Northern Natural Gas Co. v. State Bd. of Equalization and Assessment

Decision Date14 July 1989
Docket NumberNo. 88-706,88-706
Citation443 N.W.2d 249,232 Neb. 806
PartiesNORTHERN NATURAL GAS COMPANY and Enron Liquids Pipeline Company, Appellants, v. STATE BOARD OF EQUALIZATION AND ASSESSMENT, Appellee.
CourtNebraska Supreme Court

Syllabus by the Court

1. State Equalization Board: Appeal and Error. Neb.Rev.Stat. § 77-510 (Cum.Supp.1988) provides that any person, county, or municipality affected by a final decision of the State Board of Equalization and Assessment may prosecute an appeal to the Supreme Court.

2. Administrative Law: Appeal and Error. When an appeal from an administrative agency is not taken pursuant to the Administrative Procedure Act because of a special statute, the standard of review in this court is to search only for errors appearing in the record; i.e., whether the decision conforms to law, is supported by competent and relevant evidence, and was not arbitrary, capricious, or unreasonable.

3. State Equalization Board: Taxation: Valuation. The State Board of Equalization and Assessment has a wide latitude of judgment and discretion in equalizing assessment of property.

4. State Equalization Board: Taxation: Valuation. The State Board of Equalization and Assessment acts in a quasi-judicial capacity when equalizing property.

5. Appeal and Error. In instances where the Supreme Court is required to review a case for error appearing in the record, questions of law are nonetheless reviewed de novo on the record.

6. State Equalization Board: Taxation: Valuation: Appeal and Error. In an application before the State Board of Equalization and Assessment, a taxpayer may employ any factual or legal argument in support of his, her, or its position requesting equalization, subject to the final determination of questions of law on a de novo basis by this court on appeal.

7. State Equalization Board: Taxation: Valuation: Appeal and Error. When the State Board of Equalization and Assessment arbitrarily undervalues a particular class of property so as to make another class of property disproportionately higher, or achieves the same result because of legislative action, the Supreme Court must correct that constitutional inequity by lowering the complaining taxpayer's valuation to such an extent as to equalize it with other property in the state.

8. State Equalization Board: Taxation: Federal Acts: Equal Protection. The State Board of Equalization and Assessment, by not taxing the personal property of certain property in a class, although acting involuntarily and under compulsion of federal law, nevertheless, by complying with that mandate, has denied another taxpayer in that same class the equal protection of the law contrary to the 14th amendment to the Constitution of the United States.

9. Constitutional Law: Taxation: Valuation. The right of a taxpayer whose property alone is taxed at 100 percent of its true value is to have his, her, or its assessment reduced to the percentage of that value at which others are taxed even though this is a departure from the requirement of statute.

10. Constitutional Law: Taxation: Valuation. Where it is impossible to secure both the standard of the true value, and the uniformity and equality required by law, the latter requirement is to be preferred as the just and ultimate purpose of law.

11. Taxation: Property: Words and Phrases. For tax purposes in Nebraska, personal property includes all property other than real property and franchises.

12. Property: Appurtenances: Intent. To determine whether an item constitutes a fixture, this court looks at three factors: (1) actual annexation to the realty, or something appurtenant thereto, (2) appropriation to the use or purpose of that part of the realty with which it is connected, and (3) the intention of the party making the annexation to make the article a permanent accession to the freehold.

13. Property: Appurtenances: Intent. Of the three factors determining whether an item constitutes a fixture, the most important is the intention to make the article a permanent accession to the freehold.

14. Property: Appurtenances: Intent. The intention of the party making the annexation can be inferred from the nature of the articles affixed, the relation and situation of the party making the annexation, the structure and mode of annexation, and the purpose or use for which the annexation has been made.

15. Property: Appurtenances. In considering the issue of annexation, an important factor is whether removal of the article will injure the realty or will injure the article itself.

16. Property: Appurtenances. If a chattel is a necessary or useful adjunct to the realty, then it may be said generally to have been appropriated to the use or purpose of the realty to which it was affixed.

17. Constitutional Law: Taxation: Valuation. Although the taxing authorities may classify different types of property for taxation purposes, nevertheless, the results reached by such different methods and reasonable classifications must be correlated so that the valuations reached shall be uniform and proportionate.

John K. Boyer, Norman H. Wright, and Amy S. Bones of Fraser, Stryker, Vaughn, Meusey, Olson, Boyer & Bloch, P.C., Omaha, for appellants.

Robert M. Spire, Atty. Gen. and L. Jay Bartel, Lincoln, for appellee.

