Source: https://law.justia.com/cases/federal/appellate-courts/F2/276/836/88431/
Timestamp: 2020-02-24 02:40:59
Document Index: 410454389

Matched Legal Cases: ['§ 1748', '§ 11137', '§ 16', '§ 1594', '§ 251', '§ 236', '§ 23']

Moses Lake Homes, Inc., Appellant, v. Grant County, Appellee and Cross-appellant,larsonaire Homes, Inc., Larson Heights, Inc., and Moses Lake Homes, Inc., Cross-appellees, 276 F.2d 836 (9th Cir. 1960) :: Justia
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Moses Lake Homes, Inc., Appellant, v. Grant County, Appellee and Cross-appellant,larsonaire Homes, Inc., Larson Heights, Inc., and Moses Lake Homes, Inc., Cross-appellees, 276 F.2d 836 (9th Cir. 1960)
US Court of Appeals for the Ninth Circuit - 276 F.2d 836 (9th Cir. 1960) January 25, 1960
Rehearing Denied March 17, 1960
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Lycette, Diamond & Sylvester, Lyle L. Iverson, Seattle, Wash., for appellant and cross-appellees.
Abbott M. Sellers, Acting Asst. Atty. Gen., Grant Wiprud, Lee A. Jackson, Myron C. Baum, Mark S. Charwat, Attys., Dept. of Justice, Washington, D. C., Dale M. Green, U. S. Atty., Spokane, Wash., for the United States.
The condemnees, in addition to Moses Lake, are Larsonaire Homes, Inc., and Larson Heights, Inc. All three were sponsors of Wherry Act housing projects on Larson Air Force Base in Grant County, Washington. As sponsors they entered into separate leases with the United States pursuant to sections 801 to 809 of Title VIII of the National Housing Act, 12 U.S.C.A. §§ 1748, 1748a to h. The Moses Lake lease was entered into on May 31, 1950, the Larsonaire lease on August 6, 1953, and the Larson Heights lease on August 2, 1954.
In June 1954 the assessor of Grant County listed the physical improvements placed upon the land by Moses Lake Homes, Inc., on his "Detail and Assessment List," for 1955 taxes. Moses Lake brought an action in the Superior Court of the State of Washington for Grant County to enjoin the levy of any taxes on its housing units for the year 1955 or thereafter. An injunction as prayed for was entered, and Grant County and the State of Washington appealed to the state supreme court. In a decision rendered on June 28, 1956, the supreme court reversed and remanded the case for a new trial because the trial court had not permitted the State of Washington to intervene. Moses Lake Homes, Inc. v. Grant County, 49 Wash. 2d 182, 299 P.2d 840.
Following the second trial, a judgment enjoining Grant County from levying any taxes on the housing units of Moses Lake for the year 1955 or thereafter was again entered. Grant County and the State of Washington once more appealed. In its second decision, the Washington Supreme Court held that in view of Offutt Housing Co. v. County of Sarpy, 351 U.S. 253, 76 S. Ct. 814, 100 L. Ed. 1151, a tax on the leasehold could be measured by the value of the buildings. The judgment enjoining the levying of such taxes for 1955 and subsequent years was accordingly reversed. Moses Lake Homes, Inc. v. Grant County, 51 Wash. 2d 285, 317 P.2d 1069, decided November 14, 1957. The injunction was dissolved in December 1957.
In listing and assessing the property here in question for 1955 and 1956 taxes, the county assessor apparently used the forms prescribed by the tax commission pursuant to RCW 84.40.050. However, he made no entry on these forms under item 28 entitled "Leaseholds." Instead, the listing was made under item 27 entitled "Improvements upon land the fee of which is vested in the United States, the state, or any political subdivision thereof."10 At no stage in the subsequent taxing procedure with respect to these years was any reference made to leasehold interests. As before noted, the distraint proceedings later instituted were purportedly directed against the physical improvements and not the leasehold interest of Moses Lake.
A judgment upon the merits in a state court action is res judicata in a subsequent federal court action where the parties and subject matter are the same. This is true not only with regard to matters actually presented to sustain or defeat the right asserted, but also as respects any other available matter which might have been presented to that end. Grubb v. Public Utilities Commission of Ohio, 281 U.S. 470, 50 S. Ct. 374, 74 L. Ed. 972.
