Plaintiff seeks by this action to secure the refund of taxes levied upon its possessory interest as a tenant of Richmond Shipyards Nos. 3 and 3-A and paid by it under protest for the tax year 1943-1944. (Rev. & Tax. Code, § 5138.) There are two causes of action involved: the first concerns the payment of the tax levied by the county of Contra Costa in the sum of $25,136.06, and the second concerns the payment of the tax levied by the city of Richmond in the sum of $18,083.20. The United States has intervened in support of plaintiff by reason of its agreement to reimburse plaintiff for all taxes paid in connection with the operation of the shipyards. The ease was heard upon an agreed statement of facts, findings were made relative to the respective causes of action, and separate judgments were entered sustaining each of the challenged tax levies. It is from these judgments that this appeal is prosecuted.
The levies were computed as ad valorem taxes upon possessory interests in real property, and the sole point here in controversy is the legality of such levies. Each of the assessments is premised upon the same concept of tax liability— plaintiff’s possessory interest in the two shipyards—and each recognizes this distinction in the status of plaintiff’s occupancy of the property. As to Shipyard No. 3, the United States owned both the fee and the shipbuilding facilities erected thereon; but as to Shipyard No. 3-A, only the facilities were owned by the United States while the land was owned by a private corporation and leased to plaintiff for *614 the express benefit of the United States as part of the national wartime shipbuilding program. The facilities in both shipyards were constructed by plаintiff in pursuance of a “Facilities Contract” executed with the United States. With respect to Shipyard No. 3, plaintiff’s assessment was computed in relation to its possessory interest in both the land and the improvements; but with respect to Shipyard No. 3-A, the entire value of the leased land was assessed to the fee owner and plaintiff’s assessment was limited to its possessory interest in the improvements. The record herein and applicable legal considerations stemming therefrom in the light of the pertinent tax statutes of this state sustain the propriety of these tax levies and plaintiff’s liability therefor.
In 1942, plaintiff contracted with the United States Maritime Commission to build certain cargo vessels at Richmond Shipyards Nos. 3 and 3-A. As above stated, the former was owned by the United States while the latter was owned by a private corporation, the Santa Fe Land Improvement Company, and was leased to plaintiff. Under the terms of the “Vessel Construction Contracts,” plaintiff operated the shipyards as a contractor on a cost-plus-a-fixed-fee basis and “without payment of rent,” had the right of “exclusive use and possession of the Facilities owned by the Commission and any land owned by the Commission on which such Facilities or any part thereof may be situated for the sole purpose of constructing the Vessels” for the United States pursuant to the Emergency Cargo Ship Construction Program. (U. S. Stats, at L., vol. 55, pt. I, Public Laws, ch. 5, p. 5.) The contracts called for the progressive construction and delivery of vessels: the specified delivery date for the building of the last vessel in Shipyard No. 3 being August 8, 1944, and in Shipyard No. 3-A being November 16, 1944. Payment of the fixed fee for one type of vessel, upon launching and delivery, was scheduled at $150,000 and for another type of vessel at $35,000, with bonuses in both cases if the costs of construction were less than the agreed amounts, and with bonuses or penalties of $200 per day for each day by which the dates of delivery preceded or followed the specified delivery dates. Plaintiff was to be reimbursed for all costs directly or indirectly attributable to the maintenance of the shipyards and the construction of the vessels. The contracts were not transferable. Provision was made for termination of the contracts if plaintiff failed to “use *615 due diligence” in the performance of the work, or upon plaintiff’s insolvency; and in the event of such default the United States Maritime Commission was given the right of reentry in the shipyards. The contracts also contained an optional cancellation clause in favor of the commission, upon written notiсe to plaintiff.
On the first Monday of March, 1943, plaintiff was occupying the two shipyards and using the facilities thereon in the performance of its “Vessel Construction Contracts.” Accordingly as of that date, the County Tax Collector of Contra Costa County and the City Tax Collector of Richmond each assessed plaintiff upon its possessory interest in Richmond Shipyard No. 3, both as to land and facilities, and in Shipyard No. 3-A as to the facilities only. Similar valuation factors were used in both cases in arriving at the assessment figure of $806,200 for the possessory interest in the facilities and $13,900 for the possessory interest in the land.