HASTINGS, C.J., and BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT and FAHRNBRUCH, JJ.

HASTINGS, Chief Justice.

This is an appeal by Northern Natural Gas Company and Enron Liquids Pipeline Company (hereinafter collectively referred to as Enron) from a decision of the Nebraska State Board of Equalization and Assessment (the Board) with respect to a request made by Enron for equalization of centrally assessed property.

Enron appealed directly to this court pursuant to Neb.Rev.Stat. § 77-510 (Cum.Supp.1988), which provides in part: "From any final decision of the State Board of Equalization and Assessment with respect to the valuation of any real or personal property, any person, county, or municipality affected thereby may prosecute an appeal to the Supreme Court."

Since appeal was not taken pursuant to Neb.Rev.Stat. § 84-918 (Reissue 1987) of the Administrative Procedure Act, this court's standard of review is not de novo on the record. This court has decided that when the Administrative Procedure Act is inapplicable because another method of appeal has been prescribed, the standard of review will be to search only for errors appearing in the record; i.e., whether the decision conforms to law, is supported by competent and relevant evidence, and was not arbitrary, capricious, or unreasonable. In re Application A-15738, 226 Neb. 146, 410 N.W.2d 101 (1987) (direct appeal to the Supreme Court from the Department of Water Resources); Banner County v. State Bd. of Equal., 226 Neb. 236, 411 N.W.2d 35 (1987).

The disputes involved in this appeal arose in part as a result of three cases which were decided by the U.S. District Court for the District of Nebraska: Trailer Train Co. et al. v. Leuenberger, No. CV87-L-29 (D.Neb. Dec. 11, 1987), aff'd No. 88-1118 (8th Cir. Dec. 19, 1988), cert. denied, Boehm v. Trailer Train Co. et al., --- U.S. ----, 109 S.Ct. 2065, 104 L.Ed.2d 630 (1989); Burlington Northern RR. Co. et al. v. Leuenberger, No. CV87-L-565 (D.Neb. Dec. 10, 1987); and Oklahoma Gas & Electric Co. et al. v. Leuenberger, No. CV88-L-52 (D.Neb. Jan. 26, 1988).

The plaintiffs in Trailer Train were car companies that furnish railcars to railroads. Their only relationship to Nebraska stems from the fact that their railcars are located or operated in Nebraska by the railroads. The federal district court held that the assessment of the plaintiffs' personal property and the imposition, levy, or collection of any personal property taxes against the plaintiffs pursuant to Neb.Rev.Stat. §§ 77-624 et seq. (Reissue 1986) violates § 306(1)(d) of the Railroad Revitalization and Regulatory Reform Act of 1976 (the 4-R Act), and permanently enjoined the imposition, levy, and collection of any personal property taxes from the plaintiffs. On appeal, the U.S. Court of Appeals for the Eighth Circuit affirmed, ruling that the levy and collection of Nebraska's ad valorem tax on car company property violated the 4-R Act.

The plaintiffs in Burlington Northern RR. Co. were several of the railroads that do business in Nebraska. The federal district court preliminarily enjoined and restrained the collection of ad valorem property tax payments for tax year 1987 on that portion of plaintiffs' operating property that consists of personal property. The court issued the preliminary injunction after finding reasonable cause to believe that the personal property tax levied on the plaintiffs results in discriminatory treatment of common carriers by railroad, in violation of § 306(1)(d) of the 4-R Act.

The plaintiffs in Oklahoma Gas & Electric Co. were carlines doing business in Nebraska. The federal district court enjoined distribution of the Nebraska carline tax for the 1987 tax year, finding reasonable cause to believe that the tax violates § 306 of the 4-R Act.

The result in each case was reached through application of the 4-R Act, a federal statute. To prevent the unreasonable burdening of interstate commerce that results from discriminatory state and local taxation of rail carrier property, Congress enacted the 4-R Act, Pub.L. No. 94-210, 90 Stat. 54, § 306 (codified at 49 U.S.C. § 26c (1976); recodified at 49 U.S.C. § 11503 (1982) in accordance with the revised Interstate Commerce Act of 1978).

At issue in Trailer Train was whether Nebraska's personal property taxation system, which provides for extensive exemptions from personal property tax under Neb.Rev.Stat. § 77-202 (Supp.1987), violates § 306(1)(d) of the 4-R Act, which prohibits the imposition of any tax which results in discriminatory treatment of a common carrier by railroad. The federal district court found that the Nebraska system of taxation did violate the federal statute....

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