Offutt Housing Company v. County of Sarpy – Oral Argument – April 30, 1956 (Part 1)

Media for Offutt Housing Company v. County of Sarpy

Audio Transcription for Oral Argument – April 26, 1956 in Offutt Housing Company v. County of Sarpy
Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Earl Warren:

Number 404, Offutt Housing Company, a Corporation, versus County of Sarpy.

Mr. Adams.

Dixon G. Adams:

May it please the Court.

It is the position of the respondents in this case, first, that Congress has consented to this tax.

And that in so doing, Congress has waived any immunity that might result from exclusive jurisdiction.

Secondly, this tax was not imposed upon any property or interest in property of the United States, and only the property of the Offutt Housing Company, the petitioner has been taxed.

Now we rely upon a flat consent by Congress to this taxation in the — the legislation under which this project was constructed.

The list and I referred to page 132 of the record.

Hugo L. Black:

Do you have any particular language of the consent on which you rely and printed in your brief the particular —

Dixon G. Adams:

It is printed at page 24 in our brief, Mr. Justice, a particular language in Section 6 of the Act of August 5th, 1947, the second paragraph on page 24.

William O. Douglas:

Section 6?

Dixon G. Adams:

Section 6.

Now the lease recites as follows.

Witnesses, that under the authority of the Act of August 5th, 1947, 10 U.S.C. 1270 and the Act of August 8, 1949 Public Law 211 81st Congress, and goes on to lease 63 acres of bare land to the petitioner here for a consideration of $100 per year.

Now the Wherry Act was not a leasing act.

It was an amendment to the National Housing Act and it extended the provisions of the National Housing Act to this type of rental housing, but it gave no new authority to lease.

The Congress looked to its prior authority which was contained in the Act of August 5th, 1947, which is set out on this first section which is set out on page 22 of the appendix in our brief.

This was a general Military Leasing Act.

Now the leases made under the authority of the 1947 Act were generally limited to a term of five years, and they were also cancelable in the event of a national emergency.

And this, of course, would not work under the Wherry Act because it made profits impelled profits and made financing very difficult.

So these provisions, these limitations were removed in the Wherry Act in Section 805 of the Wherry Act.

But the Wherry Act itself in Section 805 which is setout at page 26 in the appendix to our brief recites, ‘Whenever the Secretary of the Army, Navy, or Air Force determines that it is desirable to lease property within the meaning of the Act of August 5th, 1947 to effectuate the purposes of this title, the Secretary concerned is authorized to lease such property under the authority of said Act.

And that goes on to say that the two limitations as to duration and as to cancellation in the event of a national emergency should not apply.

The rest of the Act of August 5th, 1947 was not disturbed.

And it is our contention that Section 6 was incorporated and that the consent of taxation applies to this property.

Now this consent was the basis for decision in all of the cases decided by appellate courts both state and federal, which have passed upon the consent proposition in Wherry Act cases.

The first such case was Meade Heights, Incorporated, versus State Tax Commission of Maryland decided by the Maryland Court of Appeals.

There as here, the United States had exclusive jurisdiction over the land.

The distinction in the Maryland case, Meade Heights case, was that the least involved purported or vested title in the lessee title to the improvements.

Here, the lease purports to vest title to the improvements of the United States.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Harold Burton:

Do you regard the tax here to be upon the lease to hold interest on the lessee’s interest or upon the profit.

Dixon G. Adams:

We have taxed it as personal property.

We taxed —

Harold Burton:

And you’re not taxing a lease hold interest as such.

Dixon G. Adams:

We don’t contend that we’ve taxed the lease hold interest.

You claim the United States doesn’t own a property.

Dixon G. Adams:

We claim that the petitioner owns a property and we will demonstrate that.

Suppose that — suppose we will decide that a property was owned by the Government, would you have a different conclusion there?

Dixon G. Adams:

If this Court decided that the property was owned by the Government, I would say that the most we could tax would be the leasehold interest.

Pardon me.

