State ex rel. Int'l Bus. Machines Corp. v. Bd. of Review of City of Fond Du Lac

• Decision Date: 09 May 1939
• Citation: 285 N.W. 784,231 Wis. 303
• Parties: STATE ex rel. INTERNATIONAL BUSINESS MACHINES CORPORATION v. BOARD OF REVIEW OF CITY OF FOND DU LAC et al.
• Court: Wisconsin Supreme Court

231 Wis. 303

285 N.W. 784

STATE ex rel. INTERNATIONAL BUSINESS MACHINES CORPORATION

v.BOARD OF REVIEW OF CITY OF FOND DU LAC et al.

Supreme Court of Wisconsin.

May 9, 1939.

Appeal from a judgment of the Circuit Court for Fond du Lac County; C. F. Van Pelt, Judge.

Reversed.

Upon the petition of the relator, International Business Machines Corporation, hereinafter called the plaintiff, the circuit court for Fond du Lac county, on August 29, 1938, issued a writ of certiorari directed to the Board of Review of the city of Fond du Lac and to John Murray, city clerk, for the purpose of bringing up for review, the proceedings of said board relating to the assessment of certain personal property belonging to the plaintiff. All proceedings regarding said assessment were stayed. Due return to the writ was made. After hearing duly had, the trial court approved the assessment made by the assessor, and entered judgment accordingly. From that judgment, entered October 20, 1938, the plaintiff appealed. The facts will be stated in the opinion.Fred W. Genrich, of Wausau, and George R. Currie, of Sheboygan (A. L. Hougen, of Manitowoc, of counsel), for appellant.

Allan L. Edgarton, of Fond du Lac, for respondents.

NELSON, Justice.

This controversy concerns the correctness of an assessment of certain personal property belonging to the plaintiff which was located in the city of Fond du Lac on May 1, 1938. The property consisted of electrical tabulating machines which had theretofore been leased to Fred Rueping Leather Company and to the First Fond du Lac National Bank. It was assessed by the assessor at $42,000. The plaintiff thought the valuation of its property too high and therefore challenged the assessment before the Board of Review. Sec. 70.47(2), Stats. At the hearings before the Board, the plaintiff adduced testimony in support of its contention that the assessment was too high. Nicholas Entringer, the assessor, and Aldro Jenks, district supervisor of assessments under the tax commission, testified in support of the assessment. The Board decided that the challenged assessment was fair, reasonable and correct. The plaintiff thereafter petitioned the court for a writ of certiorari, which issued. Upon hearing duly had the trial court affirmed the decision of the Board.

[1] Before detailing the evidence adduced before the Board and expressing our opinion, we deem it desirable briefly to restate the well established law of this state applicable to controversies of this kind. An assessment made by an assessor is presumed to be correct and is binding upon the Board of Review in the absence of evidence showing that it is incorrect. State ex rel. Miller v. Thompson, 151 Wis. 184, 138 N.W. 628;State ex rel. Althen v. Klein, 157 Wis. 308, 147 N.W. 373;State ex rel. Kimberly-Clark Co. v. Williams, 160 Wis. 648, 152 N.W. 450;State ex rel. Pierce v. Jodon, 182 Wis. 645, 197 N.W. 189;Worthington Pump & Machinery Co. v. Cudahy, 205 Wis. 227, 237 N.W. 140.

[2] A Board of Review is not an assessing body but rather a quasi-judicial body whose duty it is to hear evidence tending to show errors in the assessment roll and to decide upon the evidence adduced whether the assessor's valuation is correct. Fond du Lac W. Co. v. Fond du Lac, 82 Wis. 322, 52 N.W. 439, 16 L.R.A. 581;State ex rel. Augusta v. Losby, 115 Wis. 57, 63, 90 N.W. 188;Brown v. Oneida County, 103 Wis. 149, 79 N.W. 216;State ex rel. Heller v. Lawler, 103 Wis. 460, 79 N.W. 777; State ex rel. Kimberly-Clark Co. v. Williams, supra.

[3] If there be adduced before the Board competent evidence which is unimpeached and which shows that the assessor's valuation is incorrect, such evidence cannot be disregarded by the Board. Disregard of such evidence is considered jurisdictional error. Milwaukee Iron Co. v. Schubel, 29 Wis. 444, 453, 9 Am.Rep. 591;Tainter v. Lucas, 29 Wis. 375;Wilson v. Heller, 32 Wis. 457; State ex rel. Heller v. Lawler, supra; Brown v. Oneida County, supra; State ex rel. Kimberly-Clark Co. v. Williams, supra.

