Assessors of Quincy v. Boston Consol. Gas Co.

• Citation: 309 Mass. 60,34 N.E.2d 623
• Parties: ASSESSORS OF QUINCY v. BOSTON CONSOL. GAS CO.
• Decision Date: 26 May 1941
• Court: United States State Supreme Judicial Court of Massachusetts

309 Mass. 60
34 N.E.2d 623

ASSESSORS OF QUINCY
v.
BOSTON CONSOL. GAS CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 26, 1941.

Appeal from Appellate Tax Board.

Proceeding between Assessors of Quincy and the Boston Consolidated Gas Company. From a decision of the Appellate Tax Board granting a partial abatement of taxes, the Assessors of Quincy appeal.

Order in accordance with opinion.

[34 N.E.2d 624]

Argued before FIELD, C. J., and DONAHUE, LUMMUS, DOLAN, and RONAN, JJ.

F. D. Coffman, of Quincy, for Board of Assessors.

J. S. Eastham and C. R. Walton, both of Boston, for taxpayer.

RONAN, Justice.

This is an appeal, by the assessors of Quincy, from a decision of the Appellate Tax Board granting a partial abatement of taxes assessed for 1935 on certain personal property of the Boston Consolidated Gas Company, a domestic corporation, engaged in the manufacture, purchase, distribution and sale of gas in Boston and in various cities and towns including Quincy

The Boston Consolidated Gas Company, hereinafter called the company, manufactures

[34 N.E.2d 625]

a considerable quantity of gas at its plant in Everett but it purchases the greater portion of the gas that it sells to its customers. The gas is vonveyed by pipe lines to the various districts that the company serves, where, by means of connections with these pipes, the gas is distributed and sold to its customers. The mains supplying gas to Quincy run through other municipalities. The company owns gas holders and other equipment necessary for the operation of this distributing system. It maintains service stations and sales offices in the territory in which its gas mains are located. Its principal office is located at Boston, where a large clerical staff is employed.

The business in Quincy was acquired by the company in 1928 in exchange for its stock, of the par value of $1,568,000, which it gave to the Massachusetts Gas Companies. At that time the Massachusetts Gas Companies owned the capital stock of both the seller and purchaser.

The taxable personal property in Quincy on January 1, 1935, consisted principally of street mains, service connections and customers' meters. There was also a small amount of other property comprising street lighting, boiler plant, garage and yard equipment. The company seasonably filed a list of its taxable property, which included nine hundred forty-seven thousand one hundred ninety-seven feet of gas mains, sixteen thousand six hundred fifty-five feet of service connections, twenty thousand eight hundred thirty-one meters, and the miscellaneous property above mentioned. This list, however, contained no estimate of the value of any of the property. It appeared at the hearing before the board that the company owned two thousand sixty-one feet of mains, and thirty-five feet of service connections in excess of the quantities stated in the list, and that it had six meters less than the number reported in the list. The board found that the company believed at the time it prepared and filed the list that it was accurate; that it was filed in good faith; that the variations between the amounts mentioned in the list and the actual quantities were small; that the list was accepted by the assessors without further inquiry of the company; and that, so far as it was a matter of fact, the list was sufficient.

The dispute between the parties centers upon the fair cash value of the property. There was evidence that the reproduction cost less depreciation was $2,609,776, according to the testimony introduced by the company, and $3,379,432, according to that introduced by the assessors. The value of this property was carried on the books of the company as $2,221,789.71, but this was based not on actual cost but on an apportionment of the entire property of the company plus additions made since 1931 to the Quincy branch. There was other testimony to the effect that the book value if properly computed would amount to $2,031,904.99 or $2,621,673. The gross income received by the company in 1934 from its business in Quincy was $614,776.82. The expenses incurred in conducting this business were not segregated in the books of the company, and various methods of allocating the expenses to it were introduced in evidence in order to determine the net income of the Quincy branch. There was testimony that the most reliable method was to consider the actual expenses where they were known, and to apportion the other expenses properly allocable in part to the Quincy business, each item of these expenses being apportioned according to the method best suited to correspond with actual conditions in Quincy. In some instances these expenses were apportioned in the ratio that the number of meters in Quincy bore to the total meters in use by the company, and in other instances in the ratio that gross sales in Quincy bore to total gross sales of the company. The deduction of such expenses was in accordance with the classification of accounts prescribed by the department of public utilities. The net income of the Quincy business in 1934, as thus computed, was $110,421.85, but would be $140,994.15 if the property was assessed upon a valuation of $1,394,685. The capitalization of these estimated net earnings at seven and one-half per cent would show a valuation (after deducting real estate, nontaxable personal property, working capital and going concern value-all amounting to $485,239) of $1,394,685 for the personal property now in question.

