Rio Algom Corp. v. San Juan County

• Decision Date: 13 March 1984
• Docket Number: No. 18782,18782
• Citation: 681 P.2d 184
• Parties: RIO ALGOM CORPORATION, a Delaware corporation, et al., Plaintiffs and Appellants, v. SAN JUAN COUNTY, et al., Defendants and Respondents.
• Court: Utah Supreme Court

Page 184

681 P.2d 184

RIO ALGOM CORPORATION, a Delaware corporation, et al Plaintiffs and Appellants, v. SAN JUAN COUNTY, et al., Defendants and Respondents.

No. 18782.

Supreme Court of Utah.

March 13, 1984.

James B. Lee, James M. Elegante, Salt Lake City, for plaintiffs and appellants.

Bruce K. Halliday, Monticello, Bill Tomas Peters, Salt Lake City, for defendants and respondents.

STEWART, Justice:

This is an action brought by plaintiffs Rio Algom Corporation, Utah Power and Light Company, Atlas Corporation, Energy Fuels Nuclear, Inc., Consolidated Oil and Gas, Inc., and Northwest Pipeline Corporation against San Juan County and various of its officials, the San Juan School District and various of its employees, and the State Tax Commission and its commissioners for a refund of a part of the property taxes the plaintiffs paid, over protest, to San Juan County for the year 1981.

The plaintiff taxpayers are owners of state-assessed properties located in San Juan County. On this appeal, they challenge the constitutionality of two statutes: (1) U.C.A., 1953, § 59-5-4.5 (Supp.1981), which reduces by 20 percent the value of county-assessed property appraised by comparable sales or cost methods; and (2) U.C.A., 1953, § 59-5-109 (Supp.1981), which rolls back the value of all county-assessed real property to its 1978 level. Plaintiffs contend that the reduction of the assessed value of county-assessed properties, but not state-assessed properties, has unlawfully increased their ad valorem property taxes by requiring them to pay greater taxes to compensate for the reduced taxes that owners of county-assessed properties pay. The plaintiffs' contention is that the two challenged statutory provisions violate, on their face, the tax uniformity and equal protection provisions of the Utah Constitution and the Equal Protection Clause of the Fourteenth Amendment.

I. AD VALOREM PROPERTY TAXES GENERALLY

U.C.A., 1953, § 59-5-4.5 (Supp.1981) and § 59-5-109 (Supp.1981) were enacted in 1981, Laws of Utah 1981, ch. 231, § 1. ¹ Section 59-5-4.5 provides:

Assessor to recognize certain expenses in valuing property--percentage limitation. When the county assessor uses the comparable sales or cost appraisal method in valuing taxable property for assessment purposes, the assessor is required to recognize that various fees, services, closing costs, and other expenses related to the transaction lessen the actual amount that may be received in the transaction. The county assessor, shall, therefore, take 80% of the value based on comparable sales or cost appraisal of the property as its reasonable fair cash value for purposes of assessment.

Section 59-5-109 provides:

All locally-assessed taxable real property shall be appraised at current fair market value and the value of such property rolled back to its January 1, 1978, level as such level is determined by the state tax commission.

In the trial court, the plaintiffs sued for a refund of that portion of their 1981 property taxes which they contend should have been paid by county-assessed property owners in San Juan County who were underassessed pursuant to the above statutes. On a motion for partial summary judgment, §§ 59-5-4.5 and 59-5-109 were attacked as being facially unconstitutional. Plaintiffs adduced no evidence of actual nonuniformity in the tax assessments of state-assessed properties as compared with county-assessed properties. Plaintiffs' argument was that county-assessed properties were not assessed at current market value, and therefore the assessments were unconstitutional as a matter of law. Defendants opposed the motion in part on the ground that the issues could not be adjudicated by summary judgment because of the existence of issues of fact. Defendants submitted evidence indicating that state-assessed properties were undervalued and that the statutes in question were intended by the Legislature to redress a substantial and discriminatory shift of property taxes from state-assessed properties to county-assessed properties. The trial court ruled against the plaintiffs on the motion and held the statutes constitutional. The court held that the statutes were enacted pursuant to the state's constitutional authority to classify property and to establish different methods for valuing different types of property.

