El Toro Development Co. v. County of Orange

TRAYNOR, J.

— El Toro Development Co., a California corporation, hereinafter called El Toro, brought an action against the county of Orange (Rev. & Tax. Code, § 5138) to recover taxes paid under protest that were levied against personal property and possessory interest in tax-exempt land

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and improvements. Plaintiff appeals from a judgment that it recover nothing.

El Toro had a 571-unit housing project constructed at El Toro Marine Air Base in Orange County on land owned by the United States government that was leased to El Toro for 75 years at an annual rental of $100. The project was built pursuant to the provisions of title VIII of the National Housing Act (12 U.S.C.A. §§ 1748-1748d) and section 522a of title 34 of the United States Code. It was financed to the extent of 90 per cent of its cost by a loan from the Bank of America and to the extent of 10 per cent thereof by a loan from the contractors who built it, and was subleased to military and civilian personnel designated as tenants by the commanding officer at rents regulated by the Federal Housing Administration and the Marine Corps. The loan by the Bank of America is secured by a mortgage on the leasehold insured by the Federal Housing Administration and by a chattel mortgage on all ranges, refrigerators, and garbage disposal units in the project. The lease between El Toro and the government provides: “That the buildings and other improvements erected by the Lessee, constituting the aforesaid housing project, shall be and become, as completed, real estate and part of the leased premises, and property of the United States, leased to the Lessee to effectuate the purposes of Title VIII of the National Housing Act. . . . That upon the termination of the FHA period (as hereinafter defined),

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all ranges, refrigerators, screens, shades, and other items required to be furnished in accordance with the detailed plans and specifications submitted by the Department, and approved by the Commissioner, shall remain on the leased premises and become the property of the Government without compensation ; provided, however, that where the Lessee replaces any such items, this Condition . . . shall apply only to the replacement.”

Congress provided that the interest of the lessee is taxable (34 U.S.C.A. § 522e), and the lease provides that the lessee must pay all “taxes, assessments and similar charges which, at any time during the term of the lease, may be taxed, assessed or imposed upon the Government or upon the Lessee