American Bauxite Company v. Board of Equalization of Saline County

• Decision Date: 21 June 1915
• Docket Number: 68
• Citation: 177 S.W. 1151,119 Ark. 362
• Parties: AMERICAN BAUXITE COMPANY v. BOARD OF EQUALIZATION OF SALINE COUNTY
• Court: Arkansas Supreme Court

177 S.W. 1151

119 Ark. 362

AMERICAN BAUXITE COMPANY v. BOARD OF EQUALIZATION OF SALINE COUNTY

No. 68

Supreme Court of Arkansas

June 21, 1915

Appeal from Saline Circuit Court; W. H. Evans, Judge; reversed.

Judgment reversed and cause remanded.

Mehaffy Reid & Mehaffy and Rose, Hemingway, Cantrell, Loughborough & Miles, for appellant.

1. The taxing authorities of Saline County should have taxed each separate tract of land involved in this appeal according to the market value of that tract. Article 16, § 5 Constitution; Kirby's Dig., § 6974; 62 Ark. 461 463. As to what constitutes "market value," see 49 Ark. 381, 390; 25 N.J.Eq. 144-147; 27 A. 1057; 30 P. 111, 49 Kan. 17; 6 S.Ct. 801, 805; 117 U.S. 379, 29 L.Ed. 924; 38 A. 108, 90 Me. 193; 74 S.W. 370, 373; 101 Mo.App. 32; 36 A. 892, 60 N. J. Law 70.

The "unit theory" of taxation of appellant's property attempted to be applied by appellee, would not only be contrary to our Constitution and laws, but to the Constitution of the United States as well, as it would result in the taxation of property outside of the State. 188 U.S. 385; 198 U.S. 341; 199 U.S. 194, 204.

2. Thirty-five per cent of the market value was the basis of valuation in Saline County in 1913, and the court, at appellant's request, should have made a finding of the valuation on thirty-five per cent of the market value.

George Vaughan and Wm. L. Moose, Attorney General, for appellee.

1. The unit rule of valuation is the exclusive method provided for the primary ascertainment of the value of all corporate property for tax purposes. It is a rule that has been approved by this court. 78 Ark. 192; Acts 1907, p. 1225; 94 Ark. 235; article 16, sections 5, 7 Constitution. And this doctrine is supported by many eminent authorities. 37 L. R. A. 371, notes on 63 Ark. 576; Beale on Foreign Corporations and the Taxation of Corporations, Both Foreign and Domestic, § 507; Judson on Taxation, 265, §§ 239, 240, 249, 251, 260; 11 Cyclopedia of U.S. Supreme Court Reports, 449; Gray on Limitation of Taxing Power, § 61; 65 Mo. 502; 190 U.S. 413, 47 L.Ed. 1116. The Supreme Courts of numerous States have held that no distinction is justified between a foreign corporation doing business in a State, and one organized within the State, and have applied the unit rule for the apportionment of assets of foreign corporations. 116 N.C. 441, 21 S.E. 423; 39 S. E. (N. C.) 18; 143 U.S. 305; 159 N.Y. 70, 45 L. R. A. 126; 161 N.Y. 52; 185 N.Y. 546; 133 N.Y. 323; 104 Miss. 381; 55 N.Y.S. 317; 109 Id. 868.

2. The value of mineral lands consists largely, if not exclusively, in the value of the underlying ores, and ordinary rules for the appraisement of real estate do not apply.

To assess each separate tract of land involved in this appeal "according to its market value," is a loose method not adapted to mineral lands.

How can each separate tract be assessed "according to its market value" when there has been no sale or transfer for twenty years?

In valuing mineral lands for tax purposes, the basis is the actual or true value, as limited or defined by the "market value" of the ore contents. 162 N.Y. 327; 17 L. R. A. 33, 37; 123 Wis. 61; 7 So. 509; 84 A. 761; 138 N.W. 707; 104 P. 180; 229 P. 460; 100 N.E. 561, 563.

As to the valuation of interstate properties, see 10 A. 849; 51 N.H. 455; 85 Me. 330; 21 L. R. A. 525; 66 N.H. 562; 90 Me. 60; 91 N.E. 638; 63 N.W. 746; 131 N.W. 669.

3. The unit rule prescribed by Kirby's Digest, §§ 6936, 6937, is applicable to the valuation of appellant's property. The principles applicable in cases dealing with the property of express, railroad and telegraph companies, banks and all other industrial corporations organized for profit, also rightfully apply to this case. 29 S.W. 116; 103 P. 341; 90 N.W. 298, 300; 106 S.W. 247; 49 So. 404; 78 N.W. 1032; 64 N.E. 661.