Dixon G. Adams:

The most that we could tax would be the leasehold interest.

But in the Meade Heights case, the Court —

Well have you — have you taxed the leasehold interest here?

Dixon G. Adams:

We have not taxed — we’ve taxed it as personal property.

You’ve taxed only the improvements.

Dixon G. Adams:

The buildings —

— the improvements —

Dixon G. Adams:

— and the other personal property which is admittedly the appliances.

So those buildings are — are the property of the Government who have no claim.

Dixon G. Adams:

That’s right.

If they belong to the Government, but they don’t belong to the Government unless four meters to control on the substance.

I didn’t understand your last sentence.

Dixon G. Adams:

We — we submit that these buildings do not belong to the Government, they belong to the petitioner.

Now, the Court in the Meade Heights case —

Felix Frankfurter:

Yes, may I ask you —

Dixon G. Adams:

Yes, sir.

Felix Frankfurter:

I found a little (Inaudible) in mere statement —

Dixon G. Adams:

Surely.

Felix Frankfurter:

— that the petitioner carried to my view, that if the petitioner is Nebraska could not pass the leasehold, meeting the value of the lease as personal property which I take it Nebraska (Inaudible) leasehold personal property.

Dixon G. Adams:

Well as I read Your Honor, the Nebraska court’s opinion, a leasehold in Nebraska is taxable as personal property.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Felix Frankfurter:

That’s the way I read it.

Dixon G. Adams:

That is the way —

Felix Frankfurter:

Tell us what you say — that you reject that?

Dixon G. Adams:

No.

I — I don’t reject that except that I say we taxed them as personal property.

We don’t want to make any playing that we tax the leaseholder, we tax them as improvements upon leased lands.

But we think they belong to the petitioners so we don’t think it makes any difference.

Felix Frankfurter:

They, what is they?

Dixon G. Adams:

The buildings.

Felix Frankfurter:

The lease — what?

Dixon G. Adams:

The buildings.

Felix Frankfurter:

But suppose — I would like to have your view on this.

Suppose without any of this — without bothering by form and substance, suppose I were to conclude that — that Offutt is a lessee in the ordinary conventional sense terms, is it your position if Nebraska could or couldn’t show the Wherry Act taxed the words of that — that Act —

Dixon G. Adams:

I think —

Felix Frankfurter:

— leads to — to an asset of the (Inaudible)

Dixon G. Adams:

I’d like to answer it this way.If you should conclude that what the petitioner has is a leasehold interest, I still think we can tax it.

Because Nebraska — the Nebraska opinion at page 206 are being said that in Nebraska, a leasehold is classified as personal property.

Felix Frankfurter:

Well that certainly — the power to class — the choice in classifying whether it’s to be treated as realty or personal is for the State in which the property is and therefore it cannot turn on whether Nebraska regardless if the person would be real — perhaps it’s really in with this — this interest whatever you label which Offutt Company has in this effort.

It’s something that Nebraska can tax in view of its relation to governmental immunities.

Dixon G. Adams:

That’s right and whether or not any interest of the Government is actually being taxed by — I mean that is why —

Felix Frankfurter:

Well, then why — why are you — why does it seem important to you for you to differentiate your ground of support from what one reads or at least (Inaudible) as I read the opinion of Nebraska Supreme Court.

Dixon G. Adams:

I’m not trying to make any distinction.

I merely go into that because the title here, the paper title to these things is — is in the United States under the lease.

So I do think it’s important that the Court recognized it in substance, these buildings are the property.

Felix Frankfurter:

Well, of course if somebody who has an interest to a property for a thousand years for practical purposes has dominion over.

Dixon G. Adams:

That’s right.

Felix Frankfurter:

Is that all you mean?

Or you mean something more esoteric to that?

Dixon G. Adams:

No, I think that’s what I mean.

Felix Frankfurter:

All right.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Felix Frankfurter:

I can understand that too.

Well I’ve always understood the billing build upon the land is part of the land.

