Golder v. Department of Revenue, State Bd. of Tax Appeals

• Decision Date: 31 July 1979
• Docket Number: C,No. 13656-PR,No. 6596,6596,13656-PR
• Citation: 599 P.2d 216,123 Ariz. 260
• Parties: Lloyd W. GOLDER and Esther B. Golder, husband and wife, Cimarron Properties Company, a partnership, A. W. Gibson and Eunice Gibson, husband and wife, Transamerica Title Insurance Company, Trustatalina Foothills Estates, Inc., an Arizona Corporation, Barrick W. Groom, John G. Payson and Patricia Payson, husband and wife, Robert Snowden, as Trustee, and John W. Murphey, Trustee, Appellants, v. DEPARTMENT OF REVENUE, STATE BOARD OF TAX APPEALS, successor in interest to the State Board of Property Tax Appeals, Pima County Board of Supervisors, Pima County Assessor and Pima County Treasurer, Appellees.
• Court: Arizona Supreme Court

Page 216

599 P.2d 216

123 Ariz. 260

Lloyd W. GOLDER and Esther B. Golder, husband and wife, Cimarron Properties Company, a partnership, A. W. Gibson and Eunice Gibson, husband and wife, Transamerica Title Insurance Company, Trust No. 6596, Catalina Foothills Estates, Inc., an Arizona Corporation, Barrick W. Groom, John G. Payson and Patricia Payson, husband and wife, Robert Snowden, as Trustee, and John W. Murphey, Trustee, Appellants, v. DEPARTMENT OF REVENUE, STATE BOARD OF TAX APPEALS, successor in interest to the State Board of Property Tax Appeals, Pima County Board of Supervisors, Pima County Assessor and Pima County Treasurer, Appellees.

No. 13656-PR.

Supreme Court of Arizona, In Banc.

July 31, 1979.

Stubbs & Townsdin by Charles L. Townsdin, Jr., and Robert C. Stubbs, Tucson, for appellants.

Beer, Kalyna & Simon, by Olgerd W. Kalyna and Donald P. Roelke, Phoenix, for appellees.

HOLOHAN, Justice.

In this appeal nine property owners challenged the validity of the Pima County Assessor's valuation of their property for 1975. The nine taxpayers appealed individually pursuant to A.R.S. §§ 42-241.01 and 42-245. All nine then appealed to the Superior Court of Pima County pursuant to A.R.S. § 42-151. The nine appeals were consolidated for trial. The superior court found that the valuations of appellants' properties by the county assessor were not excessive. The taxpayers filed a timely appeal with the Court of Appeals, 123 Ariz. 271, 599 P.2d 227, and that court affirmed the trial court. Because of an apparent conflict between this decision and a previous opinion by the Court of Appeals, Division One, in Burns v. Herberger, 17 Ariz.App. 462, 498 P.2d 536 (1972), we granted the taxpayers' petition for review. We vacate the decision of the Court of Appeals and affirm the decision of the trial court.

Each of the nine appellants owns property in an area north of Tucson known as the Catalina Foothills. In 1974, the Pima County Assessor reassessed all of the rural and suburban lands within Pima County for the first time in several years. As a result of this reassessment, the taxable value of appellants' Catalina Foothills properties more than doubled. The county assessor found that sales of comparable real property indicated that the increased valuation of these properties was justified.

The assessor used the market data approach in valuing the properties, and assessed them at what he found to be current market values. Appellants estimated the taxable values of their properties to be substantially lower. They too used the market data approach. However, they applied a reduction formula intended to exclude amounts paid for "future anticipated property increments" as called for in A.R.S. § 42-123(A)(5). ¹

On appeal, the taxpayers raise three issues:

1) Did the trial court err in not using the reduction formula defined in 1969 by Director of the Arizona Department of Property Valuation and approved by the Court of Appeals in Burns v. Herberger ?

2) Did the trial court err in refusing to strike expert testimony of property valuations based upon sales other than cash sales?

3) Did the trial court err in refusing to strike testimony of an expert wherein he assessed a large parcel of property in three separate pieces rather than as a whole?

I.

