Pima County v. Cyprus-Pima Mining Co.

• Decision Date: 10 April 1978
• Docket Number: CYPRUS-PIMA,No. 13182,13182
• Parties: PIMA COUNTY, a body politic, and Arizona Department of Revenue, Appellants, v.MINING COMPANY, a corporation, Appellee.
• Court: Arizona Supreme Court

Page 1081

579 P.2d 1081

119 Ariz. 111

PIMA COUNTY, a body politic, and Arizona Department of Revenue, Appellants, v. CYPRUS-PIMA MINING COMPANY, a corporation, Appellee.

No. 13182.

Supreme Court of Arizona,In Banc.

April 10, 1978.

Rehearing Denied May 9, 1978.

Bruce E. Babbitt, former Atty. Gen. by James Powers, Sp. Asst. Atty. Gen., Phoenix, for appellants.

Bilby, Shoenhair, Warnock & Dolph by David W. Richter, Michael A. Lacagnina, Tucson, for appellee.

STRUCKMEYER, Vice Chief Justice.

By this appeal, the Arizona Department of Revenue and Pima County seek to set aside the valuation for tax purposes fixed on the open pit copper mine of Cyprus-Pima Mining Company by the Superior Court for the year 1975. The judgment of the Superior Court is reversed with directions to enter judgment in favor of appellants, reinstating the valuation of appellee's mine at $67,300,000, the amount fixed by the State Board of Tax Appeals.

This case presents the same basic question as was presented in Mohave County v. Duval Corporation, 119 Ariz. 105, 579 P.2d 1075 (1978) (opinion filed this date); namely, whether the valuation of the Cyprus-Pima Mine as fixed by the State Board of Tax Appeals is lawful under A.R.S. § 42-201(4). The Cyprus-Pima Mining Company appealed its property tax valuation to the State Board of Tax Appeals. The State Board fixed the value of 60.86% of the mine at $67,300,000. ¹ The mining company was still not satisfied and petitioned the Superior Court for a reduction pursuant to A.R.S. §§ 42-146, 42-151 and 42-152. As in Duval, the Superior Court ordered the valuation reduced. Here the reduction was from $67,300,000 to $39,600,000.

The Arizona Department of Revenue and Pima County did not cross-appeal from the State Board's valuation; but in their answer to Cyprus-Pima's appeal, they asked the Superior Court to increase the valuation. The Superior Court was, however, of the view that because of the failure to present this issue to the State Board of Tax Appeals and to file a timely appeal or cross-appeal, the only issues were whether the valuation of the State Board was excessive and, if so, how much.

The first question we consider then is whether Cyprus-Pima's valuation for tax purposes may be increased without directly appealing from the valuation of the State Board. We think not.

By statute A.R.S. § 42-123(B)(6), the Department of Revenue may contest valuations of property before the State Board of Tax Appeals. If the decision of the State Board is, in the opinion of the Director of the Department of Revenue, erroneous, he may "appeal" such decision to the Superior Court in the manner provided in A.R.S. § 42-151. By § 42-151, an appeal is commenced by filing a notice of appeal. The Department of Revenue did not file a notice of appeal. Rather, as stated, it sought affirmative relief in its answer to the appeal of Cyprus-Pima. The procedure used by the Department to test the decision of the Board of Tax Appeals does not comply with the statute. The right to appeal is statutory and the method provided by the Legislature is exclusive. County of Pima v. State Dept. of Revenue, 114 Ariz. 275, 560 P.2d 793 (1977); Williams v. Bankers Nat. Ins. Co., 80 Ariz. 294, 297 P.2d 344 (1956). We therefore hold that the valuation fixed by the State Board may not be raised except and in the manner provided by law; that is, by direct appeal. We do not hold, however, that evidence of valuation in amounts greater than the State Board's finding may not be shown to support its valuation. We only hold that where there is no appeal or cross-appeal, a valuation may not be set greater than that fixed by the State Board.

Appellants question the failure of the Superior Court to dismiss Cyprus-Pima's appeal because Cyprus-Pima did not file a receipt for the payment of its taxes as required by statute.

A.R.S. § 42-151(E) provides:

"All taxes levied and assessed against property on which an appeal has been filed by the owner thereof shall be paid under protest prior to the date the tax becomes delinquent. A receipt shall be given for the amount of such tax paid, and within forty-five days a copy of the receipt shall be filed by the owner with the clerk of the court in which the appeal is docketed. If such taxes are not paid prior to becoming delinquent, or if a copy of the receipt for payment is not so filed, the court shall dismiss the appeal."

It is appellants' position that because Cyprus-Pima did not file a copy of the receipt for payment of taxes within 45 days, the Superior Court should have dismissed the appeal. We think, however, the circumstances of this case did not require the dismissal of Cyprus-Pima's appeal to the Superior Court.

