Case Title: Boise Cascade v. Pierce County

Citation: 529 P.2d 9, 84 Wash. 2d 667

Docket Number: 

State: washington

Court: Washington Supreme Court

Date: 1974-12-12T00:00:00Z

Document:
84 Wn.2d 667 (1974) 529 P.2d 9 BOISE CASCADE CORPORATION, Appellant, v. PIERCE COUNTY, Respondent. No. 43162. The Supreme Court of Washington, En Banc. December 12, 1974. Gordon, Thomas, Honeywell, Malanca, Peterson, O'Hern & Johnson, by E.M. Murray, James A. Furber, and William E. Holt, for appellant. *668 Ronald L. Hendry, Prosecuting Attorney, and Michael B. Hansen, Deputy, for respondent. HUNTER, J. This case involves an action brought by the plaintiff (appellant), Boise Cascade Corporation (hereinafter referred to as "Boise"), against the defendant (respondent), Pierce County, in the Superior Court for Pierce County, to review a decision by the Washington State Board of Tax Appeals pursuant to RCW 82.03.180, and as a suit for refund of taxes paid to the defendant pursuant to RCW 84.68.020. The trial court awarded a judgment for the plaintiff against the defendant for taxes unlawfully and illegally assessed, and both parties thereafter filed a notice of appeal. The issues involved in the case center around the proper valuation of certain personal property owned by the plaintiff at its West Tacoma Newsprint plant, Steilacoom, Washington, during the assessment years of 1970 and 1971, for taxes payable in 1971 and 1972. On January 1, 1970, and January 1, 1971, the plaintiff was the owner of certain personal property located at its West Tacoma Newsprint division in Steilacoom, Pierce County, Washington. Although the property in question is classified as personal property for tax purposes, it is, for the most part, large industrial machinery and equipment that is not readily or economically movable from its location. In evaluating the capabilities of its newsprint manufacturing facility at Steilacoom at this time, the plaintiff recognized that there were certain functional problems and deficiencies in the operation of the plant. The property tax manager employed by the plaintiff felt that the standard affidavit and listing form submitted to the county assessor pursuant to RCW 84.40.040 would overvalue the true and fair value of its machinery and equipment account, and therefore an appraisal of the personal property in the plant should be undertaken. Consequently, the plaintiff thereafter hired General Appraisal Company to prepare a so-called "nuts and bolts" appraisal, i.e., reproduction costs *669 less depreciation, both physical and functional. This comprehensive appraisal indicated a true value of the personal property as follows: This appraisal was later submitted to the Pierce County assessor in the latter part of May 1970 when the plaintiff requested a reappraisal of the value of certain of its personal property. At this time the county assessor requested the special assistance of the Washington State Department of Revenue pursuant to RCW 84.41.060, to evaluate the appraisal undertaken by General Appraisal Company. On June 23, 1970, Mr. Leslie D. Anderson, Supervisor of Appraisals for the Department of Revenue, wrote a letter to the Pierce County assessor commenting upon the appraisal and making certain suggestions. The letter accepted a part of General Appraisal Company's appraisal, which established the reproduction cost, less depreciation, and system functional obsolescence, but refused to accept $6,270,980 in overall plant functional obsolescence determined by General Appraisal Company. The letter, therefore, refused to accept the ultimate opinion by General Appraisal Company of the fair market value of the personal property of $7,930,000. On June 25, 1970, the Pierce County assessor, based solely upon the June 23 letter of the Department of Revenue, assessed the value of the personal property of the plaintiff as of January 1, 1970, at an alleged true value of $14,198,190, of which $13,301,880 was assigned to the machinery and equipment account. Following the assessment of the plaintiff's personal property by the county assessor, the plaintiff filed a complaint with the Pierce County Board of Equalization protesting the county assessor's determination of value of the machinery *670 and equipment classification, and alleging the personal property in question to have a true value of $7,930,000 as of January 1, 1970. After a hearing, the Board of Equalization sustained the determination of value as found by the county assessor. On March 10, 1971, the plaintiff petitioned the Board of Tax Appeals of the State of Washington for review of the decision by the Pierce County Board of Equalization, and requested an informal hearing pursuant to RCW 82.03.140. During this time period the Pierce County treasurer issued a personal property tax statement for taxes due based upon the assessment by the county assessor, and on May 21, 1971, the plaintiff paid to the defendant under written protest the sum of $104,965.16 representing the first half of 1971 personal property taxes based upon the assessment by the Pierce County assessor. Meanwhile, on August 27, 1971, the Board of Tax Appeals of the State of Washington rendered a decision sustaining the determination of the Board of Equalization and the Pierce County assessor. On October 6, 1971, the plaintiff sought a "de novo" review of the decision by the Board of Tax Appeals of the State of Washington in the Superior Court for Pierce County pursuant to RCW 82.03.180, and instituted an action for refund of taxes pursuant to RCW 84.68.020. On October 29, 1971, the plaintiff paid to the defendant under written protest the sum of $104,965.16 representing the second half of 1971 personal property taxes based upon the assessed value as determined by the county assessor, and the plaintiff's appeal and complaint for refund of taxes was accordingly amended on November 1, 1971. In accordance with the Department of Revenue's letter of June 23, 1970, the Pierce County assessor continued the determination (with some additions) that the true and fair value of the plaintiff's personal property was $15,189,060 as of