Is there something in the contract or circumstance of this case that severed these buildings on the land and make some chapters or make some — some personal property?

Dixon G. Adams:

There — there’s this.

That the — the evidence, the record will show that these buildings will never outlast the terms of the lease, that they’re (Voice Overlap) —

Does that make them personal property?

Dixon G. Adams:

Is it what?

Does that make them personal property?

Dixon G. Adams:

We believe it makes, it makes some personal property, yes.

I was to build upon the 99-year leases and outlive the lease but I always understood it’s part of the land.

Dixon G. Adams:

We — we believe that what our Court was saying is that here, the entire beneficial interest to this property is in the lessee and that you can tax it as personal property.

Felix Frankfurter:

Mr. Adams, is this interest is that the neutral enough words that this monetary value that belonged to the Offutt in relation to this building.

Is that (Inaudible) with the consent of the United States?

Dixon G. Adams:

Yes, under the lease.

Felix Frankfurter:

Under the lease.

So that he got something of value.

Dixon G. Adams:

Oh yes, he has.

He —

Felix Frankfurter:

And therefore (Voice Overlap) is whatever label Nebraska depends on, whatever the common law you maybe as to what a leasehold is.

Whether that something in which you can get money tomorrow on the air force or whatever (Inaudible) whether that’s taxable thing.

Does it make any difference what (Inaudible) you based on it?

Dixon G. Adams:

We don’t think so.

Felix Frankfurter:

Because I dont understand —

Dixon G. Adams:

We think they have something (Voice Overlap) of value as demonstrated by the fact.

The mortgage that they have for almost $5 million.

Now the Meade Heights case found that there was consent by Congress to this taxation.

And just in passing, I’d like to say that counsel said that he was happy to see that the Solicitor General is still on his side, but I note from the opinion of the Meade Heights case that the Solicitor General who I believe is the same gentlemen was at that time the Chief Justice of the Maryland Court of Appeals and he found that there was consent.

He now urges the other way.

The next —

Felix Frankfurter:

This is official now.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Dixon G. Adams:

The next Wherry Act case to which I would like to refer is the opinion of the Third Circuit Court of Appeals in Fort Dix Apartments Corporation against Borough of Wrightstown.

Again, land where the United States had exclusive jurisdiction and that case involved both types of leases, one, which vested the title to the improvements in the lessee and another which purported to vest title in United States.

And the New Jersey Court in a decision which one judge said and held that they were subject to taxation by New Jersey.

Conley Housing Corporation against Coleman, decided by the Supreme Court of Georgia, held to the same effect that there was a consent here, and there the titled was vested in the lessee.

Dayton Development Fort Hamilton Corporation against Boylan, the New York Supreme Court case held in the same effect.

There is an error in the citation of that in the brief of amicus curiae, the correct citation is 133 New York Supp.2d, page 831 rather than 820.

Felix Frankfurter:

(Inaudible)

Dixon G. Adams:

The brief in the amicus for Grant County or Washington.

The change should be in the page number, it should be 831.

Felix Frankfurter:

What page is — what page is that?

(Inaudible) — all right what is the case —

Dixon G. Adams:

The correct citation is Dayton Development Fort Hamilton Corporation.

Hugo L. Black:

It should be 831.

Dixon G. Adams:

It should be 831.

Felix Frankfurter:

831?

Dixon G. Adams:

Page 8 (Voice Overlap).

Felix Frankfurter:

That’s all right.

(Inaudible)

Felix Frankfurter:

Thank you very much.

Dixon G. Adams:

Now those are the — and of course this — this case including this case in the Supreme Court of Nebraska’s opinion and the only cases which have passed upon this question of consent and they only have found that the Congress consented to this taxation.

There is a Virginia decision cited in the reply brief of the petitioner but there the Court didn’t pass upon the question of consent.

They merely said that this is a leasehold interest and Virginia doesn’t have a statute which will reach the interest.

So they didn’t pass on the question of consent.