Cyprus-Pima timely paid all the taxes assessed against it for the year 1975. The first half of the 1975 taxes was due on November 3, 1975 and it was paid on that date. On November 5, 1975, Cyprus-Pima filed with the Clerk of the Superior Court a receipt which indicated payment of the first half of the 1975 taxes. The second half of the 1975 taxes was not due until May 3, 1976. These taxes were paid April 28, 1976, the day the trial of the action was concluded in the Superior Court. Cyprus-Pima did not file a receipt showing payment of the second half of taxes within 45 days. However, prior to entry of judgment, Cyprus-Pima filed with the clerk of the court a post office receipt for certified mail indicating delivery of its check to the county treasurer on April 28, 1976.

The plain purpose of the statute in requiring the payment of taxes before they become delinquent is to insure the continued fiscal soundness of the government. In this we think the statute is mandatory. The purpose of the requirement that a receipt be filed with the Clerk of the Superior Court is to notify the court that the taxpayer has complied with the law. Where, as here, the taxpayer timely pays its taxes and satisfactorily makes known to the court that its taxes had been paid before the court orders the appeal dismissed, we think the spirit of the law is satisfied. A statute should be given a sensible construction. Sanders v. Folsom, 104 Ariz. 283, 451 P.2d 612 (1969). We hold that there was sufficient compliance with the provision of § 42-151(E).

Before examining the basis for the Superior Court's action in reducing the valuation of the Cyprus-Pima Mine, certain points should be emphasized.

First, the Legislature requires for tax purposes that the valuation of property shall be at its "market value." A.R.S. § 42-201(4). ² More will be said later about the determination of the market value of the Cyprus-Pima Mine.

Second, the term "cash flow" as used in the evidence means the total of all revenues minus all costs net income after taxes. The cash flow (net income after taxes) and the full cash value for 60.86% of the Cyprus-Pima Mine for the five years preceding 1975 were:

CASH FLOW FULL CASH VALUE

----------- ---------------

1970 $13,333,000 $21,544,000

1971 9,034,000 21,179,000

1972 11,414,000 36,698,000

1973 20,231,000 34,568,000

1974 21,330,000 28,604,000

It is obvious from the above that the full cash value of the Cyprus-Pima Mine was not adequately reflecting market value. The figures show that the mine was consistently being valued at less than three times earnings or, in some cases, at less than two times earnings and that, therefore, the value of the mine was being recovered long before its ore body was expected to be exhausted. Consequently, in 1975 the decision was made to evaluate by a method which would produce a more realistic result.

Both parties rested their cases on the testimony of two expert appraisal witnesses. For the mine, Alfred Petrick, Jr. testified to a valuation of $35,900,000 for 60.86% of the mine, and Fredrick C. Kruger testified to a valuation of $39,682,000. The Arizona Department of Revenue's two witnesses, Jack W. Still and Ernest K. Lehmann, testified, respectively, to valuations of $93,666,099 and $79,000,000.

Before examining the evidence supporting Cyprus-Pima's valuations, we note the Superior Court's findings of facts 8 and 9. In number 8, the Superior Court found that "the valuation * * * of $67,300,000 as found by the State Board of Tax Appeals is excessive." In finding 9, the court found that the testimony and valuation of Fredrick C. Kruger "were more persuasive than those of any other expert witness and the Court therefore substantially adopts Dr. Kruger's valuation." The Superior Court did not give any reason why the testimony of Kruger was "more persuasive." Nor did the Superior Court find that the witnesses for the State did not use standard appraisal methods or techniques. Hence, the court's findings of fact provide us with little, if any, basis as to why the court found the State's valuation to be excessive. We have said that a mere difference of opinion as to the method to be used in computing valuation does not justify judicial intervention in the area of taxation. Mohave County v. Duval Corp., supra; Navajo County v. Four Corners Pipe Line Company, 106 Ariz. 511, 479 P.2d 174 (1970), rehearing denied, 107 Ariz. 296, 486 P.2d 778 (1971). And see County of Yuma v. Tongeland, 15 Ariz.App. 237, 488 P.2d 51 (1971). If a difference of opinion as to the method of computation does not justify judicial intervention, then clearly a difference in result arrived at by use of a different method cannot alone justify intervention. The burden of proof to establish error in the State's valuation is not satisfied by pointing to a finding of fact that the trial judge simply preferred one witness over others. Consequently, the difference in results alone does not justify judicial intervention. However, in order that there be no misconception as to our views of Cyprus-Pima's case, we think an explanation of why its experts' valuations are unsound and do not therefor reflect the requirements of the Arizona Statute § 42-201(4) is appropriate.

By statute, A.R.S. §...