Ewa Plantation Co., In re

• Decision Date: 16 July 1963
• Docket Number: No. 4189,4189
• Citation: 384 P.2d 287,47 Haw. 41
• Parties: In the Matter of the Taxes of EWA PLANTATION COMPANY and Waialua Agricultural Company, Limited.
• Court: Hawaii Supreme Court

Page 287

384 P.2d 287

47 Haw. 41

In the Matter of the Taxes of EWA PLANTATION COMPANY and Waialua Agricultural Company, Limited.

No. 4189.

Supreme Court of Hawai'i.

July 16, 1963.

SYLLABUS BY THE COURT

1. Upon appeal from the tax appeal court, the appellant has the burden of establishing that the decision of that court was 'clearly erroneous.'

2. Reliance on past assessment values as the sole basis from which to compute, percentagewise, present values for current assessment of real property taxes is not in itself a sound method of approaching an assessment.

3. An erroneous assessment is not established merely because other property has been assessed too low if the tax assessor acted in good faith and if other property in general has not been assessed at a lower rate. The burden is on the taxpayer to show clearly the invalidity claimed by overcoming the presumption that the tax assessor has faithfully performed his duty.

4. Where a formula is utilized by the tax assessor and the results therefrom reflect current land values, not only is it incumbent on the taxpayer to show conclusively that the method employed was incorrect but that the results incorporated in the assessment do not represent the fair and reasonable value of the land assessed.

R. B. Greig, Deputy Atty. Gen., Honolulu, for appellant Tax Commissioner.

R. E. Stifel, Honolulu (Anderson, Wrenn & Jenks, Honolulu, on the brief), for appellees.

Before TSUKIYAMA, C. J., CASSIDY and WIRTZ, JJ., KING, Circuit Judge, in place of LEWIS, J., disqualified, and MONDEN, Circuit Judge, in place of MIZUHA, J., disqualified.

WIRTZ, Justice.

This case involves real property taxes for Ewa Plantation Company and Waialua Aggricultural Company, Limited, for the year 1956. The totla tax for each taxpayer was computed on the basis of the value of an average acre of cane land. The taxpayers did not object to the method whereby the value of an average acre of cane land was used to determine the value of all of their cane land for assessment purposes. Rather, the dispute centered on the method used by the Tax Commissioner of the Territory of Hawaii ¹ to determine the value of an average acre of cane land and to the values obtained by that method. The sole question on appeal, as it was in the tax appeal court, is the value of an average acre of cane land of each of the taxpayers.

In 1955 the tax commissioner formed a committee to study and recommend fair and reasonable values of sugar cane lands for the assessment of real property taxes in 1956. It had been the practice to assess sugar cane lands every four years and the previous assessment had been made in 1952. The formula and the values submitted by the committee were adopted by the tax commissioner in making the assessments from which the taxpayers appealed to the tax appeal court. The values forming the basis of this assessment for 1956 were $735 for Ewa Plantation Company and $658 for Waialua Agricultural Company, Limited.

The taxpayers' position was that the 1952 values plus an increase of ten per cent. (10%) represented a fair and reasonable value. Under the taxpayers' method of valuation, the resultant values were $635 for Ewa Plantation Company and $576 for Waialua Agricultural Company, Limited.

The tax appeal court, in rejecting the values derived from the formula of the committee adopted by the tax commissioner, concluded that the values produced by the tax commissioner's formula were not accurate and should not be used for taxpayers' lands. It then proceeded to value taxpayers' sugar cane lands by engrafting on the method advocated by the taxpayers an additional five per cent. (5%) on the 1952 values to compensate for the island differential in values. This resulted in a value of $664.30 for Ewa Plantation Company and $603.75 for Waialua Agricultural Company, Limited. From this decision of the tax appeal court, entered on April 10, 1959, the tax commissioner has brought this appeal.

It is well established that upon an appeal from the tax appeal court, the appellant has the burden of establishing that the decision of that court was erroneous. Tax Appeals, Maenaka, 41 Haw. 141; In re Taxes Castle, 24 Haw. 598; In re Taxes Waiakea Mill Co., 24 Haw. 333; In re Taxes, Catholic Mission, 22 Haw. 764; Hawi Mill & Plantation Co. v. Forrest, 21 Haw. 389; In re Taxes, Makee Sugar Co., 19 Haw. 331; Tax Assessor v. Wailuku Sugar Co., 18 Haw. 422; Tax Assessor v. Wilder, 17 Haw. 425; In re Taxes, Haw'n Sugar Co., 16 Haw. 236; Lihue Plantation Co. v. Farley, 13 Haw. 283. This court, in Tax Assessor v. Wailuku Sugar Co., supra, 18 Haw. at page 423, stated the rule thusly:

'This court has uniformly held that it does not reduce or increase the valuation made by a tax appeal court which appears to be fair and just, but allows it to stand unless shown to be erroneous, or based on a wrong theory or insufficient or defective data. Hind v. Willfong, 13 Haw. 125; Assessor v. Rapid Transit Co., 15 Ib. 3; Oahu R. & L. Co. v. Assessor, 17 Ib. 163; Tax Assessor v. Wilder, Ib. 425.'

