San Bernardino County v. Harsh Cal. Corp.

• Decision Date: 23 June 1959
• Citation: 340 P.2d 617,52 Cal.2d 341
• Court: California Supreme Court
• Parties: COUNTY of SAN BERNARDINO et al., Respondents, v. HARSH CALIFORNIA CORPORATION (a California Corporation), Defendant; United States of America, Intervener and Appellant. L. A. 25089.

Page 617

340 P.2d 617

52 Cal.2d 341

COUNTY of SAN BERNARDINO et al., Respondents, v. HARSH CALIFORNIA CORPORATION (a California Corporation), Defendant;

United States of America, Intervener and Appellant.

L. A. 25089.

Supreme Court of California, In Bank.

June 23, 1959.

Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson and John J. Crown, Department of Justice, Washington, D. C., Laughlin E. Waters, U. S. Atty., Edward R. McHale, Asst. U. S. Atty., Los Angeles, and Melvin L. LeBow, Washington, D. C., for appellant.

Albert E. Weller, County Counsel, and John B. Lawrence, Deputy County Counsel, San Bernardino, for respondents.

TRAYNOR, Justice.

The United States of America appeals from an order denying its motion for leave to intervene in an action to recover unsecured personal property taxes.

Defendant Harsh is the operator of a Wherry Act Military Housing Project located on federally owned land at the Marine Corps Supply Center near the town of Barstow. Defendant operates the project under a 75-year lease from the United States executed pursuant to title VIII of the National Housing Act. 12 U.S.C.A. §§ 1748-1748h. Under the terms of the lease, defendant built 337 family dwelling units for occupancy by those military and civilian personnel designated by the United States. Title to all improvements and personal property installed therein is in the United States. The United States agreed to furnish fire and police protection, if available, and retained the right to regulate the rents charged to the subtenants.

In 1956, the Supreme Court of the United States held that Congress had consented to the taxation by local authorities of a lessee's possessory interest in a Wherry Act housing project. Offutt Housing Co. v. Sarpy County, 351 U.S. 253, 76 S.Ct. 814, 100 L.Ed. 1151. Congress then amended the National Housing Act (§ 408 (as amended by § 511, Housing Act of 1956, ch. 1029, 70 Stat. 1110-1111)) to provide that:

'* * * Nothing contained in the provisions of title VIII of the National Housing Act in effect prior to August 11, 1955, or any related provision of law, shall be construed to exempt from State or local taxes or assessments the interest of a lessee from the Federal Government in or with respect to any property covered by a mortgage insured under such provisions of title VIII: Provided, That, no such taxes or assessments (not paid or encumbering such property or interest prior to June 15, 1956) on the interest of such lessee shall exceed the amount of taxes or assessments on other similar property of similar value, less such amount as the Secretary of Defense or his designee determines to be equal to (1) any payments made by the Federal Government to the local taxing or other public agencies involved with respect to such property, plus (2) such amount as may be appropriate for any expenditures made by the Federal Government or the lessee for the provision or maintenance of streets, sidewalks, curbs, gutters, sewers, lighting, snow removal or any other services or facilities which are customarily provided by the State, county, city, or other local taxing authority with respect to such other similar property * * *.' 42 U.S.C.A. § 1594 note.

The designee of the Secretary of Defense, in accordance with section 511, supra, determined that Harsh was entitled to a reduction of $27,759 with respect to assessments for the 1957-1958 tax year. The assessor, however, sent Harsh a tax bill for the full amount of its assessment without any reduction.

The county brought this action to recover taxes and penalties in the amount of $23,099.04. Defendant pleaded that the designee of the Secretary of Defense had determined that defendant was entitled to a reduction of $27,759 in its taxes, that notice of this determination had been served on plaintiff's board of supervisors, and that plaintiff had refused to comply with this determination.

The United States filed a petition and proposed answer in intervention. It alleged that it had paid more for facilities or services normally provided by the local taxing agencies than the amount of the taxes levied against defendant's possessory interest, that the money so paid was in lieu of taxes, and that pursuant to federal law the Secretary of Defense had notified the county board of supervisors of his determination that the local taxes on defendant's possessory interest must be reduced by $27,759.