Now the petitioner argues that Section 6 of the 1947 Act is not applicable to leases made under the 1949 Act, the Wherry Act, and that the very reference in the Wherry Act to the 1947 Act isn’t sufficient.

But Congress must have reviewed the 1947 Act when they removed these two limitations as to length of lease and the cancellation in the event of the national emergency and they could have said that Section 6 is not to apply but they didn’t — so we submit that if it did.

In another way, there is an indication here that Section 6 of the 1947 Act applies to leases made under the Wherry Act.

The Court will note that Section 6 contains two sentences.

The first is the lessee’s interest made or created pursuant to the provisions of this Act shall be made subject to state or local taxation, that’s the first sentence.

The second sentence says any lease of property authorized under the provisions of this Act shall contain a provision that if and to the extent that such property is made taxable by state and local governments by Act of Congress.

In such event, terms of such lease shall be renegotiated.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Dixon G. Adams:

Those two sentences are Section 6 of the 1947 Act.

Then looking at the lease involved at page 137 of the record, paragraph 8 of the lease, which deals with taxes, the Court will note that there are also two sentences in that paragraph for the lease.

The first one provides that the lessee shall pay to the proper authority when as the same become due and payable, all taxes, assessments and similar charges which at anytime during the term of this lease maybe taxed, assessed or imposed upon the Government or upon the lessee with respect to or upon the lease premises.

The second sentence provides in the event any taxes, assessments or similar charges are imposed with the consent of the Congress of the United States upon the property owned by the Government and included in this lease.

As opposed to the leasehold interest of the lessee, therein, this lease shall be renegotiated.

So we submit that the Government itself and the Government prepared this lease recognized that Section 6 would apply to leases under the Wherry Act.

And so they complied with the statutory mandate and included that provision in their lease and they cannot now be heard to say that Section 6 doesn’t apply to Wherry Act leases.

Felix Frankfurter:

What are the petitions then to that application of constructive (Inaudible)?

Dixon G. Adams:

Our construction of that paragraph —

Felix Frankfurter:

Not yours but the petitioner (Inaudible)

Dixon G. Adams:

Well I — I think they mean that — that there’s — if there’s anything here in this — I don’t think they’ve answered this question — my contention there.

It never answered that.

Felix Frankfurter:

They — they renegotiated to cover both the taxation of what (Inaudible) —

Dixon G. Adams:

I — I think their position to be that they say well Congress has never consented to the taxation of anything but if it should then this lease shall be renegotiated.

But do we submit that that can’t be, what would be — there’s $100 a year rental to the Government, what would be the sense of renegotiating that?

The lease — under this provision, the lease they could renegotiate would be half of it or $50 a year.

So — so it doesn’t make sense.

Now our construction of Section 6 is this.

That the first sentence refers to the property owned by the lessee and here that’s the buildings and the other personal property.

And the second sentence in Section 6 refers to the land, and, of course, we haven’t taxed the land, but the land clearly belongs to the Government.

Now should the Government consent to the taxation of the land, this lease would be renegotiated.

As to the improvements, there already have been consents.

The Maryland court said, as we read this provision it’s called for renegotiation only in the event that Congress should consent to taxation of the Government’s interest in addition to that of the lessee, which is recognized as fully taxable as of the date of execution.

Felix Frankfurter:

But that is going to happen to the Maryland case that — I don’t mean to imply but the failure of the Government to seek review and to determine the legal question but I’m curious to know what did happen to that decision.

Dixon G. Adams:

The Government intervened.

Felix Frankfurter:

What happened after the Court of Appeals of Maryland?

Dixon G. Adams:

It was not appealed.

Felix Frankfurter:

What’s the date of that case?

Dixon G. Adams:

March 13th, 1953.

I understand from the petitioner’s brief that they were seeking certiorari in the Fort Dix case but that’s where my information functions.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Felix Frankfurter:

The Maryland case had no (Inaudible)

Dixon G. Adams:

No.

Felix Frankfurter:

(Inaudible)

Dixon G. Adams:

That’s right.

