In re Taxes

• Decision Date: 07 November 1904
• Citation: 16 Haw. 236
• Parties: IN RE ASSESSMENT OF TAXES, HAWAIIAN SUGAR COMPANY, LIMITED.
• Court: Hawaii Supreme Court

16 Haw. 236

IN RE ASSESSMENT OF TAXES, HAWAIIAN SUGAR COMPANY, LIMITED.

Supreme Court of the Territory of Hawai‘i.

Submitted October 17, 1904.

Decided November 7, 1904.

APPEAL FROM TAX APPEAL COURT, FOURTH DIVISION.

Syllabus by the Court

An assessment, made by the assessor and sustained by the tax appeal court, of the lessors' interest in certain land at more than the amount of eight years' rental, is affirmed under the circumstances set forth in the opinion.

Smith & Lewis and L. J. Warren for appellant.

W. S. Fleming, Assistant Attorney General, for appellee.

FREAR, C.J., AND CIRCUIT JUDGES DE BOLT AND GEAR IN PLACE OF HARTWELL AND HATCH, JJ.

OPINION OF THE COURT BY FREAR, C.J.

This is an appeal from the tax appeal court, fourth division, sustaining, on appeal from the tax assessor, an assessment of $400,000, made as of January 1, 1903, upon the lessors' interest in 3,933 acres of cane land held by the appellant, the Hawaiian Sugar Company, Limited, under a lease for fifty years, beginning January 1, 1889, the lessee being obliged by the terms of the lease to pay all taxes on the demised premises. The question whether the assessment was properly made against the lessee, instead of against the lessors, is not raised, and perhaps could not be raised, under the circumstances, at the present time. Hilo Sugar Company v. Tucker, 8 Haw. 148. The company returned the land at $300,000 and appealed to the tax appeal court as to all over that amount, namely, $100,000, but afterwards abandoned its appeal as to $30,000, and the question now is as to the remaining $70,000. The land had been assessed at $400,000 and the assessment had been accepted by the company for a number of years previously, except that in 1902 the assessment was reduced, as the result of a compromise, to $300,000.

The appellant's present counsel come into the case for the first time in this court. They rely in part upon the rule, prescribed in C. L., Sec. 820, that the assessment value in cases of this kind should be “eight years' rental” unless that would be “manifestly unfair or unjust,” and contend that at most the assessment should be no greater than eight years' rental and that it should be less on the ground that that amount would be manifestly unfair or unjust. The rent of the land in question consists of percentages of the sugar produced on it, varying according to the amount of sugar produced, and for the previous five years had average in value $42,500 a year. This rental would require an assessment of $340,000, if the eight year rule should be applied. Appellant's counsel, in their original brief, contend that the valuation of the lessors' interest should be no greater in proportion to their income from the land than the company's invested capital plus the value of the land and the annual expenses is a compared with the profits from its business, and they estimate the value of the lessors' interest on that basis at $302,357.72; but in their supplementary brief they point out an error in their estimate, the correction of which would make the valuation $374,800. They contend, however, that the valuation of the lessors' interest should be less than that of the company's property in proportion to income, for the reason that the lessors' income is derived from “naked land, unimproved (save as by the lessee) without a cent of value added, without an iota of risk in production of income, without a cent of expenditure, of a moment of labor or attention to make the enterprise pay,” while the company obtains its profit only by the expenditure of a large amount of capital and thought and energy and the incurrence of much risk. It seems to us that these considerations weigh in the opposite direction. The fact that the lessors obtain their income simply as rent for the land, without expenditure, labor or risk, is an element that adds to the value of their interest in the land. In such case a given amount of income would be a fair return upon a larger valuation than where such expenditure, labor and risk are involved. However, a comparison between the income of a sugar plantation and the rent of a tract of land is of little if any assistance in determining the value of the lessors' interest in the land.

The evidence as a whole in this case is not very complete or satisfactory, but it tends to support the finding of the tax appeal court, or at least does not clearly show that that finding was erroneous. The decision of that court should not be disturbed unless good reason appears for doing so. The evidence shows that the land in question has an area of nearly 4,000 acres, and that it is the finest cane land, and is supplied with water from mountain streams. There is evidence that some years ago,...