January 1, 1971, whereas the plaintiff claimed that the true and fair value of the property in question as of January 1, 1971, was $8,619,531. Consequently, on April 28, 1972, the plaintiff *671 paid the defendant under written protest the sum of $111,943.37 representing the first half of the 1972 personal property taxes, and the plaintiff's appeal and complaint for refund of taxes was thereafter amended on May 9, 1972. The trial of the case commenced on June 5, 1972, in the Superior Court for Pierce County, where expert testimony and the arguments of counsel were heard before the judge without a jury. The trial of the case continued until June 14, 1972, and thereafter, on October 10, 1972, and October 16, 1972, the trial court rendered an oral decision in the case, and entered findings of fact and conclusions of law on December 27, 1972. The court found that the assessments made by the county assessor for the assessment dates, January 1, 1970, and January 1, 1971, were arbitrary and capricious and constituted constructive fraud upon the plaintiff. The court reasoned that the county assessor had failed to make a determination of the true and fair value of the plaintiff's personal property as required by law since the assessment was based solely upon the June 23 letter from the Department of Revenue. The court held that not only was the valuation of the plaintiff's personal property based upon a fundamentally wrong premise in that the county assessor failed to fully recognize overall functional obsolescence which existed in the plant, but that the value placed upon the plaintiff's property was grossly inequitable and palpably excessive. Furthermore, the court found that the appraisal technique employed by General Appraisal Company was improper and failed to apply the correct test to determine the fair market value of the plaintiff's property. The trial court accordingly established that the true and fair value of the plaintiff's property (exclusive of inventory) on January 1, 1970, was $11,198,190, and entered judgment for the plaintiff in the sum of $42,029.45, together with interest in the sum of $3,514.23 and costs in accordance with law. In addition, the trial court held that the true and fair value of the plaintiff's personal property on January 1, 1971 (exclusive of inventory) was $11,310,107, and determined that the balance of taxes owing by the plaintiff *672 for 1972, after allowing for credit for taxes paid, amounted to $67,058.28. Neither party was satisfied. The plaintiff thereafter appealed that portion of the judgment which denied Boise the full relief prayed for in the amended complaint, and the defendant filed a notice of cross-appeal, appealing the judgment awarded to the plaintiff. The major contention by the plaintiff in this case is that the county assessor acted improperly in failing to make an allowance for overall plant functional obsolescence in arriving at the true and fair value of the plaintiff's property. The record clearly shows that overall plant functional obsolescence should have been allowed as an item of depreciation. This plant, prior to its acquisition by the plaintiff in 1969, was operated by a group of newspaper publishers for the production of newsprint for their own use and not for profit. The plaintiff's use of the plant for profit necessarily required a more efficient operation. Therefore, a Mr. Sandwell, an expert in plant analysis, was employed by the plaintiff to make a survey of the plant for repair and modernization. This report clearly disclosed that certain parts of the plant could not be effectively modernized which affected its total production capacity reflecting an overall plant obsolescence. [1, 2] Under the circumstances of this case, the trial court was correct in holding that the failure of the assessor to make an allowance for overall plant functional obsolescence, in consideration of the element of depreciation of the plant's true market value, resulted in an excessive and exorbitant valuation and amounted to constructive fraud upon the plaintiff. It is established law in this state that courts will grant relief from a grossly inequitable and palpably excessive overvaluation of property for taxation as constructively fraudulent, even though the assessing officers may have proceeded in good faith. Pier 67, Inc. v. King County, 71 Wn.2d 92, 426 P.2d 610 (1967); Bellingham Community Hotel Co. v. Whatcom County, 190 Wash. 609, 70 P.2d 301 (1937). *673 In the instant case, we conclude that the trial court was justified in entering a finding that the county assessor had failed to perform his duty in a proper manner, and in making a determination of the true and fair value of the plaintiff's property on the basis of the evidence that was before it. The record shows the trial court very carefully considered all the evidence by the respective experts of both parties, and in making its determination of the amount of overall plant functional obsolescence that should be allowed as a deduction to reflect the correct depreciation in arriving at the plant's true and fair value. That the trial court did just this on the evidence before it is disclosed by its oral opinion: [3, 4] We have quoted at length from the trial court's oral opinion to demonstrate that the amount of overall plant functional obsolescence to be allowed was purely a factual determination made by the trial court upon the evidence before it, applying the familiar test of what a purchaser willing, but not obliged, to buy would pay to an owner willing, but not obligated, to sell, taking into consideration all uses to which the property is adapted and might in reason be applied. Under these circumstances, this court cannot substitute its judgment for that of the trial court. Mayo v. Mayo, 75 Wn.2d 36, 448 P.2d 926 (1968); Thorndike v. Hesperian Orchards, Inc., 54 Wn.2d 570, 343 P.2d 183 (1959). It is argued by the plaintiff, however, that the trial court's determination was not based upon the evidence in the record in that the county introduced no expert testimony supporting its valuation of the plaintiff's property. *677 