How — how many years (Inaudible)

Dixon G. Adams:

I — I think the lease involved was the same with the exception of — in the Maryland lease, the lease purported or vested title to the improvements in the lessee.

And here they change the form of lease to —

That’s Section 11 of this case.

Dixon G. Adams:

That’s right.

And that’s the difference between the two cases.

Dixon G. Adams:

That’s right.

I suppose you’re going to comment to Section 11 later.

Dixon G. Adams:

Yes, sir.

We plan to comment on that quite extensively.

(Inaudible)

Dixon G. Adams:

Yes.

Now, so that’s where we — we rely for express consent.

But we — we say that in two ways, Congress has consented to this tax by implication.

First of all, there is Section 807 of the Wherry Act which is setout on page 26 of the appendix to our brief.

And which provides as follows.

Nothing in this title shall be construed to exempt any real property acquired and held by the Commissioner under this title from taxation by any state or political subdivision thereof to the same extent according to its value as other real property is taxed.

Now we don’t say that that is a direct consent but we do say that the inclusion of this section by Congress would appear to evidence and intent or an indication that Congress intended that this property should be treated the same as any other property insured by on which the Federal Housing Commission insured the mortgage, it shouldn’t be put on any other basis.

That’s the only construction of it that we can make.

This was the —

Hugo L. Black:

What do you say you think that section means other than (Inaudible)

Dixon G. Adams:

We — we think it was — it was an indication that Congress intended that this property should be treated the same as any other property on which there was an FHA insured mortgage.

Now the District Court in New Jersey decided the case for the demurral there the municipality under this section.

And the District Court there said that, certainly, a private corporation like the petitioner shouldn’t be preferred to the Commissioner.

But we don’t say that this is a direct consent of taxation, but we say it’s an implied consent to taxation.

Now, in the third way, we say there’s consent by implication.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Dixon G. Adams:

This is a lease for 75 years to a private corporation.

And it was authorized by Congress and Congress in Section 805 of the Wherry Act set no term, no length of time on this lease, presumably this could be a lease for 150 or 200 years.

That the same section also gave the secretaries power to sell the property.

And we believe that such a statute as that impliedly waves exclusive jurisdiction and impliedly consents to this tax.

And as authority for that, we’ve cited the case of S.R.A. versus Minnesota decided by this Court which involved property over which the United States had exclusive jurisdiction.

It was sold as authorized by Congress under an executory contract of sale.

A legal title remaining in the United States.

And the S.R.A. Incorporated there contended that there had been no waiver of exclusive jurisdiction and you couldn’t tax anything over which the United States had exclusive jurisdiction, but the Court there announced what it called the rule of necessity and said that certainly the unrestricted transfer of this property waived any — any such claim that the United States still had exclusive jurisdiction.

And we believe that a — a lease of this type for 75 years to a private profit seeking corporation brings at somewhere close to the rule of this Court as announced in S.R.A. against Minnesota.

The S.R.A. case (Inaudible)

Dixon G. Adams:

It was an — there had been no date.

The brief would say —

Dixon G. Adams:

It was an executory contract sale — initial sale.

Now the petitioner relies quite strongly upon Surplus Trading versus Cook.

But we think it’s distinguishable, there was no lease involved and there was absolutely no question of consent by Congress.

Now as to who owns the buildings, the petitioner here confuses title the abstract concept title with beneficial ownership and here the entire beneficial ownership is in the petitioner.

Clause 11 of the lease purports to vest title in the United States, that’s the clause that — that’s on page 138.

The petitioner suggests in its brief that — that the army used the old form and the Air Force didn’t but the Moses Lake case indicates that the Air Force did the same thing when they first started making leases under the Wherry Act, they vested title to the improvements in the lessee.

And when it appeared that these units were going to be assessed, they changed the form of the lease and read — in Moses Lake they actually presume to modify the lease retroactively to vest title to the improvements of the Government.

But that’s the form, that’s the paper.

The substance is this.

