State ex rel. Mitchell Aero, Inc. v. Board of Review of City of Milwaukee

• Decision Date: 03 November 1976
• Docket Number: No. 75--45,75--45
• Citation: 74 Wis.2d 268,246 N.W.2d 521
• Parties: STATE ex rel. MITCHELL AERO, INC., a Wisconsin Corporation, Plaintiff-Appellant, v. BOARD OF REVIEW OF CITY OF MILWAUKEE and Theodore Asti, Sr., Chairman thereof, Defendants-Respondents.
• Court: Wisconsin Supreme Court

Page 521

246 N.W.2d 521

74 Wis.2d 268

STATE ex rel. MITCHELL AERO, INC., a Wisconsin Corporation Plaintiff-Appellant, v. BOARD OF REVIEW OF CITY OF MILWAUKEE and Theodore Asti, Sr. Chairman thereof, Defendants-Respondents.

No. 75--45.

Supreme Court of Wisconsin.

Argued Oct. 4, 1976.

Decided Nov. 3, 1976.

Herman E. Friedrich and Michael, Best & Friedrich, Milwaukee, for plaintiff-appellant.

James B. Brennan, City Atty., and Walter J. Schutz, Asst. City Atty., Milwaukee, for respondents.

CONNOR T. HANSEN, Justice.

It is our opinion that the basic issue in this case is controlled by our decision in Mitchell Aero, Inc. v. Milwaukee (1969), 42 Wis.2d 656, 168 N.W.2d 183.

Mitchell Aero, Inc., operates a private commercial aircraft business at General Mitchell Field in Milwaukee. The lease which was under consideration in Mitchell, supra, is still in effect. It is a twenty year lease, commencing on August 1, 1965, and containing an option to renew for five years. Mitchell concerned the 1966 and 1967 personal property tax assessment on Hangar No. 3, constructed by Aero prior to the execution of the lease, but nevertheless made a part of the leasehold premises by the lease, and Hangar No. 4, constructed by Aero after commencement of the lease and pursuant to the terms thereof. In Mitchell, supra, it was determined that these improvements (Hangar No. 3 and Hangar No. 4) were subject to personal property tax. The provisions of the lease are extensively discussed in Mitchell, and we deem it unnecessary to again repeat them.

The facts giving rise to this appeal are: (1) That between May 1971, and May, 1972, Aero completed construction on an addition to the 'old firehouse' which was located on the leased land; (2) the improvement consisted of a complete renovation of the building into office space, at a cost to Aero of approximately $65,000; and (3) the construction of the improvements to the 'old firehouse' were not required by the lease, but were approved by the county, as required by the lease.

The city assessor appraised the market value of the 'old firehouse' improvements at $44,800. This was added to the previous year's market value of $145,300 of other personal property which apparently consisted of Hangar No. 3 and Hangar No. 4. Aero was notified by the city that for the year 1972, the total market value of its personal property for taxation purposes as located on the leased land at Mitchell Field was increased from $145,300 to $190,100.

Subsequently, based upon the $190,100 market value figure, the total improvements constructed by Aero on the leased land were assessed as 'other' personal property at the sum of $105,430 for 1972. The $105,430 figure reflects the fact that full market value was assessed at approximately 55 percent in Milwaukee in 1972.

Aero objected to the amount of the 1972 'other' personal property assessment that reflected the addition to the 'old firehouse' on the basis that the county of Milwaukee, and not Aero, owned the premises. Aero requested a hearing on the matter before the defendant-respondent, Board of Review of the City of Milwaukee. A hearing on the merits of the objection was ultimately held and the Board of Review sustained the $105,430 assessment of 'other' personal property.

Three issues are presented on appeal:

1. Is Aero precluded from raising the issue of 'ownership' for tax purposes of improvements constructed by it on leased land by virtue of this court's decision in Mitchell Aero, Inc. v. Milwaukee, supra.

2. Did the city assessor act reasonably and according to law in arriving at the true cash value or fair market value of the subject leasehold improvements?

3. Does the record disclose credible evidence which taken as a whole would support the determination of the Board of Review which sustained the assessment of the subject leasehold improvements?

In Mitchell, supra, Aero took the position that the county acquired legal title to Hangar No. 3 by virtue of the lease and that Aero was required to build Hangar No 4 by the terms of the lease, hence, since legal title to the improvements was in the county they were exempt from taxation under sec. 70.11(2), Stats. The decision of this court was adverse to Aero.

In the instant case, Aero claims that the additions to the 'old firehouse' are exempt from taxation principally because the additions were to an existing structure owned by the county and that Aero was not required by the lease to make the improvements.

