Boise Cascade Corp. v. Pierce County

• Decision Date: 12 December 1974
• Docket Number: No. 43162,43162
• Citation: 529 P.2d 9,84 Wn.2d 667
• Parties: BOISE CASCADE CORPORATION, Appellant, v. PIERCE COUNTY, Respondent.
• Court: Washington Supreme Court

Page 667

84 Wn.2d 667

529 P.2d 9

BOISE CASCADE CORPORATION, Appellant, v. PIERCE COUNTY, Respondent.

No. 43162.

Supreme Court of Washington, En Banc.

Dec. 12, 1974.

Gordon, Thomas, Honeywell, Malanca, Peterson, O'Hern & Johnson, E. M. Murray, William E. Holt, Tacoma, for appellant.

Ronald L. Hendry, Pros. Atty., for Pierce County, Michael B. Hansen, Deputy Pros. Atty., Tacoma, for respondent.

HUNTER, Associate Justice.

This case involves an action brought by the plaintiff (appellant), Boise Cascade Corporation (hereinafter referred to as 'Boise'), against the defendant (respondent), Pierce County, in the Superior Court for Pierce County, to review a decision by the Washington State Board of Tax Appeals pursuant to RCW 82.03.180, and as a suit for refund of taxes paid to the defendant pursuant to RCW 84.68.020. The trial court awarded a judgment for the plaintiff against the defendant for taxes unlawfully and illegally assessed, and both parties thereafter filed a notice of appeal. The issues involved in the case center around the proper valuation of certain personal property owned by the plaintiff at its West Tacoma Newsprint plant, Steilacoom, Washington, during the assessment years of 1970 and 1971, for taxes payable in 1971 and 1972.

On January 1, 1970, and January 1, 1971, the plaintiff was the owner of certain personal property located at its West Tacoma Newsprint division in Steilacoom, Pierce County, Washington. Although the property in question is classified as personal property for tax purposes, it is, for the most part, large industrial machinery and equipment that is not readily or economically movable from its location. In evaluating the capabilities of its newsprint manufacturing facility at Steilacoom at this time, the plaintiff recognized that there were certain functional problems and deficiencies in the operation of the plant. The property tax manager employed by the plaintiff felt that the standard affidavit and listing form submitted to the county assessor pursuant to RCW 84.40.040 would overvalue the true and fair value of its machinery and equipment account, and therefore an appraisal of the personal property in the plant should be undertaken. Consequently, the plaintiff thereafter hired General Appraisal Company to prepare a so-called 'nuts and bolts' appraisal, i.e., reproduction costs less depreciation, both physical and functional. This comprehensive appraisal indicated a true value of the personal property as follows:

                Machinery and equipment   $7,030,900
                Transportation equipment     272,710
                Spare machinery              582,000
                Office equipment              41,600
                                          $7,927,210
                                          ----------
                                             rounded  to $7,930,000
                

This appraisal was later submitted to the Pierce County assessor in the latter part of May, 1970, when the plaintiff requested a reappraisal of the value of certain of its personal property. At this time the county assessor requested the special assistance of the Washington State Department of Revenue pursuant to RCW 84.41.060, to evaluate the appraisal undertaken by General Appraisal Company.

On June 23, 1970, Mr. Leslie D. Anderson, Supervisor of Appraisals for the Department of Revenue, wrote a letter to the Pierce County assessor commenting upon the appraisal and making certain suggestions. The letter accepted a part of General Appraisal Company's appraisal, which established the reproduction cost, less depreciation, and system functional obsolescence, but refused to accept $6,270,980 in overall plant functional obsolescence determined by General Appraisal Company. The letter, therefore, refused to accept the ultimate opinion by General Appraisal Company of the fair market value of the personal property of $7,930,000. On June 25, 1970, the Pierce County assessor, based solely upon the June 23rd letter of the Department of Revenue, assessed the value of the personal property of the plaintiff as of January 1, 1970, at an alleged true value of $14,198,190, of which $13,301,880 was assigned to the machinery and equipment account.