The computation schedule for the government-owned facilities in the two shipyards shows the following items: The actual book cost of labor and materials used in construction was ascertained at $11,735,625, to which was added 14 per cent for cost of ovеrhead expenses, or $1,642,987.50, giving a total of $13,378,612.50; from such total 20 per cent thereof, or $2,675,722.50, was subtracted on the premise that wartime conditions made the costs abnormally high, giving $10,702,890 as the value of the facilities new on March 1, 1943; then a depreciation allowance for a one-year use period was made by depreciating each improvement (by groups of like construction and use) at rates varying from 3 per cent to 20 per cent for a total of $1,067,110, which, when subtracted from the above figure of $10,702,890, gave $9,635,780 as the value of reversion as of March 1, 1944, and multiplying this latter sum by .9434 (the present value factor at 6 per cent) resulted .in $9,090,394* as the present value of the reversion as of March 1, 1943; next there was subtracted from the aforesaid sum of $10,702,890, the value of the facilities on March 1, 1943, the sum of $9,090,394, the present value of the reversion on March 1, 1943, to givе the sum of $1,612,500* as the present value of plaintiff’s one-year possessory interest; and 50 per cent of this amount, or $806,200, * was fixed as the assessment figure.
*616 The computation schedule for the government-owned land in Shipyard No. 3 shows the following items: The cash value of 125.365 acres of land, in fee, was fixed at $3,000 per acre, or $376,095; from this sum 5 per cent thereof, or $18,804.75, was deducted because the use of the land was restricted, giving $357,290 * as the base value of the land; then this latter figure was multiplied by 8½ per cent (6 per cent as proper investment return value and 2½ per cent, being roughly one-half of the combined county and city rates of 3.065 plus 2.205, or 5.27 per cent) to give the sum of $30,369 * as the annual worth of the land; next this latter figure was discounted by multiplying it by .9174 (the present worth of one deferred one year at 9 per cent discount), giving $27,860* as the present value of plaintiff’s one-year possessory interest; and 50 per cent of this amount, or $13,900 * was fixed as the assessment figure.
Plaintiff appealed to the Board of Supervisors of the County of Contra Costa and to the council of the city of Richmond, each sitting as a board of equalization for the respective governmental units, for an elimination of the assessed valuations on its possessory interest in the aforesaid land and improvements. After hearing all the evidence that was offered, the respective boards denied plaintiff’s applications. Thereupon, and on August 31, 1943, plaintiff paid against the total assessment of $820,100 ($806,200 for the improvements and $13,900 for the land) the county tax of $25,136.06, computed at the rate of $3.065 per $100 of assessed valuation, and the city tax of $18,083.20, computed at the rate of $2.205 per $100 of assessed valuation, for the tax year 1943-1944 upon its possessory interest in the aforesaid property. Within six months thereafter this action was commenced.
Upon the trial of the case, the court, after considering the agreed facts as above outlined and reviewing the proceedings before each of the aforesaid boards of equalization, made findings and entered separate judgments sustaining the respective county and city tax assessments against plaintiff. It found, among other things, that at the respective board hearings, “plaintiff was afforded an opportunity to offer all the evidence it desired with reference to the alleged overvaluation of its possessory interest in said land and improvements and facilities”; that “after receiving all the evidence,” *617 each board “found and determined that the assessed valuation of plaintiff’s said possessory interest in said [property] was the full cash value thereof, and . . . was not arbitrary, excessive, exorbitant, discriminatory or inequitable”; that on the assessment date “plaintiff had a substantial and taxable possessory interest in said land, improvements and facilities”; that “in arriving at [the] assessed valuation of said possessory interest, [each] Assessor intended to and did include only such possessory interest as plaintiff had in and to said land and improvements owned by the United States and intended to and did exclude from said assessment any and all rights, title and interest of the United States in and to said property”; that each “Assessor exercised an honest, fair and impartial judgment as to what should be included as improvements to the land for the purpose of assessing the value of plaintiff’s possessory interest therein, and what should be excluded therefrom as personal property”; that “the method used by [each] Assessor . . . was calculated to result in a valuation fairly representing the net worth on the first Monday in March, 1943, of the annual benefits over the estimated term of plaintiff’s possessory right to and interest in said land and improvements known as Shipyards No. 3 and 3-A”; that “the method used by [each] Assessor was reasonable and fair,” and that “the refusal of [each] Board of Equalization to grant the plaintiff’s application and protest does not constitute actual or constructive fraud or anything equivalent to fraud,” but that each “brought its honest judgment to bear upon the question and denied plaintiff’s application without fraudulent, discriminatory or arbitrary action. ’ ’
Plaintiff and the United States as intervener unavailingly urge these points in their appeal from the judgments entered herein: (1) That plaintiff’s right to use and possess the two shipyards was not “property” within the meaning of the California Constitution and tax statutes; (2) that even if such right were properly regarded as “property” under the law of this state, it was without taxable value; (3) that the tax levies were invalid under the Fourteenth Amendment of the federal Constitution because they amounted to an assessment upon property owned by the United States; and (4) that the facilities in Shipyard No. 3-A were personalty and a possessory interest therein was not subject to assessment *618 under California statutes. These points will be discussed herewith in their order of presentation as above stated.