It is therefore our view that the judgment of the Washington Supreme Court upholding the validity of the levies "for the year 1955 and thereafter"11 is res judicata on the question here raised as to the validity of those levies. Regardless of the manner in which entries were made on the detail and assessment list, we therefore hold that the levies against Moses Lake for 1955 and 1956 taxes were validly directed against the company's leasehold interest.
This being the nature of the levies, the validity thereof is not open to challenge on the ground that the value of the leasehold was measured by the value of the improvements. Offutt Housing Co. v. County of Sarpy, supra; Moses Lake Homes, Inc. v. Grant County, 51 Wash. 2d 285, 317 P.2d 1069.
Section 511 amends section 408 of the Housing Amendments of 1955, 69 Stat. 653, to provide that no state or local taxes on Wherry Housing project lessees from the United States, "not paid or encumbering such property or interest prior to June 15, 1956," shall exceed the amount of taxes or assessments on other similar property of similar value, less specified offsets as determined by the Secretary of Defense or his designee.12
"The taxes assessed upon each item of personal property assessed shall be a lien upon such personal property from and after the date upon which it is listed with and valued by the county assessor, and no sale or transfer of such property shall in any way affect the lien of such taxes thereon."
The lien referred to in RCW 84.60.030, however, is only inchoate at the time of listing and valuation. See State of Washington v. Snohomish County, 71 Wash. 320, 128 P. 667. It is not enforceable until there is a valid tax for that year which the lien may secure. There can be no valid tax until there has been a levy specifying the amount thereof. Puget Sound Power & Light Co. v. Cowlitz County, 38 Wash. 2d 907, 234 P.2d 506, 511. If no 1955 tax had been thereafter levied, or if the property had passed into public ownership prior to such levy, the lien for 1955 taxes would never have matured into an enforceable lien. But in the meantime, and unless defeated by one of these circumstances, it was an encumbrance upon the property which prevented third persons from gaining intervening rights.
For the reasons stated above, it is our view that the 1957 taxes levied against the leasehold of Moses Lake are not subject to the restrictions imposed by section 511. But for the injunction that leasehold would have been listed and valued for 1957 taxes prior to June 15, 1956. An inchoate lien would then have come into existence which, when the tax was thereafter levied, would have become fully effective, by relation back, to a date prior to June 15, 1956. By its own conduct in securing an injunction, Moses Lake prevented this inchoate lien from coming into existence prior to June 15, 1956. As in the case of the 1956 taxes on this leasehold, we will, under these circumstances, consider that a section 511 encumbrance attached prior to June 15, 1956.
With regard to the 1958 tax levied against Moses Lake, no inchoate lien could have come into existence prior to December 1, 1956. This was the first day on which the assessor, even if unrestrained by court order, could have listed and valued the leasehold for 1958 taxes. See RCW 84.40.040. Since no inchoate lien for 1958 taxes could have come into existence prior to June 15, 1956, the limitations on tax payments set out in section 511 apply thereto.
The county, however, advances several reasons why in its opinion the Secretary's determinations are "totally useless" and should therefore have been disregarded by the court. The first of these is that the designated offsets were not segregated with regard to the individual taxpayers, but only an unsegregated designation covering all three leaseholds at Larson Air Force Base was made.
Some support for the county's view is to be found in the use in section 511 of such terms as "the interest of a lessee," "the interest of such lessee," "with respect to such property," and "the lessee." It can be argued that the use of the singular number in referring to Wherry Act lessees and Wherry Act project properties evidences an intent to require that the designation of offsetting payments and expenditures under clause (2) of the proviso be allocated as between individual lessees and leaseholds.
However, when regard is had to the underlying purpose of Congress in enacting this statute, we believe that such a construction of section 511 is not warranted. As indicated in the report of the House Committee on Banking and Currency on the bill which became the Housing Act of 1956,21 this legislation was an outgrowth of the decision of the United States Supreme Court on May 28, 1956, in Offutt Housing Company v. County of Sarpy, 351 U.S. 253, 76 S. Ct. 814, 100 L. Ed. 1151. The committee report points out that this decision upheld the right of local taxing officials to levy personal property taxes against the lessee's interest in a Wherry Act project, measured by the full value of the buildings and improvements.