Again, the court in In re Taxes Bishop Est., 33 Haw. 149, 159, compared the findings of the tax appeal court with those of a circuit judge by stating:

'* * * The court has on numerous occasions announced the rule to be that the findings of a tax appeal court are entitled to great weight; that where such findings depend upon the credibility of witnesses and upon the weight of conflicting statements of witnesses, such findings are to be accorded the same weight as the findings of a circuit judge at chambers. (See Tax Assessment Appeals, 11 Haw. 235; Hawi Mill & Plantation Co. v. Forrest, 21 Haw. 389.) In the Hawi Mill & Plantation Co. case this court expressly likened tax appeals to equity appeals.

'* * * Indeed, under the new law the tax appeal court has been raised to the dignity and importance of a court of record, clothed within the sphere of its duties and functions with all the power and authority of a circuit judge at chambers. (See §§ 43, 48, Act 40, 2d Sp.S.L.1932.)' ²

Consequently, we approach the first question presented under this appeal, namely, whether the tax appeal court erred in its determination of the respective values of an average acre of cane land for each of the taxpayers, with the admonition that such can only be disturbed if found to be 'clearly erroneous.' H.R.C.P. Rule 52(a); Filipino Federation of America, Inc. v. Cubico, 46 Haw. 353, 380 P.2d 488; Peine v. Murphy, 46 Haw. 233, 377 P.2d 708; Miller v. Loo, 43 Haw. 76; Lum v. Stevens, 42 Haw. 286; Hawaii Builders Supply Co. v. Kaneta, 42 Haw. 111; Lima v. Tomasa, 42 Haw. 478. In this connection we must keep in mind the warning of In re Taxes Carter, 27 Haw. 826, 828, that '* * * the tax appeal court, similarly as this court, must base its conclusions upon the evidence adduced and not upon what might have been adduced * * *.'

The tax appeal court's method of redetermining the values of an average acre of each of taxpayers' cane lands may be briefly summarized. First, it noted that the 1952 values, having been accepted by both the tax commissioner and the taxpayers, were the only figures having any real value. This became the foundation for its revaluation. The court, having noted that the values of agricultural lands appeared generally to have increased about ten per cent. (10%) from 1952 to 1956, concluded that the ten per cent. (10%) increase testified to by taxpayers' expert witness was reasonable. Finally, the court went on to find that the values of lands on the island of Oahu were subject to special influences which warranted an additional five per cent. (5%) increase over 1952 values. In short, the court revalued an average acre of taxpayers' cane land at fifteen per cent. (15%) over the 1952 values.

The tax appeal court's reliance, in this instance, on the 1952 values as the sole basis from which to compute, percentagewise, the values for 1956 is not in itself a sound method of approaching an assessment. ³ In Hackensack Water Co. v. Division of Tax Appeals, 2 N.J. 157, 65 A.2d 828, 830, it was pointed out that:

'* * * Each annual assessment of property for taxation is a separate entity, distinct from the assessment of the previous or subsequent year * * *.

'On each assessment the test is does it reflect true value?'

Again, the court in In re Kresge-Newark, Inc., 30 N.J.Super. 489, 105 A.2d 12, 18, emphasized that:

'* * * Such assessment for prior years should not be used as the sole basis of valuation for the year in question because such assessment for prior years may not reflect true value * * *.' (Emphasis added.)

If reliance on prior assessed values is unsound when such values are based on bona fide opinions of values derived from appraisal, it is even more unsound where such values are obtained through negotiation as was the case here. The record discloses a compilation of the average estimate of value per acre covering sugar cane lands of plantations on the island of Oahu for the year 1952. Therein enumerated were values found by eleven qualified real estate appraisers ranging from $525 to $750 per acre in the cases of Ewa and Waialua. The average per acre value attributable to Ewa was $611 while that attributable to Waialua was $585. These average values were then adjusted to $578 for Ewa and $525 for Waialua, as the basis for the 1952 assessment, by negotiation. Since the foregoing questionable procedure of bargaining had been applied to determine the agreed valuation of 1952, it follows that there exists even a more serious question as to the reliability of these 1952 values which the tax appeal court used as its sole foundation for the 1956 values.

The taxpayers assert that: 'This is exactly what was done in Tax Appeals Maenaka, [supra] 41 Haw. 141 (1955), where this court sustained the tax appeal court's determination that values for 1949 be computed on the basis of 1948 values plus 20%.' While this court in Maenaka, supra, did...