Georgia-Pacific Corp. v. County of Butte

• Decision Date: 22 February 1974
• Docket Number: GEORGIA-PACIFIC
• Parties: CORPORATION, Plaintiff, Respondent, Cross-Appellant, v. COUNTY OF BUTTE, Defendant, Appellant, Cross-Respondent. Civ. 14034.
• Court: California Court of Appeals Court of Appeals

Page 327

112 Cal.Rptr. 327

37 Cal.App.3d 461

GEORGIA-PACIFIC CORPORATION, Plaintiff, Respondent, Cross-Appellant, v. COUNTY OF BUTTE, Defendant, Appellant, Cross-Respondent.

Civ. 14034.

Court of Appeal, Third District, California.

Feb. 22, 1974.

Hearing Denied April 17, 1974.

Thelen, Marrin, Johnson & Bridges by Paul Haerle, San Francisco, for plaintiff, respondent, cross-appellant.

Daniel V. Blackstock, County Counsel, Oroville, for defendant, appellant, cross-respondent.

Marshall S. Mayer, Redding, for County Assessor, amicus curiae.

RICHARDSON, Presiding Justice.

Defendant County of Butte appeals from the judgment of the trial court which held among other things that the formula used by defendant in assessing timberlands of plaintiff Georgia-Pacific Corporation, now Louisiana-Pacific Corporation, was illegal and which directed a new hearing to be conducted by defendant's Assessment Appeals Board. Plaintiff, in turn, has filed a cross-appeal from that portion of the judgment which directs that a complete rehearing be held on plaintiff's application for a reduction of the assessment on its timberlands.

Defendant makes multiple contentions of trial court error, both procedural and substantive, which contentions may be summarized:

(1) A general assertion that substantial evidence supports the decision of the Assessment Appeals Board (hereinafter the Board) as to timberland valuation and particularly that article XIII, section 12 3/4 of the California Constitution was not violated by the method of appraisal utilized by the Assessor and approved by the Board.

(2) Substantial evidence sustained the valuation by the Board of plaintiff's recreation lands.

(3) The introduction of additional evidence before the trial court constituted error, and in that connection appellate review is controlled by the substantial evidence rather than weight of the evidence test.

(4) The exclusion by the Board of a portion of the testimony of the witness Oslund did not constitute error.

(5) There was no violation by the Board of Rule 326 of the State Board of Equalization which prohibits the Board from reconsidering or rehearing an application for reduction in assessment.

(6) Plaintiff failed to comply with Revenue and Taxation Code sections 5137 and 5139.

Our review of defendant's arguments in a slightly different sequence, as well as that of plaintiff on its cross-appeal, reveals that they lack merit and we will affirm the judgment of the trial court in its entirety.

We trace the procedural history of the case.

Plaintiff brought its action against defendant to recover $65,227.13 in property taxes paid by plaintiff to defendant under protest in December of 1970 and April 1971. These payments represented county property taxes for the tax fiscal year 1970--1971 levied and assessed against 21,-469 acres of land situate in Butte County of which 19,959 were determined to be 'timberland' and 1,510 were 'recreation land.' Defendant's Assessor concluded that the full cash values and assessed values of plaintiff's 'bare land' (defined at trial as land exclusive of standing timber thereon) as of March 1, 1970, the lien date, were $4,506,820 and $1,126,705 respectively. Plaintiff's figures for the same values as of the lien date were $753,695 and $188,424 respectively.

On August 25, 1970, plaintiff filed with the Butte County Board of Supervisors, as the county board of equalization, a verified application for reduction in assessment pursuant to Revenue and Taxation Code section 1607. In its application, plaintiff did not contest the Assessor's valuation of the mature timber subject to taxation standing on the property in question, which timber was separately assessed and the taxes on which were separately paid. On December 8 and 9, 1970, defendant, through its Board of Assessment Appeals, conducted a hearing on plaintiff's application during which it declined to hear the testimony of a witness, Robert Oslund, offered by plaintiff. Thereafter on December 10, 1970, and on April 8, 1971, plaintiff paid under written protest first and second installments of the taxes in the amounts previously indicated. On April 12, 1971 plaintiff forwarded to defendant a letter in further amplification of its protest. On January 25, 1971, defendant's Board of Assessment Appeals issued it decision on the application for reduction and on February 24, 1971 the Board filed an amendment to its findings of fact and decision. The amended findings of fact and decision stated that the property in question was encompassed within three categories, namely, 'forest Land, Forest-Recreation land, and non productive rubble land.' Additionally, the forest land was defined as land the highest and best use of which was for timber production. Forest recreation land was land the highest and best use of which was for forest recreational homesite properties.

