Pier 67, Inc. v. King County

• Decision Date: 22 December 1977
• Docket Number: No. 44366,44366
• Citation: 89 Wn.2d 379,573 P.2d 2
• Parties: PIER 67, INC., a/k/a Edgewater Inn, Appellant, v. KING COUNTY, a Municipal Corporation, A. J. Steen, as Assessor for King County and A. A. Tremper, as Treasurer for King County, Washington, Respondents.
• Court: Washington Supreme Court

Page 379

89 Wn.2d 379

573 P.2d 2

PIER 67, INC., a/k/a Edgewater Inn, Appellant, v. KING COUNTY, a Municipal Corporation, A. J. Steen, as Assessor for King County and A. A. Tremper, as Treasurer for King County, Washington Respondents.

No. 44366.

Supreme Court of Washington, En Banc.

Dec. 22, 1977.

Jennings P. Felix, Inc., P. S., Jennings Felix, Seattle, for appellant.

Christopher T. Bayley, Pros. Atty., Robert D. Johns, Deputy Pros. Atty., Seattle, for respondents.

UTTER, Associate Justice.

This is an appeal from property valuations for purposes of the ad valorem property tax. The primary issues are whether these valuations violate various provisions of the state and federal constitutions.

The present appeal is essentially a continuation of the original action commenced in 1964. We considered this case on two previous occasions. See Pier 67, Inc. v. King County, 71 Wash.2d 92, 426 P.2d 610 (1967) (Pier 67 I ); and Pier 67, Inc. v. King County, 78 Wash.2d 48, 469 P.2d 902 (1970), cert. denied, 401 U.S. 911, 91 S.Ct. 876, 27 L.Ed.2d 810 (1971) (Pier 67 II ). The issues raised on this appeal stem primarily from Pier 67 II. In that case, this court overruled prior statutory interpretations of RCW 84.40.030 ¹ and set a new standard for the valuation of leasehold interests and improvements on state-owned land. The result of that decision is that leaseholds of state-owned land and the improvements thereon are now valued with the same standards used for valuing taxable property in general. No deductions are to be allowed for rent reserved and mortgage indebtedness.

Since Pier 67 II, a host of legislation has been passed amending RCW 84.40.030. ² Of interest to the present litigation is Laws of 1971, 1st Ex.Sess., ch. 43, § 1, p. 417. ³ This legislation was designed to temporarily and partially alleviate the effect of Pier 67 II. However, the act was declared unconstitutional in Haines v. Anaconda Aluminum Co., 87 Wash.2d 28, 549 P.2d 13 (1976). We also held that our decision in Pier 67 II should be applied retroactively.

After our decision in Pier 67 II, the King County assessor changed the valuations on appellant's (Pier 67, Inc.) leasehold and improvements (the Edgewater Inn, Seattle), and appellant now challenges their validity. The valuations in dispute concern assessment years 1963-67 and 1970-72 (for taxes payable in years 1964-68 and 1971-73). No taxes have been paid for those years.

The trial court made the following findings and conclusions: (1) The leaseholds of Pier 67, Inc., the Olympic Hotel, and the University Properties, Inc., have similar characteristics making the comparison of valuations valid on the constitutional issues of discrimination and uniformity; (2) Pier 67, Inc., was unconstitutionally discriminated against for assessment years 1968 and 1969 based on the uncontested fact that mortgage payment deductions were allowed in those 2 years as to University Properties, Inc. while no similar deductions were granted when valuing appellant's leasehold and improvements. On the basis of this finding, the court concluded the assessments for the years 1968 and 1969 were void as a matter of law. It also found that if the Pier 67 property had been assessed in a uniform manner its assessed valuation would have been zero in each of these 2 years and fixed the value accordingly in its findings. Its judgment enjoined any further assessment for these 2 years. This is not appealed by respondents. (3) For all the other years in question, however, there was no unlawful discrimination against appellant despite a finding that the Olympic Hotel and the University Properties, Inc. were assessed in a "substantially different manner" than appellant for assessment years 1963 through 1969. This conclusion was based on the reasoning that (a) a fair determination of the true value of appellant's leasehold and improvements is possible under the statutes, and (b) appellant's leasehold is sufficiently akin to ordinary real property interests so that absent substantial specific evidence of discrimination, its leasehold should bear a fair burden of taxation. In addition, the presumption of correctness of an assessment prevailed. (4) On the basis of all the evidence, the full, true, and fair values for appellant's leasehold interest for assessment years 1963 through 1967 and 1970 through 1972 were determined. The values found for assessment years 1970, 1971, and 1972 were reduced by the amount of rents due in accordance with Laws of 1971, 1st Ex.Sess., ch. 43, § 1. (5) Our decision in Pier 67 II does not constitute an impairment of contract and does not violate article 1, section 10 of the United States Constitution. (6) Finally, the court held that respondents are entitled to interest at the statutory rate of 8 percent per annum from May 23, 1968, to the date of payment.

