B-127635, MAY 14, 1957

B-127635: May 14, 1957

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED OCTOBER 30. IT APPEARS THAT THE AMOUNT REQUIRED TO LIQUIDATE THE TAXES WILL BE CHARGED TO THE ACCOUNT "21M 2020 "MAINTENANCE AND OPERATIONS. ARMY.'" IN 1946 THE FACILITY INVOLVED WAS DECLARED SURPLUS TO THE NEEDS OF THE RECONSTRUCTION FINANCE CORPORATION PURSUANT TO THE SURPLUS PROPERTY ACT OF 1944. RECORD TITLE TO THE PLANT WAS IN THE RECONSTRUCTION FINANCE CORPORATION UNTIL MAY 6. WHEN IT WAS TRANSFERRED TO THE GENERAL SERVICES ADMINISTRATION AND THE DEED OF TRANSFER WAS RECORDED DECEMBER 9. IT IS REPORTED THAT PRIOR TO 1952. COUNTY AND LOCAL TAXES AND WAS REIMBURSED BY THE ARMY THEREFOR PURSUANT TO ITS CONTRACTS. TAXES WERE NOT CONSIDERED PROPERLY ASSESSABLE AND WERE NOT PAID FOR THE YEAR 1952.

B-127635, MAY 14, 1957

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED OCTOBER 30, 1956, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS) REQUESTING A DECISION AS TO WHETHER YOUR DEPARTMENT MAY LEGALLY EXPEND APPROPRIATED FUNDS IN ORDER TO REMOVE THE CLOUD UPON THE TITLE OF THE UNITED STATES TO PLANCOR 166, MUSKEGON, MICHIGAN--- A GOVERNMENT-OWNED FACILITY--- CREATED BY THE NONPAYMENT OF REAL ESTATE TAXES FOR THE YEAR 1952. IT APPEARS THAT THE AMOUNT REQUIRED TO LIQUIDATE THE TAXES WILL BE CHARGED TO THE ACCOUNT "21M 2020 "MAINTENANCE AND OPERATIONS, ARMY.'"

IN 1946 THE FACILITY INVOLVED WAS DECLARED SURPLUS TO THE NEEDS OF THE RECONSTRUCTION FINANCE CORPORATION PURSUANT TO THE SURPLUS PROPERTY ACT OF 1944, 58 STAT. 765, 50 U.S.C. APP. 1611 ET. SEQ., AND ON APRIL 1, 1949, CONTINENTAL MOTORS CORPORATION LEASED IT FROM THE GENERAL SERVICES ADMINISTRATION FOR USE IN THE PERFORMANCE OF ITS CONTRACTS WITH THE ARMY. ON NOVEMBER 1, 1950, THE GENERAL SERVICES ADMINISTRATION GRANTED TO THE ORDNANCE CORPS, DEPARTMENT OF THE ARMY, A RENT-FREE INTERIM PERMIT TO USE AND OCCUPY THE PLANT PROVIDING TAXES WOULD BE PAID DURING THE CONTINUATION OF THE INTERIM PERMIT. CONTINENTAL THEREAFTER USED AND OPERATED THE PLANT UNDER AGREEMENT WITH THE ARMY. RECORD TITLE TO THE PLANT WAS IN THE RECONSTRUCTION FINANCE CORPORATION UNTIL MAY 6, 1953, WHEN IT WAS TRANSFERRED TO THE GENERAL SERVICES ADMINISTRATION AND THE DEED OF TRANSFER WAS RECORDED DECEMBER 9, 1953. IT IS REPORTED THAT PRIOR TO 1952, THE CONTRACTOR PAID THE STATE, COUNTY AND LOCAL TAXES AND WAS REIMBURSED BY THE ARMY THEREFOR PURSUANT TO ITS CONTRACTS, SUCH PAYMENTS BEING RECOGNIZED AS A PROPER BURDEN CHARGE REFLECTED IN THE PRICE OF END ITEMS PRODUCED IN THE FACILITY. HOWEVER, FOLLOWING THE DECISION OF THE COURT OF CLAIMS IN BOARD OF COUNTY COMMISSIONERS OF SEDGWICK COUNTY V. UNITED STATES, 105 F.SUPP. 995, TAXES WERE NOT CONSIDERED PROPERLY ASSESSABLE AND WERE NOT PAID FOR THE YEAR 1952. THE 1953 TAXES WERE PAID UNDER PROTEST BY THE CONTRACTOR AND SUIT STARTED FOR THEIR RECOVERY. BECAUSE THE 1952 TAXES WERE UNPAID, THE AUDITOR GENERAL OF MICHIGAN PETITIONED THE CIRCUIT COURT FOR THE COUNTY OF MUSKEGON, IN CHANCERY, FOR A DECREE THAT THE ASSESSMENTS FOR THE 1952 TAXES ON THE PROPERTY IN QUESTION WERE VALID AND ALSO FOR A DECREE WHICH WOULD ORDER THE PROPERTY TO BE SOLD TO SATISFY THE LIENS FOR SUCH TAXES. THE PETITION OF THE AUDITOR GENERAL WAS GRANTED AND THE DECREE ENTERED ON MARCH 28, 1955. PURSUANT TO THE DECREE OF THE COURT THE PROPERTY WAS OFFERED FOR SALE ON MAY 3, 1955, AT WHICH TIME IT WAS BID IN AND SOLD TO THE STATE OF MICHIGAN. YOUR DEPARTMENT WAS ADVISED THAT UNLESS THE PROPERTY WAS REDEEMED ON OR BEFORE APRIL 30, 1956, ABSOLUTE TITLE WOULD VEST IN THE STATE OF MICHIGAN UNDER ITS LAWS AS OF THAT DATE.

