State ex rel. General Motors Corp., AC Electronics Division v. City of Oak Creek

Citation49 Wis.2d 299,182 N.W.2d 481
Decision Date05 January 1971
Docket NumberNo. 209,209
PartiesSTATE ex rel. GENERAL MOTORS CORP., AC ELECTRONICS DIVISION, a foreign corp., Appellant, v. CITY OF OAK CREEK et al., Respondents.
CourtUnited States State Supreme Court of Wisconsin

This proceeding was commenced by the appellant, General Motors Corporation, AC Electronics Division, (hereinafter AC Electronics), by petition for a writ of certiorari to challenge the validity of the tax assessment for the year 1968 made against it by the City of Oak Creek on personal property in its possession but owned by the United States government.

The appellant AC Electronics owns and operates a plant in the city of Oak Creek, Milwaukee county. 1 Part of its operations in the said plant consist of research, development and manufacturing activities related to guidance, navigation and fire control systems pursuant to various contracts with the United States government. As a result, for many years a substantial amount of United States government property has been located at the appellant's plant. Generally, this property consists of:

Facility Items--this category includes general plant equipment such as lathes, milling machines, grinders, etc. It also includes machinery and equipment with limited and specialized uses, and general furniture and fixtures.

Special Tooling Items--consists of jigs, dies, fixtures, molds, patterns of other equipment of such a specialized nature that its use is limited to the development and production of particular supplies for the performance of appellant's services.

Spare Parts--are parts supplied by the government or manufactured by appellant and used in repairing government property under certain contracts.

Manufacturer's Stock--this category includes inventory items such as raw material, purchased parts, and work in process.

Special Test Equipment--is specialized equipment of a limited use in testing during the development or production of particular devices.

It is undisputed that legal title to all of the property involved in this litigation is in the United States. Use of this property is limited to the performance of government contracts, except when the government specifically consents to some other use by appellant, in which case the appellant is required to pay rental fees to the government for any nongovernmental use and the government retains the right to terminate its consent at any time. In 1967, appellant paid approximately $102,000 in such rental fees, and the projected total for 1968 was between $240,000 and $250,000.

Control over the property remains in the hand of the government with the absolute right to remove it at any time. The ultimate disposition of the property is made according to government direction, and any proceeds realized from the disposition of property belong to the government. The appellant is required to keep detailed records concerning the handling of all government property.

The risk of loss of any property remains with the government, with the exception of loss resulting from the the willful misconduct or bad faith of certain key executives of appellant.

Minor repairs on property are made and paid for by appellant; however, any such costs are included in the work performed and are ultimately billed to the government. Major overhauls are the direct responsibility of the government.

The government has the right of access to the property for inspection or removal at any time and, in practice, government personnel are present in appellant's plant at all times.

The government contracts provide that any taxes levied on appellant because of its property are, ultimately, the responsibility of the United States.

Prior to 1968 this property had not been taxed. However, in 1967 the Wisconsin legislature enacted sec. 70.11(8m), Stats., (Laws of 1967, ch. 304, published January 25, 1968) which levied a tax against persons who lease, use, or are in charge or possession of property of the United States government and use it for pecuniary profit. Because of the new legislation appellant filed an information return with the Oak Creek city assessor listing the government-owned property in its plant. The city assessor initially assessed the value of the federally-titled property at $17,627,100. Appellant filed a written objection on August 6, 1968, to the assessment of the property.

On August 26, 1968, the assessor met with company officials who submitted schedules of additional information concerning the property and objected to the propriety of any assessment against it. After reviewing the information in these schedules the assessor applied the city's assessment factor of 45 percent and established a new assessed value of $5,088,230. This was the same method used in computing the assessed value of the other personal property at the plant owned by AC Electronics, which amounted to approximately $10,000,000.

Pursuant to sec. 70.47(7), Stats., the company filed an objection with the respondent Board of Review of the City of Oak Creek and appeared before it on September 23 and October 16, 1968. After the hearing the board reduced the assessment to $4,512,880 and sustained the assessment in this amount. The board eliminated finished inventory in the amount of $575,350 from the assessment on the basis that it was not used for pecuniary profit as required by sec. 70.11(8m), Stats.

The company then appealed from this determination of the board of review to the circuit court for Milwaukee county by writ of certiorari. It requested that the board's determination be set aside for the reason that there was no valid statutory authority to sustain the assessment. In a supplemental circuit court brief the company also raised the argument that sec. 70.11(8m), Stats., was invalid because it had not been properly enacted by the legislature.

The circuit court, by a memorandum decision, order and judgment, affirmed the board of review's decision. AC Electronics appeals from that judgment.

Foley & Lardner, Milwaukee, for appellant; Ross L. Malone and Paul H. Zalecki, Detroit, Mich., of counsel.

Milton S. Bedusek, City Atty. of Oak Creek, Cudahy, George A. Schmus, West Allis, Sp. Counsel, for respondents.