“Possessory interests” in “land or improvements” are taxable under section 107 of the Revenue and Taxation Code and in pursuance of the constitutional mandate that “all property . . . shall be taxed.” (Const., art. XIII, § 1.) Illustration of this class of taxable estate is found in cases involving possessory interests in property which is tax exempt by virtue of ownership in the federаl government
(State of California
v.
Moore,
Plaintiff’s possessory interest in the shipyards under the “Vessel Construction Contracts” was properly classifiable as an “estate for years” in that it was “to continue for a fixed or determinable period” though subject to earlier termination upon certain conditions. (Burby on Real Property [Hornbrook Series, 1943], § 112, pp. 149-150.) Thus, plaintiff had the right to “exclusive use and possession” of the property “until the last of the Vessels shall have been completed” according to the schedule of delivery dates. Con *619 sistent with the interests of the government in its shipbuilding program were the two grounds specified for termination of plaintiff’s tenancy of the shipyards: (1) its failure to “use due diligence in proceeding with the performance of the work” and (2) its insolvency; and the provision giving the Maritime Commission the right of reentry upon the occurrence of either of the “events of default.” Likewise appropriate to the government’s purpose was the optional cancellation clause, permitting the commission “at any time prior to the completion of the work to be performed” to “cancel” the contracts “upon written notice to” plaintiff, and so protect the government in case of a short war or plaintiff’s inability to construct vessels properly. So pertinent in this regard is the testimony of the regional counsel for the commission before the boards of equalization: “In fighting a war, of course, the only reason for changing a contractor—that is, that would be justifiable—would be that the contractor wasn’t doing his job.”
Such provisions for cancellation and termination, however, did not establish plaintiff’s right to use the shipyards as no mоre than a permit or license which could not be responsible for a “property” tax. As stated in
Von Goerlitz
v.
Turner,
In line with these principles, plaintiff’s continued possession of the shipyards was reasonably estimated as of the first Monday in March, 1943, to be one year. These possibilities presented themselves: (1) Plaintiff’s right of possession might have been terminated immediately by action of the Maritime Commission due to plaintiff’s failure to perform properly its part of the contracts; (2) plaintiff’s right of possession might continue until delivery of the last of the ships as scheduled—August 8, 1944, for Shipyard No. 3, and November 16, 1944, for Shipyard No. 3-A; or (3) plaintiff’s right of possession might continue for the duration of the war. Plaintiff’s shipbuilding records established its ability to perform the work in question and negatived the happening of the first possibility as ground for cancellation of the contracts; and general views prevailing in early 1943 as to the war’s prolongation for at least another year or two and the continued need of the United States for ships during such period would justify the one-year base period of the 1943 assessments upon plaintiff’s possessory interest in the shipyards. Under such circumstances the duration estimate governing the assessments does not warrant objection.
It is. true that plaintiff did not have the right to transfer its possession of the shipyards to another, but such prohibition did not remove plaintiff from the status of a lessee, for it is common practice for leases to include clauses forbidding assignment or subletting. The cases of
City and County of San Francisco
v. Anderson,
The next matter to be noted is the claim that plaintiff’s possessory interest in the shipyards was without taxable value. The Revenue and Taxation Code requires that “all taxable property shall be assessed at its full cash value” (§ 401), which means “the amount at which property would be taken in payment of a just debt from a solvent debtor” (§110). The state Constitution authorizes local boards of equalization “to equalize the assessment of the property contained in [the] assessment-roll, and to make the assessment conform to the true value in money of the property contained in said roll . . .” (Art. XIII, § 9.) But the precise method to be used in calculating “full cash value” is not prescribed by law. To this point it was said in
Utah Construction Co.
v.
Richardson,
While for the purpose of taxation the “full cash value” of property is commonly construed to mean its “fair market value”—the value a willing purchaser will pay to a willing seller in an open
market—(Crocker
v.
Scott,
The computation process used by thе assessors in their valuation of plaintiff’s possessory interest in the shipyards, both as to the land and improvements, is outlined above and need not be detailed with greater particularity at this point, except to note that the respective valuation methods followed have been judicially approved in cases presenting analogous considerations.
(Blinn Lumber Co.
v.
