Rockwell Intern. Corp. v. Clay

Rockwell Intern. Corp. v. Clay
1989 OK 108
780 P.2d 700
60 OBJ 1723
Case Number: 67822
Decided: 07/11/1989
Supreme Court of Oklahoma

Various proceedings were brought by lessee-tenants of city-owned airport property challenging the legality of ad valorem tax assessment of their leasehold interest. The district court consolidated the cases and gave summary judgment to the lessees, declaring that a private leasehold interest in tax-exempt property qualifies for an exemption and is hence not taxable for ad valorem purposes. The trial court further ruled that a lessee-hotel operator's leasehold interest was also exempt from taxation by the provisions of 3 O.S. 1981 § 65.17.

AFFIRMED.

David L. Moss, Dist. Atty., Tulsa County, Susan K. Morgan, Doris Fransein, Asst. Dist. Atty., Tulsa, for defendants-appellants.
J. Anthony Miller, Studenny and Associates, Tulsa, for plaintiffs-appellees.

Graydon Dean Luthey, Jr., Stephen W. Ray, Messrs. Jones, Givens, Gotcher, Doyle and Bogan, Tulsa, for plaintiff-appellee Terminal Drive Corp.
J. Douglas Mann, Jerry A. Richardson, Messrs. Rosenstein, Fist and Ringold, Tulsa, for intervenors-appellants School Districts.

OPALA, Vice Chief Justice.

¶1 The Tulsa County Assessor and Equalization Board appeal from the trial court's ruling that a private leasehold interest in tax-exempt property may not be assessed for ad valorem levy. Two issues are presented for review: (1) May a private leasehold estate in tax-exempt city-owned property be taxed ad valorem to the lessee? and (2) May appellee's [Terminal Drive's] leasehold interest be exempt from ad valorem tax as property acquired by a municipality for airport purposes pursuant to the provisions of 3 O.S. 1981 § 65.17? 1We answer the first question in the negative and the second in the affirmative.

¶2 THE ANATOMY OF LITIGATION

¶3 The City of Tulsa [City] holds the fee simple title to all the leased real property in this litigation (located at two Tulsa-area airports). At the Tulsa International Airport the City leases land to the Tulsa Airports Improvement Trust, an entity created pursuant to the provisions of 60 O.S. 1981 § 176. Rockwell International Corp., Tulsair Beechcraft, Inc., Butler Aviation, Terminal Drive Corp.2, Cities Service and Reading & Bates, sublease that land from the Trust. The other leaseholds in contest here are located at the Richard Lloyd Jones Jr. Airport. The Tulsa Airport Authority, a charter-authorized agency of the City, operates and maintains the "Jones" airport. The City has leased portions of the Jones airport property directly to Tulsa Piper, Inc. and Kenneth Warren.3

¶4 The private leasehold interests were assessed in 1984 for ad valorem tax. The lessee-tenants, who initially protested unsuccessfully before the Tulsa County Board of Equalization, later appealed to the district court in a number of actions which were consolidated for trial. Two local school districts were allowed to join as defendants; twenty-six lessee-tenants of the "Jones" airport property intervened "as plaintiffs" pursuant to leave of court.

¶5 The district court's summary judgment went to the lessees. It declared that for ad valorem purposes a private party's leasehold estate is not a separate interest in land and that property owned by a municipality is exempt from that levy. Terminal Drive's leasehold interest also was declared exempt as property acquired by a municipality for airport purposes pursuant to the provisions of 3 O.S. 1981 § 65.17.

¶6 The Tulsa County Assessor and members of the Tulsa Board of Equalization [collectively called "County"] bring this appeal from the trial court's judgment.

I

¶7 LEASEHOLD INTERESTS MAY NOT BE TAXED AD VALOREM SEPARATELY FROM THE FEE ESTATE

¶8 The County argues a private leasehold from a tax-exempt entityis a separate legal estate that must be taxed to the lessee. Wereject this notion as contrary to law. Applying the authority and rationale of our recent pronouncement in Oklahoma Industries Authority et al. v. Joe B. Barnes, County Treasurer of Oklahoma County et al.,

¶9 Under the taxing scheme presently in force the leasehold interests in the city-owned airport properties are clearly exempt from ad valorem exaction

II

¶10 TERMINAL DRIVE'S LEASEHOLD INTEREST IN PROPERTY ACQUIRED BY A MUNICIPALITY FOR AIRPORT PURPOSES IS EXEMPT FROM AD VALOREM TAX BY THE PROVISIONS OF 3 O.S. 1981 § 65.17

¶11 The Municipal Airports Act of 1947[Act]

¶12 The central focus of Terminal Drive's argument is that the leased property was acquired from the City by the Trust for an airport purpose. According to the provisions of the lease agreement, the Trust was to build a hotel on the premises. The hotel presently situated there operates as a commercial business over which neither the City nor the Trust has any direct control.

¶13 The hotel building is only 1,760 feet away from the airport. Its accommodations primarily used by air travelers who take advantage of the terminal's proximity and by passengers who are stranded during traffic disruptions and delays caused by inclement weather though not stricto sensu absolutely essential, afford a reasonable and necessary service facility for a growing number of airline customers. We hence conclude that the tax-exempt property in which Terminal Drive holds a leasehold interest clearly was acquired by the City for an airport-related purpose and pronounce it exempt from ad valorem tax under the provisions of § 65.17.

¶14 The trial court's judgment is affirmed.

¶15 HARGRAVE, C.J., and LAVENDER and SUMMERS, JJ., concur.

¶16 KAUGER, J., concurs by reason of stare decisis.

¶17 HODGES, SIMMS, DOOLIN and ALMA WILSON, JJ., dissent.