OPINION

SMITH, J.

This is an appeal from a judgment of the circuit court of Saline County, fixing the values for taxation for the year 1913 of certain tracts of land belonging to the appellant, the American Bauxite Company. The county assessor assessed the lands at an aggregate valuation of $ 47,000,000, and upon an appeal from this assessment to the board of equalization, the valuation was reduced to approximately $ 2,500,000. This valuation was arrived at by the board of equalization by estimating that appellant's lands contained practically 5,000,000 tons of commercial bauxite, which had a value of $ 1 a ton, and 50 per cent of this amount was taken as the proper valuation to assess against appellant's lands upon the theory that property situated in that county was assessed at 50 per cent of its actual value.

An appeal was taken to the county court, where the assessment of the equalization board was sustained, and an appeal was prosecuted from the judgment of that court to the circuit court, where the valuations were reduced to an aggregate of $ 623,100, and this appeal has been prosecuted from the judgment of the court fixing these valuations.

The proof shows that the appellant company paid as high as $ 1 per ton royalty for bauxite, but that this was the highest royalty paid in any case.

No attempt is now made to justify the assessment made by the county assessor, but it is insisted upon the cross-appeal which was taken in this case that the judgment of the circuit court should be set aside and the assessed value, as fixed by the board of equalization, and by the county court, should be declared the true and proper valuation.

Exceedingly interesting briefs have been filed in this case, and a great many questions, both of law and fact, are discussed therein; but we find it unnecessary to review all these questions in this opinion.

The record in the case is singularly free from questions of veracity, or, for that matter, disputed questions of fact, and the appellant company appears to have manifested a most commendable frankness and candor in the production and exhibition of evidence showing the operation of its own business, and that of affiliated concerns engaged with it in the reduction of its raw material to the finished product.

Bauxite is a term given to an earth that contains aluminum in sufficient quantities to make it worth working for the extraction of aluminum. It is shown that aluminum is the third most common element in the earth, but for bauxite to have commercial value, it must contain as much as 55 per cent alumina, and not exceeding 7 per cent silica, an element the presence of which renders difficult and expensive the extraction of alumina.

The lands in question are owned by the American Bauxite Company, but it is shown that the Aluminum Company of America owns most of the stock of the appellant company, and, in addition, also owns the controlling stock of other corporations engaged in carrying the bauxite through intermediary processes. It is shown that at one time the process for the reduction of bauxite was monopolized by a patent, but that this monopoly expired with the expiration of the patent in 1903, since which time neither the aluminum company nor any other company has any special privileges from patents or secret processes, and the industry is now one which is open to any who desire to enter it, and that there is competition in the production of aluminum, although the aluminum company was shown to be the principal concern engaged in its manufacture.

We are of opinion that, even though $ 1 per ton was a fair royalty value of all the bauxite owned by the appellant company, and the proof shows that this would be an excessive value for this bauxite when considered as a whole--that value could not form a proper basis for assessment, as this royalty is not paid until the bauxite has been mined, whereas the proof in the present case shows that with the facilities at hand, the appellant company will be engaged anywhere from thirty to fifty years in mining its bauxite.

Appellees insist, however, that the valuation of the several tracts of land should be arrived at by treating them as part of a profit-producing plant, of which the property of the Aluminum Company of America and all of its subsidiary companies should be treated as a unit, and that the proportion of the whole borne by the market value of the lands in Arkansas to the entire value should be added to the market value of the lands in Arkansas; and the theory is also urged that for the purposes of taxation the profit-producing capacity of the industry should be capitalized, and that the sum of money upon which a reasonable dividend is earned or profit yielded should form the basis for the assessed valuation. Bearing upon this question, numerous experts have testified, and much valuable and interesting information has been collected, and the history of this industry is gone into in great detail and in a most interesting manner. The proof shows the cost of mining a ton of bauxite, and the method and cost of its reduction to the finished product, and it is urged that these facts should be considered in determining the proper valuation for purposes of assessment of the lands in question, inasmuch as the earning of these profits is dependent upon the extraction of the bauxite from the lands in question. But the proof also shows that bauxite is found in commercial quantities in several other States.

It was shown that the appellant company bought lands in Saline and Pulaski counties, and that at the time of their purchase, the presence of the bauxite was known, and indeed, the evidence rather tends to show that the lands do not contain the quantity of bauxite which they were estimated to contain at the time of their purchase. The appellant company paid something less than $ 600,000 for these lands, of which about $ 500,000 was paid for the 5,000...