State ex rel. Wisconsin Edison Corp. v. Robertson, 79-1910

• Decision Date: 24 November 1980
• Docket Number: No. 79-1910,79-1910
• Citation: 299 N.W.2d 626,99 Wis.2d 561
• Parties: STATE of Wisconsin ex rel. WISCONSIN EDISON CORPORATION, a Domestic Corporation, and Peter H. Burno, Plaintiffs-Appellants, v. Howard ROBERTSON, Clerk of the Town of Porter, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

Page 626

299 N.W.2d 626

99 Wis.2d 561

STATE of Wisconsin ex rel. WISCONSIN EDISON CORPORATION, a Domestic Corporation, and Peter H. Burno Plaintiffs-Appellants, v. Howard ROBERTSON, Clerk of the Town of Porter, Defendant-Respondent.

No. 79-1910.

Court of Appeals of Wisconsin.

Submitted on Briefs Sept. 15, 1980.

Opinion Released Nov. 24, 1980.

Opinion Filed Nov. 24, 1980.

Stephen P. Hurley and Pieper & Hurley, Stoughton, for plaintiffs-appellants.

Jeffrey T. Roethe and Roethe, Buhrow, Roethe & Pope, Edgerton, for defendant-respondent.

Before GARTZKE, P. J., and BABLITCH and DYKMAN, JJ.

DYKMAN, Judge.

This is an appeal from a judgment quashing a petition for a writ of certiorari taken to review the 1978 assessment of petitioner's real estate. The issue is whether the assessment was made at the property's fair market value.

The Stebbinsville dam is located on the Yahara River in the Township of Porter, seven miles southeast of Stoughton. It was constructed in 1917 to generate electricity and consists of the dam, a 41/2 acre pond, a powerhouse and a caretaker's residence. The City of Stoughton electric utility, which owned the Stebbinsville facility, discontinued using it to generate electricity and became interested in selling the entire 71/2 acre facility. It hired an appraiser who placed a $1.00 value on the facility as of August 9, 1974.

Peter Burno is a retired power engineer who wanted to own and experiment with small hydroelectric facilities. He had been the consulting engineer on a phase of the Grand Coulee dam and the Ludington pump storage plant. In 1967, he was hired to design and effect some rebuilding of the Stebbinsville generator, and in 1969 began negotiations to purchase the facility. On October 14, 1974, the Wisconsin Edison Corporation (Wisconsin Edison), whose shares are wholly owned by Burno, purchased the Stebbinsville facility from the City of Stoughton for $1.00.

The Township of Porter assessed the Stebbinsville facility at $88,000 ¹ for 1978. ² Wisconsin Edison contested that assessment. The town board of review sustained the assessment, and the circuit court affirmed the board of review. ³

At the hearing before the town board of review, Mr. Burno produced three witnesses and a number of documents from which the following uncontroverted facts are taken.

In 1941, about 40 percent of Wisconsin's electrical energy was produced by water power. By 1977, that figure had decreased to about 5 percent. During that period electric generation was discontinued at about 600 small dams in Wisconsin, such as the Stebbinsville facility. The total loss in generating capacity was about 12,000 kilowatts. During the same period, about 15 large hydroelectric plants were constructed with a total generating capacity of about 200,000 kilowatts. No new dams have been constructed since 1949.

Small hydroelectric facilities have been discontinued for primarily economic reasons, though overregulation is to some extent responsible, as is the difficulty of getting parts and service. Electric utilities have been divesting themselves of their small hydroelectric facilities, but the Wisconsin Department of Natural Resources (DNR) ⁴ has required that all dams be in good repair before their transfer. This is expensive; it costs about $210,000 to put the Stebbinsville facility in good condition before it was transferred to Wisconsin Edison. ⁵ Dams are also expensive to maintain; the Stebbinsville dam alone needs $3,000 to $4,000 of maintenance per year. The cost of generating electricity from a small hydroelectric facility has exceeded the value of the electricity produced so that most small dams are no longer used for that purpose.

Other difficulties attend the ownership of a dam. Persons purchasing dams must show proof of financial ability to maintain the dam for not less than 10 years. ⁶ Mr. Burno satisfied this requirement by posting a $75,000 letter of credit from a local bank. The department of natural resources regulates the public use of the water impounded by a dam; Mr. Burno found that he was in effect "running a public park on behalf of somebody-the town or the county or whoever runs public parks." This takes almost a day of labor per week during the summer. The department requires water levels to be maintained, necessitating the owner or an employee to be on duty at all times.