Following the assessment of the plaintiff's personal property by the county assessor, the plaintiff filed a complaint with the Pierce County Board of Equalization protesting the county assessor's determination of value of the machinery and equipment classification, and alleging the personal property in question to have a true value of $7,930,000 as of January 1, 1970. After a hearing, the Board of Equalization sustained the determination of value as found by the county assessor. On March 10, 1971, the plaintiff petitioned the Board of Tax Appeals of the State of Washington for review of the decision by the Pierce County Board of Equalization, and requested an Informal hearing pursuant to RCW 82.03.140. During this time period the Pierce County treasurer issued a personal property tax statement for taxes due based upon the assessment by the county assessor, and on May 21, 1971, the plaintiff paid to the defendant under written protest the sum of $104,965.16 representing the first half of 1971 personal property taxes based upon the assessment by the Pierce County assessor. Meanwhile, on August 27, 1971, the Board of Tax Appeals of the State of Washington rendered a decision sustaining the determination of the Board of Equalization and the Pierce County assessor.

On October 6, 1971, the plaintiff sought a 'de novo' review of the decision by the Board of Tax Appeals of the State of Washington in the Superior Court for Pierce County pursuant to RCW 82.03.180, and instituted an action for refund of taxes pursuant to RCW 84.68.020. On October 29, 1971, the plaintiff paid to the defendant under written protest the sum of $104,965.16 representing the second half of 1971 personal property taxes based upon the assessed value as determined by the county assessor, and the plaintiff's appeal and complaint for refund of taxes was accordingly amended on November 1, 1971. In accordance with the Department of Revenue's letter of June 23, 1970, the Pierce County assessor continued the determination (with some additions) that the true and fair value of the plaintiff's personal property was $15,189,060 as of January 1, 1971, whereas the plaintiff claimed that the true and fair value of the property in question as of January 1, 1971, was $8,619,531. Consequently, on April 28, 1972, the plaintiff paid the defendant under written protest the sum of $111,943.37 representing the first half of the 1972 personal property taxes, and the plaintiff's appeal and complaint for refund of taxes was thereafter amended on May 9, 1972.

The trial of the case commenced on June 58 1972, in the Superior Court for Pierce County, where expert testimony and the arguments of counsel were heard before the judge without a jury. The trial of the case continued until June 14, 1972, and 5, 1972, in the Superior Court for Pierce 16, 1972, the trial court rendered an oral decision in the case, and entered findings of fact and conclusions of law on December 27, 1972. The court found that the assessments made by the county assessor for the assessment dates, January 1, 1970 and January 1, 1971, were arbitrary and capricious and constituted constructive fraud upon the plaintiff. The court reasoned that the county assessor had failed to make a determination of the true and fair value of the plaintiff's personal property as required by law since the assessment was based solely upon the June 23rd letter from the Department of Revenue. The court held that not only was the valuation of the plaintiff's personal property based upon a fundamentally wrong premise in that the county assessor failed to fully recognize overall functional obsolescence which existed in the plant, but that the value placed upon the plaintiff's property was grossly inequitable and palpably excessive. Furthermore, the court found that the appraisal technique employed by General Appraisal Company was improper and failed to apply the correct test to determine the fair market value of the plaintiff's property. The trial court accordingly established that the true and fair value of the plaintiff's property (exclusive of inventory) on January 1, 1970, was $11,198,190, and entered judgment for the plaintiff in the sum of $42,029.45, together with interest in the sum of $3,514.23 and costs in accordance with law. In addition, the trial court held that the true and fair value of the plaintiff's personal property on January 1, 1971 (exclusive of inventory) was $11,310,107, and determined that the balance of taxes owing by the plaintiff for 1972, after allowing for credit for taxes paid, amounted to $67,058.28. Neither party was satisfied. The plaintiff thereafter appealed that portion of the judgment which denied Boise the full relief prayed for in the amended complaint, and the defendant filed a notice of cross-appeal, appealing the judgment awarded to the plaintiff.

The major contention by the plaintiff in this case is that the county assessor acted improperly in failing to make an allowance for overall plant functional obsolescence in arriving at the true and fair value of the plaintiff's property. The record clearly shows that overall plant functional obsolescence should have been allowed as an item of depreciation.

This plant, prior to its acquisition by the plaintiff in 1969, was operated by a group of newspaper publishers for the production of newsprint for their own use and not for profit. The plaintiff's use of the plant for profit necessarily required a more efficient operation. Therefore, a Mr. Sandwell, an expert in plant analysis, was employed by the plaintiff to make a survey of the plant for repair and modernization. This report clearly disclosed that certain parts of the plant could not be effectively modernized which affected its total production capacity reflecting an overall plant obsolescence.

Under the circumstances of this...