upon adversely to her. The memorandum in support of the demurrer to the third paragraph of answer alleged, in substance, that there was no allegation of fact other than those contained in appellee's complaint, and was a conclusion of law that the appellee Fletcher Savings and Trust Building Company was obligated to pay federal income taxes on account of rentals received by appellant; that it failed to show wherein either of the appellees were bound to pay federal income taxes on account of rentals due or received by appellant on the real estate described in the lease, but on the contrary, said paragraph of answer, and the lease which was made an exhibit thereto, showed that there was no obligation upon the appellees to pay such income tax. The...