It is stated in the committee report that a large portion of the projects have not been subjected to such local taxes in the past, and as a consequence the federal government has frequently made payments to local taxing officials in lieu of taxes in exchange for usual services, such as schools, furnished to the projects. Moreover, as the report notes, many expenditures have been made by the federal government for streets, utilities, schools, and for other services normally furnished by taxing bodies. Now that the right of local taxing agencies to tax such leaseholds has been recognized, the committee report states, it had become important "that no payments be made to communities which would constitute a windfall over and above normal taxes."
On the other hand, we do not believe that the proviso of section 511 authorizes the inclusion in the Secretary's designation of any part of noncapital expenditures made prior to June 15, 1956. Congress sought to prevent local taxing units from receiving windfalls after June 15, 1956. It would receive a windfall after that date if credit could not be taken for the sums necessary to be paid annually in order to amortize capital expenditures made prior thereto. It would not receive a windfall after that date if credit could not be taken for noncapital expenditures made prior thereto, since local government does not normally amortize such expenditures over a period of years.
The third objection which the county makes to the Secretary's designation of offsets is that such offsets were not designated with regard to specific tax years, but only for an unidentified and unsegregated number of years.
The parties have apparently assumed that the $111,358.65 designation is intended to include all credits due at the time the determination was made on September 4, 1957. But examination of the designation quoted in footnote 20 indicates that with regard to six items the payments and expenses are attributed to a single year. These are the items referred to in footnote 24 and the five items listed under "Appropriate amounts for expenditures for services and facilities." Each of the latter items describes a capital outlay in a certain amount, but then designates approximately four per cent of such outlay as the offset, with the explanation "amortized 25 yrs. life." It would appear that the designation of these net items was intended to be reapplied during each of the twenty-five years that the indicated capital outlays were being amortized.25
The proviso to section 511, it will be noted, first recites that no 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 * * *." Thus, a year-by-year comparison is required between the taxes or assessments actually levied or made with respect to the Wherry Act leasehold for a particular year and those which were levied or made on other similar property of similar value for the same year.
As stated above in discussing the similar contention of Moses Lake, the assessor in listing and assessing these properties used the form prescribed by the tax commission pursuant to RCW 84.40.050. He did not, however, list the properties under item 28 entitled "Leaseholds," but did so under item 27 entitled "Improvements upon land the fee of which is vested in the United States, the state, or any political subdivision thereof."
RCW 84.40.050 authorizing the tax commission to prescribe such forms was enacted in 1925.30 Prior to this enactment the forms to be used in listing and assessing property were prescribed by statute. Rem.Comp.Stat. § 11137 (Sess. Laws 1897, p. 143, § 16). Under that statute the assessor was required to list and value personal property under some thirty different classes as its character and situation might vary. While that statute was in effect a case arose in the courts of Washington in which the owner of certain property contended that the personal property tax was invalidly levied because the property fell within three classes specified in the statute, whereas it was listed and valued as if in reality it fell only within one class. Southwark Foundry & Machine Co. v. Barham, 126 Wash. 204, 217 P. 1021, 1023.
"But we cannot conclude that this renders the assessment void. The statute is largely directory, and a substantial compliance therewith is sufficient to satisfy its directions. It is the policy of the law, so declared in the act itself, that all property subject to taxation shall be listed and assessed, and it is of more importance that this part of the act be complied with than it is that it be listed under the specific designation the legislative form prescribes. Moreover, the appellant was in no manner injured by the error. If in the end it is required to pay a tax upon the property it claims, the tax will be no more nor no less than it would have been required to pay had the listing and valuation been made in the manner in which it contends it should have been made."
It seems to us that since the Washington Supreme Court regarded the prior statute which prescribed the form of such lists as directory only it would so regard the form of lists prescribed by the tax commission under the later enacted RCW 84.40.050. The rationale of the Southwark decision therefore leads us to hold that the listing of the Larsonaire and Larson Heights properties under an item not specifically labeled "leaseholds" did not invalidate the levying of taxes upon their Wherry Act project leaseholds for the years in question.
