Natatorium Co. v. Board of Com'rs of Ada County

• Decision Date: 05 October 1946
• Docket Number: 7227
• Citation: 67 Idaho 143,174 P.2d 936
• Court: Idaho Supreme Court
• Parties: NATATORIUM CO. v. BOARD OF COM'RS OF ADA COUNTY

174 P.2d 936

67 Idaho 143

NATATORIUM CO. v. BOARD OF COM'RS OF ADA COUNTY

No. 7227

Supreme Court of Idaho

October 5, 1946

Rehearing Denied Dec. 30, 1946.

Rehearing Denied December 30, 1946.

Appeal from District Court, Third District, Ada County; Charles E Winstead, Judge.

Judgment reversed and cause remanded with directions to enter judgment in accordance with opinion.

James W. Blaine and Maurice H. Greene, both of Boise, for appellant.

Income from real property is a factor to be considered in fixing its value for taxation purposes. I.C.A. § 61-111; In re Winton Lbr. Co., supra; 3 Cooley, Taxation, 4th Ed., Section 1146, p. 2311; Adams Express Co. v. State Auditor, 165 U.S. 194, 17 S.Ct. 305, 41 L.Ed. 683; State v Halliday, 61 Ohio St. 352, 56 N.E. 118, 49 L.R.A. 427; Note, L.R.A.1916C, 529. Citizens Savings Bank v. Fitchburg Mutual Fire Insurance Co., 86 Vt. 267, 84 A. 970.

Where property has no market value capitalizing net income as one means of valuation is proper. 61 C.J. 668; 57 Am.Jur. 650; South Utah Mines & Smelters v. Beaver County, 262 U.S. 325, 43 S.Ct. 577, 67 L.Ed. 1004; Somers v. Meriden, 119 Conn. 5, 174 A. 184, 95 A.L.R. 434 and Note 442; Crosby v. Kitsap County, 154 Wash. 212, 281 P. 494; Equitable Life Assur. Society v. Slade, 122 Conn. 451, 190 A. 616; Quincy v. Boston Consolidated Gas Co., 309 Mass. 60, 34 N.E.2d 623; Kussraw v. Pitney-Bowes Postage Meter Co., 154 Fla. 417, 18 So.2d 25.

Carey H. Nixon and J. L. Eberle, both of Boise, for respondent.

Assessment of property for ad valorem tax purposes must be on the basis of the status and value of the property on the second Monday in January of the year in which the assessment is made; and in making such assessment, the assessor shall value each piece or parcel of property by itself, which separate pieces or parcels of property shall be listed in a taxpayer's statement. I.C.A. §§ 61-202, 61-203, 61-209, 61-212; Preston A. Blair v. Jensen, 49 Idaho 118, 286 P. 366; Winton Lumber Co. v. Shoshone County, 50 Idaho 130, 294 P. 529.

Although it is proper to consider earning power in determining the cash value of any particular piece or parcel of assessable property, as by statute provided, it is not proper or legal to assess earnings or income and there is no authority for either an assessor or a County Board of Equalization to determine what rate of return a taxpayer may earn and then apply a multiplier, according to either of their fluctuating judgments, to what they, or either of them, deem to be excessive earnings or income and capitalize the same depending upon the particular multiplier used as to any particular combination of separately assessable pieces or parcels of property, especially where great disproportion in assessment is accomplished, or where the resultant assessment is based principally upon such earnings. I.C.A. §§ 61-102, 61-111, 61-202, 61-204; Diefendorf v. Gallett, 51 Idaho 619, 10 P.2d 307; Northern Pac. Ry. Co. v. Clearwater County, 26 Idaho 455, 144 P. 1; State v. Horn, 27 Idaho 782, 152 P. 275; Humbird Lumber Co. v. Thompson, 11 Idaho 614, 83 P. 941; Washington County v. First National Bank, 35 Idaho 438, 206 P. 1054; Standard Oil Co. v. Howe, 9 Cir., 257 F. 481.

Holden, Justice. Ailshie, C. J., Miller, J., and Buckner, District Judge, concur. Budge and Givens, JJ., did not sit at the hearing or participate in this decision. Sutphen, District Judge, concurring in part and dissenting in part.

OPINION

Holden, Justice.

Preliminarily, the motion of respondent and cross-appellant, Natatorium Company, to strike from the record the "memorandum decision" of the trial judge is presented. It appears the "memorandum decision" was included in and made a part of the record on appeal. It is not properly a part of the record. The motion is granted and the "memorandum decision" stricken. Sec. 7-1107, I.C.A.; Williams v. Boise Basin Mining, etc., Co., 11 Idaho 233, 81 P. 646; North Robinson Dean Co. v. Strong, 25 Idaho 721, 730, 139 P. 847; Corker v. Cowen, 30 Idaho 213, 215, 164 P. 85; Baldwin v. Singer Sewing Machine Co., 48 Idaho 596, 598, 284 P. 1027; Clark v. Clark, 58 Idaho 37, 41, 69 P.2d 980; Stearns v. Graves, 61 Idaho 232, 246, 99 P.2d 955.

