Opinion of the Court.

327 U.S.

to private hands is thought without more to revest sovereignty in the States. As the purpose of Clause 17 was to give control over the sites of governmental operations to the United States, when such control was deemed essential for federal activities, it would seem that the sovereignty of the United States would end with the reason for its existence and the disposition of the property. We shall treat this case as though the Government's unrestricted transfer of property to nonfederal hands is a relinquishment of the exclusive legislative power.10 Recognition has been given to this result as a rule of necessity." If such a step is necessary, Minnesota showed its acceptance of a supposed retrocession by its levy of a tax on the property. Under these assumptions the existence of territorial jurisdiction in Minnesota so as to permit state taxation depends upon whether there was a transfer of the property by the contract of sale.

In determining the meaning and effect of contracts to which the United States is a party, the governing rules of law must be finally declared by this Court. United States v. Allegheny County, supra, 183. Turning to the contract, we find in it no characteristics which differentiate it from the normal executory contract for the sale of land with partial payments. Normally, contracts between the United States and others are construed as contracts between private parties. Lynch v. United States, 292 U. S.

10 Compare Palmer v. Barrett, supra, with Arlington Hotel v. Fant, 278.U.S. 439.

11 Fort Leavenworth R. Co. v. Lowe, 114 U. S. 525, 542: "It is necessarily temporary, to be exercised only so long as the places continue to be used for the public purposes for which the property was acquired or reserved from sale. When they cease to be thus used, the jurisdiction reverts to the State."

The reference to federal control of "reserved" land probably relates to the supremacy of the United States for the management of governmental affairs in the absence of exclusive legislative power. See page 539.

558

Opinion of the Court.

12

571, 579. This Court has been of the opinion that contracts for the sale of land transfer to the purchaser the equity in the land. We think this contract did so. That equity is realty. It was owned by the vendee. The United States retains only a legal title as security. In substance it is in the position of a mortgagee. Minnesota has the same rule. In re S. R. A., Inc., 219 Minn. 493, 507; 213 Minn. 487, 495, 499. Therefore when petitioner entered into possession of this real estate under its contract of purchase, the taxed property by the transfer became subject to the territorial jurisdiction of Minnesota.13

Territorial jurisdiction in Minnesota does not dispose of this tax problem. The nub of this case, that is the immunity from state taxation of property to which the United States holds legal title, remains. Minnesota took care to leave unassessed whatever interest the United States holds. The levy and judgment was "subject to fee title remaining in the United States of America." 219 Minn. at 496. Although Minnesota real estate taxes are assessed on the parcel of land as a "unitary item" including "all rights and privileges," the State does not claim that a tax sale will divest the fee title of the United States. 213 Minn. at 493, 499. Apparently the State is of the view that the equitable interest alone may be sold under its laws, leaving the fee of the United States in its position of priority over any interests which may be transferred by the tax sale. 219 Minn. at 513. Such a construction of the state law is binding upon this Court. It

12 Lenman v. Jones, 222 U. S. 51; Gunton v. Carroll, 101 U. S. 426, 430-31; Bissell v. Heyward, 96 U. S. 580; Secombe v. Steele, 20 How. 94, 103-104. Compare 8 Thompson, Real Property, § 4579; 2 Sugden, Vendors (14th Ed.), 375. See Lowery v. Peterson, 75 Ala. 109. Compare Restatement, Conflict of Laws, § 209.

13 We intimate no view as to the legislative status of this property, if it is repossessed by the United States. See the cases cited in note 10, supra.

691100°-47-40

does not impinge upon federal rights. So long as that situation exists, the determination of the State cannot be challenged here. The possibility of repossession by the United States is not enough to block a tax sale in which the paramount rights of the United States are protected. Baltimore Shipbuilding Co. v. Baltimore, 195 U. S. 375, 381-82; New Brunswick v. United States, 276 U. S. 547, 556; United States v. Alabama, 313 U. S. 274, 282.14