We need only refer to the above quoted part of the trial court's oral opinion to demonstrate that the plaintiff is in error. In this regard, the trial court further stated: [5] It is further argued that the trial court erred in failing to consider any evidence on the income approach in arriving at the true and fair value of the plaintiff's property. We disagree. The record shows that witnesses on both sides testified in regard to the income approach which the trial court considered, but to which it gave no credence by reason of the short period in which the plant had been in operation, and that the history of the income was too brief to be reliable. The trial court stated: It is further argued that the income approach was not considered by the defendant's expert witness. This is in error. We quote further from the trial court's oral opinion: It is contended by the defendant in support of its cross-appeal that the reasons stated for the payment of the taxes under protest by the plaintiff were insufficient to support a claim for refund under RCW 84.68.020. We find no merit to this contention. There can be little doubt that the county had sufficient notice to understand the basis upon which the protest was made. In summary, we find this case to be a factual appeal; that the determination by the trial judge of the true value of the plaintiff's property was well within the ambit of the evidence; that the trial court did consider the income approach but found the evidence thereon to be of no assistance in determining the true and fair value of the plaintiff's property for the respective tax assessment years of 1970 and 1971. We have reviewed the other assignments of error raised by the parties and find them to be without merit or implicitly considered in view of our disposition of the case. The judgment of the trial court is affirmed. FINLEY, ROSELLINI, HAMILTON, STAFFORD, WRIGHT, and BRACHTENBACH, JJ., concur. HALE, C.J. (concurring in the result) I concur in the result of the opinion. The trial court should be affirmed on the principle that this court will not substitute its view of the facts for those of the trial court when supported by *679 substantial evidence. Here, on substantial but conflicting evidence, the trial court found that the assessor had fixed too high a value upon the subject property. Beyond that, I would not go. The case presents no more than the review of a factual dispute resolved by the superior court on disputed evidence based largely on conflicting conclusions of expert witnesses. The learned trial judge in resolving these disputes of fact did not, I am sure, intend to abridge nor impair the responsibilities of and great weight to be accorded the county assessor, the county boards of equalization, and finally the state's tax agencies in fixing value for tax purposes. The hazard here, however, is that in referring to what is called functional obsolescence, the court in its opinion, may be adding a new element to the taxing methodology and require that it be specifically included and declared by the public officer charged by law with the responsibility of appraising property for purposes of assessing taxes. As I see it, the expression "functional obsolescence" is no more than one of numerous descriptive terms delineating one of many means employed by some experts in the field of real estate appraising who may take one of several available approaches in making an estimate of fair cash market value. To hold that the assessor must ascertain whether obsolescence exists and then put a figure on it, I fear would require the assessor to spend more money in assessing commercial and industrial property than the treasurer could collect in taxes from it. In State v. Wilson, 6 Wn. App. 443, 447, 493 P.2d 1252 (1972), the Court of Appeals stated the three basic approaches currently employed by real estate appraisers in determining fair market value, and pointed out that if the cost-of-reproduction approach is utilized then a deduction should be made for depreciation. Depreciation, the court said, includes economic and functional obsolescence. That court, I think, was speaking conceptually and did not mean to declare a rule that the assessor, the board of equalization, *680 or the state taxing agency must, as this court now implies, put a figure in dollars and cents upon the cost of reproduction, or upon depreciation, or upon economic obsolescence, or upon functional obsolescence, or indeed even use the cost-of-reproduction approach. Public officials charged by the law with determining value for tax purposes may use all or none of the approaches described in State v. Wilson, supra, or a mix of some or all of them. All of these imponderables and variables are included in and a part of the concept of depreciation. See Lindheimer v. Illinois Bell Tel. Co., 292 U.S. 151, 167, 78 L. Ed. 1182, 54 S. Ct. 658 (1934) and State ex rel. Pacific Tel. & Tel. Co. v. Department of Pub. Serv., 19 Wn.2d 200, 142 P.2d 498 (1943). One should not overlook the fact that appraising property is more of an art than a science, that it necessarily deals in imponderables and may involve wide disputes in expert opinion or judgment. Even functional obsolescence is a vague and imprecise concept, and when related to the idea of economic obsolescence it becomes even more so. Thus, a buggy whip manufacturer employing the most modern and efficient machinery designable, while not deemed functionally obsolescent in most respects, quite likely would be held economically obsolescent in all respects, and to fix a fair value upon the machinery might require the assessor to reject the idea of obsolescence altogether. I would, therefore, while concurring in the result of this opinion, read it to hold no more than that the evidence supports the judgment and that neither the assessor nor other taxing authorities are, under existing statutes and the constitution, required to designate in dollars and cents the amount ascribed to functional or economic obsolescence, or depreciation for that matter, in arriving at the fair market value. UTTER, J., concurs with HALE, C.J.