Court Opinion

ID: 9792097
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:23:03.225685+00
Date Added: 2024-06-11T07:37:40.519509
License: Public Domain

Donworth, J.
(dissenting) — In Moses Lake Homes v. Grant County, 51 Wn. (2d) 285, 317 P. (2d) 1069 (1957), we held that, under the Wherry Act, the county could base its assessed value of the lessee’s interest for tax purposes on the full value of the buildings and improvements placed on government real property by the lessee instead of on the value of its leasehold interest. This holding was compelled by decision of the supreme court in Offutt Housing *648Co. v. Sarpy County, 351 U. S. 253, 100 L. Ed. 1151, 76 S. Ct. 814 (1956).
Congress has the power to determine whether, and to what extent, a state may levy a tax on property belonging to the United States. But Congress cannot amend the state’s statutes regarding the method of assessing such property for purposes of taxation. Our Legislature has defined what property is to be treated as personal property for that purpose. In RCW 84.04.080, there is included in this classification “all improvements upon lands the fee of which is still vested in the United States, or in the state.”
In the case of In re Metropolitan Bldg. Co., 144 Wash. 469, 258 Pac. 473 (1927), this court applied this statute to a leasehold on state-owned land. We there said:
“We now come to the merits. The subject matter of this case has been before us three times in the past. Metropolitan Bldg. Co. v. King County, 62 Wash. 409, 113 Pac. 1114, Id., 64 Wash. 615, 117 Pac. 495, and Id., 72 Wash. 47, 129 Pac. 883. The general history of the leasehold involved is sufficiently shown in these earlier cases and need not be here repeated. At the time of each assessment heretofore involved, the operations showed a net loss; now they show a profit, but of how much is seriously in dispute and presents the vital question in the present case.
“The first of the former cases settled the law, which is still applicable. It is there said:
“ ‘We are bound by the statute, therefore, to determine the value of the leasehold as personal property. In determining the worth of a leasehold the courts have universally held that it is the value of the term less the rent reserved. The value of the term is fixed with reference to present as well as prospective conditions; not speculative, but actual; or, to state the proposition more aptly, its value in money to one who desires to sell but who is under no necessity for selling, and to one who is desirous of buying but is under no compulsion to do so. . . .
“ ‘This rule of value has been applied in condemnation cases, where it is necessary to determine the immediate value of leasehold property as a basis for the assessment of damages. Corrigan v. Chicago, 144 Ill. 537, 33 N. E. 746, 21 L. R. A. 212; In re New York & Brooklyn Bridge, 4 N. Y. Supp. 222; Pennsylvania R. Co. v. Eby, 107 Pa. St. 166. If the real property upon which the buildings are erected *649were owned by a private individual, we apprehend that the question raised in this case would not have occurred; for, unless controlled by the contract of the parties, the real property would be assessed to the owner of the fee, while the leasehold would be assessed to the lessee. The fact that the fee is in the people of the state of Washington does not alter the rule.
“ ‘The fallacy of appellants’ position may be readily shown by suggesting that, in the final years of the term, if their theory be followed, respondent would pay only a nominal tax, or be burdened by a tax so onerous as to amount to confiscation. For if the assessment be made with reference to the time the lease had yet to run, the assessed value would be out of all proportion to its value. If, on the other hand, respondent were compelled to pay upon the amount of its investment, the tax would be grossly excessive. Whereas, under the rule as we find it to be, the present worth of the lease from year to year, considering also the term, fixes a criterion of value easily ascertainable and just to both parties. Therefore, an assessment based upon the value of the improvements or the amount invested therein was erroneous, and entitles respondent to relief.’ ”
The material facts before us are as follows:
In 1956, Congress enacted the amendment to the Wherry Act involved in this case. That amendment provided, in effect, that no state or local taxes or assessments on the interest of a Wherry Act lessee 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 certain payments made by the Federal Government to local taxing or other public agencies as determined by the secretary of defense.
The sole question before us is whether these deductions can be applied to appellant’s leasehold interest in the subject property at Fairchild Air Force Base in Spokane county.
Prior to June 15, 1956, the county assessor had listed and valued appellant’s leasehold interest for tax purposes as personal property. But on that date there existed no lien for taxes which constituted an encumbrance on this lease*650hold interest under our statutes, because the county commissioners had not yet levied a tax based on such assessed valuation. This was not done until October, 1956. Therefore, under our decision in the Cowlitz case, there was no tax lien encumbering the property on June 15, 1956.
The majority overrule the Cowlitz case, stating its reason therefore, in part as follows:
“However, we feel compelled to review the Cowlitz case and reconsider the rule there announced. This is occasioned by the clear and unambiguous language of Laws of 1943, chapter 34, § 1, p. 71, [cf. RCW 84.60.030], which reads in part:
“ ‘ . . . 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 the same is listed with and valued by the County Assessor, and no sale or transfer of such personal property shall in any way affect the lien for such taxes upon such property. . . . ’
“It is plain from the language of the Cowlitz case that it was not our intention to modify the effect of this statute, except in so far as it operated in contravention of our constitutional provision making public property immune from taxation. It now appears that the rule of the Cowlitz case is not so limited in its operation. In the Cowlitz case, at the time of the assessment, the personal property in question had not been sold to the public utility districts; therefore, at the time of the assessment, it was not public property and had no claim to the immunity from taxation provided by the fourteenth amendment. Consequently, at the time of the assessment, RCW 84.60.030 could not in any way have been in contravention of the constitution. The rule of the Cowlitz case, modifying the effectiveness of this statute by nullifying a valid tax lien attaching at the time of the assessment of personal property, cannot be justified on the theory that the statute collided with the fourteenth amendment. In the absence of this statute contravening our state constitution, it may not be modified by a rule announced by this court.”
In the present case, the interest of appellant Air Base Housing, Inc., in the leased property is based on the full value of the improvements under the supreme court’s interpretation of the Wherry Act. Under RCW 84.60.030 *651(cited in the majority opinion), was appellant’s property subject on a tax lien on June 15, 1956?
I think that our decision in Puget Sound Power & Light Co. v. Cowlitz County, 38 Wn. (2d) 907, 234 P. (2d) 506 (1951) should not be overruled because it correctly holds that, before a tax lien can become an encumbrance on personal property, there must be a levy. Until that final step in the taxing process is taken, it is impossible to pay the tax or even ascertain its amount. Under RCW 84.60-.030, there may be an inchoate lien on personal property based on its assessed value as of noon on January first (after it has been listed and valued by the county assessor), but the 1956 amendment to the Wherry Act becomes applicable only if the taxes either have been paid or have become an encumbrance on the leasehold interest prior to June 15, 1956. Neither payment nor the creation of an encumbrance is legally possible until after the county commissioners have levied a tax upon all the real and personal property in the county. RCW 84.52.030 et seq. and 84.56-.010 et seq.
Since the taxes involved in this case neither had been paid prior to June 15,1956, nor had become an encumbrance on appellant’s property prior to that date, I would reverse the judgment with directions to reinstate appellant’s action for further proceedings.
Foster, J., concurs with Donworth, J.