Bankers Life Co. v. Zirbel

• Decision Date: 09 March 1948
• Docket Number: 47074.
• Citation: 31 N.W.2d 368,239 Iowa 275
• Parties: BANKERS LIFE CO. v. ZIRBEL et al.
• Court: Iowa Supreme Court

31 N.W.2d 368

239 Iowa 275

BANKERS LIFE CO. v. ZIRBEL et al.

No. 47074.

Supreme Court of Iowa

March 9, 1948

Bradshaw Fowler, Proctor & Fairgrave, of Des Moines, for appellant.

F T. Van Liew and Herrick, Sloan & Langdon, all of Des Moines, for appellees.

SMITH Justice.

The property in question extends from Seventh to Eighth Streets in the City of Des Moines, a distance of 280.5 feet, and from High Street north approximately 234 feet including a part of the vacated portion of Pleasant Street.

The building fronts on High Street and the main part is 93 feet deep north and south and 239 feet long east and west. It has six full floors above basement and ground floor and a smaller dimension seventh floor.

An L on the north is 123 feet long east and west and 90 feet north and south. It is only the height of the second story of the main part and contains a gymnasium, locker rooms and gallery on the basement and ground floor levels and an auditorium on the first and second floor levels.

The 1941 assessment appealed from fixed the actual land value at $124,480 and building value at $2,271,240, total actual value $2,395,720. The 60% taxable value was thereby established as $1,437,430. The board of review and district court confirmed the assessment as made. On this appeal no serious complaint is made of the land valuation. The controversy seems to concern only the building.

The building value of $2,271,240 was arrived at by deducting 10% from the appraisal of $2,523,600 made by an appraisement company which was employed to value the central business district of the city in connection with the 1941 assessment. This 10% deduction was not made with reference to this particular property alone but was the result of a general horizontal 10% cut of most of the appraisal figures set by the company throughout the city. The appraisal company's valuation of $2,523,600 ont he building was arrived at by using an estimated replacement value of $2,804,000 and deducting 10% initial depreciation therefrom.

However, the company appraiser, after testifying clearly as above stated added a qualifying and apparently contradictory statement: '* * * If I had been appraising the building according to its reproductive cost,--replacement cost, less depreciation, I should have had a total replacement value of approximately $3,000,000, and one per cent depreciation--therefore, a sound value of $2,970,000. As I pointed out, there are other factors that I adopted. I considered the value of the property for the purpose for which it is being utilized. I considered what it might conceivably be used for.' He said on cross-examination:

'I did not ask anybody what they thought the building might bring if placed on the open market. However, I asked myself that question, knowing that there was a possibility of appeal being taken from my valuation and I came to the conclusion that assuming a willing seller who did not have to sell, and a willing buyer who did not have to buy, that the property would bring not less than the total value that I placed on it.'

The building was completed in 1940 and this first assessment of it was as of January 1, 1941. In its 1940 report to the Insurance Commissioner, sworn to in February, 1941, plaintiff gave the book and market value of the property as of December 31, 1940, $2,857,156.75 and its cost, $3,129,610.60. This included ground and building.

A plat offered by plaintiff shows the business district west of the river as roughly seven blocks north and south by nine blocks east and west. Plaintiff's building is shown to be approximately three blocks from both the office building center and the retail center and at the north edge of the district.

Witnesses on both sides agree in praise of the building as representing the ultimate in both beauty and utility of design and construction. Plaintiff, without admitting extravagance, argues that much of the actual cost of the building, because of its location, unnecessary perfection, and monumental character, is not and cannot be reflected in its actual value for assessment purposes.

Illustrative of this point one witness for plaintiff estimated the cost of a downtown building of comparable net office area and of 'typical, standard column beam construction' at somewhat less than one-half the cost of plaintiff's building. This of course involved entire omission of the gymnasium and auditorium features and the use of less expensive but standard material in many parts of the structure.

