Jones & Laughlin Steel Corp. v. City of Warren

• Decision Date: 25 March 1992
• Docket Number: Docket No. 119309
• Citation: 193 Mich.App. 348,483 N.W.2d 416
• Court: Court of Appeal of Michigan — District of US
• Parties: JONES & LAUGHLIN STEEL CORP., Petitioner-Appellant, v. CITY OF WARREN, Respondent-Appellee, and Fitzgerald Public Schools, Intervening Respondent-Appellee. 193 Mich.App. 348, 483 N.W.2d 416

Page 416

483 N.W.2d 416

JONES & LAUGHLIN STEEL CORP., Petitioner-Appellant, v. CITY OF WARREN, Respondent-Appellee and Fitzgerald Public Schools, Intervening Respondent-Appellee.

Docket No. 119309.

193 Mich.App. 348, 483 N.W.2d 416

Court of Appeals of Michigan.

Submitted Oct. 1, 1991, at Lansing.

Decided Jan. 10, 1992.

Approved for Publication March 25, 1992, at 9:15 a.m.

Released for Publication May 19, 1992.

[193 MICHAPP 349] Bodman, Longley & Dahling by John C. Cashen, Troy, for Jones & Laughlin Steel Corp.

W. Thomas Marrocco, Jr., Warren, for City of Warren.

Clark, Hardy, Lewis, Pollard & Page, P.C. by Neil H. Goodman, Birmingham, for Fitzgerald Public Schools.

Before MARILYN J. KELLY, P.J., and WAHLS and FITZGERALD, JJ.

PER CURIAM.

Petitioner Jones & Laughlin Steel Corporation appeals as of right from a judgment of the Michigan Tax Tribunal that dismissed petitioner's[193 MICHAPP 350] appeal concerning the true cash value and lawful assessed value for tax year 1983 of personal property located at its facility in the City of Warren. We reverse and remand this case to the Tax Tribunal for further findings of fact and an independent assessment of true cash value.

The relevant tax date was December 31, 1982. Petitioner's personal property was originally assigned an assessed value on the roll for tax year 1983 of $4,933,100. Petitioner unsuccessfully protested the assessment to the local board of review and then sought review by the Tax Tribunal. After the tribunal ordered a continuance following bankruptcy proceedings involving petitioner, a hearing was held in April 1988. The parties stipulated to the value of the real property at the Warren facility and submitted proofs with respect to the value of the personal property. The main point of disagreement concerned the facility's blooming mill and billet mill, which together represented a substantial portion if not most, of the total value of the personal property. ¹

Petitioner's proofs showed that the use of blooming and billet mills in steel production was no longer the most cost-advantageous method and that there is increasing use of the more efficient continuous-casting method of fabricating steel. Furthermore, 1982 was a difficult year for the steel industry, and in the last quarter of 1982 petitioner was operating at forty-six percent of capacity and sustaining a monthly loss of approximately $1 million. In November 1982, petitioner purchased an idle continuous-casting facility in Pennsylvania and made plans to sell or close the [193 MICHAPP 351] Warren facility. Efforts to sell the Warren facility began and operations there ceased in May 1983. The facility was purchased in September 1983 by Youngstown Industrial, a machinery dealer and real estate developer, which hoped to find a buyer who would use the facility for steel production, or, failing that, planned to demolish the facility and redevelop the land. Youngstown Industrial paid petitioner $1,001,000 for the facility's equipment, including the mills. According to a Youngstown employee, prospective buyers did not desire the entire facility because it was obsolete. Although Youngstown was able to sell a portion of the blooming mill for $30,000, the remainder of the blooming mill and the billet mill were eventually sold as scrap. Gross proceeds from all equipment and scrap sales totaled $420,000. Petitioner's proofs also included an appraisal, prepared in anticipation of the sale of the facility, that valued the blooming and billet mills together at $500,000. According to the appraiser, his research found only two comparable sales of blooming mills. These mills had sold for approximately twice their scrap value. Petitioner argued that true cash value was shown by the sale price of its equipment to Youngstown, plus original cost-less-depreciation estimates of other property not included in the Youngstown sale but owned or leased by petitioner on the tax date. Petitioner's estimate of true cash value was $2,331,866.