I

Appellant makes several assignments of error pertaining to the trial court's refusal to find it had been unconstitutionally discriminated against, not only during the years 1968 and 1969, but also 1963 through 1967, and 1970 through 1972. Appellant reasons that the interpretation of RCW 84.40.030 by this court prior to Pier 67 II allowed deductions for mortgage amortization and it is logical to assume the assessor followed the law in the years prior to that decision. In addition, appellant argues that the assessor's failure to produce records which would evidence a contrary conclusion should create a presumption that the assessor did grant such deductions to other taxpayers, with the result that the failure to allow these deductions to the appellant constituted an act of unlawful discrimination.

Our constitution provides: "All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax . . ." Const. art. 7, § 1 (amendment 14). In interpreting the provisions of our constitution concerning uniformity of taxation this court has held:

It seems too plain for argument that to pick out the property of a particular owner and raise the assessed valuation of his property substantially above the assessed valuation of property of a like character similarly situated, violates the uniformity and equality provision of article VII, § 2 of the state constitution.

. . . If the assessment is higher than that of property of like character and similar in situation, the assessment cannot be sustained, even though it be based on the true market value of the property.

(Italics ours.) Pacific Tel. & Tel. Co. v. Wooster, 178 Wash. 180, 183-84, 34 P.2d 451, 452 (1934). The United States Supreme Court has expressly held, in a case arising in this jurisdiction and on facts closely analogous to those now before us, that the use of different valuation techniques for like properties, which result in substantially different assessments, constitutes an unconstitutional act of discrimination and voids the assessment. Moses Lake Homes, Inc. v. Grant County, 365 U.S. 744, 81 S.Ct. 870, 6 L.Ed.2d 66 (1961). Appellant contends the respondents' general admission that the Olympic Hotel and University Properties, Inc. were assessed "in a substantially different manner" during the years 1963 through 1969, coupled with the existence of evidence of specific acts of discrimination in the only years in which records were preserved, constitutes sufficient evidence to conclude it has been the victim of the intentional and systematic use of discriminatory assessment techniques in each of the years in question.

Property tax assessments and the underlying valuations are presumed valid. Alaska Land Co. v. King County, 77 Wash.2d 247, 461 P.2d 339 (1969); Dexter Horton Bldg. Co. v. King County, 10 Wash.2d 186, 116 P.2d 507 (1941); Bellingham Community Hotel Co. v. Whatcom County, 190 Wash. 609, 70 P.2d 301 (1937). In addition, the assessor's valuations will only be overturned if the taxpayer can prove that the valuations were fraudulently, arbitrarily, or capriciously made (Mason County Overtaxed, Inc. v. Mason County, 62 Wash.2d 677, 384 P.2d 352 (1963); Dexter Horton Bldg. Co. v. King County, supra ) or if the valuations violate some constitutional provision. Pacific Tel. & Tel. Co. v. Wooster, supra. The taxpayer has the burden of establishing by clear and convincing evidence that the valuations and assessments are illegal. Alaska Land Co. v. King County, supra; Ozette Ry. v. Grays Harbor County, 16 Wash.2d 459, 133 P.2d 983 (1943).

The trial court concluded the presumption of correct assessment must prevail for the years now at issue because the records which contained the valuation techniques utilized for the Olympic Hotel and University Properties, Inc. during these periods had not been preserved by the county, with the result that the appellant was unable to prove with absolute certainty that the Olympic Hotel and University Properties, Inc. had been allowed deductions which had been denied to the appellant. In so holding, the trial court placed too great an emphasis upon the presumption of proper assessment.

The trial court found the leaseholds of Pier 67, the Olympic Hotel and University Properties, Inc. have similar characteristics, making comparison of assessments valid for purposes of determining compliance with the constitutional mandate of uniformity. It also found those properties were assessed in "a substantially different manner" for assessment years 1963 through 1969. Despite these findings, the court held, in essence, that absent specific evidence of discrimination as to each of the tax years in question (such as was found to exist for the years 1968 and 1969), the presumption of correctness prevails.

The cases in which the presumption of correctness was developed did not involve a factual setting such as this. Those cases concerned attacks on excessive or disparate evaluation, generally in a single year, rather than disparate valuation allegedly arising from the systematic use of varying valuation...