Respondent and cross-appellant, Natatorium Company, hereinafter referred to as the Company, for many years has been, and still is, engaged in the business of selling natural hot water for heating residences in Boise. Apparently it is the only concern known to be engaged in the business. Its stock is owned by the Boise Water Corporation whose stock in turn is owned by the General Water, Gas and Electric Company. July 16, 1943, the Company filed written objections to and protest with the Ada County Board of Equalization, protesting the assessment of its properties made by the Assessor of the County for the year 1943. The protest was levelled against the formula used by the Assessor, by which the Assessor arrived at a capitalized value of the properties of $ 495,000, a physical valuation of $ 160,921, or a composite value of $ 327,960, the composite value being reduced one-half, or to $ 163,980, to make that value, $ 163,980, conform to the actual value at which other property in Ada county was assessed. On the hearing of the Company's protest, the Board used the same formula as the Assessor, excepting the Assessor had capitalized net income, or net earnings, before taxes, while the Board arrived at valuation (capitalized) after deducting federal income taxes.

August 6, 1943, the Company appealed to the district court from the action and order of the Board, dated July 19, 1943. The appeal from the Board was heard December 14, 1943. Findings of fact and conclusions of law were made and entered June 29, 1944, and on the same day judgment was entered thereon reversing and modifying the order of the Board. September 14, 1944, the Board appealed from the judgment of the district court and thereafter and on the 25th day of September, 1944, the Company also appealed.

It appears from the record, and the court found, property in Ada county for the year 1943 was generally assessed on a basis of fifty per cent. of its value; the court also found the value of the property of the Company at 12:00 M. on the second Monday of January, 1943, for taxation purposes, was $ 80,460.50; the trial court held the method of assessment used by the Assessor and the method of equalizing the assessment used by the County Board of Equalization, in assessing the property of the Company for 1943, was illegal; it further held the assessment of the property of the Company for the year 1943, as made by the Assessor, and as equalized by the County Board of Equalization, was arbitrary and capricious. In fixing the value of the property of the Company for taxation purposes at $ 80,460.50, the trial court refused to and did not consider the factor of the earnings of the Company.

The controlling question presented on these appeals, is: Where, as here, neither the stock, property nor system like that of the Company was every sold on the open market, can the Assessor use a capitalized earning power formula as one factor in determining the cash value of the Company's system for taxing purposes?

The Company, as we understand it, first insists the use of a capitalized earning power formula as one factor in evaluating its property, is an assessment of income, but, nevertheless, then says "no issue was taken to the principle, of which our statute is declaratory, that earning capacity is a factor in valuation."

We quote pertinent provisions of our "Revenue and Taxation" statute:

Sec. 61-102, I.C.A. "All real and personal property subject to assessment and taxation must be assessed at its full cash value for taxation for state, county, city, town, village, school district and other purposes, under the provisions of this act, with reference to its value at twelve o'clock meridian, on the second Monday of January in the year in which such taxes are levied, * * *."

Sec. 61-111, I.C.A. "Value defined. -- By the term 'value,' 'cash value' or 'full cash value' is meant the value at which the property would be taken in payment of a just debt due from a solvent debtor, or the amount the property would sell for at a voluntary sale made in the ordinary course of business, taking into consideration its earning power when put to the same uses to which property similarly situated is applied."

Sec. 61-202, I.C.A. "Criteria of value. -- In ascertaining the value of any property the assessor shall not adopt a lower or different standard of value because the same is to serve as a basis of taxation, nor shall he adopt as a criterion any value or price for which the property would sell at auction or at forced sale, or in the aggregate with all the property in the taxing district; nor, on the other hand, shall be adopt a speculative valuation, or one based upon sales made upon the basis of a small cash payment and instalments payable in the future, but he shall value each article or piece of property by itself and at such sum or price as he believes the same to be fairly worth in money at the time such assessment is made. * * *."

It will be noted Section 61-102, supra, requires all property must be assessed at its full cash value; that section 61-111, supra, defines "value" ; that by the term "value," "cash value," "full cash value," the legislature says, "is meant the value at which the property would be taken in payment of a just debt due from a solvent debtor, or the amount the property would sell for at a voluntary sale made in the ordinary course of business taking into consideration its earning power when put to the same uses to which property similarly situated is applied" (emphasis added); it will be further noted section...