When a taxpayer appeals to superior court on the ground that the assessment of his property is "excessive," he bears the burden of overcoming the statutory presumption that valuation by the assessing authority is correct. A.R.S. § 42-152(B). ² This he must do by presenting competent evidence. Where the taxpayer presents evidence based upon different methods of assessment than those used by the state, that evidence is not competent unless the taxpayer can demonstrate that the appraisal methods used are appropriate in the given circumstances. Graham County v. Graham County Electric Co-op., Inc., 109 Ariz. 468, 512 P.2d 11 (1973). In 1969, Arlo Woolery was director of what was then known as the Arizona Department of Property Valuation. At that time he circulated a memorandum to the county assessors of all the counties in Arizona. This memorandum, hereinafter referred to as the "Woolery memorandum," outlined a procedure for assessing the value of undeveloped real estate held for speculation. The procedure began with the use of sales data gathered by the assessor from sales of comparable land. This information would give the assessor an estimate of the current market value of the property. The memorandum then instructed the assessor to calculate the "absorption rate" of the property in question. This figure, expressed in years, indicates the amount of time required for the market to fully absorb and develop the property in question. Then, using this figure, the assessor was to discount the current market value of the property by applying the appropriate percentage found in the Inwood reversion tables. (These tables are designed to calculate the present value of a dollar amount to be received at a given future date.) The assumption behind the procedure outlined in the Woolery memorandum was that property purchased today to be held for use at a later date had no current use, and that the holder would do nothing with the property but wait until the market was ready to absorb it.

From the inception of this case, appellants have clung to the assessment procedure spelled out in the so-called "Woolery memorandum." As its own author has testified, that procedure is incorrect. A careful examination of the memorandum shows that application of the Inwood reversion tables as proposed by Mr. Woolery at that time is an inappropriate use of these tables. ³ No case law exists, nor any logic which would support the perpetuation of faulty administrative proceedings merely for the sake of uniformity.

This court in Industrial Commission v. Harbor Insurance Company, 104 Ariz. 73, 449 P.2d 1 (1968) stated:

"We have held many times that the construction placed on a statute by the executive body which administers it, if acquiesced in for a long period of time, will not be disturbed Unless such construction is manifestly erroneous." 104 Ariz. at 76, 449 P.2d at 4. (Emphasis added.)

The procedure outlined in the "Woolery memorandum" was manifestly erroneous.

It is true that at the time the "Woolery memorandum" was in effect, it was given judicial approval by the Court of Appeals, Division One, in Burns v. Herberger, supra. In Burns v. Herberger, however, the issue facing the court involved the meaning of the term "current use." Neither party challenged the validity of using Inwood tables to calculate the "price paid for future anticipated property value increments." Rather, the taxpayer contended that the taxing authorities, by using a market data approach in assessing his property and a use approach in assessing surrounding property, discriminated against him in violation of the Constitution of Arizona, Art. IX, § 1, 17 Ariz.App. at 468, 498 P.2d at 542. In the course of discussing the issues, the Court of Appeals, Division One, described the procedure then used by the Department of Property Valuation (the procedure defined by the "Woolery memorandum") in the context of its discussion of the constitutional question. ⁴ Having examined this procedure carefully, we find that it is not mandated by A.R.S. § 42-123(A)(5). To the extent that Burns v. Herberger holds otherwise, it is hereby overruled.

In support of their interpretation of A.R.S. § 42-123(A)(5), appellants presented the testimony of two persons who had testified before a legislative committee regarding the provision. Appellee contends that this evidence should have been excluded.

The rule is clearly established in Arizona that one member of a legislature which passes a law is not competent to testify regarding the intent of the legislature in passing that law. Barlow v. Jones, 37 Ariz. 396, 294 P. 1106 (1930); State Tax Commission v. Marcus J. Lawrence Memorial Hospital, 14 Ariz.App. 554, 557, 485 P.2d 277, 280 (1971); Tucson Gas and Electric Company v. Schantz, 5 Ariz.App. 511, 514-515, 428 P.2d 686, 689-690 (1967). "The intent of the Legislature can only be determined by the language used, aided by the canons and rules of construction founded upon reason and experience." Barlow v. Jones, 37 Ariz. at 399, 294 P. at 1107. The same logic which prevents one legislator from putting a gloss upon the meaning of a statute based only upon his own individual feelings also prevents a lobbyist or other interested party from doing the same. The testimony of the witnesses Arnold and Killian regarding the intent of the legislature in passing A.R.S. § 42-123 was clearly incompetent, and must be disregarded in interpreting the meaning of that provision.

What then does the term "future anticipated property value increments" mean? In attempting to resolve this question, appellant cites the maxim that a court should not interpret the language of a statute so as to render it meaningless, but it is equally basic that the words of a statute must be construed in conjunction with the full text of the statute. A.R.S. § 42-123(A)(5) requires that current usage of the property shall be used to determine cash value. It further provides that if "market data" is the means used to determine market value, "the price paid for future anticipated property value increments shall be excluded." We believe that this is another way of saying that market data valuation must be limited to present usage.

If land is being used for agricultural purposes in the middle of urban growth, the statute in question requires that it be appraised on the basis of current usage. If a market data approach were used to appraise the land, the value of surrounding land would reflect the value for future housing or commercial use. This anticipated or future use may not be used in fixing a value for the land being used as a farm. The difference between market value and the value of the...