Court Opinion

ID: 7948430
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:23:29.960672+00
Date Added: 2024-06-11T16:34:02.057887
License: Public Domain

Ostrander, J.
(after stating the facts). 1. It was held in Chicago, etc., R. Co. v. Babcock, 204 U. S. 585, 27 Sup. Ct. 326, cited by plaintiff, that in an independent proceeding attacking the judgment of an assessing board it is improper to cross-examine the members in an attempt to exhibit confusion in their minds as to the method by which the result was reached. It was further held that, in a suit to. declare void assessments, the court would not consider complaints as to the results reached by a State board of assessors, except those based on fraud or the adoption of a fundamentally wrong principle. It was said:
“The board was created for the purpose of using its judgment and its knowledge.” “Within its jurisdiction, except, as we have said, in the case of fraud or a clearly shown adoption of wrong principles, it is the ultimate guardian of certain rights. The State has confided those rights to its protection, and has trusted to its honor and capacity as it confides the protection of other social relations to the courts of law. Somewhere there must be an end.”
The conclusions and the language here referred to may be adopted by this court in this case. Appellant says:
“We do not claim that Mr. Shields was limited to any particular process of reasoning in arriving at the valuation of the land, or that there was any legal objection to making any reasonable calculation of the probable profits of the business' of mining the ore to aid his judgment, in arriving at the value of the mine. What we object to is the adoption of any calculation *686intended to embrace the present worth of all the profits as the measure of the value of the land.”
As witnesses for plaintiff and for defendant, who spoke upon the subject, maintain, some such method as that of Mr. Finlay must be used to determine the value of the mineral, and therefore of the land. And if it is true that the Finlay method necessarily led to a valuation of the mining business, it does not follow, I think, that its result was not the fair value of the land. Large iron mines are, it seems, very infrequently sold. Comparisons, therefore, cannot be made to determine the cash value by any standard of selling value. The statute direction, already referred to, is that the quantity and value of minerals, when known to be available therein, must be considered by the assessor in determining the value of land for taxation. It will be admitted that the availability and value of minerals, unmined, are not matters of common knowledge, nor to be correctly ascertained or estimated except by men possessed both of certain particular information and of expert knowledge. A number of factors have to be considered in determining whether, it being made apparent that there is a deposit of ore in a given locality, it is available, there being no mine or mining carried on. Its availability. —that it has commercial value and the ease and cost of coming at it in mining — would have to be considered, as well as its quality and quantity. The extent and quality of the ore body being known, or estimated, one important factor in determining taxable value — cash value — would be secured. This factor being considered, some person or corporation might be willing to undertake the mining of the ore, paying the landowner therefor. Usually, the price to be paid would be a fixed price per ton during the continuance of mining operations, or a variable price, depending upon the quantity, or selling price, of ore mined and *687shipped, or both. The expense of opening the mine, of conducting mining operations, would be incurred, and if the adventure was successful the owner of the fee would receive, in installments, his royalties, his selling price of the ore. For purposes of taxation, the State would not be bound to accept the amount of royalty bargained for by the landowner as controlling its valuation of the land. It might occur — has frequently occurred — that, the ore body being developed, the owner of the mining lease would be able to sell it upon a royalty basis in excess of the royalty reserved in the lease. And, besides, the miner pays the royalty and still, if successful, makes a profit on. the ore. In the case of the Newport mine, at the time the assessment complained about was made, much that in a new adventure would be considered as problematical, as uncertain, had been made certain. The mine was in operation. The quality of ore was assured, the quantity to a certain point was actually determinable, measurable. Experience had proved that, as the mine was equipped and managed, a definite quantity of ore could be, had been, moved and marketed, annually, the cost of mining and the market price of the ore. The equipment, costly or otherwise, was performing its part in the operation. At a given rate of mining the ore body would be exhausted in a determinable period, during which period the value of the ore would be recovered in installments. No question remained concerning the quantity of the ore in sight, its availability, or its immediate value when mined. What remained to be determined was the quantity of ore not in sight, and the present value of the land. .
What would an intending purchaser have done, under such circumstances? What would the landowner have required? Clearly, first, an estimate of the quantity of ore not in sight. Such an estimate *688having been made, the price to be paid would depend upon the views of the buyer and the seller as to the annual rate of mining and the market value of the ore mined. The rate of mining would enable them to judge, not with absolute precision, the rate of recovering the value of the ore. It is not important to know just what terms a buyer and seller of the mine would agree upon. The point we are concerned with is whether a method, wrong in principle, was adopted by the assessing officers in their endeavor to form a judgment as to the present value of the particular land. There is no reasonable ground for contending that the State may not use the methods of business to ascertain such values. In such a case, it is not compelled to ignore, or discount, the facts of demonstrated availability, quantity, and quality of mineral. If a rule or method exists by which engineers and business men ascertain the values of ore bodies for the purpose of buying and selling them, if no better rule is or can be suggested, how can it be said that the rule is wrong in principle when adopted by the State ? The State must, of necessity, treat the peculiar subject of taxation as the subject requires, not to change or modify a cardinal rule of taxation, but to apply it. Upon this record no other rule is suggested, and the rule employed is conceded to be the rule of engineers in like cases.
That all of the mineral in the ore body is not in sight is conceded. What ought to be added is matter of judgment. The legislature provided as an aid to assessing officers expert judgment upon the subject. Experience has, to some extent, confirmed the estimate which was made. The future cost of mining and the future price of ore are uncertain, but not too uncertain to be made the basis for present valuation of the mine, as matter of business. The State may *689act upon considerations which business men act upon, so long, at least, as those considerations appear to universally affect and determine, for business purposes, for buying and selling, the value of mining properties. At present, the method employed appears to be scientific, and the result justified by experience.
