Phillips Chemical Co. v. Dumas Independent School Dist. of Moore County, 6697

• Decision Date: 30 September 1957
• Docket Number: No. 6697,6697
• Citation: 307 S.W.2d 605
• Court: Texas Court of Appeals
• Parties: PHILLIPS CHEMICAL COMPANY, Appellant, v. DUMAS INDEPENDENT SCHOOL DISTRICT OF MOORE COUNTY, Texas, Appellee.

Page 605

307 S.W.2d 605

PHILLIPS CHEMICAL COMPANY, Appellant, v. DUMAS INDEPENDENT SCHOOL DISTRICT OF MOORE COUNTY, Texas, Appellee.

No. 6697.

Court of Civil Appeals of Texas, Amarillo.

Sept. 30, 1957.

Rehearing Denied Dec. 2, 1957.

Rayburn L. Foster and Harry D. Turner, Bartlesville, Okl., E. H. Foster, T. M. Blume and C. Rex Boyd, Amarillo, for appellant.

James W. Witherspoon, John D. Aikin, Wayne E. Thomas and Earnest L. Langley, Hereford, for appellee.

PITTS, Chief Justice.

This appeal is from a trial court order denying appellant, Phillips Chemical Company, a corporation, injunctive relief in its attempt to restrain appellee, Dumas Independent School District of Moore County, Texas, from assessing and collecting property taxes from appellant for certain designated years on its leasehold interest in property known as 'Cactus Ordnance Works' owned in fee simple by the United States Government but operated by appellant under a long term lease contract. The original lease contract was executed on July 23, 1948, effective August 16, 1948, between the United States Government and Phillips Petroleum Company, which assigned it to appellant herein on July 30, 1948. Appellant accepted all of its terms and assumed all of its covenants.

The trial court heard the case without a jury and, only in so far as the controlling question presented here is to be determined, denied appellant the relief sought. In its judgment the trial court found that the said property was not being used or occupied by the United States Government but was being used and occupied by appellant under the terms of the said lease contract in conducting and operating a business as a private enterprise for profits during each of the years beginning with March 17, 1950 through the year 1954, the same being the period of time appellant alleges appellee is seeking the right to collect the property taxes upon its leasehold interest previously mentioned.

In its alleged action appellant sought to enjoin appellee from assessing and attempting to collect taxes from it upon the property in question for the years 1949 through 1954, and sought further to cancel the taxes already assessed by appellee. Appellee joined issues with appellant and also filed a cross action seeking to collect taxes from appellant upon its interest in the property for the said years. Upon appellant's motion the trial court severed the question of injunctive relief from the remainder of the suit, including appellee's cross action, and tried only the issue of injunctive relief, after which it entered its order enjoining appellee from assessing and collecting taxes on appellant's interest in the property in question for 1949 and up to March 17, 1950, the date the last amendment to Art. 5248, Vernon's Ann.Civ.St. became effective, but denying appellant the relief sought in an effort to enjoin the collection of taxes for the remainder of the period of time from March 17, 1950, through 1954. An appeal from the latter part of the trial court's judgment was perfected by appellant and that is the only question before us. Appellee, as a cross appellant, gave notice of appeal from the first part of the trial court's judgment granting appellant injunctive relief for 1949 and up to March 17, 1950, but appellee as a cross appellant did not bring forward its appeal from that part of the trial court's judgment.

The lease contract here involved is lengthy but under the terms thereof appellant herein accepted a binding lease agreement for the use and operation of a multimillion dollar industrial plant known as the 'Cactus Ordnance Works' for its use in manufacturing anhydrous ammonia, or fertilizer, and for other commercial and experimental purposes. The said industrial plant consists of buildings, improvements, machinery and appurtenances thereto located upon certain described lands in Moore County, Texas. The primary term of the said lease is for 15 years beginning August 16, 1948, with the right and privilege of appellant herein to extend the primary term of the same for two additional periods of five years each, the consideration therefor being an annual rental of $1,026,666.67 to be paid by appellant herein as lessee to the United States Government as lessor. The lease further provides for a termination of the same by the United States Government if desired and upon giving 30 days notice to lessee in case of a national emergency, but there is no showing that any such emergency ever existed and appellant herein has continuously occupied and used the property covered in the least since the date it became effective.

Appellant herein concedes that it owns the said leasehold and has been occupying and using the premises and the property thereon as provided for under the terms of the lease 'in its private capacity as a business enterprise in an effort to make a profit therefrom.' Appellee contends that because of such ownership of the leasehold by appellant as lessee and because of its operations thereof for a profit, it should be required to pay a fair and equitable tax thereon in the same manner as other competitive private corporations or individuals engaged in a similar enterprise for profit, although the latter parties may own their plants in full. Appellant here charges that appellee is attempting to tax it on the fee simple title to real property with improvements thereon which property is not owned by appellant but is owned by the United States Government. Appellant further charges that it can not be legally taxed for property owned by the United States Government and not owned by appellant, while appellee asserts it is not seeking to tax appellant on property owned by the United States Government but it is seeking only to tax appellant on its interest in the property in question by reasoin of its leasehold, its occupancy and operations of the same in a private capacity for profits as a business enterprise.

The lease contract between the Government as lessor and appellant herein as assignee and lessee recognizes the provisions of 'Public Law 364-80th Congress,' the leasing Act, codified in part at least in 10 U.S.C.A. Secs. 1270-1270d,* which provides in part (1270d) that 'The lessee's interest, made or created pursuant to the provisions of sections 1270-1270b, 1270d of this title, shall be made subject to State or local taxation.'

Under the terms of the lease contract between appellant herein and the Government, appellant obligated itself to pay the local taxes assessed against it by the approval of the language found as a part of the covenant in Condition (Section) 29 of the lease contract reading as follows:

'That the Lessee shall pay to the proper authority, when and as the same becomes due and payable, all taxes, assessments, and similar charges which, at any time during the term of this lease, may be taxed, assessed, or imposed upon the Government or upon the Lessee with respect to or upon the Leased Property.'

Article 5248 as amended, effective since March 17, 1950, previously herein referred to, authorizes appellee to impose a property tax upon appellant's interest in the property in question as a result of the leasehold since appellant admittedly occupies and uses the said property in conducting a private business or enterprise in an effort to make a profit therefrom. The language of the said Article is as follows:

'The United States shall be secure in their possession and enjoyment of all lands acquired under the provisions of this title; and such lands and all improvements thereon shall be exempt...