Yuma County v. Tongeland

• Citation: 15 Ariz.App. 237,488 P.2d 51
• Decision Date: 30 August 1971
• Docket Number: No. 1,CA-CIV,1
• Parties: COUNTY OF YUMA and the Department of Property Valuation of the State of Arizona, Appellants, v. Clifford N. TONGELAND and Evelyn C. Crow, Appellees. 1492.
• Court: Court of Appeals of Arizona

Page 51

488 P.2d 51

15 Ariz.App. 237

COUNTY OF YUMA and the Department of Property Valuation of the State of Arizona, Appellants, v. Clifford N. TONGELAND and Evelyn C. Crow, Appellees.

No. 1 CA-CIV 1492.

Court of Appeals of Arizona, Division 1.

Aug. 30, 1971.

Gary K. Nelson, Atty. Gen., by Leonard M. Bell, Asst. Atty. Gen., Phoenix, for appellants.

Rolle, Jones & Benton, by Waldo W. Israel, Yuma, for appellees.

KRUCKER, Chief Judge.

The appellees, plaintiffs below, own a parcel of property located at the corner of Fourth Avenue and Fourteenth Street in the City of Yuma. The property is leased to an oil company for use as a service station and the oil company owns the improvements on the property.

For the year 1969, the property, exclusive of improvements, was valued by the Yuma County Assessor at $53,900. Plaintiffs paid their taxes under protest and appealed to superior court. Their position was that the value of the subject property was $18,000. The matter was heard by the court sitting without a jury, and judgment was subsequently entered reducing the actual cash value of the plaintiffs' property to $35,900. This appeal followed.

The following questions are presented:

'A. Did the failure of the trial court to make findings of fact and conclusions of law constitute reversible error?

B. Did the trial court have jurisdiction to change the value of the subject property?'

Although a request for findings of fact and conclusions of law was timely made, the trial court did not comply with the request. However, we need not address ourselves to the effect of such failure since we are of the opinion that the trial court erred in denying the State's 'motion for a directed verdict' at the close of the plaintiffs' case.

In the recent Arizona Supreme Court decision in Navajo County v. Four Corners Pipe Line Company, 106 Ariz. 511, 479 P.2d 174 (1970), rehearing denied, 107 Ariz. 296, 486 P.2d 778 (filed April 16, 1971), the court held that in the absence of sufficient competent evidence to support a finding that the value placed on the property by the Department of Property Valuation was inequitable or excessive, such value must stand as 'correct and lawful.'

We agree with the proposition that the income or rental value of real property is one of the factors affecting its market value and is therefore to be considered in determining its value for tax purposes. Bade v. Drachman, 4 Ariz.App. 55, 417 P.2d 689 (1966); Annot., 96 A.L.R.2d 666; 51 Am.Jur. Taxation §§ 703--705. Income or earnings, however, is not the only element to be considered nor the controlling element in determining the valuation of realty for tax purposes. Annot., 96 A.L.R.2d 666 § 5 and cases cited therein. As pointed out in the case of Rowland v. Tyler, 5 S.W.2d 756 (Tex.1928):

'It cannot be doubted that the amount of rental a particular piece of property produces is an important element to be considered in fixing the value of that property. It is likewise true that there are a number of other elements which necessarily enter into the value of any particular piece of property, such as original cost, location, cost and character of improvements, rental history, location as to future growth of the city, sales of adjacent property, etc. * * * In many instances, the amount of rentals would be wholly misleading as applied to value, and a value fixed solely by such method would not approximate the real value. Long-time rental contracts may be made in boom times or in times of depression, and if the amount of rental under such contracts were made the sole and determinative factor in fixing the value of the property covered thereby, the valuation arrived at by such plan would not represent a fair value either to the city or to the taxpayer. Again, many rental contracts are excessive because of bad business judgment on the part of the lessee, and for this reason could not properly be used as the decisive and controlling factor in fixing the values.' 5 S.W.2d at 760.

In the case at bench, the substance of the taxpayers' evidence was all to the same effect--that the value of the property could be determined only by its net return. Mr. Tongeland, when asked as to his opinion of the value of the property, responded:

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'A. From the returns which a purchaser would naturally look at I would say around $18,000.'

Mr. Tongeland testified that for the year 1969, the net income of the subject property was $1,764. This figure was computed by deducting the real estate taxes from the annual income received from Union Oil as rental. When asked how he computed the value of $18,000 as the value of his property, he stated:

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'A. Well, most businessmen would expect a return of ten percent on a piece of property they were buying.

Q. How do you base that most businessmen would expect ten percent return on that property?

A. I have been in business for some time and I know numerous other businessmen. I don't know of any businessmen today that would buy a piece of property that wouldn't give them a return of ten percent.'

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'Q. So, you took the net income and a ten percent rate against that?

A. For instance, the State, its appraisal of $54,000, we would expect to get a $5,400 income.'

The following testimony was elicited from the taxpayers' other witness:

'Q. And what is your opinion as to that value?

A. I place the value of that property to be $18,000.

Q. Mr. Crow, what factors did you look into to determine this market value of this particular piece of property?

A. Well, I looked at it at the present use of the property today and the area seems to have been downgraded somewhat going north of 16th Street. I looked at it from the ultimate value of the property when the traffic will some day be taken away from it and the main part of my valuation was that the income approach of the property only gives about ten percent income net, for the valuation.

Q. Now, Mr. Crow, after you collect and appraise all this information that you have just testified to, how do you calculate the market value of the property?

A. The way you ultimately get an answer on that is what somebody--if you put the property us to sale, who would buy it for such price--for a given price so that they get a fair...