Title: Swan Lake Moulding Co. v. Department of Revenue
Citation: 478 P.2d 393
Docket Number: N/A
State: Oregon
Issuer: Oregon Supreme Court
Date: December 23, 1970

478 P.2d 393 (1970)
SWAN LAKE MOULDING COMPANY, an Oregon Corporation, Appellant,
v.
DEPARTMENT OF REVENUE of the State of Oregon, Respondent.

Supreme Court of Oregon, Department 2.
Argued and Submitted September 16, 1970.
Decided December 23, 1970.
Rehearing Denied February 18, 1971.
*394 Ernest F. Gordon, Klamath Falls, argued the cause for appellant. With him on the briefs were William Ganong and Ganong, Ganong &amp; Gordon, Klamath Falls.
Richard A. Uffelman, Salem, argued the cause for respondent. With him on the brief were Lee Johnson, Atty. Gen., and Theodore W. de Looze, Asst. Atty. Gen., Salem.
Before O'CONNELL, C.J., and DENECKE, HOLMAN and TONGUE, JJ.
Rehearing Denied February 18, 1971. See 480 P.2d 713.
DENECKE, Justice.
The plaintiff taxpayer appeals from a decision of the Tax Court affirming the order of the defendant Department of Revenue fixing the true cash value of the taxpayer's land at $563,850. 4 OTR Adv.Sh. 27. The county assessor had fixed the value at $639,150 and on review the County Board of Equalization lowered the value to $181,955. Testifying before the Tax Court, one appraiser for the taxpayer fixed the value at $193,000, the other at $253,000.
The property is on the outskirts of the city of Klamath Falls and is on the south side of Sixth Street, a well-traveled thoroughfare. On the north side is a new shopping center described by the Tax Court as "one of the busiest and most attractive shopping areas in southern Oregon." The Tax Court in its opinion accurately described the taxpayer's property:
The entire tract contains approximately 20 acres.
The assessor used the market value approach. The sales used for comparison were primarily of the parcels purchased for the shopping center. These sales prices varied. Property fronting on Sixth Street sold at prices ranging from $3.70 to $1.70 per square foot depending on its location. Prices for property not fronting on Sixth Street ranged from $13,000 to $17,000 per acre. The assessor was of the opinion that the taxpayer's land was less desirable than the land across the thoroughfare because of its triangular shape, inferior access, and the presence of railroad tracks at the rear. For this reason he valued the frontage property at $1.00 per *395 square foot and the interior at $10,000 per acre.
The taxpayer's witnesses were of the opinion that sales of land on the north side of the thoroughfare were not comparable sales and the income approach was the most realistic, with the market approach to be used only as a check.
The most important difference between the parties and the appraisers testifying on their behalf is what consideration, if any, is to be given to the long-term leases on substantial portions of the property. Some of the leases had remaining terms of over 30 years. The appraisers testifying for the taxpayer stated that these leases had to be taken into account as they control the income potential and what the highest and best possible use would be if the land were unencumbered is only hypothetical.
The appraiser for the county testified he gave no effect to the leases. The taxpayer charged that in so doing the appraiser disregarded ORS 308.235, which provides, in part:
The county appraiser and the Tax Court are correct. In fixing the true cash value of land for property tax purposes the effect of existing leases on the value to the owner is disregarded. The basis for such a principle is that the tax is levied upon the land and is a tax upon all the interests into which the land might be divided. Admittedly, a lease might decrease the price which the owner might receive; however, the tax is not merely upon the owner's interest; the tax is upon all the interests in the land, including the leasehold interest. This is so because of the corollary principle that taxes are assessed only against the one having title:
Bonbright is of this opinion that the lease and the amount of rent are to be disregarded when appraising for property tax purposes. 1 Bonbright, Valuation of Property, 496 (1937). He illustrates by this example:
Judicial decisions have followed this reasoning. Donovan v. City of Haverhill, 247 Mass. 69, 141 N.E. 564, 30 A.L.R. 358 (1923) (noted at 24 Colum.L.Rev. 324 (1924)), was very similar to the present case. The facts were:
The court held:
To the same general effect and citing the above decision with approval are In re Property of Pine Raleigh Corporation, 258 N.C. 398, 128 S.E.2d 855, 859 (1963), and Crossroads Center v. Commissioner of Taxation, Minn., 176 N.W.2d 530, 535-536 (1970). See Annotation, "Outstanding lease as affecting taxable value of property against owner," 30 A.L.R. 361 (1924).
The other differences between the county appraiser and the appraisers appearing on behalf of the taxpayer are on matters of judgment such as the future potential of this property and the ability of the area to support the kinds of business which would pay $1.00 per square foot or more for the taxpayer's property. The taxpayer's evidence does not demonstrate to us that the assessor was incorrect in his judgment and, therefore, the taxpayer, who has the burden of proof in this case (ORS 305.427), has failed to sustain that burden.
The taxpayer's other contention concerning the service roads we conclude is correctly decided by the Tax Court in its opinion.
Affirmed.