Squantum Gardens, Inc. v. Assessors of Quincy

• Decision Date: 11 February 1957
• Citation: 335 Mass. 440,140 N.E.2d 482
• Parties: SQUANTUM GARDENS, Inc., et al. v. ASSESSORS OF QUINCY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 482

140 N.E.2d 482

335 Mass. 440

SQUANTUM GARDENS, Inc., et al. v. ASSESSORS OF QUINCY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 9, 1957.

Decided Feb. 11, 1957.

Frank B. Wallis, Boston, for plaintiff.

Douglas A. Randall, City Sol., Wollaston, for defendant.

Before WILKINS, C. J., and SPALDING, WILLIAMS, WHITTEMORE, and CUTTER, JJ.

CUTTER, Justice.

Squantum Gardens, Inc. (hereinafter called Gardens, Inc.), is the lessee from the United States of America, for a term of seventy-five years at a rent of $100 per year, of 14.48 acres of land of the former naval air station at Squantum. The lease was designed to bring about the construction of one hundred fifty military housing units under the Wherry Military Housing Act. ¹ The defendant assessors (hereinafter called the assessors) assessed with respect to the leased property a real estate tax upon Gardens, Inc. for the year 1955 and at the time of the hearing were intending to assess a similar tax on the property for the year 1956.

Gardens, Inc., filed a bill in equity against the assessors and the collector of taxes under G.L. (Ter.Ed.) c. 231A, inserted by St.1945, c. 582, § 1, for a declaratory decree which would determine the power of the assessors and their successors in office to assess to Gardens, Inc., any tax with respect to the leased real estate or any interest therein. Gardens, Inc., also requested that the 1955 assessment with respect to the property be declared void and that subsequent assessments be enjoined. The defendants filed a demurrer asserting, among other grounds, that the bill was insufficient to warrant relief in equity and that Gardens, Inc., had adequate remedies at law by application for abatement of the tax ² or action at law to recover the tax if paid under protest. ³ The demurrer was overruled.

The United States filed an intervening petition adopting and incorporating by reference 'all of the allegations and conclusions' of the bill filed by Gardens, Inc. After hearing on the merits, a final decree was entered declaring void the 1955 tax assessment and the proposed 1956 assessment and permanently enjoining collection of any taxes for these years with respect to this property, or in any later year, 'as long as the United States of America is the owner * * * and * * * Gardens, Inc., is the lessee * * *.' The defendants appealed from the final decree and from the interlocutory decree overruling the demurrer. The evidence is reported.

One hundred fifty housing units have been constructed on behalf of Gardens, Inc. These were forty per cent complete at the beginning of 1955 and fully complete at the end of that year. The project was financed by a savings bank mortgage insured by the Federal housing administration. The area ⁴ is not used for military operations and the general public has access to its streets. Gardens, Inc., as sublessor, supplies the usual landlord's services of heat, hot water, maintenance of grounds and janitor service and in fact makes roadways and play areas available to tenants for their use in common, although the use of play areas is not provided for in the subleases. The housing units are rented solely to military personnel approved as tenants by appropriate naval authorities and rates of rental are established by the navy and the Federal housing administration working together. The 1955 tax has not been paid. Permission 'to assess the 1955 real estate tax on' this property 'owned by the United States government * * * to the occupants * * * Gardens, Inc.,' was granted to the assessors by the commissioner of corporations and taxation, purporting to act under G.L. (Ter.Ed.) c. 59, § 11, as appearing in St.1939, c. 175 (since amended by St.1956, c. 397, and c. 690, § 2).

1. Madden v. State Tax Commission, 333 Mass. 734, 735-737, 133 N.E.2d 252, ⁵ and the cases there cited, establish that a court of equity in its discretion may grant declaratory relief, in a case of this character, despite the existence of remedies at law or by administrative action. Accordingly the demurrer was properly overruled. See Burnes v. Metropolitan District Commission, 325 Mass. 731, 733, 92 N.E.2d 381.

There was no error in the exercise by the trial judge of his discretion to grant declaratory relief. Important and novel questions are raised about a municipality's power, under relevant Massachusetts statutes and acts of the Congress, to tax real estate leased by the United States to a private corporation. It is desirable that such questions be decided promptly so that, if necessary, corrective legislation can be sought in the public interest if that course seems appropriate to the affected public bodies. Nothing here said, however, should be construed as indicating that this court approves use of bills for declaratory relief, rather than the appropriate administrative procedures for tax abatement, in cases which involve no special considerations, comparable to those here present and present in the Madden case, supra.