The board, upon a consideration of all the evidence, including testimony of increasing competition of other fuels for heating and cooking, general business conditions, the regulation of the gas industry by the Commonwealth and the locality where the business was conducted, found that the fair cash value of the property on January 1, 1935, was $1,750,000 and not $2,425,000 as determined by the assessors.

[34 N.E.2d 626]

It found that the company was entitled to an abatement of $23,220.

The principal contention of the assessors is that the board erred in ruling that evidence of net income was admissible upon the question of the fair cash value of the property and in considering this evidence in ascertaining the valuation of the property. They also contend that the list of its taxable property filed by the company was insufficient because it did not state the value of the property enumerated in the list and that, consequently, the board had no jurisdiction to hear an appeal from the refusal of the assessors to abate the tax.

The tax base is the fair cash value of the property. Fair cash value in our taxing statutes has been construed to mean fair market value, which is the price that an owner willing but not compelled to sell ought to receive from one willing but not compelled to buy. National Bank of Commerce v. New Bedford, 175 Mass. 257, 262, 56 N.E. 288;Massachsetts General Hospital v. Belmont, 233 Mass. 190, 206, 124 N.E. 21;Revere v. Revere Construction Co., 285 Mass. 243, 247, 189 N.E. 73;Amory v. Assessors of Boston, 306 Mass. 354, 28 N.E.2d 436;Commissioner of Corporations & Taxation v. Worcester County Trust Co., 305 Mass. 460, 26 N.E.2d 305. It is a standard that is easily understood. It is employed not only for the purpose of taxation but also ordinarily, in awarding compensation for property taken by eminent domain, and to a greater or less extent in establishing the rates to be charged by public utilities for the services rendered by them to the public. Boston Chamber of Commerce v. Boston, 195 Mass. 338, 81 N.E. 244, affirmed 217 U.S. 189, 30 S.Ct. 459, 54 L.Ed. 725;Perley v. Cambridge, 220 Mass. 507, 512, 513, 108 N.E. 494, L.R.A.1915E, 432;Smith v. Commonwealth, 210 Mass. 259, 96 N.E. 666, Ann.Cas.1912C, 1230;West v. Chesapeake & Potomac Telephone Co., 295 U.S. 662, 671, 55 S.Ct. 894, 79 L.Ed. 1640;Great Northern Railway Co. v. Weeks, 297 U.S. 135, 139, 56 S.Ct. 426, 80 L.Ed. 532.

It was the duty of the board to find the fair market value of the property. All the uses for which the property was adapted could be shown and, while its value for any special purpose was not the test, the board in ascertaining its market value could consider such a purpose together with any other use to which the property might be profitably put. Maynard v. Northampton, 157 Mass. 218, 219, 31 N.E. 1062;Holyhood Cemetery Association v. Brookline, 215 Mass. 255, 256, 102 N.E. 340;Lodge v. Swampscott, 216 Mass. 260, 103 N.E. 635;Meisel Press Manuf. Co. v. Boston, 272 Mass. 372, 172 N.E. 356;Olson v. United States, 292 U.S. 246, 54 S.Ct. 704, 78 L.Ed. 1236.

The rental value of land is competent as showing its market value, Lincoln v. Commonwealth, 164 Mass. 368, 41 N.E. 489;Ryder v. Lexington, 303 Mass. 281, 291, 292, 21 N.E.2d 382, although its earning capacity rather than its actual income would seem to be more appropriate for this purpose. Boston Belting Co. v. Boston, 183 Mass. 254, 67 N.E. 428;Donovan v. Haverhill, 247 Mass. 69, 141 N.E. 564, 30 A.L.R. 358;Harris Trust & Savings Bank v. Earl, 8 Cir., 26 F.2d 617;Somers v. Meriden, 119 Conn. 5, 174 A. 184, 95 A.L.R. 434;Central Maine Power Co. v. Turner, 128 Me. 486, 148 A. 799. And the capacity of the land to produce income may be shown by the character and extent of the use for which it has actually been employed. Pegler v. Hyde Park, 176 Mass. 101, 102, 57 N.E. 327;Wellington v. Cambridge, 220 Mass. 312, 318, 107 N.E. 976;Vineyard Grove Co. v. Oak Bluffs, 265 Mass. 270, 278, 163 N.E. 888. But the general rule is that the profits from a business located upon the land are not a fair measure of the value of the land because the financial returns from a commercial undertaking are dependent upon so many material factors having no real relation to the land itself that the profits cannot be said to be derived from the land. Whitman v. Boston & Maine Railroad, 3 Allen 133, 142;Cobb v. Boston, 109 Mass. 438;Whiting v. Commonwealth, 196 Mass. 468, 470, 82 N.E. 670; Brackett v. Commonwealth, 223 Mass....