Rau v. Fritz

• Decision Date: 28 April 1965
• Docket Number: No. 10041,10041
• Parties: Arthur RAU, Mable Rau, Ethel Rau, Irene Lockie, and Alice M. Hewitt, Plaintiffs and Appellants, v. Albert D. FRITZ et al. as Members of the Board of County Commissioners of Codington County, South Dakota, and Codington County, South Dakota and Bruce D. Billis et al. as Members of the State Board of Equalization, and Codington County, South Dakota, Defendants and Respondents.
• Court: South Dakota Supreme Court

Page 773

134 N.W.2d 773

81 S.D. 311

Arthur RAU, Mable Rau, Ethel Rau, Irene Lockie, and Alice M Hewitt, Plaintiffs and Appellants, v. Albert D. FRITZ et al. as Members of the Board of County Commissioners of Codington County, South Dakota, and Codington County, South Dakota and Bruce D. Billis et al. as Members of the State Board of Equalization, and Codington County, South Dakota, Defendants and Respondents.

No. 10041.

Supreme Court of South Dakota.

April 28, 1965.

Austin, Hinderaker & Hackett, Watertown, for plaintiffs and appellants.

Thomas G. Ries, State's Atty., Watertown, Frank L. Farrar, Atty. Gen., John Dewell, Asst. Atty. Gen., Pierre, for defendants and respondents.

ROBERTS, Presiding Judge.

Appellants are the owners of the Lincoln Hotel in Watertown, South Dakota. The assessment for 1959 fixed the value of the structure exclusive of land at $260,000 and for each of the years 1960 and 1961 as $234,000. Sixty percent of such assessed values was taken as the taxable values upon which levies were made and taxes computed. After hearing on appeal, the circuit court found that the assessment for 1959 was excessive and reduced it to $234,000 and confirmed and approved the assessments for 1960 and 1961. The property owners not having obtained all the relief to which they claimed to be entitled appealed to this court contending that the trial court was bound to accept the testimony of their expert witnesses as to the value of the structure from which an assessment for each of the years not exceeding $110,000 was determinable.

Section 2, Article XI, of the State Constitution requires not only that 'taxes shall be uniform on all property of the same class', but that the 'valuation of property for taxation purposes shall never exceed the actual value thereof'. We stated in Williams v. Stanley Co. Board of Equalization, 69 S.D. 118, 7 N.W.2d 148, that 'when excessive valuation has been shown the owner is entitled to relief though there is no proof that a reduction is necessary to effect uniformity with other property of the same class.' See also In re Jepsen's Appeal, 76 S.D. 421, 80 N.W.2d 76.

SDC 1960 Supp. 57.0334 provides that 'All property shall be assessed at its true and full value in money but only sixty per cent of such assessed value shall be taken and considered as the taxable value * * *. In determining the true value of real and personal 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 of value the price for which the property would sell at auction or at a forced sale.' SDC 57.0301 defines 'True and full value' as 'the usual cash selling price at the place where the property to which the term is applied shall be at the time of the assessment.' SDC 57.0331 provides that the assessor 'shall actually view, when practicable, and determine the true and full value of each tract or lot of real property listed for taxation, and shall enter the value thereof in one column, and the value of all improvements or structures thereon in another column, opposite each description of property, also the total value of the same including improvements and structures.'

The terms 'actual value' and 'true and full value' mean the 'market value' of property to be assessed and market value has been defined as the price which a purchaser willing but not obligated to buy would pay an owner willing but not obligated to sell, taking into consideration all uses to which the property is adapted and might in reason be applied. Tidball v. Miller, 72 S.D. 243, 32 N.W. 683; Sheraton-Midcontinent Corp. v. County of Pennington, 77 S.D. 554, 95 N.W.2d 892. When there are insufficient sales to establish a market price, such value may be determined by the opinions of witnesses acquainted with the property, uses to which the property is adapted and the circumstances of the surrounding community. Village of Aurora v. Commissioner of Taxation, 217 Minn. 64, 14 N.W.2d 292; Sibley v. Town of Middlefield, 143 Conn. 100, 120 A.2d 77; Buhl Foundation v. Board of Property Assessment, 407 Pa. 567, 180 A.2d 900. The worth of property for income and sale is also its worth for purposes of taxation. Elements bearing upon market value include the condition of the property, location, income derived therefrom, cost of replacement less depreciation and every other element which can reasonably affect its value. Depreciation includes physical depreciation, functional obsolescence and economic obsolescence. The first is wear and tear occasioned by use and the elements. Functional obsolescence is the loss of utility and failure to function because of inadequacies and deficiencies in the property. Economic obsolescence is loss of value brought about by conditions in the neighborhood of a property causing loss of business. Sheraton-Midcontinent Corp. v. County of Pennington, supra.

The issue for our determination is whether the evidence is sufficient to sustain the finding of the trial court that $234,000 was the fair and full value of the Lincoln Hotel structure for each of the three years here in question. The valuation of the lots on which the building stands as we have stated is not in question. The circuit court does not review the record merely to ascertain whether or not the assessor and review boards acted reasonably and in the performance of their duties, but exercises an independent judicial judgment in determining whether an assessment is in excess of actual value and in violation of the constitutional limitation. If the decision of the circuit court is supported by substantial evidence, it may not be disturbed on appeal. In re Robinson, 73 S.D. 580, 46 N.W.2d 908.

The Lincoln Hotel is a five-story brick and concrete structure. The original structure was erected in 1912. A fifth story was added in 1915 and in 1921 and 1922 an addition fifty feet in width was added. Portions of the second, fourth and fifth floors in the addition have not been finished and furnished as hotel...