B-127635, APR. 20, 1956

B-127635, APR. 20, 1956

TO THE HONORABLE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED APRIL 18, 1956, WITH ENCLOSURES, FROM THE DEPUTY ASSISTANT SECRETARY OF THE ARMY (LOGISTICS) REQUESTING THAT THERE BE MADE AVAILABLE TO THE DEPARTMENT THE SUM OF $102,096.43 TO PROTECT THE INTERESTS OF THE UNITED STATES IN PLANCOR 166, MUSKEGON, MICHIGAN, A GOVERNMENT-OWNED FACILITY WHICH WAS BID IN AND SOLD TO THE STATE OF MICHIGAN FOR DELINQUENT STATE, COUNTY AND LOCAL REAL ESTATE TAXES FOR THE YEAR 1952.

IT IS REPORTED THAT THE FACILITY INVOLVED WAS DECLARED SURPLUS TO THE NEEDS OF THE RECONSTRUCTION FINANCE CORPORATION AND THAT 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, GENERAL SERVICES ADMINISTRATION GRANTED TO THE ORDNANCE CORPS, DEPARTMENT OF THE ARMY, A RENT FREE PERMIT TO USE AND OCCUPY THE PLANT PROVIDING TAXES WOULD BE PAID DURING THE CONTINUATION OF THE INTERIM PERMIT; AND, 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 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. HOWEVER, FOLLOWING THE DECISION OF THE COURT OF CLAIMS IN THE BOARD OF COUNTY COMMISSIONERS OF SEDGWICK COUNTY V. UNITED STATES, 105 F.SUPP. 995, TAXES WERE NOT CONSIDERED PROPERLY TO BE ASSESSABLE AND THEY WERE NOT PAID FOR THE YEAR 1952. THE 1953 TAXES WERE PAID UNDER PROTEST BY THE CONTRACTOR AND SUIT STARTED FOR THEIR RECOVERY; AN APPEAL FROM A DECISION DENYING RECOVERY CURRENTLY IS PENDING BEFORE THE MICHIGAN SUPREME COURT. IT APPEARS THAT BECAUSE THE 1952 TAXES WERE UNPAID THE FACILITY WAS BID IN AND SOLD TO THE STATE OF MICHIGAN AT AN ANNUAL TAX SALE HELD MAY 3, 1955. THE DEPARTMENT HAS BEEN ADVISED THAT UNLESS THE PROPERTY IS REDEEMED ON OR BEFORE APRIL 30, 1956, ABSOLUTE TITLE WILL VEST IN THE STATE OF MICHIGAN UNDER ITS LAWS AS OF THAT DATE. IT IS INDICATED THAT A SUIT WILL BE BROUGHT IN ACCORDANCE WITH THE PROCEDURE SET FORTH IN SECTION 211.70 OF THE MICHIGAN GENERAL PROPERTY TAX ACT ON OR BEFORE APRIL 30, 1956, IN THE APPROPRIATE STATE COURT TO SET ASIDE THE TAX SALE ON THE GROUNDS THAT THE FACILITY DURING THE PERIOD WAS EXEMPT FROM TAXATION BUT THAT TO AVOID THE POSSIBILITY OF LOSING TITLE TO THE FACILITY, IT IS PROPOSED TO REDEEM THE FACILITY BY PAYMENT OF THE AMOUNT INVOLVED TO THE PROPER MICHIGAN AUTHORITIES. TO ASSURE PROTECTION TO THE FULLEST EXTENT POSSIBLE IN THE AMOUNT AND PRECLUDE ITS DISSIPATION BY LOCAL TAXING AUTHORITIES, IT IS TO BE PROPOSED THAT THE AMOUNT BE PAID INTO THE REGISTRY OF THE LOCAL COURT IN MICHIGAN PENDING RESOLUTION OF THE ISSUES ON APPEAL BUT THAT, IF NECESSARY, IT BE PAID UNDER PROTEST, IF POSSIBLE, TO THE TAXING AUTHORITY. THE POSSIBILITY IS SUGGESTED OF PURCHASING INTEREST BEARING UNITED STATES BONDS WITH THE AMOUNT TO BE DEPOSITED IN LIEU OF CASH WITH THE LOCAL COURT IF SUCH ARRANGEMENTS CAN BE WORKED OUT. BECAUSE THE NATURE OF THE PAYMENT IS DEPENDENT UPON ARRANGEMENTS YET TO BE WORKED OUT BY NEGOTIATIONS WITH STATE OFFICIALS AND THE PAYEE IS NOT DEFINITELY KNOWN, AN ENCLOSURE TO THE LETTER PROPOSES THAT THE FINANCE AND ACCOUNTS OFFICER, DETROIT ORDNANCE DEPOT, MICHIGAN, BE AUTHORIZED TO DISBURSE THE AMOUNT TO THE PAYEE TO BE DETERMINED BY THE NEGOTIATIONS WITH THE STATE OFFICIALS. THE APPROPRIATION TO WHICH THE TAXES WOULD HAVE BEEN CHARGEABLE, IF PROPERLY DUE, IS INDICATED TO BE ,2132020 MAINTENANCE AND OPERATIONS, ARMY, 1953" WHICH NOW HAS LAPSED FOR EXPENDITURE PURPOSES BUT FROM WHICH A SUFFICIENT AMOUNT HAS BEEN COVERED INTO THE FUND FOR PAYMENT OF CERTIFIED CLAIMS TO ENABLE PAYMENT THEREOF FROM THAT FUND. IT IS INDICATED IN THE ENCLOSURE TO THE LETTER OF APRIL 18 THAT SHOULD THE ISSUE OF THE INVALIDITY OF THE TAXES ULTIMATELY BE DECIDED IN FAVOR OF THE UNITED STATES, AN ADDITIONAL MEANS OF RECOVERY OF ANY TAXES IMPROPERLY PAID MAY EXIST BY OFFSETTING, AGAINST THE OVERPAYMENTS, AMOUNTS WHICH MAY BECOME DUE THE LOCAL TAXING AUTHORITIES UNDER PUBLIC LAW 388, APPROVED AUGUST 12, 1955, 69 STAT. 721. IT IS STATED IN YOUR LETTER THAT THE DEPARTMENT OF JUSTICE CONCURS IN THE PROPOSAL TO REDEEM THE FACILITY, IT BEING CONSIDERED UNWISE TO RISK LOSING TITLE TO THE FACILITY, WORTH MANY MILLIONS OF DOLLARS, AS AGAINST THE POSSIBILITY OF LOSING THE AMOUNT NECESSARY TO REDEEM THE PROPERTY.

