State Tax Commission of State v. Phelps Dodge Corp.

Decision Date06 April 1945
Docket NumberCivil 4745
Citation157 P.2d 693,62 Ariz. 320
PartiesTHE STATE TAX COMMISSION OF THE STATE OF ARIZONA; THE STATE BOARD OF EQUALIZATION OF THE STATE OF ARIZONA; THAD M. MOORE, D. C. O'NEIL and JOE HUNT, Members of and constituting said State Tax Commission and said State Board of Equalization; and THE COUNTY OF YAVAPAI, STATE OF ARIZONA, Appellants, v. PHELPS DODGE CORPORATION, a corporation, Appellee
CourtArizona Supreme Court

APPEAL from a judgment of the Superior Court of the County of Yavapai. C. C. Faires, Judge.

Judgment affirmed.

Mr. Joe Conway, Attorney General, and Mr. Thomas J. Croaff, Assistant Attorney General, for Appellants.

Messrs Ellinwood & Ross, and Mr. Norman S. Hull, of Phoenix Arizona; Messrs. Crawford, Baker and Favour, and Mr. A. M Crawford, for Appellee.

LaPrade, J. Stanford, C. J., and Morgan, J., concur.


LaPrade, J.

This is a puerile appeal from a judgment of the Superior Court of Yavapai County, determining that for the ad valorem tax year of 1943 the State Tax Commission had over-assessed the producing mining claims of the appellee Phelps Dodge corporation's copper mining claims in Yavapai County, commonly designated as its United Verde Branch, to the amount of $ 7,477,770, and awarding judgment against the county in the sum of $ 89,968.67, account overpayment of taxes. The company paid its taxes under protest and appealed to the Superior Court as provided for in Section 73-110, Arizona Code Annotated 1939. This appeal invoked the jurisdiction of the Superior Court "to find the full cash value of the property and render judgment." This section requires an independent and original inquiry into the matters affecting valuation in that it expressly authorizes the trial court to consider "evidence of any matters that relate to the full cash value of the property" and directs that "Should the court find that the assessment is excessive, then the court shall find the full cash value of the property, and render judgment for appellant and against the county; . . ." State Tax Commission v. United Verde Extension Mining Co., 39 Ariz. 136, 4 P.2d 395; State Tax Commission v. Magma Copper Co., 41 Ariz. 97, 15 P.2d 961.

The record discloses that the officers of the corporation appeared before the State Tax Commission in June, 1943, and gave evidence as to the value of the producing mining claims herein involved. The minutes of the Commission dated July 8, 1943, read as follows:

"Mine Assessments

"The commission after final consideration of all mine tax statements filed in its office by producing mines, together with all other information indicating the value of said producing mines, by a vote of Chairman Moore and Member Hunt, passed and adopted the following resolution:

. . .

"Now, therefore, be it resolved, that the State Tax Commission does now determine, fix, apportion and certify for the year 1943 for the purpose of taxation the valuation of all producing patented and unpatented mining claims or groups thereof, as further described in the certificates made by this commission to the various county Boards of Supervisors, copies of which are on file in this office, and are hereby a part of these minutes, said valuations being as follows:

. . .

"Phelps Dodge Corp. (United Verde Br.) 11,463,031.00."

On this resolution, Member O'Neil of the Commission voted no, and in explanation of his vote made the following statement:

"This department has reports from our own engineer on the following: (other mines not herein involved) Phelps Dodge, Verde Branch and proposed valuation in no instance conform to engineer's reports. To be able to sustain a valuation there must be some basis for same."

On August 5, 1943, the corporation, represented by a valuation engineer and its attorney, appeared before the State Tax Commission sitting as the State Board of Equalization, and protested the valuation fixed, this in writing and stating its reasons therefor. The commission by the vote of Commissioners Moore and Hunt, Commissioner O'Neil not being present, denied the protest.

Our Statutes require assessment of real estate, including mines, and improvements and personal property for ad valorem tax purposes, Section 73-202, Arizona Code Annotated 1939, and impose upon the State Tax Commission the duty of assessing producing mining claims, Section 73-106, Id., and impose upon the County Assessor the duty of assessing non-producing mining claims, improvements, and personal property, Section 73-402, Id. As heretofore stated, the State Tax Commission assessed the producing mining claims involved at $ 11,463,013; the County Assessor assessed the other property at $ 3,109,079; thereby imposing upon all the property of the United Verde Branch an assessment in the aggregate sum of $ 14,572,100.

