The plaintiff corporation (appellant) is owner of substantially 176,000 acres of land in Colfax County. In 1934 it listed said property under the following classification:
"Classification of Lands
Class Acres at Value
Agriculture 1600 4 6400.00 Vega 40 20 800.00 Coal 200 10 2000.00 Grazing Class `C' 35029 1-1/2 52545.00 Grazing Class `E' 105085 1 105085.00 Grazing Class `G' 35029 .50 17515.00 Total (Column 1 Tax Roll) 184345.00"
The property list was subscribed and sworn to by the corporation manager, which oath contained the usual statement that "the classification of lands * * * as is herein set forth, is true and correct in all particulars."
For the year 1937 the corporation made return of a similar list of land with the identical classifications, to which the County Assessor added "Timber 75000.00".
The taxpayer appealed to the Board of County Commissioners of Colfax County, *Page 57 sitting as a Board of Equalization, praying that the assessment for 1937 on account of timber be removed, which prayer was denied. The plaintiff taxpayer appealed to the State Tax Commission, which after hearing the evidence and argument of counsel ordered the assessor to reclassify enough acreage of land of plaintiff so as to make a total increase in valuation as a result of such reclassification in the sum of $75,000 for the year 1937, and dismissed the appeal of plaintiff. Thereupon the taxpayer filed suit praying a restraining order against the assessor's carrying into effect the order of the tax commission.
The assessor made return to the order to show cause, containing certain admissions and denials, and affirmatively alleged: "And further answering said complaint and as a further return to the said order to show cause alleges and shows to the Court that as defendant is informed and believes, there is in excess of one hundred million board feet of merchantable timber now growing upon the lands of the plaintiff herein; that said timber, or a portion thereof, has been sold to one W.E. Burke, and that said Burke is now engaged in cutting and removing said timber; that said lands belonging to the plaintiff upon which said timber is growing were not classified as timber lands for the year 1934 through error of the Tax Assessor of Colfax County; that the reclassification ordered by the State Tax Commission and the Additional assessment placed upon plaintiff's property by this defendant represents the actual value of the property of the plaintiff."
These allegations are not denied by plaintiff.
The District Court heard the matter and discharged the order to show cause and dismissed the complaint, from which action of the court the taxpayer appeals to this court.
Ch. 86, L. 1933, is "An Act to Provide for the Appraisement and Assessment of Real Property Prescribing the Method Thereof and Repealing Acts in Conflict Herewith." Sec. 1 provides that certain real property "shall be appraised and valued for purposes of taxation once every four years, the first of such valuations to be in the year 1934, the next in the year 1938, and thereafter each four years."
Sections 2, 3 and 5 are as follows:
"Sec. 2. All such property shall be assessed and valued at actual market value in the manner and by the authority as now provided by law, except that the value of all such property as finally fixed in the year 1934, and each succeeding fourth year thereafter shall be final and binding on all taxing authorities and all owners of such property for four successive tax years, except as to right of appeal. Actual market value of property is hereby determined and fixed to be that price or worth represented by the amount of money, or its equivalent, which would be received therefor at a normal sale in or at a normal market. *Page 58
"Sec. 3. Each of the three years following any years in which its value is fixed, the assessor shall add to the value of all real property the actual value of any or all improvements which may be placed thereon during the preceding year, and shall deduct from such value the value of all improvements which may have been destroyed or removed during the preceding year. * * *
"Sec. 5. Whenever any real property is found to have been omitted from the tax roll of any year in which real property values were fixed, its value shall be fixed and determined and such value, when so fixed, shall be final and binding on all taxing authorities and all owners of such property until the next year in which general real property values are fixed; and such omitted property so valued shall be listed for the number of years omitted and in the manner as provided by law."
It is to be noted that there has been no change in the law requiring the listing and assessment of property to be made annually. N.M.S.A. 1929, § 141-201 et seq., Ch. 107, L. 1933. It is the valuation which is to be fixed every four years. "Assessment proper includes valuation but valuation alone is not assessment but instead only its most important element." Cooley on Taxation, 4th Ed. § 1044.
