Title: TIMBER TRADERS v. Johnston

State: washington

Issuer: Washington Supreme Court

Document:

87 Wn.2d 42 (1976) 548 P.2d 1080 TIMBER TRADERS, INC., Petitioner, v. KEN JOHNSTON, ET AL, Respondents. No. 43875. The Supreme Court of Washington, En Banc. April 22, 1976. ROSELLINI, J. The Court of Appeals, Division Two, reversed a summary judgment permanently enjoining the assessment and collection of certain ad valorem property taxes on standing timber. (Timber Traders, Inc. v. Johnston, 13 Wn. App. 607, 536 P.2d 655 (1975).) We granted the taxpayer's petition for review which asked the court to reconsider its decision in Star Iron & Steel Co. v. Pierce County, 81 Wn.2d 680, 504 P.2d 770 (1972), insofar as it approved and adopted the holding of the Court of Appeals, Division Two, that under RCW 84.40.020, the exempt status *43 of personal property must be determined as of the date the assessor values the property. In Star Iron & Steel Co. v. Pierce County, 5 Wn. App. 515, 488 P.2d 776 (1971) (adopted by this court in a per curiam opinion three justices dissenting), title to equipment in the possession of the taxpayer had passed to various exempt entities, for whom it was being manufactured, after January 1 of the assessment year but before the date of actual valuation. Here, the taxpayer (the petitioner in this court) purchased property from the State after January 1, but before the date the assessor valued it. Thus, ostensibly, the interpretation which worked to the taxing authority's disadvantage in Star Iron & Steel Co. should work to its advantage here. Nevertheless, the county prosecutor joins the petitioner in earnestly contending that the appellate courts of this state were mistaken in their interpretation of the statute and that, whereas the legislature had intended that all personal property be taxed with reference to the same date, the courts have substituted a floating tax day, determined fortuitously by the assessor's work load and the order in which the assessment lists are considered. The statute provides in pertinent part: RCW 84.40.020. *44 The statute should be read in conjunction with RCW 84.36.005, which provides: [1] The opinion in Star Iron & Steel Co. v. Pierce County, supra, first noted that in P.B. Inv. Co. v. King County, 78 Wn.2d 81, 469 P.2d 893 (1970), this court held that the exempt status of real property is to be determined as of the date it is actually valued and assessed. Reading the statutory language with respect to real and personal property as identical, both courts saw no reason why the personal property provision should not be construed the same as the real property provision. In this we were in error. While the provisions with respect to real and personal property are the same as regards valuation, both requiring that the property be valued as of January 1, the provision with respect to personal property has an additional feature. It requires that the property be listed and assessed with reference to its ownership on January 1. While this distinction was pointed out in the dissenting opinions written by Justices Hunter and Hale, the latter being also signed by Justice Hamilton, it nevertheless escaped the attention of the majority of this court. We now deem ourselves compelled to reexamine the statute in the context of other related statutes, to determine if there is any reason why the words "with reference to its ... ownership on the first day of January" should not be taken to mean that the exempt status should be determined as of that day. Further evidence that the legislature intended the property to be taxed with reference to its ownership on the 1st of January is found within the provision itself. It is provided that if the stocks, wares, etc., held on that date are not fairly representative of the average stock carried by the *45 owner, an average shall be substituted. In other words, an owner whose stock of goods is less or more than his average stock, shall list it as though he held on January 1 the amount which he generally has in stock. Looking at the exemption provisions, we find that they consistently refer to January 1 as the date upon which taxability is determined. For example, RCW 84.36.150 requires the listing, as of January 1, of certain food products, which are exempt if shipped out of the state before April 30. If they are actually shipped, the assessment is cancelled, provided the assessor is notified by June 1 of the assessment year. RCW 84.36.300 exempts a