Mitchell, supra, considered and determined two issues: (1) What is the meaning of the word 'owned' in the phrase 'property owned by any county' in sec. 70.11(2), Stats.; and (2) do the lease and other facts constitute the county of Milwaukee the owner within the meaning of that section?

This court held that the word 'owned' as used in sec. 70.11(2), Stats., could not be equated with paper title only, but meant real or true beneficial ownership. It was further held that under the terms of the lease and the facts, Aero had sufficient beneficial ownership in the improvements to make them subject to taxation as other personal property, and that Aero retained and exercised such substantial attributes of ownership so as to constitute it the true owner, even though naked legal title to the improvements was vested in the county.

We are of the opinion the facts in the instant case are not sufficiently distinguishable from those of Mitchell, supra, so as to produce a different result. The improvements to the 'old firehouse' are subject to taxation as other personal property.

Although Aero's original objection filed with the Board of Review objected only to the amount of the 1972 assessment for tax purposes as pertained to '. . . those certain premises known as the 'old firehouse' . . ..' Aero now contends that its objections were, and always have been, against the whole assessment of $105,430 as 'other' personal property. We have serious doubts as to whether the record supports such a contention. However, whether Aero contests the whole or only part of the assessment is not significant to our decision in this case.

The thrust of Aero's first argument is that it cannot be taxed upon any of the improvements reflected in the $105,430 assessment for 1972 because Milwaukee county and not Aero is the owner of such improvements.

We believe it is abundantly clear that the ownership for the City of Milwaukee personal property tax purposes of the leasehold improvements constituting the Hangar No. 3 addition and Hangar No. 4 has already been decided in the previous Mitchell Case. Aero has litigated that very issue once and under the principles of res judicata as set forth in Lingott v. Bihlmire (1964), 24 Wis.2d 182, 128 N.W.2d 625, 129 N.W.2d 329, and Missionaries of La Salette v. Michalski (1962), 15 Wis.2d 693, 113 N.W.2d 427, cannot now relitigate it.

The fact that in the previous case the assessment was for the years 1966 and 1967, while here it is for 1972, has no significance to the issue of ownership. The parties remain the same; the issue of ownership remains the same; the lease remains the same; and it was largely upon the unambiguous terms of the lease that this court based its decision in the prior Mitchell Case. See Mitchell, supra, 42 Wis.2d pp. 663, 664, 168 N.W.2d 183.

It is true that the prior case involved a stipulation of facts; but that stipulation itself, in the most part, referred directly to the terms of the lease. The parties definitely did not stipulate as to the issue of ownership. Only one fact outside of the lease provisions was relied upon by this court in reaching its decision--the fact that Aero amortized its cost of construction of the Hangars as leasehold improvements over the term of the lease for income tax purposes. See Mitchell, supra, p. 664, 168 N.W.2d 183. This fact has not changed. Insofar as the $105,430 assessment figure reflects assessments for improvements constructed on the Hangar No. 3 addition and Hangar No. 4 (i.e., the 1971 carry-over assessment figure) Aero is not free to raise the issue of ownership of those improvements for tax purposes.

Aero further argues that buildings/improvements are real property within the definition of sec. 70.03, Stats., and that the county's exemption from taxation under sec. 70.11(2), extended to such improvements. This argument is dependent upon a finding that the county is indeed the owner of the improvement for tax purposes. It totally ignores the existence of sec. 70.17(1), Stats., which specifically provides that improvements on leased land may be assessed as real or personal property. This court in Town of Menominee v. Skubitz (1972), 53 Wis.2d 430, 435, 192 N.W.2d 887, held that sec. 70.17(1), created an exception to the general definition of real estate contained in sec. 70.03, and sec. 70.17(1) controls the assessment of improvements on leased land.

The portion of the assessment figure which reflects assessments for improvements constructed later than 1966, and specifically included the improvements to the 'old firehouse,' completed prior to May 1, 1972, presents a somewhat different situation.

The prior Mitchell Case decided ownership of only improvements already existing at the time the lease was entered into (i.e., the Hangar No. 3 addition) and improvements specifically required to be built under the terms of the lease (i.e., Hangar No. 4 required by clause 11 of the lease.) The issue of ownership of improvements built at the discretion of Aero, with the approval of the county under clause 13 of the lease, was not litigated; nor was it essential to litigate that issue in the prior case. Thus, the res judicata doctrine would not apply. Northwestern N.C. Co. v. State A. & C. Underwriters (1967), 35 Wis.2d 237, 151 N.W.2d 104.

However, even if the prior Mitchell Case is not res judicata on the issue of ownership of improvements to the 'old firehouse,' that case represents convincing authority for the...