In such further proceedings the respective taxpayers shall be given a reasonable opportunity (1) to offer evidence showing the extent to which the tax levied for each such year exceeds the tax payable in that year which Grant County levied, or would have levied, on other similar property of similar value; and (2) to obtain and offer in evidence a revised designation of offsets made pursuant to section 511, in which offsetting payments and expenditures made in each year in which the taxes payable in 1956, 1957, and 1958 were levied, including sums reasonably attributable to annual amortization of capital expenditures, are separately stated. With respect to evidence, if any, submitted under (1) above, Grant County may produce counter evidence. The validity of any revised designation may be challenged on any ground not adjudicated on this appeal, subject to the question of whether such challenge is an impermissible collateral attack upon an administrative determination.
Enacted August 7, 1956, 70 Stat. 1110, 42 U.S.C.A. § 1594 note
Year Moses Lake Larsonaire Larson Heights 1955 $21,150 1956 32,925 $21,750 1957 31,330 18,798 $18,798 1958 22,575 14,145 14,145
As defined in RCW 84.04.080, personal property includes "all leases of real property and leasehold interests therein for a term less than the life of the holder; [and] all improvements upon lands the fee of which is still vested in the United States * * *."
In the case of Moses Lake the assessment noted under item 27 in the Detail List of Personal Property was $500,000, with this notation on the reverse side: "This listing covers 400 rental units at Larson Air Force Base near Moses Lake, Wash."
Moses Lake Homes, Inc. v. Grant County, 51 Wash. 2d 285, 317 P.2d 1069, 1070
"Sec. 511. Section 408 of the Housing Amendments of 1955 is amended by adding at the end thereof the following: `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 * * *."
For other examples of the doctrine of relation back, as applied to tax liens arising under somewhat analogous statutes, see United States v. State of Alabama, 313 U.S. 274, 61 S. Ct. 1011, 85 L. Ed. 1327; United States v. Sampsell, 9 Cir., 153 F.2d 731; Allen v. Bemis, 99 N.H. 247, 108 A.2d 549
See Moses Lake Homes, Inc. v. Grant County, 51 Wash. 2d 285, 317 P.2d 1069, in which the value of this same Wherry Act project leasehold was measured by the full value of the buildings and improvements
The Moses Lake leasehold was heavily encumbered by a mortgage. The amortization of this indebtedness was not taken into account in assessing the leasehold, as only the value of the physical improvements was considered. But had the valuation of the leasehold been measured by its market value considered in the light of its burdens and benefits, the necessity of amortizing the mortgage would have been taken into account. See In re Assessment of Metropolitan Building Co., 144 Wash. 469, 258 P. 473, 476. Had it been taken into account, the assessed value for 1958 and therefore the levied tax would have been substantially lower, though we do not know how much lower
"Department of the Air Force Washington "Office of the Secretary 4 Sep 1957 Determination "Subject: Determination under Section 408 of the Housing Amendments of 1955, as amended: Larson Air Force Base, Washington (FHA Projects Nos. 171-80001-7-8)
"1. I have considered the information with respect to the subject project, the lessee of which believes that the tax for 1956 will be equal to approximately $65,000.00. Pursuant to my designation under Section 408 of the Housing Amendments of 1955, 69 Stat. 653, as amended by Section 511 of the Housing Act of 1956, 70 Stat. 1110, I have determined $111,358.65 to be equal to (1) any payments made by the Federal Government to the local taxing or other agencies involved with respect to such property, plus (2) such amount as may be appropriate for expenditures made by the Federal Government or the lessee for the provision or maintenance of streets, roads, sidewalk, curbs, gutters, water and sewer system, fire lines and hydrants, playgrounds, street lighting, fire protection, garbage disposal, snow removal and sewer service, or any other service or facilities which are customarily provided by the State, county, city, or other local taxing authority with respect to other similar property of similar value. This determination is not to be considered an expression of opinion by me or the Department of Defense with respect to the validity or propriety of the tax bills to which it is applied.
"2. The items included in this determination are as follows:
"Payments for operation of schools pertaining to dependents living in Wherry projects pursuant to P.L. 874, 61st Congress: $46,646.57.
