Southern Pac. Co. v. Cochise County

• Decision Date: 09 January 1963
• Docket Number: No. 7188,7188
• Citation: 92 Ariz. 395,377 P.2d 770
• Parties: SOUTHERN PACIFIC COMPANY, a corporation, Appellant, v. COCHISE COUNTY et al., Appellees.
• Court: Arizona Supreme Court

Page 770

377 P.2d 770

92 Ariz. 395

SOUTHERN PACIFIC COMPANY, a corporation, Appellant, v. COCHISE COUNTY et al., Appellees.

No. 7188.

Supreme Court of Arizona, In Banc.

Jan. 9, 1963.

Rehearing Denied Feb. 11, 1963.

Evans, Kitchel & Jenckes, Phoenix, Robert L. Pierce, San Francisco, Cal., for appellant.

Robert W. Pickrell, Atty. Gen., William Clark Kennedy, Chief Asst. Atty. Gen., Philip M. Haggerty, Asst. Atty. Gen., and Stanley Z. Goodfarb and Leslie C. Hardy, Sp. Counsel, Phoenix, for appellees.

STRUCKMEYER, Justice.

The Southern Pacific Company brought this action is the superior court seeking to recover taxes paid under protest for the first one-half of the fiscal year 1959 and to enjoin future discriminatory assessments arising from alleged systematic undervaluation practices by appellees. From a judgment granting a motion to dismiss appellant's complaint this appeal has been taken.

Appellant is a Delaware corporation owning and operating an interstate railroad system, a portion of which is located in the appellee counties of the state. In June 1959 the State Tax Commission assessed the taxable property of appellant in the state at $65,397,243.50. Pursuant to the applicable statutes appellant appeared before the State Tax Commission acting in its capacity as the State Board of Equalization and objected to the assessment. It offered to show that the full cash value of its property in Arizona was $73,000,000 and that its property was assessed at not less than 89 per cent of full cash value but that other property subject to assessment by the respective county assessors was assessed at no more than 20 per cent of full cash value on the average. The Board was requested to equalize the assessment by either lowering it to the average of other properties or by raising other assessments to full cash value. Appellant alleged that the Board wilfully, intentionally and fraudulently rejected its request for equalization refusing to take any action. Thereafter the taxes assessed were paid to the respective county treasurers accompanied by written protests. In January, 1960, appellant commenced suit seeking to recover a portion of the taxes paid and to enjoin defendants from making similar discriminatory assessments in the future.

The State Tax Commission in its capacity as State Board of Equalization is invested with the duty to equalize the valuation and assessment of property throughout the state. Its power of equalization is practically unlimited. To that end it may equalize the assessment of all property between persons of the same assessment district, between cities and towns in the same county, and between different counties of the state and the property assessed by the Commission in the first instance, A.R.S. § 42-141.

'The equalization of taxes is as essential to a valid assessment as the listing and valuing of the same by the assessor. Beginning with the laws of 1877, Chapter 33, Complied Laws of that year, down to the present time the taxpayer has been given the right to appear before equalizing boards and protest his assessment as made and returned by the assessing officer. Since statehood, or 1912, that right, we take it, is a constitutional right, for when the organic law provides that the manner, method and mode of assessing, equalizing and levying taxes shall be such as the law prescribes, it is tantamount to saying that there must be a procedure or method for equalizing valuations of property before exacting the tax.' Maricopa County v. Trustees Ariz. Lodge, 52 Ariz. 329, 80 P.2d 955.

The Board of Equalization, having plenary power to consider and correct discriminatory practices presented to it, has the positive duty to exercise such power when its authority is invoked by one claiming discriminatory assessments.

It is urged that appellant has not followed the proper remedy afforded to it by the statute. A.R.S. § 42-146, subd. A requires:

'Any taxpayer dissatisfied with the amount of his assessment as fixed by the state tax commission, or as reviewed by the state board of equalization, may appeal therefrom as provided in this article and not otherwise.'

Where the 'amount of the assessment' is questioned, this section is exclusive. Valley National Bank of Phoenix v. Apache County, 57 Ariz. 459, 114 P.2d 883.

