Rohr Aircraft Corp. v. San Diego County

• Decision Date: 17 March 1959
• Citation: 336 P.2d 521,51 Cal.2d 759
• Court: California Supreme Court
• Parties: ROHR AIRCRAFT CORPORATION (a Corporation), Appellant, v. COUNTY OF SAN DIEGO et al., Respondents. L. A. 24556.

Page 521

336 P.2d 521

51 Cal.2d 759

ROHR AIRCRAFT CORPORATION (a Corporation), Appellant, v. COUNTY OF SAN DIEGO et al., Respondents.

L. A. 24556.

Supreme Court of California.

March 17, 1959.

Rehearing Denied April 15, 1959.

Glenn & Wright and Leroy A. Wright, San Diego, for appellant.

James Don Keller, Dist. Atty., and County Counsel, Carroll H. Smith, Deputy Dist. Atty., and Manuel L. Kugler, City Atty., San Diego, for respondents.

SPENCE, Justice.

Plaintiff, Rohr Aircraft Corporation, sought to recover property taxes paid to the defendants County of San Diego and City of Chula Vista under allegedly illegal assessments. From a judgment denying a refund, plaintiff appeals.

During the years for which recovery is sought, plaintiff occupied the land in question under a lease obligating it to pay 'all taxes, assessments and similar charges * * * upon the leased premises.' Plaintiff's lessors were the 'Reconstruction Finance Corporation * * * and the United States of America, both acting by and through the General Services Administrator.' While plaintiff concedes the taxability of its possessory interest, it maintains that taxes levied upon the realty itself were unlawful because of the general rule that lands owned by the United States of America or its instrumentalities are immune from state and local taxation. Clallam County, Wash., v. United States, 263 U.S. 341, 44 S.Ct. 121, 68 L.Ed. 328; Van Brocklin v. State of Tennessee, 117 U.S. 151, 6 S.Ct. 670, 29 L.Ed. 845. Defendants argue, however, that the property was owned by the Reconstruction Finance Corporation, that Congress had waived the tax immunity of such property (Reconstruction Finance Corporation Act, ch. 166, § 8, 61 Stat. 205 (1947), as amended, 15 U.S.C.A. § 607 (formerly Reconstruction Finance Corporation Act, ch. 8, § 10, 47 Stat. 9 (1932)), and that the assessments were therefore lawful.

In 1942 and 1943, plaintiff's predecessor, also named Rohr Aircraft Corporation, conveyed to property in question to the Defense Plant Corporation, a subsidiary of the Reconstruction Finance Corporation (hereinafter sometimes referred to as the RFC.) The Defense Plant Corporation improved the property and leased it to plaintiff's predecessor for the production of aircraft parts and assemblies during World War II. On July 1, 1945, the Defense Plant Corporation was dissolved and all its assets were transferred to the RFC by operation of law. Act of June 30, 1945, ch. 215, 59 Stat. 310, 15 U.S.C.A. § 611 note. In October, 1945, the lease was terminated at Rohr's request, and there was evidence that the company then vacated the premises. On May 29, 1946, the RFC declared the property to be surplus to its needs and responsibilities pursuant to the Surplus Property Act of 1944, § 11, 58 Stat. 769. Later in the year the War Assets Administration, a federal instrumentality designated as a surplus property disposal agency (see Surplus Property Act of 1944, ch. 479, § 10(a), 58 Stat. 769), accepted possession and control of the property pending its ultimate disposition. No deed was executed at that time, and legal title remained in the RFC. The functions of the War Assets Administration were subsequently transferred to the General Services Administration. Federal Property and Administrative Services Act of 1949, ch. 288, § 105, 63 Stat. 381, 5 U.S.C.A. § 630c.

In May, 1948, the former Rohr Aircraft Corporation began renting portions of the property on a month-to-month basis, and in September, 1949, its successor, the plaintiff, obtained the above-mentioned lease of the entire property. In accordance with its terms, plaintiff paid taxes on the land pursuant to defendants' assessments against the RFC as record owner for the fiscal years 1951-1952 through 1954-1955. In 1955 the RFC conveyed its interest to the United States.