portion of the stock of goods held on January 1 by any taxpayer. RCW 84.36.470, providing a phaseout exemption for animals, birds, insects, and agricultural crops, changes the assessment levels as of January 1 each year. RCW 84.36.800 et seq. provides the procedure for establishing the exempt status of property. While there is no express provision that exemptions are to be determined with reference to ownership or use on January 1, it is clear that exemptions are allowed with reference to the assessment year. See, e.g., RCW 84.36.825, referring to applications made for the "assessment year 1974," and RCW 84.36.830, directing the Department of Revenue to review each application for exemption and make a determination prior to August 1 of the assessment year. In further harmony is RCW 84.36.855, providing that property which changes from exempt to taxable status shall be placed on the assessment roll for taxes due and payable in the following year. Reading the exemption provisions as a whole and in conjunction with the language used in RCW 84.40.020, we cannot escape the conclusion that the legislature intended that the exempt status of property should be determined as of January 1. If the property changes status during the year, its new status will be noticed on the following January 1. In Puget Sound Power & Light Co. v. Cowlitz County, 38 Wn.2d 907, 234 P.2d 506 (1951), this court held that there *46 can be no valid personal property tax until there has been a levy specifying the amount thereof, Judges Finley and Mallery dissenting. The case was overruled in Air Base Housing, Inc. v. Spokane County, 56 Wn.2d 642, 354 P.2d 903 (1960), thus denoting later approval of the views expressed in the dissent. In the course of the argument advanced in the dissent in Puget Sound Power & Light Co. v. Cowlitz County, supra at 919, Justice Finley explored the legislative intent with respect to the date upon which the obligation to pay a personal property tax arises. RCW 84.40.020's predecessor at that time provided: That chapter was amended in Laws of 1961, ch. 15, § 84.40.020, to provide that real property should be listed and assessed with respect to its value on January 1 only, while personal property should be listed and assessed with respect to its value and ownership. The legislature thus manifested an intent that the two types of property should be treated differently. The discussion by Justice Finley in his dissenting opinion is particularly applicable to the present language of the section dealing with the taxation of personal property. Finding ourselves unable to improve upon the analysis contained in that dissent, we set it forth here and adopt it as a part of this opinion. Referring to the statutory language quoted above, the opinion reads: Puget Sound Power & Light Co. v. Cowlitz County, supra at 919-22 (Finley, J., dissenting). Finding the clearly expressed intent of RCW 84.40.020 to be that owners shall be liable only for taxes levied upon taxable personal property which they hold on January 1 of the assessment year, unless the stock of goods then held does not fairly represent the average of such stock carried by the taxpayer, an intent which is in harmony with the legislative purposes and with other provisions of the tax statutes, we are compelled to admit our error in Star Iron & Steel Co. v. Pierce County, 81 Wn.2d 680, 504 P.2d 770 (1972). To the extent that we adopted the rationale and holding of the Court of Appeals, Division Two, upon this question, the case is hereby overruled. The decision of the Court of Appeals, Division Two, is reversed (Timber Traders, Inc. v. Johnston, 13 Wn. App. 607, 536 P.2d 655 (1975)), and the judgment of the Superior Court is reinstated. STAFFORD, C.J., and HUNTER, HAMILTON, WRIGHT, UTTER, BRACHTENBACH, and HOROWITZ, JJ., concur. [1] Spokane County v. Annis, 43 Wash. 655, 86 P. 1066 (1906); Porter v. County of Yakima, 77 Wash. 299, 137 P. 466 (1914); Scandinavian American Bank v. King County, 92 Wash. 650, 159 P. 786 (1916); Raymond v. King County, 117 Wash. 343, 201 P. 455 (1921); Wilberg v. Yakima County, 132 Wash. 219, 231 P. 931 (1925), 41 A.L.R. 184 (1926); Fowler v. Snohomish County, 149 Wash. 530, 271 P. 587 (1928); Lahn & Simons v. Matzen Woolen Mills, 149 Wash. 538, 271 P. 830 (1928); Mogan v. Larson, 183 Wash. 287, 48 P.2d 621 (1935); Libby, McNeill & Libby v. Ivarson, 19 Wn.2d 723, 144 P.2d 258 (1943); and Palace Fish & Oyster Co. v. Bean, 32 Wn.2d 56, 200 P.2d 753 (1948).