And that, first of all, it was never the intention of Congress that title to this building should be in the United States and any reading of the debates in Congress for instance our brief at page 16 will indicate that Congress understood that title to these things as to be on the lessees.

Mr. Manoli said it’s a strictly private enterprise building which probably construction is moved out and the whole matter is turned over to private enterprise.

And Mr. Johnson said, I’m reading down toward the bottom.

In other words we propose to have contractors build houses on military installations and pay the rental allowance provided by law for service personnel in form of rent to the contractor so that in 30 years, the house will be paid out.

When the installments have been paid out to the contractors, the house and land become the property of the Government not before but after and other indications in the debates in the committee are the same.

Senator Capehart said, there possibly should be a provision that if the base abandoned and the houses are there without military tenants, the owners would be permitted to rent them to civilians or sell them.

That’s at page 41 of the Senate hearings.

Now, the building is here have a usual life of less than the term of the lease.

And I would like to read the testimony on that subject at page 108 of the record.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Dixon G. Adams:

This is the president of the petitioner corporation testifying.

Mr. Wilson question – “How long have you been engaged in the building and rental of houses in that business?”

Answer – “42 years.”

Hugo L. Black:

What — what page is that?

Dixon G. Adams:

108, Your Honor.

About the —

Hugo L. Black:

Yes, I see it.

Dixon G. Adams:

Question – “Now from your experience then, with the construction of houses, and the building and renting of houses, what would be the expectancy of these units that were constructed at off the field.”

Answer – “We are thinking rather go along with the F.H.A. and the mortgage folks, we put a 35-year life on these buildings.”

And on page 113, the petitioner’s counsel tried to qualify that, and he said.

Question – “You testified that the life of these buildings were estimated to be 35 years did you not?”

Answer – “I did.”

Based upon your experience these buildings with proper maintenance when repaired this type of construction for these buildings be maintained and referred to have a longevity in excess of the term of the lease.

Answer – “Yes they could.”

Question – “Would you deem it profitable throughout the housing company to maintain them and refer them so that their longevity will exceed the term of the lease?”

Answer – “Do you mean the term of the 75-year lease?”

Question – “Yes sir.”

Answer – “I have always considered that any building that was 75 years old was not worth maintaining any prior than that.

So that’s all the testimony that ‘s in this record on useful life of these buildings, and we submit that at the end of this lease, there won’t be anything left for the Government to inherit.”

Now,

Hugo L. Black:

When the Court signed (Inaudible)?

Dixon G. Adams:

The Nebraska Supreme Court?

Hugo L. Black:

Yes.

Dixon G. Adams:

But if —

Hugo L. Black:

What was that — was there any finding to support the conclusion we read on that.

Dixon G. Adams:

There’s a finding in the Nebraska Supreme Court’s opinion, yes sir.

What do you mean by the — it was a lower court finding?

Dixon G. Adams:

I don’t believe there’s a lower court finding, is there?

I’ll have that checked to see if we could (Inaudible).

Now the petitioner has here a 75-year lease for which it pays $100 a year.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Dixon G. Adams:

It has the right to possession for 75 years and the right to all profits out of this project for 75 years.

The petitioner mortgage of its interest which it now claimed a worth little or nothing to manufacturer’s trust company of New York for almost $5 million.

And in this mortgage which is in the record at page 170, it mortgaged three things.

It mortgages leasehold interest in the land, it mortgaged of the buildings and improvements, and it mortgaged its other personal property on the lease premises.

It also worn to its title to these things in the mortgage, that’s on record 171.

Harold Burton:

Record what?

Dixon G. Adams:

171.

Toward the bottom of the page it says the intention being to convey hereby an absolute title and be simple including all rights homestead and other rights and interest as aforesaid.

Now, at another point in the mortgage, record 176, it’s provided that all awards of damages in connection with any condemnation for public use of or injury to any of the said property are hereby signed and shall be paid to the mortgagee.

So if the property is condemned, the manufacturers trust company gets the award.

Hugo L. Black:

What does the Government get — what beneficial interest does it retain?