Section 73-203, Arizona Code Annotated 1939, prescribes "full cash value" as the basis for assessment, and defines the term as "the price at which property would sell if voluntarily offered for sale by the owner thereof, upon such terms as such property is usually sold, and not the price which might be realized if such property were sold at a forced sale." The issue before the trial court was the full cash value of the property at the time the assessment was made. State Tax Commission v. United Verde Extension Mining Co., supra. The assessed valuation of the plant, mill, and personal property made by the County Assessor and fixed in the sum of $ 3,109,079 was not protested and was assumed by all the parties at the trial to be correct. The various estimates of "full cash value," testified to by the several engineers, included the value of the entire workings -- plant, mill, personal property, and mine. It was made to appear from their testimony that the plant, mill, and personal property were of no value, except for salvage purposes, without the mine, and likewise that the mine was of no value without the plant, mill, and personal property. To find the "full cash value" of the mine, as distinct from the plant, mill, and personal property, requires that the amount fixed by the County Assessor, to-wit $ 3,109,079, as the assessed valuation of the plant, mill, and personal property, be subtracted from the individual estimates of the engineers to arrive at the valuation placed on the mine alone by any particular valuation engineer. All the valuation engineers adopted as correct the assessment of the plant, mill, and personal property made by the County Assessor. The court also adopted the County Assessor's assessment of the plant, mill, and personal property. In this behalf the court's judgment reads as follows:

"The full cash value of said United Verde Branch is and was $ 7,094,340, and the full cash value of the producing mining claims thereof is and was $ 3,985,261, for the ad valorem tax year 1943-1944."

The burden was upon the plaintiff company to establish affirmatively its contention that the assessment was excessive. State Tax Commission v. Magma Copper Company, supra. The company promptly assumed this burden. It called four experienced mining and valuation engineers who testified as to:

(1) The tonnage (quantity and quality of the ore);

(2) The life of a mine (amount and time of production);

(3) The future net profits (during the remaining life of the mine);

(4) The present worth of such profits (full cash value as of the date of valuation).

These engineers in estimating the full cash value made allowances for probable salvage values in the plant, supply materials, and tools that might reasonably be expected to be on hand when the mine should cease to be an active producer. In addition to the valuation engineers, the superintendent of the mine gave testimony supplementing that of the engineers. All of the witnesses testified as to the tonnage, and, in so doing, made appropriate references to charts showing the working levels and geological conditions of the mine. All but one testified as to costs. All but two testified as to metal prices and profits. The engineer W. C. Browning estimated the present-day (time of assessment) value of the entire property (mine and plant) was $ 5,193,624. The engineer George M. Colvocoresses estimated that the fair cash value at time of assessment of the entire property, including mine and plant, was $ 7,094,340. The engineer H. H. Fields estimated that the full cash value of the entire property, mine and plant, was $ 6,348,852. These witnesses were all thoroughly cross-examined on their experience, their personal examination of the premises, and their sources of original information. The company's books, surveys, assays, mining reports, costs, and profits, were all available to the Commission at the trial and before the trial, and were offered in evidence and considered by the trial court. Commissioners Moore and Hunt did not testify. No engineers and no appraisers were called by the defendants. They rested their case on the cross-examination of plaintiff's witnesses and on the submission of a tabulation prepared by the chief accountant for the Income Tax Division of the State Tax Commission. This witness identified a compilation of the ad valorem tax statements filed by the company for the years 1935 to 1942, both inclusive, together with a compilation depicting the net income of the company from the operations of this property for the several years 1935 to 1942, both inclusive.

As early as 1931, this court inferentially approved a basis or method by which the actual cash value of a producing mine could be arrived at. State Tax Commission v. United Verde Extension Mining Co., supra. With reference to such basis, the court then made the observation [39 Ariz. 136, 4 P.2d 397]:

"It (basis) may be stated substantially in the language of one of the witnesses...

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