HAVING REGARD TO THE PRINCIPLES SET FORTH IN UNITED STATES V. SHOFNER IRON AND STEEL WORKS, 168 F.2D 286, THE SEDGWICK COUNTY CASE REFERRED TO ABOVE AND THOSE ENUNCIATED IN UNITED STATES V. ALABAMA, 313 U.S. 274, 282, IT APPEARS THAT THE TAXES WERE INVALIDLY ASSESSED AND THE TAX SALE IS INVALID. YET, WE AGREE WITH THE VIEW EXPRESSED IN YOUR DEPARTMENT'S LETTER, CONCURRED IN BY THE DEPARTMENT OF JUSTICE, THAT IT WOULD BE UNWISE TO RISK THE LOSS OF THE FACILITY BY REFRAINING FROM PAYING THE AMOUNT NECESSARY TO REDEEM THE PROPERTY. ACCORDINGLY, THE FINANCE AND ACCOUNTS OFFICER, DETROIT ORDNANCE DISTRICT, DETROIT, MICHIGAN, IS HEREBY AUTHORIZED TO PAY THE SUM OF $102,096.43 FROM ANY FUNDS IN HIS POSSESSION TO THE PAYEE OR PAYEES DETERMINED TO BE PROPER BASED UPON THE NEGOTIATIONS WITH THE STATE OFFICIALS, SUCH AMOUNT TO BE ADJUSTED AS A CHARGE AGAINST THE ACCOUNT "20 BY 1850 PAYMENT OF CERTIFIED CLAIMS" (2132020 MAINTENANCE AND OPERATIONS ARMY, 1953). A COPY OF THIS DECISION MAY BE ATTACHED TO THE VOUCHER IN SUPPORT OF THE PAYMENT. ALSO, IF DETERMINED NECESSARY AS THE RESULT OF THE NEGOTIATIONS, SUCH AMOUNT MAY BE PAID OUTRIGHT TO THE STATE TAXING OFFICIALS, ALTHOUGH WE AGREE THAT PAYMENT OF THE AMOUNT INTO ESCROW OR THE PURCHASE OF UNITED STATES BONDS TO BE SO DEPOSITED WOULD BETTER PROTECT THE INTERESTS OF THE UNITED STATES AND, IF SATISFACTORY ARRANGEMENTS CAN BE EFFECTED, SUCH DISPOSITION OF THE AMOUNT IS PREFERRED AND IS AUTHORIZED.

THE DEPARTMENT OF JUSTICE HAS BEEN FURNISHED A COPY OF THIS LETTER FOR ITS INFORMATION.