[4] In assessing personal property for taxation purposes, it is of course the duty of the assessor to observe the requirements of sec. 70.34, Stats., which in part provides: “All articles of personal property shall, as far as practicable, be valued by the assessor upon actual view at their true cash value; ***.”

Ordinarily the assessment of personal property gives rise to little or no difficulty. Controversies involving such assessments have not been numerous. Most personal property with which assessors are required to deal is bought and sold, and its true cash value may therefore be fairly determined. However, the property involved in this controversy, and similar property manufactured by the plaintiff, is never sold (at least in this country) but always leased under contracts which require the plaintiff, without further charge, to render valuable and expert services to the lessees and users of the machines by highly trained employees, during the lives of the contracts. Those services will hereinafter be specifically enumerated. The machines are concededly tangible personal property and are unquestionably subject to taxation. As to this there is no controversy. Similar machines are leased by the plaintiff to banks, manufacturers, insurance companies, and others throughout the United States, who have need for highly efficient accounting and statistical tabulations. The property consists of electrical duplicating key punches, a multiplying punch, sorting machines, tabulating machines, and summary punch and reproducer machines. They are highly complicated and may be set up only by experts particularly trained for that purpose. The machines, according to the testimony, would be of little practical value without the service. The amount annually paid by the Rueping Company and the bank for the services which the plaintiff renders and for the use of the machines is $10,327.75. Since the machines are never sold and since the amounts paid by the lessees or users thereof covers the services rendered by the plaintiff as well as the use of the machines, the assessor was confronted with a concededly new and perplexing problem. The precise question presented to us is one of first impression, and, so far as we can discover, has not been considered by any court of last resort in this country. A somewhat similar case involving the assessment of certain leased telephone equipment was decided by the supreme court of Ohio in 1899. That case will later be referred to and the holding therein stated.

At the hearing before the Board of Review, the deposition of W. P. Westphal, the manager of the plaintiff's branch office for Wisconsin and upper Michigan, was offered and received in evidence. That deposition was taken pursuant to stipulation, in the presence of the attorneys for the respective parties, Mr. Entringer, the assessor, and Mr. Jenks, the supervisor of assessments. Mr. Westphal testified as to the contracts, pursuant to which the machines were placed, serviced and used, the nature of the machines, the uses to which they are put and the nature of the services which the plaintiff performs without additional charge under the contracts. Such services, he testified, include: setting up the machines so that the accounting and tabulating results desired by the lessee or user thereof will be accomplished to his satisfaction; fully instructing the employee or employees of the lessee or user as to the use and operation of such machines; fully maintaining and repairing such machines; rendering immediate service in case of a breakdown; inspecting the machines weekly for the purpose of assuring efficient and continuous operation; immediately furnishing a substitute operator in case an operator-employee of the lessee or user becomes ill; rendering advice from time to time in case the lessee's needs change, necessitating other or additional equipment; substituting improved machines in case the machines in use become obsolete or are not adapted to the user's business, or become inefficient as a result of use and wear and tear.

The deposition of M. G. Connally was likewise taken and offered and received in evidence by the Board. Mr. Connally is associated with the plaintiff and has charge of all tax matters in all countries in which the plaintiff is engaged in business and is responsible for all of the plaintiff's tax accounting figures. He testified that machines of the same types as those involved in this controversy have been sold by the plaintiff to subsidiary companies in foreign countries and to one company engaged in business in England, Ireland, Australia and Indian, in which the plaintiff had no interest; that applying the prices which were received by the company on sales abroad to the Fond du Lac machines, the prices of the Fond du Lac machines new would be $9,210.82; that the machines manufactured by the plaintiff and leased under contracts depreciate at the rate of 15% per annum; that such rate of depreciation is approved by the government of the United States and by the several states in determining plaintiff's income taxes; that as a result of the experience of the company during many years, 5% of all of its machines annually become obsolete and of no value; that the value of the Fond du Lac machines, less actual depreciation and obsolescence, was $3,213.92; that the fire insurance value of the machines at the Rueping Company, as of May 1, 1938, was $4,619.73, and that of the machines at the bank was $1,277.15; that the book value of the Fond du Lac machines as of May 1, 1938, was $3,608.04, after first deducting depreciation at the rate of 15% per annum and 5% for obsolescence; that the fair market value of all of the Fond du Lac machines as of May 1, 1938, was $7,517.75, if their value be determined according to the comparative value or cost plus formula, based upon the actual cost and sale price of an electric writing machine, which is manufactured by...