Section 387 of the Code of Civil Procedure provides:

'At any time before trial, any person, who has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both, may intervene in the action or proceeding. An intervention takes place when a third person is permitted to become a party to an action or proceeding between other persons, either by joining the plaintiff in claiming what is sought by the complaint, or by uniting with the defendant in resisting the claims of the plaintiff, or by demanding anything adversely to both the plaintiff and the defendant * * *.'

The United States contends that the matter in litigation includes the validity and operation of the federal statute, that it has an interest therein, that it seeks to unite with defendant in resisting plaintiff's claim, and that it is therefore entitled to intervene. Plaintiff contends that the interest of the United States is not 'of such a direct and immediate character that' the United States 'will either gain or lose by the direct legal operation and effect of the judgment' (Elliott v. Superior Court, 168 Cal. 727, 734, 145 P. 101, 105; see, also, Allen v. California Water & Telephone Co., 31 Cal.2d 104, 109, 187 P.2d 393, and cases cited), and that leave to intervene was therefore properly refused. It points out that neither the legal nor economic incidence of the tax on defendant's possessory interest falls on the United States (see DeLuz Homes, Inc. v. County of San Diego, 45 Cal.2d 546, 570, 290 P.2d 544), that a decision upholding or invalidating the tax will affect the rents defendant may charge government personnel indirectly or not at all and therefore even more remotely the United States, and that the interest of the United States in securing a favorable precedent is alone not enough to support intervention. See Jersey Maid Milk Products Co. v. Brock, 13 Cal.2d 661, 664, 91 P.2d 599.

It may be conceded that the outcome of plaintiff's action will not directly affect the federal fisc. The payments claimed to be in lieu of taxes have been made, if defendant loses it cannot recoup its tax payments from the United States (cf., General Dynamics Corp. v. County of Los Angeles, 51 Cal.2d 59, 330 P.2d 794), and if it wins it need not reimburse the government for the in lieu payments that extinguished its tax liability. Nevertheless, the United States has a vital interest in establishing the validity and correct delineation of the fiscal policy set forth by Congress. ¹

Congress determined that local taxing agencies should not secure windfalls by being permitted fully to tax privately held interests in Wherry Act Military Housing Projects when they were also receiving payments from the United States for services ordinarily rendered to taxpayers or being relieved by the United States of the necessity of rendering such services. It concluded that unless such windfalls were prevented, government payments or services would not reduce taxes and thereby allowable rents, but result in the housing projects' carrying more than their share of the expenses of local government. Such windfalls would subvert the purpose of providing housing for government personnel at reasonable rents.

Defendant's resistance to the payment of the tax is based squarely on the federal statute, and accordingly, this case directly involves not only defendant's liability to plaintiff, but the validity and operation of federal fiscal policy defined by federal statute. The interest of the United States in sustaining its fiscal policy by securing an adjudication of the validity and correct interpretation of its statute is fully sufficient to support its intervention whether or not the judgment will directly and immediately affect its pecuniary interests. The Exchange, 7 Cranch 116, 146, 3 L.Ed. 287; State of Florida v. State of Georgia, 17 How. 478, 494-495, 15 L.Ed. 181; Commonwealth of Pennsylvania v. Williams, 294 U.S. 176, 178-179, 186, 55 S.Ct. 380, 79 L.Ed. 841; Muench v. Public Service Commission, 261 Wis. 492, 53 N.W.2d 514, 523, 55 N.W.2d 40; Van Riper v. Jenkins, 140 N.J.Eq. 99, 45 A.2d 844, 845, 163 A.L.R. 1343; Mundy v. McDonald, 216 Mich. 444, 185 N.W. 877, 880, 20 A.L.R. 398; Jamaica Gaslight Co. v. Nixon, 110 Misc. 494, 181 N.Y.S. 620, 622; Parker v. State, 132 Ind. 419, 31 N.E. 1114; see also, Securities and Exchange Comm. v. United States Realty & Improvement Co., 310 U.S. 434, 460, 60 S.Ct. 1044, 84 L.Ed. 1293; Coleman v. Miller, 307 U.S. 433, 441-442, 59 S.Ct. 972, 83 L.Ed. 1385; ...