In re Taxes Waiakea Mill Co.
| Decision Date | 15 May 1918 |
| Docket Number | No. 1065.,1065. |
| Citation | 24 Haw. 333 |
| Parties | IN RE TAXES WAIAKEA MILL COMPANY. |
| Court | Hawaii Supreme Court |
OPINION TEXT STARTS HERE
APPEAL FROM TAX APPEAL COURT, FOURTH CIRCUIT.
Syllabus by the Court
The value of property combined in an enterprise for profit is not less than the aggregate value of the separate items making up the whole unless the value of the items has been depreciated by reason of their combination.
The value of a mature crop of cane for taxation purposes is the amount the sugar it will produce would bring when harvested considering the price of sugar on January 1 of that year less the cost of harvesting, marketing, etc., and of necessity this value can only be approximated.
The valuation fixed by the tax appeal court should not be disturbed unless good reason appears therefor.
W. L. Stanley for the taxpayer.
A. G. Smith, Attorney General ( C. S. Franklin, Deputy Attorney General, on the brief), for the assessor.
This is an appeal by the Waiakea Mill Company from the decision and judgment of the tax appeal court for the fourth judicial circuit sustaining the assessment of the company's property at a valuation as of January 1, 1917, in the sum of $1,250,000.
The company returned its property for taxation as an enterprise for profit at the sum of $800,000; it was assessed at $1,250,000, and on appeal to the tax appeal court the assessment was sustained.
At the hearing before the tax appeal court it was agreed that the values placed by the taxpayer on the various items of its tangible assets were correct, except the valuations placed by it upon (a) its 1917 growing cane, (b) its 1918 growing cane and (c) its fee simple holding of forty acres constituting its mill site.
The values upon which the assessor and the taxpayer have agreed aggregate the sum of $350,060. In arriving at the total value of the tangible property owned by the taxpayer it is therefore only necessary to ascertain the value of the two crops of cane and the mill site, which, added to the agreed values, will be the total value of the taxpayer's tangible property.
The 1917 crop of cane was returned by the taxpayer at $234,496.14 but is now admitted to have been worth $429,230. The assessor placed a value of $937,500, on this crop. The tax appeal court arrived at a value of $595,320.
The 1918 crop of cane was returned by the taxpayer at $159,083. The assessor placed its value at $457,500, while the tax appeal court found its value to be one-half the value of the 1917 crop, or $297,660.
The taxpayer returned its mill site consisting of forty acres owned in fee simple at $10,000. The assessor placed its value at $40,000 and the assessment was sustained by the tax appeal court.
The total value of the tangible assets of the taxpayer, as shown by the figures above detailed, partly agreed upon and partly found by the tax appeal court to be the correct valuation of the separate items making up the whole, is the sum of $1,283,040.
In response to a request of counsel for the taxpayer the tax appeal court has sent up as part of the record on appeal an analysis of the methods used by it in arriving at a valuation of the enterprise involved in this case. Counsel has criticized these methods, but we are not so much concerned with methods as we are with results. If the value arrived at by the use of the alleged erroneous methods is sustained by the evidence the court's finding should not be disturbed.
If then the tax appeal court was justified by the evidence in its conclusions as to the value of the items in dispute the value fixed by the assessor on the property as a going concern or an enterprise for profit and sustained by the tax appeal court is $33,040 less than the total value of the separate items making up the whole. The value of the whole would not be less than the sum of its parts unless the value of the parts was depreciated by reason of their combination (In re Taxes Union Mill Co., 23 Haw. 46 at 50).
It then becomes necessary for us to examine the evidence for the purpose of determining two questions, viz., (a) Are the three disputed items of tangible assets of the value found by the tax appeal court; and (b) As an enterprise for profit is the value of the whole depreciated by reason of the combination of the parts and if so to what extent?
Mr. Williams, the secretary of Waiakea Mill Company, the taxpayer, has testified that the price his company paid for cane grown by others and sold to it in 1916 was $4.25 per ton at the mill and that it cost sixty-one cents per ton to harvest and deliver it, thus the price net to the grower was $3.64 per ton of cane. The company's estimate for the 1917 crop was 121,000 tons of cane. He further testified that his company purchases about 90% of the cane milled by it and that a sliding scale of prices is maintained by it based on the price of sugar prevailing on the date of the purchase. If this mill owner allows the price of sugar to determine the price it will pay for cane from other growers why should not the assessor and the courts consider the price of sugar in arriving at the valuation for taxation purposes to be placed on a mature crop of cane standing in the field?
The fact that the mill owner (in this case also the taxpayer) would pay only $4.25 per ton for cane delivered at its mill by other growers, especially when it is not shown what the conditions of the contracts with the growers are, should not be taken as establishing the market value of cane.
It is to be inferred from the return of the taxpayer in this case that at least a portion of the cane purchased by it is grown by its sub-lessees on the lands leased by it from the government (there being a list of some thirty sub-lessees attached to the return) and the terms on which this cane is grown and sold to the company have not been shown further than is shown by the testimony of Mr. Williams to which we have referred.
We think the value of a mature crop of cane ready for the harvest is the amount the sugar it will produce would bring when harvested, considering the price of sugar on January 1 of that year, less the cost of harvesting and marketing, etc. Of course neither the taxpayer nor the assessor can know absolutely what the cane is worth to the taxpayer while it is still standing in the field and of necessity must be approximated.
From the evidence in this case given by the tax assessor it appears that the cost of harvesting, milling, insurance,...
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Hawaiian Land Co., In re, 4829
...of proof is upon the appellant. Tax Appeals, Maenaka, 41 Haw. 141 (1955); Re Taxes Onomea Sugar Co., 25 Haw. 278 (1920); Re Taxes Waiakea Mill Co., 24 Haw. 333 (1918). In Re Taxes Bishop Estate, 33 Haw. 149, 159 (1934), we said 'that the findings of a tax appeal court are entitled to great ......