This is not a case of back assessment of omitted property. Nor is it a case of reassessment of property. Counsel for the taxing authorities states in his brief: "In the present case, the assessing officers have not attempted to assess the timber interests of appellant's property for the years 1934, 1935 and 1936, but are endeavoring to assess the same for the current year of 1937."
Apparently the implication is that they do not assert a right to back assess for said years of 1934, 1935 and 1936. This question is not before us. We refer to "omitted property" and the statute relative thereto for its analogy to omission of component parts of the property, and omitted "elements of value" not taken into consideration in fixing the valuation, by way of argument merely.
Appellant plants its claim for relief in a court of equity upon the proposition that the property listed by it as grazing land in 1934 and classed as grazing land in Classes C, E, and G, and in that year valued at $1.50, $1 and 50¢ respectively, is a final adjudication of valuation and is res judicata for four successive tax years. It will be useful to here insert a reliable definition of res judicata appearing in Ballentine's Law Dictionary, since we will have frequent occasion to refer to its essentials, one of the more important of which we have given emphasis with italics:
"A thing definitely settled by judicial decision. See State v. Wear, 145 Mo. 162, 192, 46 S.W. 1099.
"The doctrine that an existing final judgment or decree, rendered on the merits, and without fraud or collusion, by a court of competent jurisdiction, upon a matter within its jurisdiction, is conclusive of the *Page 59 rights of the parties or their privies, in all other actions or suits in the same or any other judicial tribunal of concurrent jurisdiction, on the points and matters in issue in the first suit. 15 R.C.L. 950."
This brings us naturally to a consideration of the element of fraud which will deprive a judgment tainted therewith of its conclusive effect. Some who will disagree with our conclusion will readily concede that if the assessor asks the taxpayer if there stands upon his land any merchantable timber of commercial value and the taxpayer should falsely answer in the negative and the assessor relies thereon, this would be a fraud which would vitiate the judgment of the assessor as to the valuation. But our statute penalizes "evasion" as well as misrepresentation. See § 12, Ch. 107, L. 1933, again referred to post. It is well settled that where one is under a duty to speak and remains silent as to some essential matter he should disclose, such silence or "evasion" is equivalent to misrepresentation. It is said in Smith on the Law of Fraud, Sec. 8: "Misrepresentation may consist as well in the concealment of what is true as in the assertion of what is false. If a person conceals a fact that is material to a transaction, knowing that the other party acts on the presumption that no such fact exists, it is as much a fraud as if the existence of such fact were expressly denied. * * *"
In Sec. 9, the author cautions that concealment to be fraudulent must be of those facts and circumstances which one party is under some legal and moral obligation to communicate to the other, and which the latter has a right not merely as a matter of conscience but as a matter of law to know. Again in Sec. 10, the author says: "As we have seen under Concealment, it amounts to fraud from which a court of equity will relieve, when there is no peculiar relation of trust and confidence between the parties, and there is non-disclosure of those facts and circumstances which one party is under some legal or equitable obligation to communicate to the other, and which the latter has a right * * * to know. The suppression of material facts may be as obnoxious to the law as untruthful representations, and the same rules apply in each case, * * *"
As is herein shown, we think the taxpayer and the assessor may not deal with each other with hostility and at arm's length. The relationship between the citizen and the taxing officials is one of mutual obligation demanding fair dealing and cooperation.
Valuation and assessment of property is a process required by our law to be participated in by the taxpayer as well as the taxing authorities. Cooley on Taxation, 4th Ed., § 1043, points this out admirably as follows: "The proceedings in the assessment of a tax are not, in any proper sense, hostile to the citizen; they are, on the other hand, proceedings necessary and indispensable to the determination of the exact share which each resident or property owner should take, and may and *Page 60 should be supposed desirous of taking, in meeting the public necessity for a revenue; — proceedings which the willingness of the taxpayer cannot dispense with, and which only become hostile when the duty to pay, once fixed, fails to be performed by payment. Then, and only then, do the steps taken by the government assume a compulsory form; until then the reasonable presumption is that government and taxpayer will act together in harmony."