BY LETTER DATED APRIL 18, 1956, YOUR DEPARTMENT REQUESTED THAT THERE BE MADE AVAILABLE TO IT THE SUM OF $102,096.43 TO PROTECT THE INTERESTS OF THE UNITED STATES IN PLANCOR 166 AND REDEEM IT FROM THE TAX SALE. DECISION OF APRIL 20, 1956 (B-127635) WE AUTHORIZED YOU TO EXPEND LAPSED FUNDS FROM A SPECIFIED ACCOUNT TO PERMIT REDEMPTION OF THE INSTANT FACILITY, IT BEING UNDERSTOOD A SUIT WOULD BE BROUGHT TO HAVE THE TAX SALE SET ASIDE.

IT IS REPORTED THAT SUBSEQUENT TO SUCH AUTHORIZATION NEGOTIATIONS BY REPRESENTATIVES OF YOUR DEPARTMENT AND THE DEPARTMENT OF JUSTICE WITH STATE AND LOCAL TAXING AUTHORITIES OF MICHIGAN RESULTED IN A CANCELLATION OF THE TAX SALE BY THE AUDITOR GENERAL OF MICHIGAN AND IT PROVED UNNECESSARY TO EXPEND THE AMOUNT AUTHORIZED TO "REDEEM" THE FACILITY. THE CANCELLATION, HOWEVER, RESERVED THE ISSUE OF THE VALIDITY OF THE 1952 TAXES AND THE LIEN UPON PLANCOR 166 FOR SUCH TAXES CONTINUED. THEREFORE, DESPITE THE FACT THE TAX SALE WAS CANCELED, THE UNITED STATES ATTORNEY ON APRIL 30, 1956, FILED A PETITION OR MOTION WITH THE CIRCUIT COURT FOR THE COUNTY OF MUSKEGON TO AMEND THE ABOVE REFERRED-TO DECREE OF SALE BY DELETING THEREFROM THE PROPERTY IN QUESTION (OTHER PROPERTY WAS LISTED IN THE DECREE) AND BY A FURTHER FINDING THAT BECAUSE OF THE IMMUNITY OF SUCH PROPERTY FROM TAXATION THE PUBLIC RECORDS SHOULD BE CHANGED SO AS TO DELETE THEREFROM ANY ASSESSMENTS OF TAXES PARTICULARLY THOSE OF 1952.

IT IS REPORTED THAT IT WAS DETERMINED THAT THE VALIDITY OF THE 1952 TAXES SHOULD NOT BE LITIGATED SEPARATELY IN VIEW OF THE FACT THAT IDENTICAL ISSUES OF LAW AND FACT WERE PRESENTED IN THE CASE OF CONTINENTAL MOTORS CORP. ET AL. V. TOWNSHIP OF MUSKEGON, ET AL., INVOLVING 1953 REAL PROPERTY TAXES ON PLANCOR 166. THEREFORE, ON MAY 21, 1956, THE UNITED STATES ATTORNEY FILED A ,STIPULATION" WITH THE COURT REQUESTING AN ORDER POSTPONING THE HEARING ON THE ABOVE REFERRED TO PETITION BY THE UNITED STATES TO AMEND THE DECREE OF SALE UNTIL THE CONTINENTAL CASE WAS ULTIMATELY DECIDED, AND THE ORDER WAS GRANTED BY THE COURT. THE CONTINENTAL CASE WAS DECIDED ADVERSELY TO THE UNITED STATES BY THE MICHIGAN SUPREME COURT (77 N.W.2D 370) ON JUNE 4, 1956. IT IS STATED IN THE ASSISTANT SECRETARY'S LETTER THAT THE DEPARTMENT OF JUSTICE, CONTRARY TO THE RECOMMENDATION OF THE DEPARTMENT OF THE ARMY, DETERMINED NOT TO PETITION THE UNITED STATES SUPREME COURT FOR A WRIT OF CERTIORARI IN THE CASE. IT IS FURTHER STATED THAT IN VIEW OF THE FACT THAT THE LIABILITY OF THE DEPARTMENT OF THE ARMY FOR 1952 TAXES WAS IN EFFECT ESTABLISHED BY THE CONTINENTAL CASE, IT IS NOW NECESSARY FOR THE ARMY TO PAY SUCH TAXES.