"Funds paid under P.L. 615 for years January 1953 to June 1956, inclusive, $94,092.00 depreciated at 4%: $3,763.68.
"Appropriate amounts for expenditures for services and facilities.
"Provisions by Air Force of streets, curbs, and sidewalks not including entrance walks and drives, cost $65,658.56, amortized 25 yrs. life: $2,626.35.
"Provision by lessees of streets and street signs, cost $106,416.91, amortized 25 yrs. life: $4,258.68.
"Provision by Air Force of water and sewer system, cost $132,761.00, amortized 25 yrs. life: $5,310.44.
"Provisions by lessees of curbs and sidewalks, cost $103,726.51, amortized 25 yrs. life: $4,149.06.
"Provision by lessees of water and sewer system, cost $185,426.00, amortized 25 yrs. life: $7,417.04.
"Expenditures by Lessee:
"Street lighting: $1,708.80; Sewer charge: $2,800.00; Sewer line maintenance: $250.00; Street maintenance and repair: $682.02; Street sanding: $100.00; Playground maintenance: $2,100.00.
"Expenditures by Air Force:
"Police Protection: $23,248.00; Access Roads — Maintenance: $6,300.00.
"3. The Chief, Family Housing Division, Directorate of Facilities Support, D.C.S./O., will make copies of this determination available to all interested parties.
"/s/ George S. Robinson Deputy Special Assistant for Installations"
"* * * 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 second item under paragraph 2 of the determination reads: "Funds paid under P.L. 615 for years January 1953 to June 1956, inclusive, $94,092.00 depreciated at 4%: $3,763.68." The $3,763.68 designated under this item thus represents the annual sum necessary to amortize over twenty-five years capital expenditures made between January 1953 and June 1956
This Public Law citation is incomplete and erroneous. It should be "Public Law 815, 81st Cong., 2d Sess., 64 Stat. 967 [20 U.S.C.A. § 251 et seq.]" This act relates to the construction of school facilities in areas affected by federal activities. It may also be noted that the citation "P.L. 874, 61st Cong." in the immediately preceding item of the designation is likewise erroneous. The reference intended was probably Public Law 874, 81st Cong., 2d Sess., 64 Stat. 1100, 20 U.S.C.A. § 236 et seq., which relates to the providing of financial assistance for local educational agencies in areas affected by federal activities.
In the first sentence of the designation it is stated that "the lessee of which believes that the tax for 1956 will be equal to approximately $65,000.00." It is difficult to account for this statement except upon the hypothesis that the designation was intended as an offset for 1956 taxes only. It is likewise difficult to account for the $65,000 figure which appears in this statement. Larson Heights had no tax for 1956. The 1956 tax for Moses Lake was $32,925, and for Moses Lake and Larsonaire together, $54,675
It may be noted that the Secretary does not always omit an allocation as to tax years in making these designations. In the designation involved in Air Base Housing, Inc. v. Spokane County, No. 35261, now pending on appeal before the Washington Supreme Court, the designation was $109,025.68 "for 1956" and $113,018.45 "for 1957."
Schools 2. Streets, curbs, sidewalks 3. Street signs 4. Water system 5. Sewer system 6. Street lighting 7. Playground
Airport districts 2. Cemetery districts 3. Cities and towns General government Accident fund Pension funds Local Improvement guaranty funds Park funds 4. Horticultural matters 5. Hospitals 6. Libraries 7. County roads 8. Rodent control 9. Flood control 10. Tuberculosis control 11. Veterans' relief 12. Ferry districts 13. Fire protection 14. Parks 15. Pest control 16. Port districts 17. Public utilities 18. Schools 19. Sewers 20. Water 21. Diking and drainage 22. Irrigation 23. Weed control
On January 3, 1957, following the decision in Offutt Housing Company v. County of Sarpy, supra, the property of Larsonaire was asesssed as "omitted property" for 1956 and 1957 taxes. At the same time the property of Larson Heights was similarly assessed for 1957 taxes. These two companies then obtained state court orders temporarily enjoining further tax proceedings until the remittitur should be handed down in the Moses Lake case then pending before the state supreme court for the second time
Laws Ex.Sess.1925, chapter 130, § 23