Court Opinion

ID: 3844424
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:12:57.198274+00
Date Added: 2024-06-11T09:37:30.507211
License: Public Domain

ON PETITION FOR REHEARING
Petition for rehearing to change the court's method of valuation of partially developed subdivision lots. The court held when valuing partially developed subdivision lots by working down from the market value of fully developed lots a portion of profit must be assigned to the missing improvements.
Decision on petition for rehearing rendered April 15, 1969. Decision for plaintiff, petition for rehearing denied. Former opinion modified.
Appeal pending.
The defendant has filed a petition for rehearing contending in general that this court should have adopted the assessor's method of valuing the three categories of lots involved — fully developed, lots with water but without paving and undeveloped lots. In particular the defendant contends that the court erred in the computation of the value of the lots with water but without paving. The decision stated:
    "For the lots with water but no paving the value is computed by taking $13.75 (fair market value of the fully developed lots) and deducting $5.00 for the cost of paving to arrive at a value of $8.75 per front foot."
The value of the lots with water and no paving was incorrectly determined. The parties agreed on $25.00 per front foot as the true cash value of fully developed lots and also agreed on the application of the 45% holding factor. This resulted in a value of $13.75 per front foot for fully developed lots. The *Page 382 
court then deducted $5.00 per front foot as the cost of paving to arrive at $8.75 as the true cash value of lots with water but without paving. However, the court overlooked the fact that the $5.00 paving cost was included in the $25.00 figure which was reduced by the 45% holding factor to $13.75. Consequently, the $5.00 paving cost had already been reduced, and $2.75 ($5.00 less the 45% reduction) is the amount of paving cost which remained in the $13.75 figure. Deducting $2.75 from $13.75 results in a value of $11.00 for the lots with water but without paving. However, this valuation reaches an impractical result. A prudent investor would not pay $11.00 for lots with water but without paving if he could purchase fully developed lots for $13.75, because $5.00 has been established as the cost of paving. The anomaly arises because nothing in this method accounts for profit which is included in the $25.00 value for the fully developed lots.
1. The better method for establishing the value of the partially developed lots should be accomplished in the following manner. The parties agree on $25.00 as the true cash value of the fully developed lots and on the use of the 45% holding factor. The true cash value of $3.68 for the undeveloped lots and a cost of $5.00 each for paving and water has been established. Part of the $25.00 value includes profit and if the cost of paving or water is removed from the value of the fully developed lots, not only is the cost removed but also any profit the water or paving represented. The profit *Page 383 
in a $25.00 fully developed lot is $11.32 determined as follows:
     $ 25.00         value of fully developed lots -3.68         cost of undeveloped lots ------- $ 21.32         difference between fully developed lots and undeveloped lots -10.00         cost of water and paving ------- $ 11.32         profit present in the $25.00 fully developed lots.
Since the only additions made to the undeveloped lots were water and paving which cost the same, one-half of the profit should be attributed to each. The value of water or paving would then be $5.00 plus $5.66 (one-half of the profit) or $10.66. The 45% holding factor would be applied as follows:
       $ 3.68        value of undeveloped lots 10.66        paving value 10.66        water value ------ $ 25.00        value of improved lots before application of 45% holding factor -11.25        less 45% holding factor ------- $ 13.75        true cash value of fully developed lots
Following the above method the value of lots with water but without paving would be computed as follows:
      $ 3.68         value of undeveloped lots 10.66         value of water ------ $ 14.34 — 6.45         less 45% holding factor ------- $ 7.89         (rounded to $7.90) the value of partially developed lots with water only. *Page 384
The former opinion is modified to the extent that the value of lots with water but without paving is established at $7.90.
The defendant's petition for rehearing is denied. *Page 385