Appellant concedes that it has not complied with the statutory procedure. Fundamentally, its position is that by the inequality in assessments, namely 89 per cent of full cash value as against 20 per cent of full cash value, it bears an unfair and discriminatory share of the tax burden. Thus, while superficially it would appear that appellant's complaint is with the 'amount of its assessment', the issue presented actually encompasses a broader sweep. It is sought to compel the State Board of Equalization either to equalize all assessments in the respective counties at full cash value or to equalize appellant's assessment at an amount commensurate with the valuations of property assessed by the county assessors, and, to recover taxes paid under protest occasioned by the inequal treatment.

The statutory appeal under § 42-146, supra, is limited to a determination by the superior court of the valuation of the applicant's property.

'If the court finds that the assessment is excessive, the court shall find the full cash value of the property and render judgment for appellant and against the county. If the court finds the assessment represents the full cash value of the property, the action shall be dismissed with costs against appellant. If the court finds the assessment is below the full cash value of the property, the judgment shall be for the county and against appellant for the costs of the appeal and the taxes due on the property as if it had been originally assessed at its full cash value.' A.R.S. § 42-147, subd. C.

In the statutory appeal the superior court is only authorized to raise appellant's assessment from 89 per cent of full cash value to 100 per cent, an existing difference admitted by appellant. Such a judgment would not only perpetuate but would increase the existing inequality of which appellant complains.

We said in McCluskey v. Sparks, 80 Ariz. 15, 291 P.2d 791, where the complaint was of discrimination in assessment of properties as compared to other like properties in a county:

'It is plain that when the issue to be tried is discrimination calling for proof of systematic and intentional disproportionate undervaluation, the appeal remedy prescribed by sections 73-419 [now A.R.S. § 42-245] and 73-110, supra, [now A.R.S. § 42-146] is no remedy at all for the reason that the issues concerning such a discrimination could not be tried and decided under the appeal remedy.' 80 Ariz. 19, 291 P.2d 793.

Here, it is equally plain that the statutory procedures are inadequate, in fact, providing less than no remedy at all. Appellant is compelled to either seek relief in an original action in the superior court, as it has, or it can not escape the consequences of the asserted systematic undervaluation practices.

Appellees question whether the allegations of appellant's complaint asserting systematic and intentional discrimination states a claim for relief urging that the state may properly classify the subjects of taxation, treating such subjects differently and that the legislature has created such a classification in the case of railroads by A.R.S. Title 42, Chapter 4, Art. 4. There can be no doubt that the state may classify the subjects of taxation. Brophy v. Powell, 58 Ariz. 543, 121 P.2d 647; Powell v. Gleason, 50 Ariz. 542, 74 P.2d 47, 114 A.L.R. 838; Peoples Finance & Thrift Company v. Pima County, 44 Ariz. 440, 38 P.2d 643; State Tax Commission v. Shattuck, 44 Ariz. 379, 38 P.2d 631. We said in Powell v. Gleason, supra:

'In the absence of a constitutional prohibition, the Legislature of a state may classify property for taxation. Our Constitution not only does not prohibit classification, but, as a matter of fact, implies that this can and will be done. Section 1, art. 9, Const. of Arizona.' 50 Ariz. 551, 74 P.2d 52.

The language of the Constitution, Sec. 1, Art. 9, A.R.S. provides 'All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax.' This does not mean that taxes shall be uniform on all classes of property. Property of the same value but of different character need not be taxed the same. Yellowstone Pipe Line Company v. State Board of Equalization, 138 Mont. 603, 358 P.2d 55, cert, denied, 366 U.S. 917, 81 S.Ct. 1095, 6 L.Ed.2d 241. But we need not pause to consider further whether the legislature could establish a classification permitting the assessment of appellant's property at a greater percentage of full cash value than other property throughout the state for the preliminary question of whether the legislature has done so must be answered in the negative. It has not.

A casual reading of the articles of the Revised Statutes on taxation discloses a general legislative scheme that assessments on all species of property shall be at full cash value. By A.R.S. § 42-227 'All taxable property shall be assessed at its full cash value.' By A.R.S. § 42-123 the State Tax Commission is charged with exercising general supervision over the administration of the tax laws of the state and over county, city and town assessors and all local boards of levy and assessment 'for the purpose of insuring that all assessments of property are made at its full cash value, and shall require assessors and county boards of equalization to assess all property at its full cash value.' Again, by A.R.S. § 42-143 the State Board of Equalization is required to examine and compare the abstracts of assessments of the property in the several counties and 'equalize them so that all taxable property is assessed at its full cash value.'

There are admittedly some specific legislative exceptions from the uniform general...