The owner of a dam may not sever any of the land surrounding the dam without the permission of DNR. The department looks unfavorably at requests to sever land from a dam site because of a prior experience with an unscrupulous real estate developer who severed and sold land adjoining a dam, abandoned the dam so that its maintenance costs fell on the public, and then left the state.

Mr. Burno or Wisconsin Edison spent $210,000 on the Stebbinsville dam and $40,000 on the caretaker's residence prior to the time Wisconsin Edison purchased the facility. About $30,000 was spent on the generator after the purchase. The house is now used as Mr. Burno's residence and the corporate headquarters of Wisconsin Edison. The corporation carries $30,000 of insurance on the house and its contents, but is unable to purchase liability insurance for the area surrounding the dam.

For all these reasons, the ownership of dams has not proven popular. It is not surprising that every dam sold since 1941 has been sold for $1.00.

The standards of review of an assessment in the trial court and this court were set out in State ex rel. Boostrom v. Board of Review, 42 Wis.2d 149, 155, 166 N.W.2d 184, 187-88 (1969):

"The principles of law are well settled governing the jurisdiction of courts in reviewing the findings or boards of review on certiorari. The duties of boards of review are quasi -judicial and courts have no jurisdiction to disturb their findings or determinations except where they act in bad faith or exceed their jurisdiction. Judicial review of the action of boards of review on certiorari extends only to jurisdictional errors. If a board of review does not act arbitrarily or dishonestly and the evidence presented before it is sufficient to furnish any substantial basis for the valuation found by the board, its decision will not be disturbed. The review here extends only to correction of jurisdictional errors and does not include mere errors of judgment as to the preponderance of the evidence. Upon certiorari to a nonjudicial body such as a board of review, the court will review the evidence only so far as to ascertain if there is reasonable ground for belief that the decision is the result of honest judgment, in which case it will not be disturbed. This court will review the proceedings to ascertain whether such body has kept within its jurisdiction and whether such board acted upon competent evidence sufficient to give it jurisdiction. The presumptions are all in favor of the rightful action of such board. The assessor's valuation of property is prima facie correct and is binding upon the board of review in the absence of evidence showing it to be incorrect." (Quoting State ex rel. Pierce v. Jodon, 182 Wis. 645, 647-48, 197 N.W. 189, 190 (1924).)

In addition, failure to make the assessment on the statutory basis is an error of law and correctable by the courts on certiorari. If the trial court finds upon the undisputed evidence before the board that the assessment has not been fixed upon the statutory basis, the assessment should be set aside. (Citations omitted.)

The statutory basis for real estate assessments is 70.32, Stats., which provides in part:

(1) Real property shall be valued by the assessor in the manner specified in the Wisconsin property assessment manual provided under s. 73.03(2a) from actual view or from the best information that the assessor can practicably obtain, at the full value which could ordinarily be obtained therefor at private sale. (Emphasis added.)

In Rosen v. Milwaukee, 72 Wis.2d 653, 661, 242 N.W.2d 681, 684 (1976), the court said:

This court has consistently construed the statute to mean that real property must be assessed on the basis of its "fair market value." That is, the amount it will sell for upon negotiations in the open market between an owner willing but not obliged to sell and a buyer willing but not obliged to buy.

We must therefore determine whether the Stebbinsville dam was assessed on the basis of its fair market value in order to adjudge whether the assessment should be set aside.

In State ex rel. Markarian v. Cudahy, 45 Wis.2d 683, 686, 173 N.W.2d 627, 629 (1970), the court discussed methods of arriving at a property's fair market value:

The "best information" of such value is a sale of the property or if there has been no such sale then sales of reasonably comparable property. In the absence of such sales, the assessor may consider all the factors collectively which have a bearing on value of the property in order to determine its fair-market value. However, it is error to use this method "when the market value is established by a fair sale of the property in question or like property." State ex rel. Enterprise Realty Co. v. Swiderski (1955), 269 Wis. 642, 645, 70 N.W.2d 34, 35. The statutory rule of assessment of real estate is restricted to its sale value in the open market and is not concerned with its intrinsic value if the intrinsic value differs either more or less from the sale value. State ex rel. Northwestern M. L. Ins. Co. v. Weiher, (1922), 177 Wis. 445, 448, 188 N.W. 598.

The sale of the property must be recent to preclude the assessor's use of all the factors collectively which have a bearing on the value of the property. Rosen, supra. State ex rel. Hensel v. Town of Wilson, 55 Wis.2d 101, 197 N.W.2d 794 (1972). We cannot conclude that the sale by which Wisconsin Edison acquired the dam in October of 1974, would be "recent" on January 1, 1978. ⁷ The supreme court held that a one-year difference between assessment date and sale of a comparable property did not...