Dixon G. Adams:

We say it retained none.

The petitioner argues that its these restrictions on the lease in the form of right to designate subtenants with certain exceptions.

The right to control rentals, things of that nature.

Hugo L. Black:

That’s a kind of a restrictive company, isn’t it?

Dixon G. Adams:

It’s — it’s —

Hugo L. Black:

Like a restrictive company underneath?

Dixon G. Adams:

It’s a restriction of a type but we don’t think it detracts it in the lease from the value of the petitioner’s interest here.

As a matter of fact, it might make it more valuable because the Government is practically guaranteeing 100% occupancy of these buildings.

Now if the Government fails to designate a tenant within 30 days under paragraph 3 of this lease, then the petitioner can rent to anybody, any civilian.

There’s no military connection.

Hugo L. Black:

What are the terms and conditions on which the Government can get property there?

Dixon G. Adams:

We don’t find any that they can get it back for 75 years.

Hugo L. Black:

None at all.

Dixon G. Adams:

They can condemn it.

Hugo L. Black:

Condemn it.

Dixon G. Adams:

Yes.

Hugo L. Black:

But they have to pay for it.

Dixon G. Adams:

But they’d have to pay for it.

And the prior — the condemnation award would be split between the mortgagee and the lessee here based upon their respect.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Hugo L. Black:

Those are the full value of the property.

Dixon G. Adams:

Full value as we read the — possibly not the land but certainly the buildings.

Hugo L. Black:

Is that the only way the Government can get it back?

Dixon G. Adams:

As we read the lease.

Earl Warren:

In the event this is rather — the — some of these buildings are rented to civilians.

It must — do they get the benefits of the low rent too?

Dixon G. Adams:

I believe that the rent would be the same.

There’s a provision in the lease that after the F.H.A. mortgage is paid off from then on the rents are to be agreed upon between the Government and the housing company, but in any event they can’t be less than they were before.

But, I think that the civilian tenants would probably receive the same rentals.

I don’t know if there’s any indication one way or another.

Hugo L. Black:

What are the terms under which civilians can rent the property.

Dixon G. Adams:

It’s in paragraph 3 of the lease at page 134.

Generally, if the commanding officer fails to designate military or civilian personnel of the Army, Navy, Marine Corps or Air Force to whom the unit or units shall be leased within 30 days after receipt of written notice from the lessee that such unit or units are available for lease then they can go ahead — they can go ahead and rent it to civilians.

Earl Warren:

What would happen if they close camp as they do in so many parts of the — of the country, would it be open to unrestricted rentals then on the part of the civilians?

Dixon G. Adams:

Yes.

It could be rented to someone with no military connection.

Earl Warren:

Yes and — would there — would there be fixed rentals then or would they be freed from those — those low rentals.

Dixon G. Adams:

I’m not sure that the record reflects that one way or another.

There’s no provision in the lease that requires.

I don’t think that the rentals would be the same.

There’s a guarantee of the mortgage does it not?

Dixon G. Adams:

The F.H.A., Federal Housing Administration insured the mortgage but of course the petitioner pays the same premium for that, I would pay mortgage on my house.

Hugo L. Black:

Could you do that in accordance with this general practice of insurance mortgages on property?

Dixon G. Adams:

Well the specific purpose of the Wherry Act, Your Honor, was to extend these mortgage insurance provisions to this type of rental houses, but the premium —

Hugo L. Black:

Extend the general provision —

Dixon G. Adams:

Of the National Housing Act to military rental houses.

Prior to this time apparently, it had been difficult or impossible for F.H.A. to insure this type of loan because there was too much risk involved.

The Congress —

Wasn’t it — wasn’t it more than an extend?

What was the language of the Act in directing or I what is the direction?

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Dixon G. Adams:

Well the Wherry Act itself — it was an authorization to extend the —

Well there’s — there’s a difference between an authorization and a correction.

It was the — it was merely to give the Federal Housing Administration the power to insure?