2. The propriety of the final decree must be determined on the basis of analysis of (a) the applicable acts of the Congress authorizing taxation, by the States and their subdivisions, of property owned by the United States and leased to private corporations and individuals; (b) the Massachusetts statutes authorizing assessment of real estate taxes; and (c) the administrative action taken by the assessors in assessing the taxes here in issue. Property owned by the United States is immune from State and local taxation, Assessors of Everett v. General Electric Co., 330 Mass. 464, 465-466, 115 N.E.2d 359; United States v. Allegheny County, 322 U.S. 174, 192, 64 S.Ct. 908, 88 L.Ed. 1209; Kern-Limerick, Inc., v. Scurlock, 347 U.S. 110, 122-123, 74 S.Ct. 403, 98 L.Ed. 546, except, of course, as the Congress may have granted permission for such taxation. See Kern-Limerick, Inc., v. Scurlock, supra, 347 U.S. at pages 116-117, 122, 74 S.Ct. at pages 407-408, 410; Offutt Housing Co. v. Sarpy County, 351 U.S. 253, 259-261, 76 S.Ct. 814, 100 L.Ed. 1151. Even where Congress has granted such permission, the State and its subdivisions must exercise the taxing power strictly in conformity with the Congressional permission. This principle is illustrated by the long continued and very considerable legislative difficulties encountered over the years in conforming State taxation of national banks (which, of course, are Federal agencies) to the Congressional authorization of their taxation by the States, found in U.S. Rev.Sts. § 5219 (now found in U.S.C. (1952 ed.) Title 12, § 548, as most recently amended by 44 U.S.Sts. at Large, Part 2, 223, See Commissioner of Corporations & Taxation v. Woburn National Bank, 315 Mass. 505, 506, 515, 53 N.E.2d 554, and authorities there cited; Commissioner of Corporations & Taxation v. Assessors of Boston, 321 Mass. 90, 92-93, 71 N.E.2d 874; Austin v. Aldermen, 7 Wall. 694, 699, 19 L.Ed. 224; Des Moines National Bank v. Fairweather, 263 U.S. 103, 106, 44 S.Ct. 23, 68 L.Ed. 191, opinion cited with apparent approval in Society for Savings in City of Cleveland, Ohio v. Bowers, 349 U.S. 143, 147, 75 S.Ct. 607, 99 L.Ed. 950; Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 101-102, 62 S.Ct. 1, 86 L.Ed. 65; Reconstruction Finance Corp. v. State of Texas, 5 Cir., 229 F.2d 9, 12 (holding that a Congressional waiver of exemption from State and local taxation must be construed strictly), certiorari denied sub- nomine State of Texas v. Reconstruction Finance Corp. 351 U.S. 907, 76 S.Ct. 695, 100 L.Ed. 1442. ⁶

Compliance with the Congressional permission thus has two aspects. It means both (1) that the State tax statute must authorize a tax of the character permitted by the Congress, and (2) that the administrative action of assessment and collection must comply with the Congressional and State statutory authorization.

(a) The Congressional permission to impose State and local taxes on military housing projects. Authority for State and local taxation of military housing projects is found in two acts of the Congress and has been judicially recognized in Offutt Housing Co. v. Sarpy County, 351 U.S. 253, 76 S.Ct. 814, where a bare majority of the Supreme Court of the United States, upon facts in many respects similar to those found in the case at bar, held, 351 U.S. at page 258, 76 S.Ct. at page 818, of the opinion, that the Military Leasing Act of 1947 and the Wherry Military Housing Act, 1949, both referred to in note 1, supra, 'interlock and must be read together'; 351 U.S. at page 259, 76 S.Ct. at page 818, that the provisions of the Military Leasing Act 'govern the leasing of Government property generally and its permission to tax extends generally to all lessees' interests created by virtue of the Act' including apparently those for military housing created by leases under the Military Leasing Act to accomplish purposes pursuant to the Wherry Act; and, 351 U.S. at page 260-261, 76 S.Ct. at page 819, that the Congress has decided 'that the States were to be permitted to tax private interests * * * in housing projects located on areas subject to the federal power of 'exclusive Legislation" ⁷ and 'in the exercise of this power, has permitted such state taxation as is involved in the' Nebraska situation there considered. As a consequence of this decision it is settled that the provisions of § 6 of the Military Leasing Act of 1947 are applicable to Federal real estate leased in connection with Wherry Act projects for military housing. Section 6 reads: 'The lessee's interest, made or created pursuant to the provisions of, * * * this Act, shall be made subject to State or local taxation. Any lease of property authorized under the provisions of said Act shall contain a provision ⁸ that if and to the extent that such property is made taxable by State and local governments by Act of Congress, in such event the terms of such lease shall be renegotiated' (...