Plaintiff's right to recover the amounts so paid depends on whether the leased premises were immune from local taxation or whether Congress had waived the federal immunity. The waiver in question provides, '(A)ny real property of the (Reconstruction Finance) Corporation shall be subject to * * * county, municipal, or local taxation to the same extent according to its value as other real property is taxed.' Reconstruction Finance Corporation Act, ch. 166, § 8, 61 Stat. 205 (1947), as amended, 15 U.S.C.A. § 607 (formerly Reconstruction Finance Corporation Act, ch. 8, § 10, 47 Stat. 9 (1932)). Before the RFC's surplus property declaration, this statute unquestionably subjected the land to local taxes. Reconstruction Finance Corp. v. Beaver County, Pa., 328 U.S. 204, 66 S.Ct. 992, 90 L.Ed. 1172; Boeing Aircraft Co. v. Reconstruction Finance Corp., 25 Wash.2d 652, 171 P.2d 838, 168 A.L.R. 539, appeal dismissed and certiorari denied Boeing Aircraft Co. v. King County, 330 U.S. 803, 67 S.Ct. 972, 91 L.Ed. 1262. Its taxable status was not changed by the mere declaration that it was surplus to the RFC's needs and responsibilities. Board of County Com'rs of Sedgwick County, Kan. v. United States, 105 F.Supp. 995, 1001, 123 Ct.Cl. 304. Thus the sole question for determination is whether the land ceased to be 'real property of the' Reconstruction Finance Corporation when control and responsibility were subsequently transferred to the War Assets Administration. The identical question has been presented in two previous cases.

In Board of County Com'rs of Sedgwick County, Kan. v. United States, supra, 105 F.Supp. 995, 123 Ct.Cl. 304, the Court of Claims held that RFC surplus property was immune from local taxes once the War Assets Administration had accepted control of and accountabury for the property. The court reasoned that 'the waiver of constitutional immunity from taxes * * * was undoubtedly intended to apply to that real property of the corporation held by it in the performance of the duties and responsibilities imposed upon it by law. But by the * * * declaration of the property as surplus * * * the RFC declared that the property was surplus to its 'needs and responsibilities', and by * * * acceptance (of the War Assets Administration) was divested of all control and responsibility. At no time after the acceptance by the WAA * * * did the RFC or any of its employees have physical possession, control, or custody of the property. It had neither the use nor the right to use the property. It could not even withdraw the declaration of surplus property without the approval of the War Assets Administrator.' Id. 105 F.Supp. at page 1001. Although the court recognized thta the RFC continued to be the 'owning agency' within the meaning of the Surplus Property Act (§ 3(b), 58 Stat. 767), it viewed the RFC as holding no more than 'a bare legal title for the use of the United States.' 105 F.Supp. at page 1001; see United States v. Shofner Iron & Steel Works, 9 Cir., 168 F.2d 286. On the basis of this reasoning and the assumption that the RFC omitted to transfer title merely 'as a matter of convenience to the Government and to minimize actual paper work and expense' (105 F.Supp. at page 1001), the court concluded that 'the purpose of the waiver provision had been fully served when the property passed to the control of the WAA.' Id., 105 F.Supp. at page 1001-1002.

In Continental Motors Corporation v. Township of Muskegon, 346 Mich. 141, 77 N.W.2d 370, the Supreme Court of Michigan rejected the reasoning of the Sedgwick case and came to an opposite conclusion on similar facts. The court declared that the Congressional waiver of immunity 'was intended to prevent prejudice to local economic conditions' and that the reason for the waiver persisted during the disposal process where the use of the property remained unchanged. Id., 346 Mich. at pages 149-150, 77 N.W.2d at page 374. We are in accord with the result reached by the Supreme Court of Michigan in the cited case.

In providing for taxation of 'real property of the' RFC, Congress must have intended to insure that RFC ownership of property would not withdraw important revenue sources from the local tax rolls. By enacting the Surplus Property Act of 1944 (58 Stat. 765), Congress expressed its desire to maintain competition, 'to avoid dislocations of the domestic economy,' and 'to prevent * * * unusual and excessive profits being made out of surplus property.' 58 Stat. 766. These objectives are inconsistent with the asserted intent that RFC surplus property should be immune from taxation during the disposal process. While some of that property was ultimately to be transferred to tax-exempt entities such as federal agencies, local and state governments, and charitable organizations (58 Stat. 770-772), it was also anticipated that much of it would be returned to private hands. 58 Stat. 773-779. Since RFC property was taxable at all times before it became surplus to the needs of the RFC, and since much of...