The findings of fact and decision, both in initial and amended form, essentially rejected plaintiff's contention that in determining the full cash value of plaintiff's bare land, defendant, by utilizing the socalled 'income analysis' or 'capitalization' formula, violated a constitutional provision specifically exempting immature growing timber. The amended findings further declared 'that the applicant has presented no factual basis to justify a reduction in said land values below that value found by the board,' and added that 'if this board has jurisdiction to decide issues of law, the method used by the assessor to assess land used for timber growing purposes, to wit, an income analysis based on the productive capacity of said lands, does not, as a matter of law, constitute double taxation nor does it deny the applicant the benefits of Article XIII, section 12 3/4 of the California Constitution.' The Board then concluded the full cash values and assessed values found and established by the defendant's Assessor were 'supported and established by the weight of the evidence produced at the hearing . . .'

On June 9, 1971, plaintiff filed the present action. Its complaint embraces four causes of action. The first, after reciting the procedural history of the dispute, concludes that the assessments and levy of taxes by defendant are unlawful as a tax on property exempt from taxation under the State Constitution, are not supported by the weight of the evidence presented to the assessment review board as to both timberland and recreation land, and as to both kinds of properties lack substantial supporting evidence. The second cause of action challenges the amendment by the Board of its findings of fact and decision as violative of Rule 326 of the State Board of Equalization. Rule 326 provides that '(t)he decision of the board upon an application is final. The board shall not reconsider or rehear an application.' The third cause of action asserts arbitrary, capricious and unreasonable procedures by defendant which effectively prevented plaintiff from presenting relevant material evidence and which, accordingly, did not comport with procedural due process. The fourth cause of action specifically challenges defendant's method of valuation as violative of the tax exemption defined in article XIII, section 12 3/4 of the California Constitution. The prayer of the complaint seeks a judicial declaration that the assessments and collections of the taxes in question by defendant were unconstitutional and further seeks recovery of specific sums paid to defendant by plaintiff under protest.

After a court trial, judgment was rendered for the plaintiff. Defendant, through its Board, was ordered to conduct a new hearing and specifically to refrain from employing the capitalization formula previously used because it violated a specific constitutional exemption and constituted double taxation.

In considering the various contentions, we treat initially the central and pivotal issue namely, defendant's method of valuation of plaintiff's timberlands. We will uphold the trial court's resolution of this issue requiring a new hearing by the defendant's Board. For the guidance of the Board, parties and counsel, we thereafter consider several collateral issues raised by the parties.

1. Valuation of the Timberlands.

Defendant's method of ascertaining the full cash value and the assessed value of plaintiff's timberlands is the primary issue before us. Most of the attention of the parties at all stages of these proceedings has been directed to an analysis of the technique used by defendant which variously has been described as 'The Capitalization of the Value of Average Annual Growth,' or the 'Capitalized Income Approach.' For purposes of our discussion, we utilize the latter term. Its technical aspects are more fully described in an article entitled 'Appraisal of Timberland Through Capitalization of the Value of Average Annual Growth' by Edwin E. Brown, Assistant Assessor of defendant county, appearing in the July 1971 Assessor's Journal. The Clerk's Augmented Transcript contains the article as well as two written critical responses, one by John A. Zivnuska, Dean, School of Forestry and Conservation, University of California, Berkeley and the other by plaintiff's principal witness Dr. Dennis E. Teeguarden, Associate Professor and Assistant Dean of the latter school.

The capitalized income approach was utilized because of the claimed scarcity of comparable sales information on large acreages of timberlands in Butte County. Since there apparently has been an adequate number of sales of medium sized and smaller pieces of property, the Assessor in such instances utilized the more traditional 'comparable sales' approach. Present Board of Equalization practice mandates use of the 'comparative sales' approach when possible. (State Board of Equalization Rule 41 (d).)

Under the capitalized income approach, timberland is likened to general agricultural land and the method may be generally summarized: the goal is bare land value; the index...