IT IS REPORTED IN ONE OF THE ENCLOSURES TO THE LETTER OF OCTOBER 30, 1956, THAT IT IS UNDERSTOOD BY YOUR DEPARTMENT THAT THE REASONS WHY THE DEPARTMENT OF JUSTICE DETERMINED NOT TO PETITION THE SUPREME COURT OF THE UNITED STATES FOR A WRIT OF CERTIORARI IN THE CONTINENTAL CASE INCLUDE THE FOLLOWING:

"A. THE PROBABLE REFUSAL OF THE SUPREME COURT OF THE UNITED STATES TO GRANT CERTIORARI ON THE BASIS OF A MERE EXISTENCE OF A CONFLICT WITH THE SEDGWICK COUNTY CASE IN VIEW OF THE FACT THAT THE ISSUES PRESENTED IN THE CONTINENTAL CASE ARE NOT LIKELY TO RECUR. THE ISSUES PRESENT IN THE CONTINENTAL CASE ARE DUPLICATED ONLY IN THE INSTANT CASE OF DELINQUENT 1952 TAXES, TO THE KNOWLEDGE OF THE DEPARTMENT OF JUSTICE AND THE DEPARTMENT OF THE ARMY.

"B. THE DOUBTS ENTERTAINED BY THAT DEPARTMENT THAT THE SUPREME COURT OF THE UNITED STATES, EVEN IF IT GRANTED CERTIORARI, WOULD NECESSARILY UPHOLD THE REASONING OF THE SEDGWICK COUNTY CASE. WHILE THE GOVERNMENT'S POSITION IN THE CONTINENTAL CASE IS LEGALLY SOUND AND MIGHT WELL BE SUSTAINED BY THE SUPREME COURT OF THE UNITED STATES, SUCH A RESULT WOULD NOT BE A CERTAINTY.'

AS INDICATED IN OUR PRIOR DECISION TO YOU CONCERNING THIS MATTER, HAVING REGARD FOR THE PRINCIPLES SET FORTH IN UNITED STATES V. SHOFNER IRON AND STEEL WORKS, 168 F.2D 286, AND THE SEDGWICK COUNTY CASE REFERRED TO ABOVE, IT IS OUR VIEW THAT THE TAXES IN QUESTION WERE INVALIDLY ASSESSED. HOWEVER, IT APPEARS THAT IN THE ABOVE REFERRED-TO NEGOTIATIONS BY REPRESENTATIVES OF YOUR DEPARTMENT AND THE DEPARTMENT OF JUSTICE WITH MICHIGAN STATE AND LOCAL TAXING AUTHORITIES IN CONNECTION WITH THE ADMINISTRATIVE CANCELLATION OF THE TAX SALE, IT WAS STIPULATED OR AGREED THAT IDENTICAL ISSUES OF LAW AND FACT WERE INVOLVED IN THE 1952 TAX MATTER AND THE CONTINENTAL CASE INVOLVING 1953 TAXES, AND IN VIEW THEREOF, AS INDICATED ABOVE, IT WAS DETERMINED NOT TO LITIGATE SEPARATELY THE VALIDITY OF THE 1952 TAXES. FURTHER, THE DEPARTMENT OF JUSTICE THROUGH THE UNITED STATES ATTORNEY IN ITS ABOVE REFERRED-TO "STIPULATION" STATED THEREIN:

"WHEREAS, IT APPEARS THAT THE QUESTIONS OF LAW AND FACT INVOLVED IN THE INSTANT CASE ARE IDENTICAL WITH THOSE CONTAINED IN CASE NUMBER 14603 (CONTINENTAL MOTORS CORP. ET AL. V. TOWNSHIP OF MUSKEGON, ET AL., 77 N.W.2D 370) WHICH IS NOW PENDING BEFORE THE SUPREME COURT OF THE STATE OF MICHIGAN, * * * AND;

"WHEREAS, IT APPEARS THAT IT WOULD BE ADVANTAGEOUS FOR ALL PARTIES HERETO THAT THE INSTANT MATTER BE HELD IN ABEYANCE UNTIL CASE NUMBER 14603 IS ULTIMATELY DECIDED.

