UNITED STATES v. DAVIDSON, 139 F.2d 908

HOLMES, Circuit Judge. This action was instituted by the United States to enjoin the appellees from collecting taxes assessed for the years 1937, 1938, and 1939, by various political subdivisions of the State of Texas, against a grain elevator at Amarillo, Texas. The basis of the claim for relief was that the property belonged to the United States from and after November, 1936, and was exempt from taxation.

Appellees admitted that the assessments for 1938 and 1939 were void, but contended that the United States did not acquire legal or equitable title to the property until February 24, 1937; that the assessment for 1937 became a lien as of January 1, 1937, at which time the property was subject to taxation; and by counterclaim they demanded a judgment of foreclosure of the tax liens for 1937. The court below denied the injunctions and entered a decree of foreclosure; the Government has appealed.

Farmers National Warehouse Corporation, a wholly-owned subsidiary of Farmers National Grain Corporation, held the legal title and was in possession of the property on June 12, 1936. Both corporations were organized and financed by the United States under the Agricultural Marketing Act of June 15, 1929, but they were not agencies of the United States, and their properties were subject to state taxation.

On June 12, 1936, the parent corporation entered into a contract with the Farm Credit Administration whereby it was agreed that all assets of the grain corporation and its subsidiaries, except certain properties expressly retained, should be transferred to the F. C. A. in consideration of the rendition of financial assistance and the cancellation of certain obligations of the grain corporation to the Government, but the contract was subject to approval by the Secretary of the Treasury, which was not finally given until November 7, 1936.

The grain elevator at Amarillo was one of the properties to be transferred to the F. C. A. under said contract. It was contemplated that some time would be required to execute the contract, so it was agreed that each act in consummation of the agreement should be. executed as of June 30, 1936. On October 30, 1936, the United States leased the grain elevator properties to the parent- corporation. On October 31, 1936, the parent corporation conveyed by deed to the United States “all assets” owned by the parent corporation on June 30, 1936, except those assets retained under the agreement.

The subsidiary conveyed, by deed to its parent dated November 7, 1936, “all assets” belonging to the subsidiary as of the close of business on June 30, 1936. Finally, on February 24, 1937, the subsidiary by quitclaim deed conveyed to the United States the elevator properties at Amarillo. This court unanimously agrees with the court below that legal title to the grain elevator did not vest in the United States until February 24, 1937.

The law recognizes a corporation to be a legal entity separate and apart from its stockholders, and the agreement of June 12, 1936, made by the parent corporation, was not the act of the subsidiary and was not binding upon it. The only conveyance made by the parent corporation, pursuant to its agreement, conveyed assets owned by the parent corporation on June 30, 1936, at which time title to and possession of the grain elevator was in the subsidiary.

The conveyance made November 7, 1936, as of June 30, 1936, from the subsidiary to the parent, like all of the conveyances mentioned except the quitclaim deed of February 24, 1937, did not particularly describe any property; the conveyance was of “all of its assets as at the close of business on June 30, 1936”. In Texas an instrument purporting to convey land must furnish the means of determining with reasonable certainty what land is involved; if it does not, the conveyance is void.

If, however, a transfer by the subsidiary of “all its assets” is to be taken as including all its land, still this after-acquirement by the parent of title to this elevator would not pass legal title to the Farm Credit Administration by virtue of the conveyance previously made to the latter by the parent, because that conveyance was expressly confined to assets that the parent owned on June 30, 1936, and did not purport to convey this elevator. It also appears that most of the instruments executed in 1936 bore no acknowledgment, and none of them was filed for record.

Article 6627 of Vernon’s Annotated Texas Statutes provides that all conveyances of land shall be void as to all creditors and subsequent purchasers for value without notice unless they are acknowledged and filed for recording as required by law. This statute applies to a creditor who has acquired a lien by operation of law upon the land without notice of an unrecorded conveyance, and confers upon such lienor a right superior to that of the grantee in the conveyance. A majority of this court agrees with the trial court that the equitable title was not in the. United States prior to February 24, 1937.

In Texas, as elsewhere, an equitable title is a right, enforceable in equity, to have the legal title to real estate, or the fruits thereof, transferred to the owner of the right. It is doubtful whether any of the instruments of conveyance executed prior to 1937 were sufficient under Texas law, even as between the original parties thereto, to vest an enforceable equitable right to the realty in the United States ; but we prefer to rest our decision on another ground.

The agreement upon which reliance is placed was a bilateral contract imposing obligations upon both the parties thereto, and there is nothing to indicate that the obligations of one were to be performed before those of the other. The record contains no evidence to establish that the United States or any of its agencies have yet performed the contractual obligations undertaken by it.

Under such circumstances a court of equity has no power to compel performance until the one demanding it has matured his right thereto by performance, or tender of performance, of all conditions precedent to the creation of an equitable right in him. Since the United States had neither legal nor equitable title until February 24, 1937, the property was subject to state taxation on January 1, 1937. It is conceded that taxes become a lien on taxable property on January 1st of the year for which they are levied.