Along the same line this witness estimated what would have been the cost of construction of plaintiff's building (without the auditorium wing) built in the same manner as was the United Life Building in Omaha, Nebraska. He arrived at a figure about 58.5% of its cost as actually constructed.

It would be interesting to describe in detail the features which plaintiff contends added to the cost, but not to the actual and taxable value, of the building. The foregoing is sufficient however to present appellant's contention.

Eleven propositions for reversal are relied on. For our purpose they may be summarized and compressed to the following: (1) The assessment is not entitled to the benefit of the usual presumption in favor of the judgment of the assessor; (2) the assessment should have been based on market value, and replacement cost, less physical depreciation, is not the measure of market value; (3) allowance should have been made for 'functional depreciation' on account of location and special purpose and monumental character of the building; (4) valuations reported to the Insurance Commissioner were not conclusive; (5) investment of plaintiff's funds in the building may have been a sound one for it, though not for investors generally, and therefore did not establish market value; (6) occupancy of building by plaintiff itself instead of by tenant was not a factor affecting market value.

I. Plaintiff's first proposition relied on must be sustained on the authority of Iowa Bldg. Corporation v. Zirbel, 237 Iowa 242, 21 N.W.2d 576, which also involved a 1941 Des Moines assessment. The value here was of course fixed in the same manner as was the value involved in that case. The 10% over-all reduction of the appraisement presumably was an exercise of the judgment of the assessor as to the general level of values of all properties but it did not result in any equalization of values. The custom of accepting the judgment of a hired appraisal firm as fixing the proper relationship of values of the individual properties with each other cannot be approved for the purpose of according it the benefit of the 'strong' presumption usually to be accorded the judgment of the assessor.

Nevertheless it is true here as it was in the Zirbel case that under the statute the burden is upon the appealing taxpayer to establish that the assessment is in fact excessive or inequitable, however it was computed. We must weigh the evidence to determine whether that burden has been sustained.

II. Appellant argues that where property has a market value, actual value and market value are one and the same. This does not seem to be an entirely sound proposition in view of the language of the statute: 'In arriving at said actual value the assessor shall take into consideration its productive and earning capacity, if any, past, present, and prospective, its market value, if any, and all other matters that affect the actual value of the property.' Section 441.4, Iowa Code, 1946. This language indicates that 'market value, if any' is only an element to be considered in fixing 'actual' value.

However, in Hawkeye Portland Cement Co. v. Board of Review, 205 Iowa 161, 166, 217 N.W. 837, 840, in speaking of this statutory language it is said: 'It thus becomes apparent that the Legislature had in mind that there might be property subject to taxation which would have no market value. Under the present statute, the assessor is to take into consideration the market value, if any, of the property. True, he is to take into consideration the proeuctive and earning capacity, if any, past, present, and prospective, but these are all elements which go to make up market value, as well as actual value. If the property has a market value then, as it occurs to us, there can ordinarily be no distinction between market value and actual value.'

Preceding this language the opinion points out that formerly the statute provided: 'Actual value of property * * * shall mean its value in the market in the ordinary course of trade'; and that this provision had been amended to read as quoted above. The opinion later says: 'Thus, it is quite clear that, if property has a market value, said market value and the actual value are usually the exact equivalent of each other.'

The Hawkeye Portland Cement Co. case is cited and quoted in Call v. Board of Review, 227 Iowa 1116, 1121, 290 N.W. 109; Lincoln Joint Stock Land Bank v. Board of Review, 227 Iowa 1136, 1138, 290 N.W. 94.

From this language it is argued that if the Bankers Life Building had any 'market value' such value must have been the 'actual value' and fullowing this premise appellant proceeds to demonstrate that it did have market value because various witnesses testified it had. One said: 'I think every property has a market value.' Another said: 'I regard this property as having a market value.' And still another: 'There is a market value for the Bankers Life Building.'

These were plaintiff's witnesses. Even witnesses for defendant expressed similar opinions: 'It is my opinion that the Bankers Life Building does have marketability and market value'; 'I don't think there is any question but what a buyer could be found for that building at a very substantial figure'; 'I think any building has...