"THEREFORE, IT IS STIPULATED AND AGREED BY AND BETWEEN THE PARTIES HERETO BY THEIR RESPECTIVE ATTORNEYS AS FOLLOWS:

"1. THAT THE HEARING ON THE PETITION BY THE UNITED STATES OF AMERICA TO AMEND THE DECREE SHALL NOT BE HELD ON MAY 21, 1956, BUT SHALL BE POSTPONED INDEFINITELY PENDING THE ULTIMATE OUTCOME OF CASE NUMBER 14603.'

IT APPEARS FROM THE QUOTED PORTION OF THE "STIPULATION" AND THE ACCORD REACHED IN THE ,NEGOTIATIONS" THAT THE DEPARTMENT OF JUSTICE AND THE MICHIGAN AUTHORITIES, IN EFFECT, AGREED THAT THE DECISION ULTIMATELY REACHED BY THE COURTS, IN CONNECTION WITH THE 1953 TAXES, WOULD DETERMINE LIABILITY FOR THE 1952 TAXES.

INASMUCH AS THE MATTER INVOLVING THE SALE OF THE PLANT FOR THE 1952 TAXES WAS REFERRED TO THE DEPARTMENT OF JUSTICE FOR DEFENSE IN THE COURTS, IT IS ASSUMED THE SAID "STIPULATION" WAS FILED WITH THE COURT AND THE "NEGOTIATIONS" WERE CARRIED ON BY THE DEPARTMENT OF JUSTICE PURSUANT TO THE AUTHORITY CONTAINED IN SECTION 5 OF EXECUTIVE ORDER NO. 6166, DATED JUNE 10, 1933 (ISSUED PURSUANT TO THE AUTHORITY IN THE ACT OF MARCH 3, 1933, 47 STAT. 1517) WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"AS TO ANY CASE REFERRED TO THE DEPARTMENT OF JUSTICE FOR PROSECUTION OR DEFENSE IN THE COURTS, THE FUNCTION OF DECISION WHETHER AND IN WHAT MANNER TO PROSECUTE, OR TO DEFEND, OR TO COMPROMISE, OR TO APPEAL, OR TO ABANDON PROSECUTION OR DEFENSE, NOW EXERCISED BY ANY AGENCY OR OFFICER, IS TRANSFERRED TO THE DEPARTMENT OF JUSTICE.'

MOREOVER, SINCE THE DEPARTMENT OF JUSTICE HAS DETERMINED NOT TO PETITION THE UNITED STATES SUPREME COURT FOR A WRIT OF CERTIORARI IN THE CASE INVOLVING THE 1953 TAXES AND INASMUCH AS IT APPEARS THAT THAT DEPARTMENT FEELS THAT THE 1952 TAXES SHOULD BE PAID, IT IS ASSUMED THAT IT WILL BE DISINCLINED TO LITIGATE THE VALIDITY OF THE 1952 TAXES IN THE EVENT COURT ACTION BECOMES NECESSARY IN ORDER TO REMOVE THE CLOUD ON THE TITLE TO PLANCOR 166. THUS, ANY SUBSEQUENT PURCHASER OF SUCH PROPERTY WOULD TAKE IT SUBJECT TO THE LIEN THEREON FOR THE 1952 TAXES. THE NET RESULT OF THIS SITUATION WOULD BE TO REDUCE THE PRICE THE GOVERNMENT COULD SELL THE PROPERTY FOR BY THE AMOUNT OF THE TAXES AS REPRESENTED BY THE LIEN, SO THAT THE GOVERNMENT WOULD IN EFFECT PAY THE 1952 TAXES AT THE TIME OF SUCH SALE.

IN VIEW OF THE FOREGOING, AND TAKING INTO CONSIDERATION THE REPRESENTATION THAT THE ISSUES PRESENTED IN THIS CASE ARE NOT LIKELY TO RECUR IN THE FUTURE, WE WILL NOT OBJECT TO YOUR DEPARTMENT EXPENDING FUNDS FROM THE APPROPRIATION REFERRED TO ABOVE TO PAY THE BASIC TAXES FOR 1952 ON PLANCOR 166, MUSKEGON, MICHIGAN.

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