14

Petitioner's argument goes beyond the question of the enforcement of the assessed tax. It is bottomed on the implied constitutional immunity from state taxation of property for which the United States holds title subject to unfulfilled conditions. In Van Brocklin v. Tennessee, 117 U.S. 151, that State sought to tax realty of the United States which was not held for the purposes or under the authority of the Cession Clause. Certain lots had been purchased by and conveyed to the United States pursuant to a federal tax sale. 12 Stat. 423, § 7. These lots were later transferred by deed or certificate of release to private owners. 17 Stat. 330; 18 Stat. 313. Tennessee assessed its own taxes upon the entire property for the years during which title to the lots was in the United States and attempted to collect them from the private owners after the transfer. Tennessee's claim was founded on the absence of state cession. This Court refused to permit the State's action, saying at page 179:

"While the United States owned the land struck off to them for the amount of the taxes because no one would pay more for it, and until it was sold by the United States for a greater price, or was redeemed by

14 As the case was tried below on the theory of direct or implied immunity because the fee was in the United States, we neither consider nor decide the effect of a tax sale of petitioner's rights on its contract with the United States. See Wilson v. Cook, 327 U. S. 474, 483. Compare 41 U. S. C. § 15 with Freedman's Saving Co. v. Shepherd, 127 U. S. 494.

558

Opinion of the Court.

the former owner, the United States held the entire title as security for the payment of the taxes; and it could not be known how much, if anything, beyond the amount of the taxes the land was worth. Το allow land, lawfully held by the United States as security for the payment of taxes assessed by and due to them, to be assessed and sold for State taxes would tend to create a conflict between the officers of the two governments, to deprive the United States of a title lawfully acquired under express acts of Congress, and to defeat the exercise of the constitutional power to lay and collect taxes, to pay the debts and provide for the common defence and general welfare of the United States."

The posture of the land sought to be taxed in the Van Brocklin case differentiates it from that presently under consideration. The United States there held complete title upon the assessment dates as a purchaser at a tax sale. The entire bundle of rights in the property was assessed by Tennessee. As a matter of grace, the United States had granted a right to the taxpayer to redeem. It was like an option to purchase. The statute might have authorized the sale of the land to any purchaser without consideration for the former owner. The United States, here, as we have demonstrated above, had transferred at the time of the assessment equitable ownership to the purchaser and has only a legal title as security for the unpaid purchase price. See United States v. Allegheny County, 322 U. S. 174, 188.

Petitioner presses various land grant cases upon us as announcing the controlling rule.15 The principle which petitioner extracts from these cases is that alienation of United States property does not pass an interest to the vendee taxable by a State until all conditions precedent for

15 Railway Co. v. Prescott, 16 Wall. 603; Railway Co. v. McShane, 22 Wall. 444; Northern Pacific R. Co. v. Traill County, 115 U. S. 600; Irwin v. Wright, 258 U. S. 219.

the delivery of the deed have been complied with. In the present case, petitioner asserts, the full amount of the purchase price must be paid before the State can tax. Such a rule can be extracted by the literal reading of certain phrases in the land grant cases.16 The reason for the rule was said, in the earlier cases, to be that a state tax sale would defeat the government lien for surveying or other costs because the state sale would pass a title free from lien of the United States." As heretofore shown, ante, p. 565, this ground for refusing power to Minnesota to tax is not present in this case, since Minnesota holds that the lien of the United States will remain paramount.

Irwin v. Wright involved the taxability by a State of property occupied by an entryman under the Reclamation and Homestead Acts who had not received his required final certificate of land clearance, pages 227, 228, 232. The reason for the rule against state taxation until the equitable title passes from the United States to the entryman was there placed upon the policy of the Government to require those who sought government land to perform the required conditions of residence or improvement before beneficial title, subject to state taxation, passes from the United States to the locator. This transfer was said not to take

18 Irwin v. Wright, supra, 228, 229, 232, 233; Northern Pacific R. Co. v. Traill County, supra, at 609; Railway Co. v. McShane, supra, at 462.

17 16 Wall. at 608; 22 Wall. at 462; 115 U. S. at 610. See also Colorado Co. v. Commissioners, 95 U. S. 259. In the McShane case, itself, which clearly set out the above reason for non-taxability, it was recognized that the federal right of pre-emption for the benefit of settlers would not be affected by a state tax sale. This Court therefore reversed its former judgment in the Prescott case that land held by the railroads subject to this pre-emption could not be taxed by a State. 22 Wall. at 461. Congress promptly terminated the land tax exemption after the Traill County decision by subjecting railroad land grants to state taxation before payment of conveyancing costs. 43 U.S. C. § 882.