Opinions may differ concerning the rate of interest upon which amortization should be computed. It does not appear that the judgment of the board was exercised upon other than a sound foundation, with a sincere purpose to reach a proper conclusion.
There is another consideration affecting the question at issue. The board did not adopt the valuation of the experts. On the contrary, it assessed the property at a sum nearly $5,000,000 below that valuation. Was this an extravagant valuation, in view of all facts before the board? Suppose it did adopt Mr. Finlay’s method, will it be contended that if the valuation placed upon the mine was no greater than its owners would concede to be its value, because the method was employed the tax must be held invalid? But, as has been pointed out, the result of the method, that is to say, the result of the combination of factors employed by Mr. Finlay, as he employed them, was not made the conclusive measure of the value of the land. The board did not adopt, as the measure of the value of the mine for purposes of taxation, an estimate of the future profits of the business of mining and selling ore.
2. There is yet to be considered the contention that the plaintiff’s property was valued, relatively, at too large a sum. In the argument, valuation of mines is contrasted with valuation of other classes of real property and with valuations of personal property. It is contended, anticipating the argument of necessity, that at any rate the valuation of real property *690in the assessment district should have been relatively equal, and that it is shown that it was not so.
It appears that the State board of tax commissioners had some information, and that the individual members shared with many others a belief, that the property of the State was not uniformly assessed at its cash value. Before the year 1911 the board had power, when a complaint was made to it, to review rolls in the district from which the complaint came. It had not until the year 1911 power to undertake such a review of rolls upon its own motion. The history of legislation upon the subject confirms the fact that the belief was very general that local assessing officers did not, as a rule, value property for assessment at its cash value, and that the feeling was general that the condition ought to be remedied. The information, which in 1911 the board derived in part from Mr. Finlay, was that in Gogebic county the total assessed value of real estate in the county was $12,829,605, of which $7,491,457 was the value of mining and $5,338,148 was the value of nonmining real estate, that the value of mining property alone was, in fact, $41,560,000 and of nonmining $14,907,012. In the city of Ironwood in 1911, real estate was assessed by the board of review — mining at $3,427,413, nonmining, $918,560, a total of $4,345,973. The information derived from Mr. Fin-lay was that the mining property in the city was worth $35,170,000. The board submitted the information it had to the State board of equalization, not as decisive of what it would assess the property of the county for, but as information which had come to it. In 1912, the nonmining real estate of Ironwood was assessed at $2,778,453, the total nonmining property of the county at $18,504,105, the total real estate of the county being assessed at the sum of $45,715,405.
*691The argument that property, generally, in the State was underassessed in 1911, and that the property of plaintiff was therefore relatively and fraudulently overassessed, is answered, I think, by the statement that, admitting there was a general condition which needed to be remedied, the remedy had to be applied in detail and not generally, unless the last condition was to be made worse than the first. There is more force to the argument that, having entered a district for the purpose of applying the remedy, it should have been applied to all property, and not to mining property alone. The argument considerably disturbed the trial court, as appears from his charge. The reason assigned by the board for not generally reviewing the assessment rolls was lack of time. No one can tell what it might have done had a review been attempted.
I am impressed that sufficient appears to show that the burden placed upon mining property, including that of plaintiff, when compared with nonmining property, was excessive, that no sufficient data appears for determining what would be a relatively equal burden, and that the whole tax ought to be held fraudulent and void. A majority of the justices are, however, not convinced that this fact is made to appear in the particular case. In support of an opposed conclusion it is said that it cannot be assumed for the purposes of this case that the nonmining property in the county in 1912 was substantially the same in value as the nonmining property there in 1911, and that in any event we are not required in this case to consider the valuation of the entire county. The record discloses no specific data for the conclusion that nonmining property in the city of Ironwood was not assessed in 1911 as high, relatively, as was the mining property. It has been pointed out that Mr. Finlay gave it as his opinion that the mining property *692in the city was worth $35,170,000. The board valued it at $23,283,000. Assuming that the valuation fixed by the board was the fair cash value, how can it be determined that other property in the city was not relatively assessed at its cash value? The board reported to the State board of equalization that real estate, as a whole, was assessed in the county at 22.7 per cent, of its actual value. But it does not follow that in Ironwood, in which the plaintiff’s mine and others were situated, real estate, other than mining, was assessed at only 22.7 per cent, of its value. Mining property in the city was assessed at only 10 per cent, of its value, as finally determined by the board. There can be no doubt about the rule relied upon by plaintiff. It has been repeatedly announced and applied by this court. While exact equality in taxation can never be achieved, intentional inequality of assessment invalidates the tax. Merrill v. Auditor General, 24 Mich. 170; Auditor General v. Hughitt, 132 Mich. 311 (93 N. W. 621); Solomon v. Township of Oscoda, 77 Mich. 365 (43 N. W. 990); Auditor General v. Pioneer Iron Co., 123 Mich. 521 (82 N. W. 260). It is as well settled that fraud in the assessment must be made out.
The things supposed by plaintiff to be tangible evidence of the fact that the valuation of one class of property in the city was raised, and that the valuation of another, or of other classes, known to be undervalued, was not raised, are:
First, the general impression concerning the general undervaluation of all property; second, the increase in assessed valuation of other property in the city in 1912; third, the report of the board to the State board of equalization, which is treated as an admission of its information upon the subject.
The reply is that no one can point to anything in *693the record which clearly justifies a finding that mining property was assessed relatively higher than other property in the city in 1911.
The judgment is affirmed.
Brooke, C. J., and McAlvay, Kuhn, Stone, Bird, and Steere, JJ., concurred. Moore, J., did not sit.