U.S. v. Hawkins County, Tenn., 85-5533

• Decision Date: 08 January 1987
• Docket Number: No. 85-5533,85-5533
• Citation: 812 F.2d 1409
• Parties: Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. UNITED STATES of America, Plaintiff-Appellee, v. HAWKINS COUNTY, TENNESSEE, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1409

812 F.2d 1409

Unpublished Disposition

NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.

UNITED STATES of America, Plaintiff-Appellee, v. HAWKINS COUNTY, TENNESSEE, et al., Defendants-Appellants.

No. 85-5533.

United States Court of Appeals, Sixth Circuit.

Jan. 8, 1987.

Before KEITH, NELSON and BOGGS, Circuit Judges.

PER CURIAM.

Hawkins County, Tennessee, appeals a summary judgment order in which the district court enjoined the county from imposing a real property tax on an alleged leasehold interest of a private corporation that operates a federally owned industrial facility under contract with the United States. We shall affirm the judgment of the district court.

I

The United States is the fee owner of the Holston Army Ammunition Plant, a facility located almost entirely in Hawkins County, Tennessee. The plant is operated by the Holston Defense Corporation. Between January 1, 1978, and December 31, 1982, Holston operated the plant under Government Contract No. DAAA09-78-C-3000. Since January 1, 1983, the plant has been operated under another contract, the terms of which are virtually identical to those of the 1978 agreement. Hawkins County imposed an ad valorem real property tax on what it asserts is Holston's "leasehold interest" in the facility. The United States denies that Holston is a lessee.

A similar dispute made its way through the federal and Tennessee court systems several years ago. That series of cases involved Union Carbide Corporation's operation of a government-owned facility at Oak Ridge. Anderson County, Tennessee, sought to levy a real property tax on Union Carbide's "interest" in the property, just as Hawkins County is trying to tax Holston's "interest" here. Union Carbide sought relief through the state tax appeal process, and the United States brought a declaratory judgment action in federal court. In United States v. Anderson County, Tennessee, 547 F.Supp. 18 (E.D.Tenn.1982), the district court concluded that it should abstain from deciding the case pending the outcome of the state proceeding. We reversed, holding the abstention doctrine inapplicable. United States v. Anderson County, Tennessee, 705 F.2d 184 (6th Cir.1983).

On remand, the district court held in favor of the United States, concluding that the contract between Union Carbide and the Department of Energy created merely a license and not a leasehold interest. United States v. Anderson County, Tennessee, 575 F.Supp. 574, 577-78 (E.D.Tenn.1983) (hereinafter cited as Anderson County III ).

Meanwhile, Union Carbide's state court litigation was proceeding apace. First, the Assessment Appeals Commission found that Union Carbide did not have a real property interest. The Commission was reversed by the State Board of Equalization. The Chancery Court for Davidson County affirmed the Board of Equalization. The Tennessee Court of Appeals then reversed the Chancery Court and the Board of Equalization. Although the Tennessee Court of Appeals believed that the intervening Anderson County III decision was dispositive of the question whether Union Carbide held a mere license as a matter of federal contract law, the court did not consider itself bound by the Anderson County III interpretation of state law. Nonetheless, it agreed with the federal district court that Tennessee law would not subject Union Carbide to tax.

The culmination of the state proceedings was the decision of the Tennessee Supreme Court in Union Carbide Corp. v. Alexander, 679 S.W.2d 938 (Tenn.1984), which affirmed the Tennessee Court of Appeals:

"Defendants argue that Union Carbide has a real property interest in the Y-12 Plant that is separate and distinct from the fee ownership of the United States. They maintain that Carbide has a possessory interest in Y-12 arising from its possession, use, control and enjoyment of real property for purposes of performing its contractual obligations with the United States. Defendants concede that their whole theory turns on the notion of the 'bundle of rights.' In a property assessment manual (International Association of Assessing Officers, Property Assessment Valuation (1977)), it is said that there are six basic rights associated with the ownership of property: (1) the right to use; (2) the right to sell; (3) the right to lease or rent; (4) the right to enter or leave; (5) the right to give away; (6) the right to refuse to do any of these.

"The Chancellor found that Carbide had the right to use and the right to enter and leave. It is not disputed that Carbide cannot sell, lease or give away the Y-12 Plant. We do not believe that the right to use and the right to enter and leave are sufficient to allow Anderson County to claim that Carbide has a real property interest in the Y-12 Plant. As the Court of Appeals pointed out, the right to alienate is an important element of ownership. See 63 Am.Jur.2d Property Sec. 47 (1972), at 331. Carbide has no interest under the contract that it can sell, lease, or otherwise transfer. The mere use by Carbide of the real property for purposes of performing the contract does not amount to an incident of ownership." Union Carbide Corp. v. Alexander, 679 S.W.2d at 940-41.

The Tennessee Supreme Court thus concluded that the Tennessee Legislature did not contemplate "taxing Carbide's right to use and right to enter and leave the Y-12 facility." Id. at 942.

After the Tennessee Supreme Court decision, Anderson County III was heard on appeal. United States v. Anderson County, Tennessee, 761 F.2d 1169 (6th Cir.1985) (hereinafter cited as Anderson County IV ). Based on the ...