Air Base Housing, Inc. v. Spokane County

Hunter, J.

— This is an appeal from a judgment entered in the Superior Court for Spokane county dismissing plaintiff’s action to recover personal property taxes paid under protest.

The appeal comes before this court on an agreed statement of facts. Prior to January 1, 1956, the plaintiff Air Base Housing, Inc., leased real property and improvements constructed thereon, located at Fairchild Air Force Base in Spokane county, from the Department of Air Force under three leases under the authority of Title VIII of the National Housing Act, as amended, known as the Wherry Act. Under these leases the plaintiff operated the housing project until November 1, 1957, when the United States took over all of plaintiff’s title and interest in the leaseholds by condemnation. By reason of the decision of the supreme court of the United States, in Offutt Housing Co. v. County of Sarpy, 351 U. S. 253, 100 L. Ed. 1151, 76 S. Ct. 814 (1956), the assessor of Spokane county, prior to the date of equalization of taxes for 1956, amended its assessment of plaintiff’s leaseholds on June 12, 1956. At that time the assessor listed and valued the property upon the basis of the full value as permitted by the Offutt case. In October 1956 a tax levy in a specific amount was made on the leaseholds for personal property taxes payable in 1957. Payment for the first half of the 1956 levy was made under protest in 1957. The protest resulted from the plaintiff’s contention that no taxes were due in view of the amendment in 1956 to the Wherry Act by § 511 (70 Stat. 1110), which reads as follows:

“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: And provided further, That the provisions of this section shall not apply to properties leased pursuant to the provisions of section 805 of the National Housing Act as amended on or after August 11, 1955, which properties shall be exempt from State or local taxes or assessments.’ ”

By the application of the formula permitting deductions from taxes payable, as provided under § 511, no taxes would be due against plaintiff’s leaseholds. The plaintiff contended the deductions applied to the taxes assessed on June 12, 1956, and levied thereafter in October 1956. Spokane county contended the taxes assessed against the leaseholds of the plaintiff, on June 12, 1956, constituted a tax lien upon the leaseholds at the time of the listing and valuation thereof by the county assessor on that date, which was prior to June 15, 1956, and that § 511, providing for deductions from the amount of taxes payable, did not apply.

The trial court, ruling this contention of the defendant Spokane county was correct, dismissed plaintiff’s action and entered judgment accordingly, from which this appeal was taken.

The sole issue raised by appellant’s assignments of error is whether a valid tax lien attached to the leasehold interests of the appellant at the time this personal property was listed and valued by the Spokane county assessor.

Appellant contends the rule of Puget Sound Power & Light Co. v. Cowlitz County, 38 Wn. (2d) 907, 234 P. (2d) 506 (1951), is controlling in this case. In that case personal property owned by the appellant power company was sold to five public utility districts. The sale occurred after the property had been assessed, but before a tax levy had been made. We there held that a tax lien does not become valid and effective until there has been a levy specifying the amount thereof.

The respondent contends the Cowlitz case is inapplicable to the instant case, since that case involved property owned by a municipal corporation, exempt from taxation under the fourteenth amendment to the Washington constitution.

In the instant case, as in the Cowlitz case, the controlling determination is whether a valid tax encumbrance came into existence at the time of the listing and valuation of the personal property by the county assessor. If we are to follow the rule of the Cowlitz case, it is inescapable that, prior to June 15, 1956, there was no valid tax encumbrance and the sole issue here involved would be concluded in favor of the appellant.

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.

Further, the Cowlitz case erroneously applies to personal property, the doctrine that an inchoate tax lien comes into existence on the assessment day and, upon a levy being made, becomes fully effective by relation back to the time when the inchoate lien came into existence. This doctrine of “relation back” can be applied to real property by virtue of RCW 84.60.020, as construed in State v. Snohomish County, 71 Wash. 320, 128 Pac. 667 (1912). However, applying such a doctrine to personal property violates the express language of RCW 84.60.030. The application of this doctrine to personal property would leave the taxing authority powerless to enforce a lien thereon prior to the date of the levy. The security for the payment of the tax would in every instance be lost where the property could not be found, or where it was no longer in existence, or in the jurisdiction of the taxing authority on the tax levy date.

The doctrine of “relation back” creates an additional problem, since the amount of the levy is determined by reference to the total sum needed by the taxing district, and the assessed value of the taxable property. Once the amount of the levy has been determined, the assessed value of the property multiplied by the amount of the levy equals the amount needed. To be workable under this method it must be assumed that all taxes will be collected. However, with no method of enforcing taxes on property which has passed out of the jurisdiction of the taxing authority, after the assessment but before the levy, the assessed value affords no certain basis for determining the amount of the levy. Under the “relation back” doctrine followed in the Cowlitz case, to make the assessed value a certain basis, would require a relisting and reassessment on the date of the levy.

Thus, the Cowlitz case, in applying this doctrine to personal property, constitutes a substantial alteration of the taxing process of this state, which is a direct invasion of the legislative branch of government by this court. The Cowlitz case, therefore, must be, and hereby is, overruled.

It is undisputed in the instant case that the interests of the appellant in its Wherry Act leaseholds at the Fairchild Air Force Base were listed and valued by the county assessor of Spokane county prior to June 12, 1956, at which time a valid tax encumbrance attached under RCW 84.60-.030. The taxes on appellant’s leaseholds were not affected by § 511 of the Housing Act, since they had become a valid encumbrance prior to June 15, 1956.

The trial court was correct in entering its order and judgment dismissing appellant’s action to recover the taxes paid under protest.

The judgment is affirmed.

Weaver, C. J., Mallery, Hill, Finley, Rosellini, and Ott, JJ., concur.