The plaintiff brought this action to enjoin the collection of a tax with reference to an electric-light plant. A demurrer to its petition was sustained, and it appeals.
The petition alleges substantially these facts: The electric-light plant originally belonged to the city of Lebanon, a city of the third class. On September 10, 1923, a contract was entered into, the terms of which were afterwards embodied in an ordinance, concerning the sale of the plant to a partnership whose rights and obligations in relation thereto have since been transferred to the plaintiff, the Kansas Power Company. The contract and ordinance contemplated a sale of the plant for $22,000, the city agreeing to sell and the partnership agreeing to buy upon the terms and conditions stated therein. Possession of the plant was to be given at once. The first year the partnership was to pay $8,000, by turning in that amount of city warrants. Beginning with 1924 it was to pay off a thousand-dollar bond of the city each year. It was to pay off three other bonds of the same denomination in 1933. It was to give a surety-company bond for the payments due in 1924. It was to connect the plant with a system owned by the plaintiff, and was to keep the equipment in good order.
The plaintiff as the successor in interest of the partnership is in possession of the plant and had paid $9,000 up to March 1, 1924, being the full amount then due. The assessing officers valued the plant as the property of the plaintiff on March 1, 1924, at $20,000, and a tax of $908.15 was on that account charged against the plaintiff for that year. This is the tax the action was brought to enjoin, the plaintiff, however, admitting that it was liable for taxation to the extent of what it had paid — $9,000—and tendering a payment of $390.10 on that basis, making a deposit in court of that amount.
The plaintiff’s contention is that because of the special provisions of the contract, which are hereinafter set forth, it acquired no title, legal or equitable, to the plant, and is not liable for taxation to the extent of its value. The defendants-’ theory is that the plaintiff is the owner of the property subject to a lien for the unpaid purchase price, and should pay taxes accordingly. The provisions of the contract just referred to are contained within the following paragraph:
“It is agreed by the parties hereto that time is of the essence of this contract, and the city of Lebanon shall hold and retain the title in and to all of the*254 property above described until all of the payments provided for in this contract shall have been made, and in case of default in the payments hereunder, first party shall have the right and privilege to take possession of all of said property and operate the same as its own, but in the event that said payments are promptly made at the times herein specified then this agreement shall operate as a transfer of all of said property to the second party without any further agreement or enactment of any new or additional ordinance, and said bond [that already mentioned] referred to in paragraph three (3) above shall be canceled and held for naught.”
If the arrangement is to be considered as an ordinary executory contract of sale the plaintiff should be regarded as the owner for the purposes of taxation (Note, 24 L. R. A., n. s., 1300), the city merely having a lien on the property securing its claim for the payment of the purchase price, a right which itself would be subject to taxation if held by an individual. This court has held, however, that “where an agreement is executed to sell real estate upon conditions precedent, and no notes are given for the purchase money, and it is stipulated that time is of the essence of the agreement, and neither the legal nor the equitable title to the land is transferred thereby, . . . the agreement is not subject to taxation.” (Brown v. Thomas, Sheriff, 37 Kan. 282, syl.,
“Davison [the prospective buyer] has the option to purchase. Under the agreement he has the possession of the land, and pays therefor the taxes and certain interest; but the legal title has not passed to him, because no deed or other conveyance has yet been made; and the equitable title has not passed, because the land has not been paid for, and because — on account of the provisions for forfeiture — it is clearly the intention of the parties, as indicated in the contract, that such title shall not pass until the land is paid for. Davison has a contingent or conditional equity in the land, but he is in danger of forfeiting the same, and if forfeiture occurs, his contingent or conditional equity ceases. If we could consider the agreement a mortgage merely, then as personal property it would be taxable. As the agreement cannot be construed into a mort*255 gage, nor as creating a debt, but being a conditional sale only, we must hold that it is not subject to taxation.” (p. 286.)
The doctrine of the Brown-Thomas case has been confirmed by later decisions. Upon the strength of it the court has held that under a similar contract the interest of the original owner with respect to the realty involved continues to be real estate, and upon his death passes as such and not as personalty. (Pickens v. Campbell,
The defendants cite Williams v. Osage County,
The circumstance that the ordinance was to operate as a conveyance upon the fulfillment of the terms of the contract does not impress us as affecting the general rule. Neither do several other matters of detail in which difference exists between the present contract and that involved in Brown v. Thomas.
The plaintiff also relies upon the principle by which it is held that lands to be granted by the federal government are not taxable until the grantee has done everything required to entitle him to a patent.
The plaintiff, having done equity by tendering taxes based on the payments already made, is entitled to the relief asked.
The judgment is reversed, with directions to overrule the demurrer.