Great A & P Tea Co., Inc. v. Davis

• Court: West Virginia Supreme Court
• Writing for the Court: NEELY
• Citation: Great A & P Tea Co., Inc. v. Davis, 278 S.E.2d 352, 167 W.Va. 53 (W. Va. 1981)
• Decision Date: 26 May 1981
• Docket Number: No. CC918,CC918
• Parties: The GREAT A & P TEA CO., INC. v. J. Carney DAVIS, Assessor of Marion County, West Virginia, and Marion County Board of Review and Equalization.

Page 352

278 S.E.2d 352

167 W.Va. 53

The GREAT A & P TEA CO., INC. v. J. Carney DAVIS, Assessor of Marion County, West Virginia and Marion County Board of Review and Equalization.

No. CC918.

Supreme Court of Appeals of West Virginia.

May 26, 1981.

Syllabus by the Court

1. The assessor of a county may assess the value of a leasehold as personal property separately in an amount such that when the value of the freehold subject to the lease is combined with the value of the leasehold the total reflects the true and actual value of the real property involved.

2. The county assessor may presume that leaseholds have no value independent of the freehold estate and proceed to tax all real property to the freeholder at its true and actual value; the burden of showing that a leasehold has an independent value is upon the freehold taxpayer and the taxpayer must request in a timely manner the separate listing of freehold and leasehold interests.

Frank V. Sansalone and Woodrow A. Potesta, Fairmont, for plaintiff.

Charles E. Anderson, Pros. Atty., Fairmont, for defendants.

NEELY, Justice:

This case presents four certified questions from the Circuit Court of Marion County and concerns the extent to which a county tax assessor can separately assess a leasehold interest in real property. The petitioner, The Great Atlantic and Pacific Tea Company, Inc., is a Maryland corporation engaged in the retail grocery business. In connection with its grocery business the A & P operates a label and box printing plant near Fairmont, in Winfield District, Marion County.

The A & P does printing in a building owned by the Mar-Mar Corporation under a long-term lease from Mar-Mar. For the tax years 1978 and 1979 the Marion County Assessor assessed the Mar-Mar property leased to A & P at $598,900. Mar-Mar Corporation appealed this assessment to the Marion County Board of Equalization and Review in January 1979 and the Board granted a reduction in assessment to $440,000. Following this reduction the assessor assessed the difference between the original and revised assessments of Mar-Mar, i. e., $158,900 to the A & P as the value of its leasehold. The A & P then applied to the Board of Equalization and Review for relief from this assessment, and after an adverse decision by the Board, A & P appealed to the State Tax Commissioner requesting an abatement. When the Tax Commissioner ruled that the A & P leasehold interest was taxable, A & P appealed pursuant to Code, 11-3-25 (1967) to the Circuit Court of Marion County which affirmed the Tax Commissioner.

At the hearing before the circuit court the A & P raised the absence of statutory authority for an assessment of this type of leasehold; the absence of taxation of similar leases in Marion County; and, lack of a standard for evaluation of a leasehold interest. The only witness in the circuit court was the Marion County Assessor who testified generally concerning the method which he employed in arriving at the $158,900 assessment for the leasehold interest, namely that he took the original assessment to Mar-Mar Corporation, subtracted the reduced assessment applied by the Board of Equalization and Review, and attributed the difference to the A & P's leasehold.

I

W.Va.Code, 11-5-1 (1961) provides:

All personal property belonging to persons residing in this State, whether such property be in or out of the State, and all personal property in the State, though owned by persons residing out of the State, shall be entered in the personal property book, and be subject to equal and uniform taxation, ...

W.Va.Code, 11-5-3 (1961) defines "personal property" as:

(A)ll fixtures attached to land, if not included in the valuation of such land entered in the proper land book; all things of value, moveable and tangible, which are the subjects of ownership; all chattels, real and personal; all notes, bonds, and accounts receivable, stocks and other intangible property.

Finally, W.Va.Code, 11-5-4 (1972) which provides the mechanics for taxing personal property provides that:

(I)n cases of the assessment of leasehold estates a sum equal to the valuations placed upon such leasehold estates shall be deducted from the total value of the estate, to the end that the valuation of such leasehold estate and the remainder shall aggregate the true and actual value of the estate.

It would appear from the statutory scheme that a separate leasehold is taxable if it has a separate and independent value from the freehold. W.Va.Code, 11-3-1 (1961) provides that:

All property shall be assessed annually as of the first day of July at its true and actual value; that is to say, at the price for which such property would sell if voluntarily offered for sale by the owner thereof, upon such terms as such property, the value of which is sought to be ascertained, is usually sold, ...

Where leaseholds are of short duration the rent paid will usually reflect income to the owner of the freehold commensurate with the fair market value of the real property. Under ordinary conditions the freehold estate will not be reduced in value by virtue of the leasehold, nor will the leasehold itself have any ascertainable market value. Since this latter condition is the normal circumstance in West Virginia, when assessors assess freeholds subject to leaseholds the property is...