The constitutional attack on §§ 59-5-4.5 and 59-5-109 focuses primarily on §§ 2 and 3 of Article XIII of the Utah Constitution. Section 2 of that article as it read in 1981 provided:

All tangible property in the state ... shall be taxed in proportion to its value, to be ascertained as provided by law. [Emphasis added.]

Section 3 of Article XIII provides:

The legislature shall provide by law a uniform and equal rate of assessment and taxation on all tangible property in the state, according to its value in money, and shall prescribe by law such regulations as shall secure a just valuation for taxation of such property so that every person and corporation shall pay a tax in proportion to the value of his, her, or its tangible property .... [Emphasis added.]

Two other constitutional provisions also deal with the assessment of ad valorem property taxes and are pertinent to this case. Section 4 of Article XIII deals with the taxation of mines and mining claims:

All metalliferous mines or mining claims, both placer and rock in place, shall be assessed as the Legislature shall provide; provided, the basis and multiple now used in determining the value of metalliferous mines for taxation purposes and the additional assessed value of $5.00 per acre thereof shall not be changed before January 1, 1935, nor thereafter until otherwise provided by law. All other mines or mining claims and other valuable mineral deposits, including lands containing coal or hydrocarbons and all machinery used in mining and all property or surface improvements upon or appurtenant to mines or mining claims, and the value of any surface use made of mining claims, or mining property for other than mining purposes, shall be assessed as other tangible property.

Section 11 of Article XIII provides that the "State Tax Commission shall administer and supervise the tax laws of the state. It shall assess mines and public utilities .... It shall have such other powers of original assessment as the Legislature may provide."

Pursuant to § 59-5-3 (Supp.1983), the Legislature has directed the Commission to assess the following properties:

Pipelines, power lines and plants, canals and irrigation works, bridges and ferries, and the property of car and transportation companies, when they are operated as a unit in more than one county; all property of public utilities whether operated within one county or more; all mines and mining claims, and the value of metalliferous mines based on two times the annual net proceeds thereof as provided in section 59-5-57, and all other mines and mining claims and other valuable deposits, including lands containing coal or hydrocarbons, nonmetalliferous minerals underlying land the surface of which is owned by a person other than the owner of such minerals, all machinery used in mining and all property or surface improvements upon or appurtenant to mines or mining claims and the value of any surface use made of nonmetalliferous mining claims or mining property for other than mining purposes; must be assessed by the state tax commission as hereinafter provided; except that property assessed by the unitary method, not necessary to the conduct and which does not contribute to the income of the business shall be assessed separately. All taxable property not required by the Constitution or by law to be assessed by the state tax commission must be assessed by the county assessor of the several counties in which the same is situated. For the purposes of taxation all mills, reduction works and smelters used exclusively for the purpose of reducing or smelting the ores from a mine or mining claim by the owner thereof shall be deemed to be appurtenant to such mine or mining claim though the same is not upon such mine or mining claim.

Under this section and its antecedent, the State Tax Commission has assessed the tangible properties of the plaintiffs in this action.

Under Article XIII, § 3, the property taxes paid on each property are required to have a uniform proportion to the value of the property. Although the objective is easily stated, its attainment is more difficult. Because of the many different kinds of property and the various factors that affect their values, the determination of what constitutes equal "in proportion to the value of his, her or its tangible property," under Article XIII, § 3, cannot be made by application of any single formula.

Of primary importance is the determination of what valuation methods should be utilized, and that depends on the nature of the properties to be taxed. Residential, commercial, transportation, mining, and public utilities, etc., must be treated differently because of the economic conditions that give value to such properties. Some properties are income-producing; some are not. Some types of property sell frequently in an open market and have a market value that may be reasonably estimated on the basis of comparable market sales; some types of property are rarely sold and have no ascertainable market value based on comparable sales. The value of some properties may be strongly influenced by general economic or market conditions, while others are not. Some may be "wasting asset" type properties (such as mines and oil and gas properties), while most are not. Indeed, some properties may have a value that is peculiar to the owner and to no one else. See Kennecott Copper Corp. v. Salt Lake County, 122 Utah 431, 250 P.2d 938 (1952) (where the issue was the valuation of a mine dump).

The constitution and laws of the state divide the responsibility for valuation of tangible properties between the State Tax Commission and the...