The respondent city's proofs were based on an application of the original cost multipliers found in the Tax Assessor's Manual to petitioner's equipment. According to the city's application of the assessor's manual, the true cash value of petitioner's personal property, including the mills, on December 31, 1982, was $9,466,000. This figure was based on the use of the long-life, in-use table [193 MICHAPP 352] of multipliers. Petitioner argued that the correct long-life multiplier to use for the mills was that applicable to surplus equipment, which, according to petitioner's calculations, would have resulted in a total true cash value of $3,118,800. Another estimate of true cash value submitted by the respondent school district, which was greater than the city's estimate, was rejected by the Tax Tribunal on the ground that it did not adequately account for the depreciation and obsolescence of the blooming mill.

The Tax Tribunal held that petitioner did not present sufficient evidence to allow it to make an independent determination of true cash value and that petitioner therefore had failed to meet its burden of proof. The tribunal also held that, because there was no evidence that the blooming mill was not in use on the tax date, the city's use of the in-use multiplier, rather than the surplus multiplier, in its assessment was proper. The tribunal then accepted the city's true cash value estimate of $9,466,000 and assessment of $4,773,000, apparently for the reason that petitioner had not met its burden of proof. This appeal followed.

This Court's review of a decision of the Tax Tribunal is limited. When fraud is not alleged, we ask whether the Tax Tribunal committed an error of law or adopted a wrong principle. Const.1963, art. 6, Sec. 28; William Mueller & Sons, Inc. v. Dep't of Treasury, 189 Mich.App. 570, 572, 473 N.W.2d 783 (1991). We will accept the tribunal's factual findings as final, provided they are supported by competent, material, and substantial evidence. Antisdale v. City of Galesburg, 420 Mich. 265, 277, 362 N.W.2d 632 (1984); Dow Chemical Co. v. Dep't of Treasury, 185 Mich.App. 458, 462-463, 462 N.W.2d 765 (1990). Substantial evidence must be more [193 MICHAPP 353] than a scintilla of evidence, although it may be substantially less than a preponderance of the evidence. Id. at 463, 462 N.W.2d 765; Russo v. Dep't of Licensing & Regulation, 119 Mich.App. 624, 631, 326 N.W.2d 583 (1982).

The Tax Tribunal is under a duty to apply its expertise to the facts of a case to determine the appropriate method of arriving at the true cash value of property, utilizing an approach that provides the most accurate valuation under the circumstances. Antisdale, supra, 420 Mich. at 277, 362 N.W.2d 632; Teledyne Continental Motors v. Muskegon Twp., 163 Mich.App. 188, 193, 413 N.W.2d 700 (1987). True cash value is synonymous with fair market value. M.C.L. Sec. 211.27; M.S.A. Sec. 7.27. Regardless of the approach selected, the value determined must represent the usual price for which the subject property would sell. Meadowlanes Ltd. Dividend Housing Ass'n v. City of Holland, 437 Mich. 473, 485, 473 N.W.2d 636 (1991). The three most common approaches to valuation are the capitalization-of-income approach, the sales-comparison or market approach, and the cost-less-depreciation approach. Id. at 484-485, 473 N.W.2d 636. Only the latter two methods were applied in the present case. The burden of proof was on petitioner to establish the true cash value of the property. M.C.L. Sec. 205.737(3); M.S.A. Sec. 7.650(37)(3).

The market approach is the only valuation method that directly reflects the balance of supply and demand for property in marketplace trading. Antisdale, supra, 420 Mich. at 277-278, n. 1, 362 N.W.2d 632; Teledyne Continental Motors, supra, 163 Mich.App. at 193, 413 N.W.2d 700. Petitioner's proofs regarding the $1,001,000 sale of its equipment to Youngstown Industrial was intended to show the relatively small value the marketplace put on aging steelmaking equipment, including the mills. The Tax Tribunal, however, erred as a matter of law in its treatment of petitioner's evidence regarding[193 MICHAPP 354] the sale. The tribunal held: "A sale that occurs after the tax date has little or no bearing on the assessment made prior to the sale." (Emphasis in original.)

We disagree. Unlike some situations involving...