The remaining question, therefore, is whether appellees were entitled in this proceeding to the decree of foreclosure for the enforcement of their liens. Appellees recognize that the sovereign immunity from suit of the United States would preclude any suit against it or its property for enforcement of the lien in the court below, but they contend that the act of the sovereign in bringing the injunction suit conferred jurisdiction upon the court to entertain the counterclaims for foreclosure and to administer full and complete justice upon the subject matter of the litigation.

Reliance is placed upon the case of The Thekla, 266 U.S. 328, 45 S.Ct. 112, 69 L.Ed. 313, in support of this contention. In the Thekla case the court said that, when the United States comes into court to assert a claim, it so far takes the position of a private suitor as to agree by implication that justice may be done with regard to the subject matter; that the absence of legal liability, in a case where but for its sovereignty it would be liable, does not destroy the justice of the claim against it.

It is a familiar rule, however, that the language of an opinion must be construed in the light of the particular fadts of the case. As was pointed out in United States v. Shaw, 309 U.S. 495, 60 S.Ct 659, 84 L. Ed. 888, decision in the Thekla case turned upon a relationship characteristic of claims for collision in admiralty, in which libels and cross-libels are one litigation, and it is necessary to determine both libels in order to determine the one liability for the collision.

The court expressly disavowed any intention to disturb the settled rulings in regard to sovereign immunity, namely, that a claim upon which no original suit may be brought against the sovereign may not be asserted as a counterclaim. Jurisdiction of the counterclaims here asserted is controlled by the general postulate that no suit may be brought against the United States unless specific statutory consent has been given. For these reasons the United States was not entitled to the injunctive relief sought, and the counterclaims of the appellees should have been dismissed.

The decree -is modified by striking therefrom the recoveries of money and foreclosure of tax liens against the property in controversy under the counterclaims; and as thus modified it is affirmed. No costs are awarded against the United States. Modified and affirmed. Sabre v. United Traction & Electric Co., D.C., 225 F. 601; Pierce v. National Bank of Commerce, 8 Cir., 13 F.2d 40; Harr v. Tumulty, 256 N.Y. 15, 175 N.E. 356; Ayer & Lord Tie Co. v. Commonwealth, 208 Ky. 606, 271 S.W. 693; 1 Fletcher’s Cyclopedia on Corporations, 118, 119. Osborne v. Moore, 112 Tex. 361, 247 S.W. 498; Smith v.

Sorelle, 126 Tex. 353, 87 S.W.2d 703; Smith v. Griffin, 131 Tex. 509, 116 SW.2d 1064; 14 Tex.Jur. 987. Shear Co. v. Currie, 5 Cir., 295 F. 841; In re Lindahl, D.C., 59 F.2d 91; Underwood v. United States, 5 Cir., 118 F.2d 760; Ayres v. Duprey, 27 Tex. 593, 86 Am.Dec. 657; McKamey v. Thorp, 61 Tex. 648; Hirt v. Werneburg, Tex.Civ.App., 191 S.W. 711. Citizens National Bank v. Commissioner, 8 Cir., 122 F.2d 1011; Harris v. Mason, 120 Tenn. 668, 115 S.W. 1146, 25 L.R.A.,N.S., 1011; Tanner v. Imle, Tex.Civ.App., 253 S.W. 665; Ayres v. United States, 42 Ct.Cl. 385; Johnson v. Wood, 138 Tex. 106, 157 S.W.2d 146. Cf.

Continental Supply Co. v. Missouri, K. & T. Ry. Co., Tex.Com.App., 268 S.W. 444; Patton v. Rucker, 29 Tex. 402, 409; O’Herin v. Neal, Tex.Civ.App., 56 S.W.2d 1105. Johnson v. Wood, 138 Tex. 106, 157 S.W.2d 146; 58 Corpus Juris, 1079, 1080, 1083. Cf. Taylor v. Kaufman, Tex. Civ.App., 267 S.W. 526; Barker v. Klingler, 302 Mich. 282, 4 N.W.2d 596. Carswell & Co. v. Habberzettle, 39 Tex.Civ.App. 493, 87 S.W. 911. Cf. United States v. Alabama, 318 U.S. 274, 61 S.Ct. 1011, 85 L.Ed. 1327. Nassau Smelting Works v. United States, 266 U.S. 101, 45 S.Ct. 25, 69 L.Ed. 190; Lynch v.

United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434; United States v. United States Fidelity Co., 300 U.S. 506, 60 S.Ct. 653, 84 L.Ed. 894. Stanley v. Schwalby, 162 U.S. 255, 16 S.Ct. 754, 40 L.Ed. 960; State of Kansas v. United States, 204 U.S. 331, 27 S.Ct. 388, 51 L.Ed. 510; United States v. Shaw, 309 U.S. 495, 60 S.Ct. 659, 84 L.Ed. 888; Moody v. Wickard, App.D.C., 136 F.2d 801.