County of Los Angeles, supra,
The “Vessel Construction Contracts” provided for plaintiff to be paid stated sums for each ship built and delivered to the government, and to be reimbursed for specified costs. Nevertheless, it is contended that plaintiff’s earning of profit under such arrangements has no relation to the value of the shipyards, and its right to the “exclusive use and possession” thereof, but represents simply “the fair value of [its] managerial services and organization” in the operation of the shipyards for the government’s benefit. To support this theory of payment, reference is made to certain testimony offered in the trial court and rejected because not presented to the respective boards of equalization as affecting the issue of taxable value.
(Wild Goose Country Club
v.
County of Butte,
The third contention to be noted is the claim that the assessments were invalid under the federal Constitution by virtue of the settled rule that “federal property is immune from state and local taxation.” As illustration of this rule, there are cited cases such as
Van Brocklin
v.
State of Tennessee,
Nor is plaintiff’s position strengthened by reason of the decision of
United States
v.
County of Allegheny,
After the installation of the machinery, the assessing authorities of Allegheny County revised Mesta’s previously determined assessment for ad valorem taxes, and added onto the value of the real estate a sum equivalent to the value of the machinery in question. The tax was sustained by the Supreme Court of Pennsylvania upon the premise that under the state law regardless of who held title to the machinery, it constituted a part of Mesta’s mill for purposes of assessment and was properly assessed as real estate. The Supreme Court of the United States reversed upon the ground that since the machinery in question belonged to the United Stаtes, the assessment was improper, for “Government-owned prop
*628
erty, to the full extent of the Government’s interest therein, is immune from taxation, either as against the Government itself or as against one who holds it as a bailee.” (
Implicit in this language is the proposition that had there been an attempt by the assessing authorities of Allegheny County to segregate Mesta’s possessory interest in the machinery from that of the United States, the tax on Mesta’s interest would have been upheld. Such is the precise situation here where the assessments in question were premised upon the valuation of plaintiff’s possessory interest in the shipyards as distinguished from any property interest of the United States therein. Thus, as of March 1, 1943, according to the computation schedule as above outlined, the value of the improvements was estimated as $10,702,890 and the value of the land as $376,095, or a total of $11,078,985, but plaintiff’s possessory interest therein was evaluated at $1,612,400. In so segregating the separate interests of the owner and the possessor of the property and not resting the assessments against the latter upon “the full value of the property,” a “proper appraisal” of plaintiff’s right to “exclusive use and possession” of the shipyards for the year in question appears to have beеn made; and the fact that the economic burden of the tax will be borne ultimately by the government does not invalidate it.
(James
v.
Dravo Contracting Co.,
Finally, challenge is made of the validity of that portion of the assessments relating to plaintiff’s possessory interest in the facilities in Shipyard No. 3-A, upon the premise that such facilities, according to the terms of the lease of the land on which they were erected, constituted personal property, and a possessory interest therein would not be taxable under California law. Accordingly, reference is made to the statutory definition of “possessory interests” as embracing the “possession of, claim to, or right to the possession оf land or improvements” (Rev. & Tax. Code, §.107) and the provision that “improvements” include “all buildings, structures, fixtures, and fences erected on or affixed to *630 the land” (Rev. & Tax. Code, § 105). But the record does not show that the possessory interest in the facilities in question was assessed upon any other basis than as a possessory interest in improvements to realty, and such classification is not open to dispute under the physical facts.
The facilities in Shipyard No. 3-A, like those in Shipyard No. 3, included property of a substantial nature, such as concrete basins, piping and wiring, corrugated iron buildings, frame buildings, concrete buildings, gates and fences, ways, docks and piers, lean-to sheds and portable buildings, platforms, tracks and runways, utility buildings, machinery and equipment, paving and railroad tracks. Plaintiff did not produce either before the respective boards of equalization or the trial cоurt any specific testimony bearing on the nature of this property—its size and manner of attachment to the land—and refuting its classification according to outward appearances and physical considerations as “improvements” to realty. On the contrary, it appears from the evidence before the boards of equalization that one of plaintiff’s own witnesses, the executive assistant to its general manager, admitted that all of the equipment included as improvements for tax purposes was “an integral part of the operation of the” shipyards, thus constituting “a unit for use together” and giving to it the character of “improvements to realty” for tax purposes.
(Southern California Telephone Co.
v.
State Board of Equalization,
But the terms of the lease relative to the government's right to remove .the facilities in Shipyard No. 3-A did not fix their status as personalty for tax purposes and preclude the as
*631
sessors, though having knowledge of such private arrangement of the pаrties, from classifying such property as “improvements to realty” in accordance with the physical facts of their annexation to the land. It was so held by this court in the recent ease of
Trabue Pittman Corp. Ltd.
v.
County of Los Angeles,
The judgments are affirmed.
Gibson, C. J., Shenk, J., Edmonds, J., Carter, J., Schauer, J., and Traynor, J., concurred.