Dixon G. Adams:

Yes.

Or was it a direction that they should ensure when asked to do so by the (Inaudible)

Dixon G. Adams:

It extend — it gave them the authority to it.

Nothing but authority.

Dixon G. Adams:

Well, on a certification by the Secretary of the Department concerned that there was no — and that this was a permanent base and that there was no indication of that —

No indication.

Dixon G. Adams:

— activities would be curtailed, I guess.

And — and they had that certification of course.

Dixon G. Adams:

They did.

Under those circumstances, they were compelled to insure?

Dixon G. Adams:

I don’t want to say one way or another whether they were compelled to but at least they did.

They did insure the mortgage.

Now (Inaudible) whether or not the Government has a responsibility over and above the parties of the land or whether they weren’t making sure that the money that was put into it would in turn against the issue.

Dixon G. Adams:

I don’t think that the Federal Housing Administration acts in any different capacity here than it does on any — any other loan.

Another indication of ownership here is the fact that the hazard insurance, the proceeds of the hazard of insurance are payable to the lessee and the security holder.

That’s also provided by the lease and the mortgage.

In other words if the building is burned down, the lessee and the security holder can split up the insurance money and the Government gets nothing.

So that we think that’s another indication that the petitioner actually owns the buildings and improvements.

The cases we have examined have held that their title in the United States does not prevent taxation of the whole value of property to the equitable owner.

The petitioner relies upon the United States against Allegheny County but we distinguish that case which is commonly called the master case.

And that here we’re not trying to tax any government property.

There, Pennsylvania was trying to tax the property of the Government by calling it the property of master, at least that’s what the Court said.

But here, the Government owns no property and these things that they rely on as government interest in this thing are really not government interest at all.

The Court in the master case said that we’re a private interest in government property are so preponderant that all the — the Government has the naked title then the whole value is taxable to the equitable owner.

And the conditional sales cases like S.R.A. against Minnesota and New Brunswick against United States were to the same effect, that the bare legal title in the Government doesn’t prevent the taxation of the property to its equitable owner.

Hugo L. Black:

Is there any difference in the way the Government handles this and the assistance it rendered under the Housing Act outside the fact that it is here, put it in the form of a lease of $50 to $100 a year.

Dixon G. Adams:

I don’t quite understand your question.

Audio Transcription for Oral Argument – April 30, 1956 (Part 2) in Offutt Housing Company v. County of Sarpy

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Hugo L. Black:

The General Housing Act provides a system to ensure mortgage and so forth.

What differences in the way the Government handled this one, this place, the way it handled the other outside just one on the lease.

Dixon G. Adams:

I don’t think there’s any difference outside the lease.

Hugo L. Black:

Does the Government under its General Housing Act provides for the kind of rental that must be accorded people who rent the houses?

Does it reserve that right?

Dixon G. Adams:

No.

No, there is a distinction.

They don’t reserve the right normally under an F.H.A. mortgage to determine the rental.

Hugo L. Black:

So they formally did, have they stopped there?

Dixon G. Adams:

Well, I believe so, but they do — they do prescribe the rentals here.

But we — we think this, that these rentals while, of course, Congress hope to hold them down are necessarily based upon what the amortize cost of the project is.

In other words, the rentals had to be enough to amortize the — the loan and — and allow a reasonable profit to this lessee or he never would enter into the transaction.

So that’s — that’s what the rentals are based upon.

In concluding my part of this argument and I will turn part of it over to Mr. Entenman, my colleague here.

I just like to say that the — the courts have repeatedly held that the states could reserve the rights for instance to execute civil and criminal process upon these — these reservations.

To the end that the reservation wouldn’t become a refuge or sanctuary for completely private personal property that had no other basis for immunity other than its mere location upon the land.

And we believe that this is specially true, this place shouldn’t be permitted to become a sanctuary for private property and this is specially true where Congress has spoken as clearly and it’s expressly as it has here that this property should in any event be subject to taxation.

Earl Warren:

We’ll recess now.