Treasure State Pipe Line Co. v. County of Toole

MB. JUSTICES BOTTOMLY and ADAIR,

specially concurring :

It appears to us from the briefs and arguments of counsel, in the instant case, that the procedure followed by the county assessor with regard to assessing the pipe lines involved and lying wholly within his county has adopted a very unique system of establishing the “assessed value” for ascertaining the “taxable value” of such pipe line properties.

It appears that, for many years past, the county assessors, having the oil and gas industry in their respective counties, met at various times, consulted with representatives of the industry and then reached an agreement or agreements with such representatives as to the particular method or formula to be adopted and employed in assessing the pipe line properties and in determining the value to be used for such tax assessment.

The line pipe agreement seems to have been as follows: The average cost of the pipe delivered in Montana was to be determined ; the pipe was to be assessed at 50 percent of the average cost, new, each year; the pipe line taxpayer was to be allowed no depreciation from such cost; the state was not to assess m excess of this 50 percent of cost new each year; and neither the cost of the right of way or easement where the pipe line had been acquired from private sources, nor the value of the interest in real estate, nor the cost of installation, nor the profit from the *117pipe line business were facts to be considered by tbe assessor in making bis assessment. All sucb factors tbe assessor gave up or forgave in consideration for tbe taxpayer returning tbe pipe at an assessed value of 50 percent of its market value without any depreciation, instead of tbe full casb value as provided by law. R.C.M. 1947, sec. 84-401.

While possibly not all pipe line people were represented at these consultations and meetings where this unique method of assessment was set up, yet it appears that most, if not all, followed tbe schedules prepared according to tbe agreements so made and tbe Treasure State Pipe Line was one that followed these schedules and accepted tbe assessment so agreed upon.

Now it appears sucb assessment was to be changed each year to reflect 50 percent of tbe cost new of tbe pipe to be assessed. However, tbe taxpayers soon found that some of tbe assessors, instead of adjusting tbe pipe costs yearly would merely continue using tbe schedule first adopted as tbe formula or schedule for each succeeding year. Obviously, in times of rising cost prices for pipe, as was tbe case for many years, this method resulted in a decided tax advantage for this class of taxpayer.

Thus, in tbe instant case, tbe taxpayer contended by tbe proposed assessment list for 1954 which it submitted that it should be taxed only upon 50 percent of tbe cost of new pipe back in tbe year 1946.

In this, tbe taxpayer was not even following tbe assessment formula and agreement reached between tbe pipe line companies and tbe assessors. Tbe reason of course for not following it was clear, — it resulted in a most substantial tax saving.

In 1953, tbe assessors determined that tbe taxpayers, subject to tbe agreement above-mentioned, were still using tbe 1946 schedules. Thereupon tbe assessors revised tbe schedules to bring them up to date. This is tbe schedule tbe State Board of Equalization proposed tbe taxpayer, in tbe instant case, should follow and pay tax upon.

Tbe revised 1953 schedule resulted in an increase in tbe taxable assessment in this one year, whereupon tbe taxpayer im*118mediately contended such increase constituted an arbitrary assessment. However the taxpayer had agreed to yearly adjustments provided not more than 50 percent of the value was assessed but the assessor had failed to adjust yearly his assessment as heretofore agreed upon. When, at long last, the assessor adjusted the schedule to make it conform to the agreement, the taxpayer, in the instant case, asserted the assessment became, was, and is arbitrary.

While it would be arbitrary to increase the taxpayer’s assessment from that of the previous year without the showing of an increase in value between the two years, yet if the assessment were to be made upon an agreed amount of the fair market value of specified property year by year, still the taxpayer would have no cause to complain if the assessment does not exceed the amount theretofore agreed upon.

Of course it would be arbitrary to increase assessments in one year to take into account appreciation of values which might have occurred over the last five, ten or fifteen years instead of basing the increased assessment upon the appreciation in value between the prior year and the taxable year in question, yet when the increase or decrease in value is to be determined by an agreed formula, as here, then the taxpayer cannot complain when the agreement is enforced, irrespective of whether or not it was followed before by the other party to the agreement. The pipe line company had bound itself to submit to the agreed method of' taxation. It had obtained a decided tax advantage in the many years when the agreement was not strictly asserted against it.

It agreed not to> take depreciation in order to have only 50 percent of the market value of its property taxed. Yet when the shoe began to pinch a bit because of the rising cost of pipe it then asserted the Board was arbitrary in trying to assess according to the so-called agreement. It appears, however, that the taxpayer was anxious to fix the formula in 1955. At that time a new agreement was made between the pipe line people and the assessors of the counties wherein the pipe line com*119panies had property. Now such pipe line companies are assessed on only 50 percent of the market value of pipe and such companies get what amounts to depreciation on all pipe acquired before the year 1940.

The pipe line companies gave up the depreciation to get assessment at one-half value and then came back cmd in addition took depreciation. It appears that these taxpayers have not proved a case that entitled them to any relief. For this reason we agree with the result reached in the majority opinion.

It is clear upon the record before us that neither the county assessors nor the State Board of Equalization followed the plain mandate of the statutes governing the determination of the “full cash value.”

B..C.M. 1947, sec. 84-401, declares:

“All taxable property must be assessed at its full cash value. Land and the improvements thereon must be separately assessed. ’ ’ Emphasis supplied.

B.C.M. 1947, see. 84-101, subd. 5, states:

“The terms ‘value’ and ‘full cash value’ mean the amount at which the property would be taken in payment of a just debt due from a solvent debtor.”

Such unauthorized procedure as above set forth allows the pipe line companies to be the judge of the full cash value of their property instead of being bound, as all other taxpayers are bound, by the law as interpreted and applied by the proper public constitutional officers charged with the duty of making such determination.

Instead of adopting the formula so allegedly arrived at by the private negotiations of the parties, the plain mandate of the written law, enacted by the legislature, should be followed in order that all taxpayers shall be taxed as is provided by law and not by the private dickerings of the parties to the end that all of the people will retain their confidence and trust in their taxing officials and in their courts, and in the assurance that all shall observe, follow and abide by the law as written and enacted.