Robert W. Warren, Atty. Gen., Benjamin Southwick, Asst. Atty. Gen., for State of Wisconsin, amicus curiae, in support of respondents.

BEILFUSS, Justice.

The major issues on this appeal are:

(1) Whether the tax imposed on appellant may be sustained under sec. 70.18(1), Stats.

(2) Whether sec. 70.11(8m), Stats., is invalid by reason of the legislature's failure to comply with constitutional and statutory mandates in its enactment.

(3) Whether sec. 70.11(8m), Stats., is invalid because it discriminates against the United States government and those with whom it deals.

The respondent, City of Oak Creek, contends that the appellant can be taxed for the United States property in its possession under either the recently enacted sec. 70.11(8m), Stats., or under sec. 70.18(1), which has been in existence in its present form for many years.

Sec. 70.18, Stats., entitled 'Personal property, to whom assessed,' reads in part:

'(1) Personal property shall be assessed to the owner thereof, except that when it is in the charge or possession of some person other than the owner it may be assessed to the person so in charge or possession of the same. * * *'

This statute was discussed and applied in American Motors Corp. v. Kenosha (1957), 274 Wis. 315, 80 N.W.2d 363, affirmed Per Curiam (1958), 356 U.S. 21, 78 S.Ct. 559, 2 L.Ed.2d 578, rehearing denied (1958), 357 U.S. 912, 78 S.Ct. 1147, 2 L.Ed.2d 1163, which held that in determining ownership for purposes of taxation under this section this court would apply the true or beneficial ownership test.

In American Motors Corp., supra, the corporation had entered into a contract with the United States for the manufacture and supply of aircraft engines and repair and replacement parts. The contract provided that title to all parts, materials, inventories, and work in process should vest in the United States upon making any partial payment. The city of Kenosha assessed the personal property tax on the aircraft engine inventory. This court recognized that legal title and ownership were two different things and said that the unrestricted right of the company under the contract to acquire and dispose of the property and the risk of loss were elements of ownership in American Motors inconsistent with the vesting of title in the government, and that the property was not owned by the federal government although legal title had been transferred. Therefore the tax against the corporation was held valid on the ground that it was the beneficial owner.

The same general principle for determining ownership was applied in State v. Jelco, Inc. (1957), 1 Wis.2d 630, 85 N.W.2d 487, 86 N.W.2d 428. There, the state brought a suit to recover motor vehicle registration fees allegedly owed on school buses. Sec. 85.01(4)(g), Stats., provided that the 'owner' was to pay the fee. The school districts had been given legal title to the buses by the defendant, but were required to transfer legal ownership back at the end of the school year. The buses carried signs stating that they were owned and operated by the school districts. The school districts had a hold-harmless obligation to the defendant, carried liability insurance, and had possession and control of the buses. This court held the buses were owned by the school districts, and that the case was not one where bare legal title was vested in the school districts and all other incidents of ownership remained in the defendant.

The same principle was recently applied in Mitchell Aero, Inc. v. Milwaukee (1969), 42 Wis.2d 656, 168 N.W.2d 183. The plaintiff constructed two aircraft hangars as its own expense on land leased from the county. The lease provided that upon completion title to the hangars would immediately vest in the county. Aero paid no rent for the two...

To continue reading

Request your trial
23 cases
  • State ex rel. La Follette v. Stitt, 83-1502-OA
    • United States
    • Wisconsin Supreme Court
    • 27 Septiembre 1983
    ...to invalidate legislation on the ground of legislative noncompliance with procedural statutes. In State ex rel. General Motors Corp., v. Oak Creek, 49 Wis.2d 299, 182 N.W.2d 481 (1971), the basic and dispositive question was, however, whether the statute had been enacted in compliance with ......
  • State v. Outagamie Cty. Bd. of Adjustment
    • United States
    • Wisconsin Supreme Court
    • 29 Junio 2001
    ...of the board of review, a subject properly reviewable on certiorari, it should be considered." State ex rel. Gen. Motors Corp. v. Oak Creek, 49 Wis. 2d 299, 319-20, 182 N.W.2d 481 (1971). 18. The dissent characterizes this conclusion as a "judicial grant" of "plenary power" to boards of adj......
  • Gehin v. Wisconsin Group Ins. Bd.
    • United States
    • Wisconsin Supreme Court
    • 23 Febrero 2005
    ...clearly marked as that party's draft, to that party's objections (emphasis added). 102. State ex rel. Gen. Motors Corp. v. City of Oak Creek, 49 Wis. 2d 299, 319, 182 N.W.2d 481 (1971). 103. State v. Outagamie County Bd. of Adjustment, 2001 WI 78, ¶ 55, 244 Wis. 2d 613, 628 N.W.2d 104. One ......
  • McCleary v. State
    • United States
    • Wisconsin Supreme Court
    • 5 Enero 1971
    ... ...         In general an appeal from a sentence, at least where the ... In fact, as a former mayor of New York City" implied, checks are not forged by books ...  \xC2" ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT