22 Charlotte, Inc. v. City of Detroit, 82

• Citation: 294 Mich. 275,293 N.W. 647
• Decision Date: 06 September 1940
• Docket Number: April Term, 1940.,No. 82,82
• Parties: 22 CHARLOTTE, Inc., v. CITY OF DETROIT et al.
• Court: Supreme Court of Michigan

294 Mich. 275

293 N.W. 647

22 CHARLOTTE, Inc.,

v.CITY OF DETROIT et al.

No. 82, April Term, 1940.

Supreme Court of Michigan.

Sept. 6, 1940.

Suit by 22 Charlotte, Incorporated, against the City of Detroit, Albert E. Cobo, Treasurer of the City of Detroit, and the Board of Assessors of the City of Detroit, to enjoin the collection of real estate tax on realty in the City of Detroit, on ground that the assessment valuation was based on a fundamentally wrong method. From a decree in favor of the defendants, the plaintiff appeals.

Decree affirmed.Appeal from Circuit Court, Wayne County, in Chancery; Clyde I. Webster, Judge.

Argued before the Entire Bench.

Fred W. Lindbloom, of Detroit (Alfred Lindbloom, of Detroit, of counsel), for appellant.

Paul E. Krause, Corp. Counsel, and John H. Witherspoon, Chief Asst. Corp. Counsel, both of Detroit, for appellees.

BUTZEL, Justice.

Plaintiff filed a bill to enjoin the collection of the 1938 real estate tax on its property in the city of Detroit, on the ground that the assessment valuation was based on a fundamentally wrong method which was deliberately arbitrary and in plain violation of the Federal and State Constitutions. Plaintiff offered to do equity by tendering its alleged proper tax. Merrill v. Humphrey, Auditor-General, 24 Mich. 170;City of Birmingham v. Oakland County Supervisors, 276 Mich. 1, 268 N.W. 409. The trial judge adopted the findings of fact and law of the circuit court commissioner to whom the case was referred, and the bill was dismissed.

The property in question is known as the Reid Hotel, and is situated at 22 Charlotte Avenue in the city of Detroit. At one time it was connected with the Addison Hotel located at the northwest corner of Charlotte and Woodward Avenues. In 1931, the Detroit Trust Company acquired title to the property through foreclosure of a mortgage securing an outstanding bond issue of $250,000 on both hotels. Plaintiff, through an intermediary, acquired the Reid Hotel in 1937 on a land contract for the sum of $75,000, paying $5,000 down and agreeing to pay the balance within two years without interest. Immediately repairs were made at a cost of about $17,000. Following these repairs in 1937, plaintiff has been operating the building as a hotel, thus ending the period of unoccupancy from 1931 to 1937.

In 1930 the land site was assessed at $70,420 and the building at $324,400, making a total of $398,820. During the following three years reductions were made so that by 1934 valuation of the land was placed at $28,850, and that of the building at $100,000; for the next three years, the building assessment remained the same, but the land assessment was reduced to $25,600. In 1938, after the repairs were made and the building was restored to tenantable condition, the building was assessed at $244,700, subsequently reduced after protest to $150,000, while the land continued to be valued at $25,600, making a total assessment of $175,600. Plaintiff refused to acquiesce in this valuation and paid under protest one-half of the 1938 assessed tax and tendered an additional amount which it claimed satisfied the full lawful tax liability based on the tax rate per thousand multiplied by what plaintiff insists is the ‘true cash value’ of the building. The city treasurer declined the tender. The board of review and the State Tax Commission denied plaintiff's petition for further reduction of the valuation. Plaintiff then filed this suit asking to be relieved of the alleged illegal portion of the tax.

The building is located about a half mile north of the main retail business district of Detroit. It adjoins the older, smaller, less valuable Addison Hotel. The Reid Hotel is nine stories high and consists of two wings with a court between them above the first floor. The rooms are larger in size and therefore fewer in number than would be constructed in a comparable building of today. There are 185 rooms, for which rent is asked at a weekly rate of $5 per room, including men's laundry and regular hotel service. The hotel averages about 20 transients per day at a charge about double the weekly rate. The potential annual gross earning capacity is upwards of $45,000.

While the surrounding neighborhood has deteriorated, one of the main features of the hotel location is its proximity to Woodward Avenue, which makes the building very easily accessible. The defendants showed that in appraising the building, they multiplied the cubical content by the rate per cubic foot (comparable with the replacement cost of a new building), then applied a depreciation rate of 2 1/2 per cent. per year on the diminishing value method and finally allowed an additional reduction of 5 per cent. because of the location of the building. It was shown that six other comparable hotels in the downtown section of Detroit were assessed at approximately the same rate per cubic foot: The Reid Hotel and another at 10.2 cents; two older hotels at 10 cents; one at 11.1 cents; one at 14 cents; and another at 15.2 cents. It cannot be said that a discriminatorily high rate has been applied to the Reid Hotel.

The Constitution of 1908, Art. 10, § 3, commands that the legislature shall provide a uniform rule of taxation, except on property paying specific taxes. Art. 10, § 7, declares that ‘All assessments hereafter authorized shall be on property at its cash value.’

Title VI, Chap. 2, § 1 of the charter of the city of Detroit provides: ‘All real and personal property within the city subject to taxation by the laws of this state, shall be assessed at its true cash value by the board of assessors herein provided.’

Section 3415, 1 Comp.Laws 1929, § 7.27 Stat.Ann., defines ‘cash value:’ ‘The words ‘cash value,’ whenever used in this act, shall be held to mean the usual selling price at the place where the property to which the term is applied shall be at the time of assessment, being the price which could be obtained therefor at private sale, and not at forced or auction sale. In determining the value the assessor shall also consider the advantages and disadvantages of location, quality of soil, quantity and value of standing timber, water power and privileges, mines, minerals, quarries or other valuable deposits known to be available therein and their value.'

Under the Constitution and laws of this State, the ‘final arbiter of value for taxing purposes which, when it has jurisdiction, determines the same finally and conclusively, is the State Tax Commission.’ Hudson Motor Car Co. v. Detroit, 282 Mich, 69, 275 N.W. 770, 775, 113 A.L.R. 1472. Courts are slow to interpose their judgment to say that the assessment has transgressed reasonable limits. S. S. Kresge Co. v. City of Detroit, 276 Mich. 565, 268 N.W. 740, 107 A.L.R. 1258;Sloman-Polk Co. v. Detroit, 261 Mich. 689, 247 N.W. 95, 87 A.L.R. 1294;Rowley v. Railway Co., 293 U.S. 102, 55 S.Ct. 55, 79 L.Ed. 222. In Newport Mining Co. v. City of Ironwood, 185 Mich. 668, 152 N.W. 1088, reference was made to the statement of Mr. Justice Holmes in Chicago, etc., R. Co. v. Babcock, 204 U.S. 585, 27 S.Ct. 326, 329, 51 L.Ed. 636: ‘The board was created for the purpose of using its judgment and its knowledge. [Citations omitted]. 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.’

In Merrill v. Humphrey, Auditor-General, 24 Mich. 170, Justice Cooley pointed out that ‘The courts cannot sit in judgment upon supposed errors of the assessor, and substitute their own opinions for the conclusions he has drawn, where it is his judgment, and not theirs, to which the subject has been confided by the law.’

However, the principle is clear that intentional overassessment is fraud, and equity has jurisdiction to relieve the burdenof such oppression. Sloman-Polk Co. v. Detroit, supra. The evidence must clearly show intentional violation of duty or disregard of the taxpayer's rights. Copper Range Co. v. Adams Tp., 208 Mich. 209, 175 N.W. 282.

Plaintiff challenges the assessment by the argument that there is only one proper method of valuation, that is, by determination of the usual selling price, and since there is no claim that the actual price paid was not the usual selling price, the court should determine that the correct assessment in this case is $92,000. This figure is the sum of the purchase price of the building ($75,000) and the cost of repairs ($17,000). It is contended that the assessors gave too great weight to the reproduction cost less depreciation figure in arriving at the assessment, and for the type of building in question, its age, location, and actual sale price to plaintiff, the method is clearly unreasonable, citing City of Detroit v. Detroit & Canada Tunnel Co., 6 Cir., 92 F.2d 833, 837, wherein it was held that ‘persistently adhering to cost less depreciation as a formula’ and ‘ignoring the capitalized income method’ constituted a denial of equal protection of the law. We do not think the assessment before us may be so criticized.

The bargain of the taxpayer is not controlling evidence of the ‘usual selling price * * * at private sale.’ Where property is singular in character and sales are separated by many years, there is no usual selling price in the sense the expression is used to describe the focus of buyers and sellers of commodities actively exchanged in an open market. Nor did the legislature intend that a single event be conclusive. In the valuation problem the assessing officers had to resolve in the instant case, the test of the ‘usual selling price’ is merely a guide for determination; under the circumstances before us the definition provides a standard for a hypothetical or fictitious market. It was the...