Property of Pine Raleigh Corp., In re

• Citation: 258 N.C. 398,128 S.E.2d 855
• Parties: In the Matter of the Ad Valorem Valuation of PROPERTY OF PINE RALEIGH CORPORATION for the Year Ended
• Decision Date: 31 December 1961
• Court: United States State Supreme Court of North Carolina

Page 855

128 S.E.2d 855

258 N.C. 398

In the Matter of the Ad Valorem Valuation of PROPERTY OF PINE RALEIGH CORPORATION for the Year Ended December 31, 1961.

No. 474

Supreme Court of North Carolina.

Jan. 11, 1963

Blanchard & Farmer, Raleigh, for petitioner appellant.

Thomas A. Banks, Raleigh, for appellee.

RODMAN, Justice.

Appellee urges an affirmance on two grounds: (1) Petitioner, not having applied to the State Board in 1960 when the property was appraised, could not seek a reduction in 1961 based on past income, a fact known in 1960; and (2) the appraised value was determined after due consideration of all facts bearing on that question.

Appellee moved before the State Board to dismiss petitioner's appeal on the theory that not having sought review in 1960, it was concluded and could not seek a review in 1961. State Board denied the motion to dismiss. It proceeded to hear evidence on which it could act in determining the value of the property. We are of the opinion and hold that the State Board acted correctly in refusing to dismiss the appeal from the County Board for the reasons urged. Once real estate has been appraised for taxation, it continues to be listed at that figure until reappraised, unless some good reason warrants a change in value. Some specific conditions jurstifying a change in value are enumerated in G.S. § 105-279. When that section is read and considered, as it must be, with G.S. § 105-295, it is, we think, apparent that the Legislature intended to authorize County Board of Equalization and Review, when requested so to do, to correct any unjust and inequitable assessment. If it refuses to act, the taxpayer may appeal to the State Board of Assessment. The Legislature never contemplated that an injustice done a taxpayer must continue for a period of years merely because he failed at the first opportunity to bring the injustice to the attention of the authority having the power to correct.

Holding, as we do, that petitioner was entitled to the hearing accorded it, we must examine the record to see if, as it asserts, the hearing was a pure formality, and the conclusion arbitrary and capricious because not supported by substantial evidence. If petitioner's assertion is correct, the trial court should have allowed its motion to remand to the State Board with directions to comply with the statute, G.S. § 105-295, and consider income as one of the elements of value. If, on the other hand, the State Board, as its order states, did in fact consider all the pertinent evidence, then the court correctly refused to grant petitioner the relief sought.

Petitioner, to establish its claim of overvaluation, called as an adverse witness the president of Southern Appraisal Company, employed by Wake County to determine the fair values of all properties in the county for use in levying ad valorem taxes. This witness approved the values assigned to each of petitioner's pieces of property. He listed the factors used to fix the value. He listed replacement costs less depreciation, values assigned to similar properties in the neighborhood, and then said: 'The rental or the fair rental income that could be realized in each of the properties was another factor which was taken into consideration.' When the value was assigned to these properties, the witness did not know the actual rental income which petitioner was receiving. He had asked for that information, but it had not been supplied. He said: 'Capitalization was taken into consideration in this particular only on a comparable basis with other property in the vicinity.' Most of the properties in the block in which petitioner's property is situate is owner occupied, but, according to the witness, two pieces in the block were rented and the rents produced by those properties were taken into consideration in determining values. As a result of the appraisal, the properties were actually assessed for taxation in 1960 at a lower value than in 1959.

Petitioner had a real estate broker, an expert real estate appraiser, value the properties. He fixed the fair value of the property at $400,000. He expressed the opinion that real property ought to yield 7%. Using the rent received by petitioner for the year ending 30 June 1960 of $32,899, he deducted taxes, insurance, and the $10,000 rent paid to the owner of the property on Martin Street, and arrived at a net income of $13,420. This, when capitalized at 7%, gave a value of $191,736 for all three tracts. He recognized this was not the fair value. He said: 'This would not be the fair market value of the property. That is what * * * if you were selling it on income alone * * * that would be the value, but somewhere between the physical value and the income approach you have a value. Now with every merchant it is not the same and therefore, that is where the matter of judgment comes in, as to whether the property produces what it should. Some are producing far in excess of the physical value and some less, but this is a percentage lease.' He further said: 'I used the following factors in arriving at the fair market value of this property; the physical value which includes land and buildings, the existing contracts on the property, the income from the existing contracts at the time. The income from this property has dropped from $44,000.00, approximately in 1953 to $30,000.00 in 1961.'

In addition to the parol testimony, the State Board had the benefit of statements by petitioner showing the purchase price for each of these lots. Petitioner, who purchased in 1928 and 1939, paid $355,500 for the properties on Fayetteville Street. Its lessor purchased the Martin Street property in 1952 for $100,000. It is a matter of common knowledge that the value of the dollar has depreciated during the past several years, resulting in a higher price for commodities, including real estate.

Without regard to petitioner's duty, if any, to pay taxes or insurance premiums on the building on Martin Street, that property has a value of $150,000 when capitalized at 7% on the rent currently paid by petitioner. If, instead of using 7% as a fair rate of return, it should be found that 6 1/4% was a fair rate of return, the value assignable to this property under the capitalization theory would be $168,000--slightly more than the value actually placed...