
    IN RE TAXES B. P. BISHOP ESTATE.
    No. 2133.
    Argued May 22, 1934.
    Decided September 20, 1934.
    Coke, C. J., Banks and Parsons, JJ.
   OPINION OF THE COURT BY

COKE, C. J.

(Parsons, J., dissenting.)

This case comes here on appeal from a decision rendered by the tax appeal court of the Territory. The appellants, the trustees of the estate of Bernice P. Bishop, deceased, are, and for many years past have been, the owners of a tract of unoccupied and unimproved real property containing 163,383 square feet and bounded on one side by Ala Moana and on the other by the Honolulu Harbor and lying between the premises of the Inter-Island Steam Navigation Company and property occupied by the United States lighthouse service, in the city of Honolulu. Of this area 88,895 square feet are under water measured from high watermark and 74,488 square feet are above high watermark. The portion of the land described as being submerged is covered by shallow water near the water line which tapers downward to an estimated depth of thirty-five feet. The owners made a written return of the property in question as of January 1, 1933, but refrained from fixing any value thereon in accordance with Act 40, 2d Sp. S. L. 1932. In due course the property was assessed by the tax assessor of the first taxation division, Avho fixed the value of the property at $176,440. From this assessment the OAvners perfected an appeal to the tax appeal, court of the Territory and in their notice claimed the value of the property to be $46,006. The cause Avas thereafter heard by the tax appeal court, oral and documentary evidence being introduced by both the appellants and the Territory. At the conclusion of the hearing the tax appeal court rendered a lengthy decision, placing the fair and reasonable value of the property as of January 1, 1933, at the sum of $101,398.75, and ordered the assessment list to be amended accordingly. From this decision the OAvners have perfected an appeal to this court pursuant to statute, the taxpayers urging in their appeal that the value of the property fixed by the tax appeal, court is excessive and is not supported by the evidence.

Under the law heretofore existing, namely, chapter 102, R. L. 1925, real and personal property within the Territory Avas required to be assessed on the basis of its “full cash Aalue” (see §1315). The more recent legislation on the subject enacted by the territorial legislature (see §21, Act 40, 2d Sp. S. L. 1932) .provides: “Real property tax. Except as exempted or otlierAvise taxed, all real property in each taxation division of the Territory shall be subject each year to a tax of such rate per cent as shall be determined in the manner provided in this section upon its fair and reasonable value.” As hereinafter explained Ave regard as unimportant the adoption in the neAV statute of the phrase “fair and reasonable value” instead of “full cash value.” Section 26 of Act 40 provides in part: “In making all assessments of land consideration shall be given to the advantage or disadvantage of location, accessibility, transportation facilities, size, shape, topography, quality of soil, water privileges, availability of water and its cost, easements and appurtenances, productivity and nature of use, and further to selling prices, and to the opinions of persons who may be considered to have special knoAvledge of land values, and further to all other influences whether similar to those listed or not, Avhich fairly and reasonably bear upon the question of value.”

The legislature may have intended otherwise but after careful consideration and the investigation of the authorities Ave conclude that the expressions “full cash value” and “fair and reasonable value” are terms of like import and denote the price in cash Avhich a capable and diligent man could obtain for it as distinguished from the sacrifice price on the one hand and the credit price on the other. Cash is the antonym of credit. The authorities uniformly hold that the terms “value,” “market value,” “fair value,” “reasonable value,” “fair cash value,” “actual cash value” and “fair and reasonable cash value” are synonymous expressions. 4 Words & Phrases (2d Ser.) 1137-1142. See also State v. Woodward, 208 Ala. 31; Sisk v. American Central Fire Ins. Co., 69 S. W. (Mo.) 687. In Stern v. Paper, 183 Fed. 228, 231, the court in defining “fair value” made use of the folloAving language: “Such a value excludes, on the one hand, the sacrifice price that would result from an execution or foreclosure sale, and, on the other hand, the retail price that could he realized in the sIoav process of trade. * * * 'Fair valuation’ means such a price as a capable and diligent business man could presently obtain for the property.” While the court in that case was dealing with a stock of merchandise yet we think its definition of “fair Agination” is equally applicable in the present case.

The supreme court of Hawaii has on divers occasions, in dealing with chapter 102, R. L. 1925, endeavored to define the term “full cash value.” We quote from a feAV of the local decisions: “The cash value of property at a given time is determined by what people then believe it to be worth.” Tax Assessment Appeals, 11 Haw. 235, 241. “ ‘Full cash value’ under the tax law means the value for purposes of sale, if the property is salable, and not either the value to the owner or the cost of reproduction.” In re Taxes Castle, 15 Haw. 1. See also Kash Co. v. Assessor, 15 Haw. 476. “The term 'cash value,’ as used in the tax statute, means the highest price which the property will bring for cash on the assessment date whether sold as a whole or in lots, — whichever will bring the .higher return —and after reasonable advertisement. It means the cash price obtainable if all the property were sold on the assessment date.” Re Taxes Bishop Estate, 27 Haw. 190.

The new statute is more comprehensive than the old in that it prescribes in more detail the formula to be employed to determine real property values. Act 40, 2d Sp. S. L. 1932, requires that in ascertaining the fair and reasonable value of real property many factors must be taken into consideration, namely, location, accessibility, transportation facilities, size, shape, topography, quality of soil, water privileges, availability of water and its cost, easements and appurtenances, productivity and nature of use, the opinions of persons who may be considered to have special knowledge of land values and all other influences, whether similar to those listed or not, which fairly and reasonably bear upon the question of value. What is the fair and reasonable value of a piece of property, therefore, becomes a question which can only be solved by the consideration of the facts of each case so variant, are the circumstances under which this question arises.

In the present case the land involved is conceded by all parties to enjoy a frontage on the harbor of Honolulu of 307.2 feet and a frontage of 331.2 feet on Ala Moana and this is an advantage of location which we hold should not be overlooked in arriving at the fair and reasonable value of the property. While the taxpayers contend that the premises should he appraised as industrial property and no importance should attach to the fact that the same is harbor frontage, we are unable to concur in this view. It seems plain to us that the property has an advantage of location far beyond that of strictly industrial property. This is supported by an overwhelming preponderance of the testimony of the witnesses, including the testimony of the witness Watson who appeared before the tax appeal court in behalf of the taxpayers. This witness in answer to a question propounded by one of the members of the tax appeal court, who was endeavoring to ascertain from the witness whether an exchange of the land involved for other industrial property of like area but noncontiguous to the harbor front would be a fair and reasonable one, gave the following answer: “Q * * * Mr. Watson, * * * assuming that the possibility of leasing both properties were approximately the same chance, do you think that an exchange of this property for this other property would be a fair and reasonable exchange? A No, I don’t. Q Which do you think would be the better? A The Bishop estate property. The fact that it is on the harbor is inescapable.” Campbell Crozier, deputy tax commissioner of the Territory, a witness qualified as an expert on real estate values in Honolulu and called by the government, testified in part as follows: “Q And that is, from your standpoint as tax assessor, its value would be for harbor development, docks, wharves and piers and things of that sort? A One of the factors entering into value is its harbor front environment, harbor front frontage.” And again, Lyman H. Bigelow, chairman of the territorial board of harbor commissioners and territorial superintendent of public works, a witness called by the government, referring to a plan to improve the harbor of Honolulu and include within such project the property in question, gave the following evidence: “Q But you think that a project contemplating the development of this land should logically come along in a not too far distant future? A I think so. Q Now it has been suggested and stated on the Avitness stand before this court, Mr. BigeloAV, that this property has no taxable value by virtue of the fact that it is on the water-front. Do you or do you not subscribe to such a statement, or point of vieAV? A I do not. Q You feel that there is a taxable value in this property by virtue of the fact that it is on the Avater-front? A I do now, especially due to this federal development that makes it useful.”

While it is clear that in order to make full use of the property in question so the same may accommodate ships of large tonnage it Avould be necessary to utilize adjacent premises, yet Avithout any such additional property the lot in question is of sufficient size so that it could be devoted to docks, slips, etc., for the convenient accommodation of vessels of limited size such as are plying in inter-island trade. It is notorious that the water-front area surrounding the harbor of Honolulu is of limited extent and it is also of universal recognition that the port of Honolulu is increasing in importance from a shipping standpoint and that ships calling are gradually being increased in dimensions and tonnage. Mr. Bigelow made these facts clear in the testimony given by him before the tax appeal court. In the light of all of the evidence Ave are convinced that the advantages of location of the property on the water front of the harbor of Honolulu add substantially to its value. This is a factor which the statute requires the taxing authorities to take into consideration in ascertaining the value of the land for taxation purposes.

The fact that the taxpayers fixed a selling price upon the property prior to the taxation date has in our opinion important bearing upon the question of value. The record before us shows that in December, 1930, the trustees of the Bishop estate employed three local realtors, namely, O’Connor, Steer and Hoogs, to appraise the property. This appraisal was evidently sought for the purpose of using the same as the basis of an offer then in contemplation to dispose of the property to the territorial government for harbor development purposes. The report of these appraisers fixed the value of the property at $367,-.611.75 and shortly following, to-wit, on May 11, 1931, the trustees by letter addressed to the territorial board of harbor commissioners expressed a willingness to grant the Territory a lease of the property for two years at the an- ( nual rental of one dollar net above taxes, with an option to purchase within the period for the sum fixed by the appraisers, to-wit, $367,611.75. The board of harbor commissioners, through its chairman, declined the offer thus made on the ground that the Territory was without sufficient funds at that time to acquire the property, and adjacent property, and the additional funds necessary for the construction of facilities the total of which would entail a very large expenditure. The trustees again caused the property to be appraised by a board of realty experts on December 2, 1932, who reported a value at that time of $220,567.05. This appraisal was evidently obtained for the purpose of using the same in connection with a tax appeal case then pending involving the property. Upon receipt of this latter appraisal and within a Aveek thereof the trustees directed the board of appraisers to reappraise the property but in making the appraisement to assume that the lot possessed no value for water-front purposes. Complying Avith these instructions the appraisers on December 8, 1932, reported a value of $45,525. There is no evidence in the record to indicate in the slightest degree that the trustees were willing at any time to accept less for the property than the amount of their offer of May 11,1931, to-wit, the sum of $367,611.75, nor is there any indication, that had that figure been substantially reduced a ready sale could not have been consummated. There is no indication that any wide variance in the prices obtainable for local real estate existed between May 11, 1931, and January 1, 1933. The financial and industrial panic became nation wide during the fall of 1929, causing a sharp decline in the prices of almost all commodities including real estate. The slump in local real estate had already taken place long prior to May, 1931. Eeal estate values had not fluctuated to any great extent between May, 1931, and January 1, 1933. If it could be fairly contended that the property had depreciated materially within that period yet the difference between the selling price fixed by the taxpayers in May, 1931 and the sum at which the tax appeal court appraised the value of the property as of January 1, 1933, is so great as to. more than offset any possible decline in value which could have taken place within the intervening space of time.

We are not at all impressed by the logic of the contention that merely because the Territory did not accept the single offer of the owners to sell the property for $367,611.-75, by some magic all values between that figure and $45,-525 promptly vanished. The probative value of the testimony given by experts testifying in behalf of the taxpayers on the question of values is greatly weakened if not totally destroyed because these witnesses proceeded upon the false assumption that the property enjoys no advantages of location because of its harbor frontage. This was the attitude of both witnesses Watson and Steere. Mr. Watson did, however, finally admit that a person endeavoring to arrive at the fair and reasonable value of the property would not be justified in disregarding its water-front potentialities. The attitude of the board of appraisers is explained in the testimony of both Steere and Hoogs. Mr. Steere testified: “Q So that your opinion is wholly confined to the use to which the owners have stated as being the best use to which the property could be put? A Yes, I think it is, it is rather common knowledge among realtors that going back beyond 1932, that that was considered as water-front property and I think that any realtor sent down there, or any number of realtors, to appraise it would so appraise it.” And again the same witness further testified : “Q Mr. Steere, do you know of any other piece of property on the water-front that has no water-front value? A I don’t know of any piece of property on the water-front that has no water-front value. Q Except this piece? A I don’t say that this has not. Q I thought you said that this one had not? A I said we were asked to appraise it as if it had no water-front value, and that is what we did. I am not saying that it has not a water-front value.” Hoogs, another of the appraisers, testified that he considered the instructions given to the appraisers by the trustees to disregard harbor frontage values of the property as unusual. The evidence given by witness O’Connor, the third appraiser, should carry little weight in view of his admission on the witness stand that he did not know which of the several appraisals in which he participated was correct. It ought to be unnecessary to say that a landoAvner conscientiously desiring to ascertain the fair value of his property for any purpose may not require the appraisers of the property to disregard any factor either adding to or detracting from its value.

Coming then to the testimony of values offered by the Territory Ave find as outstanding that of Campbell Crozier, who estimated the market value of the lot to be $2.16 per square foot. He explained hoAV this figure was reduced by the tax officials so that the final figure arrived at was one-half of the market value, namely, $1.08 per square foot, which he considered a fair and reasonable value to be placed on the property for tax purposes. This testimony of a reputable expert on local realty values of more than twenty years’ experience, taken together with the other evidence in the case bearing upon the subject, is ample to sustain the decision of the tax appeal court in fixing the value of the property of appellants at $101,398.75 as of January 1, 1933.

Beference has been made by appellants to the fact that the tax board of equalization of the Territory in the year 1932 fixed the value of this property as of January 1, 1932, at the sum of $43,006. And they cite the rule that prior assessments should not be lightly overturned. Doubtless many other instances could also be brought to light where certain property owners in the Territory have in the past, through negligence, incompetence or gross favoritism of tax officials, escaped their just tax burdens and the knowledge of this fact may Avell be assigned as one of the abuses Avliich the legislature of the Territory Avas endeavoring to remedy when in 1932 it not only abolished the board of equalization but enacted other drastic changes in the property tax laAvs of the Territory.

The tax appeal court after having heard and observed the Avitnesses rendered its decision revieAving the facts and by an intricate process of reasoning reduced the value of the land fixed by the assessor as of January 1, 1933, from $176,440 to $101,398.75. The evidence in our opinion amply sustains that figure. The court has on numerous occasions announced the rule to be that the findings of a tax appeal court are entitled to great weight; that where such findings depend upon the credibility of witnesses and upon the weight of conflicting statements of witnesses, such findings are to be accorded the same weight as the findings of a circuit judge at chambers. (See Tax Assessment Appeals, 11 Haw. 235; Hawi Mill & Plantation Co. v. Forrest, 21 Haw. 389.) In the Hawi Mill & Plantation Co. case this court expressly likened tax appeals to equity appeals.

A. G. M. Robertson (Robertson & Castle on the briefs) for the taxpayers.

M. E. Winn, Deputy Attorney General (H. R. Heioitt, Attorney General, and G. P. Kimball, Third Deputy Attorney General, on the brief), for the assessor.

“The decision of the tax appeal court fixing the value of property will he sustained unless shown to have been erroneous, and the burden of proof is upon the appellant.” Re Taxes Castle, 24 Haw. 598. (See also Hawi Mill & Plantation Co. v. Forrest, supra; Lihue Plantation Co. v. Farley, 13 Haw. 283.) Indeed, under the new law the tax appeal court has been raised to the dignity and importance of a court of record, clothed within the sphere of its duties and functions with all the poAver and authority of a circuit judge at chambers. (See §§43, 48, Act 40, 2d Sp. S. L. 1932.)

The decision of the tgx appeal court made and entered herein is affirmed and the appeal is dismissed.

DISSENTING OPINION OF

PARSONS, J.

I cannot concur in the foregoing opinion. There is undisputed evidence or there are findings of the tax appeal court in the case to the following effect: The tract of Avhich the land in question once formed a part extended across Avhat is noAV Ala Moana and included a triangular piece of land on the mauka side of the road. It Avás leased about the year 1881 at a nominal rental to the government by Princess Ruth Keelikolani, the then OAvner, and came to the Bishop .estate subject to that lease which expired in March, 1931. During a portion of the tenancy a marine railway was operated there by Sorenson & Lyle but that use Avas discontinued sometime between 1914 and 1917, since Avhich time the land has been, Avith negligible exceptions, unproductive, vacant and unimproved. Until the expiration of the government lease the land was exempt from taxation. Thereafter, as of January 1, 1932, the taxpayer, for assessment purposes, returned the land in question, Avhich is the portion of said tract situated on the makai side of Ala Moana, at $37,164. The OAvner’s valuation Avas raised by the tax assessor to $196,059 and from that latter assessment the taxpayer appealed to the territorial board of equalization. The board of equalization in its written decision (Exhibit D), dated December 30, 1932, said in part: “This board is of-the opinion that, since the land directly opposite the former marine railway site Avas assessed as of January 1,1932, at $1.00 per square foot, less 20% for the street frontage to a depth of 100 feet; and since coimncing evidence Avas produced by the taxpayer supporting its contention that for the former marine railway site to have a harbor frontage value Avas only a remote possibility; the former marine railway site should be classed Avith and assessed the same as the land directly opposite,” upon Avhich finding the board of equalization then fixed the valuation of said makai lot as of the assessment date at $43,006.

Since the lease expired in 1931 the trustees have tried to sell this land to the government and to others without success. Witnesses testified Avitliout contradiction that there has been no increase in value of this lot since January 1, 1932; that there has been no general appreciation in the value of local real estate during the yeai*, and that if there has been any change in the value of real property in this Territory it has been a change doAvmvard. One qualified Avitness testified that the facilities of the harbor at the present time and for many years to come are entirely adequate and that the possibility of the Bishop estate lot being required for harbor development is exceedingly remote; that the lot in and of itself is too small for development and could properly be developed only in connection Avith the adjacent properties of the Inter-Island company, the United States engineers’ base and the Department of Commerce ■ lighthouse pier; that the lot in question is neither long enough nor Avide enough to be developed for dock purposes, and that the improvement and development of it by a private OAvner for such purposes Avould be entirely impracticable. ■

In the foregoing circumstances, considered- in connection Avith other facts set forth in the majority opinion, controlling importance should not be attached to the fact that experts employed by the trustees and Avho Avere members of the territorial appraisal board, in December, 1930, prior to the former appeal, appraised this lot at $367,611-.75, or that since then, on December 2, 1932, the saíne appraisers had placed a valuation thereon of $220,567, or that on May 1,1931, the trustees had offered the property to the board of harbor commissioners at the earlier valuation.

The undisputed evidence shoAVS that the two valuations last above referred to Avere based upon the theory that the lot had special value because of its harbor frontage. The location of the lot under the specific provisions of the statute Avas a factor properly to be considered by the assessor in making his assessment; but it was only one of the many factors required to be taken into account and each factor, considered Avith the others, Avas important only as it bore “fairly and reasonably” upon the question of “value,” as that term is legally defined. If under the peculiar circumstances of the case the lot had no added value because of its harbor frontage and Avas valuable only as industrial property that fact and the fact of its appraisement under the latter classification, at $45,525, were factors, equally with others, entitled to consideration under the statute.

The opinion of the majority says: “The fact that the taxpayers fixed a selling price upon the property prior to the taxation date has in our opinion important bearing upon the question of value.” The recital refers to the trustees’ offer of May 11, 1931, to sell the property to the Territory or to the harbor commissioners at the then recently appraised value of f367,611.75; but this offer should be considered, if at all, only in connection with the undisputed fact mentioned by the majority, that it was promptly rejected by the board of harbor commissioners, and with the testimony of Mr. Bigelow, chairman of the board, that “I think it is very advantageous to the Territory, around fifty thousand” (Tr. p. 213), together with all the other qualifying circumstances in the case. If the facts last above recited are entitled to consideration under the blanket provision of section 26, Act 40, L. 1932, that consideration shall be given to the specific conditions named “and further to all other influences whether similar to those listed or not,” then the consideration of such other influences is not unrestricted but is expressly tied down, as is consideration of the influences specifically listed, to the primary question of “value” with the further qualification that such value shall be “fair and reasonable.” Section 21, Act 40, L. 1932, provides in part and in effect that real property in this Territory shall be subject to a tax determined in the manner provided by law “upon its fair and reasonable value,” and section 26, herein-above quoted, provides for the consideration of “other influences” therein referred to only where such other influences “fairly and reasonably bear upon the question of value.” A consideration therefore of the meaning of the term “value” is inescapable.

Bouvier defines “value” as “The xitility of an object. The worth of an object in purchasing other goods. The first may be called value in use; the latter, value in exchange. When applied without qualification to property of any description” it “necessarily means the price which it will command in the market,” citing Fox v. Phelps, 17 Wend. 399. To the same effect are Little Rock Junction Railway v. Woodruff, 5 S. W. 792, 795, 49 Ark. 381, 4 Am. St. Rep. 51; In re McGhee’s Estate, 74 N. W. 695, 697, 105 Ia. 9; San Diego Land and Town Co. v. Neale, 20 Pac. 372, 374, 78 Cal. 63, 3 L. R. A. 83.

“By ‘value,’ in common parlance, is meant ‘market value,’ which is no other than the fair value of property as between one who wants to purchase and another who desires to sell.” Hetland v. Bilstad, 118 N. W. 422, 423, 140 Ia. 411. See also Mo. K. & T. Ry. Co. of Texas v. Crews, 120 S. W. 1110, 1111. .“Value” of property in proportion to which property must be taxed under Const. Art. 8, § 1, means the reasonable cash market value thereof. Rowland v. City of Tyler (Tex.), 5 S. W. (2d) 756, 760. “The words ‘value’ and ‘market value’ are commonly used interchangeably as equivalents of actual value, in such case, and ‘no market value’ means nothing of value.” Anderson v. Frischkorn Real Est. Co., 235 N. W. 894, 253 Mich. 668. The terms “fair valuation” and “reasonable value” have also been given judicial definition thus: “Fair valuation,” in Bankr. Act §1, 30 Stat. 544 “means such a price as a capable and' diligent business man could presently obtain for the property after conferring with those accustomed to buy such property.” Stern v. Paper, 183 Fed. 228, 231. “Reasonable value,” “fair cash value” and “actual cash value” are practically synonymous terms and mean the fair and reasonable cash price for which the property can be sold on the market. Montesano Lumber & Mfg. Co. v. Portland Iron Works, 186 Pac. 428, 432, 94 Ore. 677. See also Groebel v. Bets (Mo.), 38 S. W. (2d) 289, 291.

The foregoing definitions seem to be sustained by the weight of authority. See Words & Phrases 1st, 2d, 3d and 4th Ser., defining the terms “value,” “reasonable value” and “fair value.”

“But not always is there a market value for an article. In such a case the value is the probable exchangeable rate, so far as one can estimate it from the various attendant circumstances and conditions which would affect the disposal of the article.” 1 Wig. Ev. §717.

Adopting the foregoing definitions I concur with the majority that “the expressions ‘full cash value’ and ‘fair and reasonable value’ are terms of like import and denote the price in cash which a capable and diligent man could obtain for” the property “as distinguished from the sacrifice price on the one hand and the credit price on the other.” Thus the earlier definitions of the term “full cash value” used in the former statute as set forth in the Hawaiian decisions cited by the majority are applicable to the expression “fair and reasonable value” used in the new enactment. It does not appear that the tax appeal court in making its finding of “value” attached to that term the meaning “cash value” set forth in the foregoing definitions and adopted in both the majority and minority opinions herein. With this fact and these definitions in mind I cannot concur in the majority view that there was sufficient evidence before the tax appeal court to support that court’s valuation of the land for taxation purposes at $101,398.75. There was no evidence that it had a cash value approximating $101,398.75. There was no evidence that the land could be sold for that amount, or made productive of income which could be capitalized at that amount, or exchanged for other property of that valuation. It is true that a witness for the taxpayer, on cross-examination, Avhen asked, in comparing the values of potential income-bearing lots, “Assuming that the possibility of leasing both properties were approximately the same chance, do you think that an exchange of this property for this other property Avould be a fair and reasonable exchange?” replied, “No, I don’t,” and replied further that he thought the Bishop estate property would be the better, “the fact that it is on the harbor is inescapable.” (Tr. p. 129.) But the witness’s answer was based upon pure hypothesis and not upon proof. Freed from the assumption above expressed the same witness testified as follows: “The water front potentialities of this lot would be considered by any one considering the valuation of the property. The principal factor, however, in connection with the extent to which such consideration should apply, would be the probability of its being put to so-called harbor development purposes, and I believe that you cannot escape the fact that this lot is on the harbor, and some appraisers, I can see, might easily take the position that its probable value for water front or harbor development purposes, at some estimated time in the remote future, should be discounted to the present day as one method of arriving at a fair and reasonable value. However, that discount would be so heavy that, in my opinion, the industrial consideration would probably control it.” (Tr. p. 128.) The same witness elsewhere (Tr. pp. 104, 105) expressed the opinion that the fair value of the property would be upon “an industrial lease basis.”

For the reasons above set forth I think that the decision of the tax appeal court should be reversed.  