St. Joe Minerals Corp. v. State Tax Com'n of Missouri, No. 62330
| Decision Date | 13 April 1993 |
| Docket Number | No. 62330 |
| Citation | 854 S.W.2d 526 |
| Parties | ST. JOE MINERALS CORPORATION, a New York Corporation, and Pea Ridge Iron Ore Company, Inc., a Missouri Corporation, Plaintiffs-Appellants, v. STATE TAX COMMISSION OF MISSOURI, William R. Brenner, Chairman, Van E. Donley, Commissioner, and Bruce E. David, Commissioner, and Virginia Pashia, Assessor for the County of Washington, Missouri, Defendants-Respondents. |
| Court | Missouri Court of Appeals |
Jerome M. Rubenstein, St. Louis, for plaintiffs-appellants.
Rhonda A. O'Brien and Margaret M. Mooney, Lashly & Baer, St. Louis, for defendants-respondents.
Plaintiffs, St. Joe Minerals Corporation (St. Joe) and Pea Ridge Iron Ore Company, Inc. (Pea Ridge), appeal from the judgment of the circuit court which affirmed the Decision and Order of the State Tax Commission of Missouri (Commission). We reverse and remand.
Pea Ridge Iron Ore Mine (Mine), subject to real estate taxation for the years 1988, 1989, and 1990, was owned by Pea Ridge, a wholly owned subsidiary of St. Joe. Fluor Corporation acquired St. Joe in 1981. In 1987, Fluor retained the services of Shearson Lehman Brothers, Inc. to sell Pea Ridge.
The effort to sell Pea Ridge spanned a three year period and involved contacting more than seventy companies throughout the world. Fluor was under no compulsion at the time to divest itself of Pea Ridge, but simply had decided to get out of the iron ore mining business. Ultimately a sale of all the stock of Pea Ridge was consummated in June, 1990, between Big River Minerals Corporation and Fluor Corporation, for a total of $13,364,899.00.
The Mine includes the only operating underground iron ore mine in the United States. It is a single use real estate property located primarily in Washington County. The Mine is comprised of a deep shaft iron ore mine, a pelletizing plant, and other related improvements.
Plaintiffs sought to establish the true value of the Mine by reference to the sale price of Pea Ridge, allocating that amount between the taxable real property and other assets. This allocation includes the following: personal property with an assessed value of $1,372,591.00; net working capital verified at a value of $7,253,446.00; and an appraised value of $791,938.00 for non-mine realty. Based upon this distribution, plaintiffs contended that the remainder of the $13,364,899.00 purchase price, attributable to the subject property and rounded to $3,950,000.00, represented the property's true value.
After considering evidence of the sale price and plaintiffs' allocation among the assets, the Commission adopted the income capitalization method for valuing the real estate. The net income produced by the Mine was approximately 2 to 2.5 million dollars yearly. Based upon that evidence, the Commission concluded that the allocated sale price failed to adequately represent the true value of the taxable property.
The true value and assessment, as of January 1 for each of the years at issue, as projected by the parties as well as various administrative evaluations, is as follows:
True Value of Real Property
1988 1989 1990
Plaintiffs $3,950,000.00 (same) (same)
Assessor and
Board of
Equalization $34,884,609.00 (same) (same)
Hearing
Officer $17,703,500.00 $14,603,500.00 $19,503,500.00
Commission $17,303,500.00 $14,603,500.00 $19,503,500.00
Property Tax Assessment
1988 1989 1990
Plaintiffs $1,264,000.00 (same) (same)
Assessor and
Board of
Equalization $11,162,375.00 (same) (same)
Hearing
Officer $5,664,420.00 $4,672,420.00 $6,240,420.00
Commission $5,536,420.00 $4,672,420.00 $6,240,420.00
Plaintiffs appeal from the judgment of the circuit court which affirmed the Commission's decision. 1 We review the administrative agency's decision for a determination whether it is supported by substantial and competent evidence upon the whole record, Hermel, 564 S.W.2d at 894, or constitutes an abuse of discretion, is unauthorized by law, or is arbitrary, capricious or unreasonable. State ex rel. Kahler v. State Tax Commission of Missouri, 393 S.W.2d 460, 464 (Mo.1965). See § 536.140.2 RSMo (1986). 2
Section 137.115.1(1) grants the statutory authority for tax assessment of, inter alia, real property, providing in pertinent part:
... the assessor or his deputies in all counties of this state ... shall ... assess ... possessory interests in real property at the percent of its true value in money set in subsection 5 of this section....
(emphasis added). 3
"True value" is never an absolute figure, Cupples Hesse Corp. v. State Tax Commission of Missouri, 329 S.W.2d 696, 700 (Mo.1959), but is merely an estimate of the fair market value on the valuation date. O'Flaherty v. State Tax Commission, 698 S.W.2d 2, 3 (Mo. banc 1985); Hermel, Inc., 564 S.W.2d at 897. Fair market value typically is defined as the price which the property would bring when offered for sale by a willing seller who is not obligated to sell, and purchased by a willing buyer who is not compelled to buy. See State ex rel. State Highway Commission of Missouri v. Pfizer, Inc., 659 S.W.2d 537, 540 (Mo.App.1983). See also, M.A.I. 16.02.
There are various methods that may properly be considered for estimating true value, including actual sale price, comparable sales, replacement cost, and income capitalization. The Commission is not required to adopt any particular valuation technique. See Quincy Soybean Co., Inc. v. Lowe, 773 S.W.2d 503, 505 (Mo.App.1989).
Plaintiffs contend on appeal that the Commission erroneously rejected the sale price of Pea Ridge as conclusive proof of the value of the assets of the corporation. They, in effect, argue that the sale price was binding on the Commission and therefore the true value of the Mine is calculated by deducting the value of the other assets of the corporation from the sale price.
The actual purchase price is not conclusive for tax purposes. See, e.g., State ex rel. Kahler, 393 S.W.2d at 465; Stein v. State Tax Commission of Missouri, 379 S.W.2d 495, 498 (Mo.1964). 4 Rather, evidence of the consideration paid may be admissible to establish value at the time of an assessment, provided that such evidence is competent--i.e., a voluntary purchase not too remote in time. See State ex rel. State Highway Commission of Missouri v. Rauscher Chevrolet Co., 291 S.W.2d 89, 92 (Mo.1956) (); State ex rel. State Highway Commission of Missouri v. Crain, 496 S.W.2d 867, 869 (Mo.App.1973) (same).
The Commission, after considering plaintiffs' evidence of the sale price of Pea Ridge, adopted the income capitalization method employed by the Hearing Officer. Capitalization of income has previously been utilized to estimate true value for taxation purposes, see, e.g., St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655...
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