Before GOODRICH, STALEY and FORMAN, Circuit Judges.
This is an appeal from an order of the United States District Court for the Western District of Pennsylvania*fn1 dismissing the complaint of the appellant, the United States, in which it sought to have declared void certain tax liens for the year 1954 in the aggregate amount of $116,900 imposed by the appellees, County of Lawrence, City of New Castle, City of New Castle School District and County of Lawrence Institution District, governmental bodies and arms of the state government of the Commonwealth of Pennsylvania.
Briefly the pertinent facts which were agreed upon by the parties are as follows:
In 1942, the City of New Castle, in the County of Lawrence, Pennsylvania, conveyed certain parcels of its land to the Defense Plant Corporation, a subsidiary of the Reconstruction Finance Corporation. A defense plant was constructed thereon known as Plancor 765 at a cost of approximately $23,000,000. United Engineering and Foundry Company operated it under a series of leases from 1943 to 1956. The Reconstruction Finance Corporation as successor to the Defense Plant Corporation declared Plancor 765 surplus to its needs under the Surplus Property Act of October 3, 1944,*fn2 and on September 4, 1947, the War Assets Administration assumed the care, custody and accountability for the property, until it was succeeded by the General Services Administration.*fn3
On June 13, 1950, the Reconstruction Finance Corporation conveyed the property to the United States of America by a quit claim deed which was recorded in Lawrence County on December 15, 1953.
On April 25, 1952, the Reconstruction Finance Corporation and the United States, acting through the Administrator of the General Services, as of January 1, 1952, leased Plancor 765 to the United Engineering and Foundry Company for a term of two years ending December 31, 1953. The lessee was required to pay all taxes,*fn4 assessments and similar charges which were assessed or imposed upon the lessor or the lessee during the term of the lease.*fn5 Several supplements to the original lease were executed during its term.
On July 13, 1954, the United States and United Engineering and Foundry Company executed an agreement as of January 1, 1954, which renewed the 1951 lease and its supplements, except as modified in the renewal. It provided for a term of one year ending December 31, 1954 and for a month to month tenancy from January 1, 1955 to June 30, 1955. By its terms the lessee was no longer required to pay local taxes but rather was required to pay their equivalent as additional rent.*fn6
On August 12, 1955, Congress enacted legislation providing for the payment, in lieu of taxes, to the appropriate taxing authorities, of
"an amount equal to the amount of the real property tax which would be payable to each such State or local taxing authority on such date if legal title to such real property has been held by a private citizen on such date and during all periods to which such date relates."*fn7
Payments for 1955 and 1956 taxes have been made pursuant to the above Act.
The United States had filed a preceding complaint to this suit in the United States District Court for the Western District of Pennsylvania against the same parties as are appellees here under United States v. Hanlon, 165 F.Supp. 1, in which it prayed to have taxes for the years 1954, 1955 and 1956 declared void. That suit was dismissed without prejudice pursuant to an opinion and order filed November 19, 1958.*fn8
On July 19, 1956, and while the said suit was pending, the United States conveyed the property to Mesta Machine Company by deed, without warranty, and the purchaser executed a purchase price mortgage to secure its note in the sum of $7,500,000.
Concurrently with the delivery of the deed the General Services Administrator entered into a "side agreement" with Mesta Machine Company whereby the United States obligated itself to continue the litigation then pending to vacate the alleged illegal tax liens and to assume liability therefor should a judgment be entered against ...