As to the effect of concealment or evasion by one under a duty to disclose matters within his knowledge with respect to its bearing on res judicata, Mr. Freeman in his work on Judgments, at § 1233, says: "`In ordinary situations one may, legally if not morally, keep silent and profit by his adversary's ignorance. That is neither fraud intrinsic, as in the case of perjury, nor fraud extrinsic within the Throckmorton rule. But where there is a solemn duty to speak, independently of coercion, and in a judicial controversy as well, whether asked to speak or not, and there is a failure to speak, resulting in the enrichment of the wrongdoer and the improverishment of the one to whom that duty is owing, there is a fraud of the most serious nature, and in a sense both intrinsic and extrinsic.' The failure to perform the duty to speak or make disclosures which rests upon one because of a trust or confidential relation is obviously a fraud for which equity may afford relief from a judgment thereby obtained, even though the breach of duty occurs during a judicial proceeding and involves false testimony and this is true whether such fraud be regarded as extrinsic or as an exception to the extrinsic fraud rule."
Further as to res judicata see Adams v. Clarke, 80 Miss. 134,31 So. 216, where it was said [page 219]: "The rule of res adjudicata in reference to assessment for taxes rests upon the same basis as that of other judgments. Wells, Res.Adj. § 483. One who relies upon the conclusive effect of a prior decision must be able to show that the precise point was decided in that proceeding. If there are two issues, on either of which the judgment may have been given, and one would be conclusive, and the other not, there is no res adjudicata. * * * A judgment is conclusive because, and only because, the court by which it is rendered has been advised of the facts, and on those facts has announced its conclusion."
Let us now look at our statutes to see what kind of co-operation is demanded of the taxpayer in his relation to the taxing authorities. A legislative expression which is a re-enactment of earlier statutes in part is found in Ch. 107, L. 1933. Sec. 2 declares that all property, not otherwise assessed and valued for purposes of taxation, shall be declared, listed, assessed and taxed in the county where it is situated, on the first of January of each year, and shall be included in assessment lists "to be declared to the Tax Assessor on or before the First business day of March."
Sec. 4 provides: "Every person, firm, association or corporation shall, in each year, *Page 61 make a declaration of all property subject to taxation of which he is the owner or has the control or management, but in no case is he to fix the value of such property, or any portion thereof, except as hereinafter provided; but it shall be the duty of the county assessor to fix the valuation for the purposes of taxation of all propertycontained in such declaration or of which he may otherwise obtain knowledge, at the full actual value thereof. Such declaration shall be made of all property as it exists on the first day of January of each year, and it shall show all theproperty belonging to, claimed by, or in the possession or under the control or management of, the person making the declaration * * *." (Italics ours.)
Sec. 9 provides that the State Tax Commission shall prescribe the form to be used for the listing and assessment of thevarious classes of property and which forms shall be uniform as to the various classes of property assessed and all such forms shall include space for the verification or affirmation thereof.
Sec. 10 makes it the duty of the tax assessor to "make a reasonable and diligent effort to visit all property owners * * * and to view, list and value all such taxable property, the value of which is not otherwise determined by law." and provides: "Such assessor shall secure from the person or persons above mentioned a declaration of all taxable property of whatsoever kind and which shall be listed by him upon the form of tax schedules above provided for."
It is further provided therein that the person declaring his property shall affix his oath or affirmation that the declaration "offered the tax assessor" is a true, complete and correct statement of all taxable property owned by or under his control. It is provided further that the failure of the tax assessor to visit the taxpayer shall not release the obligation of such property for tax payment but that the taxpayer if he has not been visited prior to March 1st shall forthwith report a complete list of all property subject to taxation, whereupon such assessor shall value it the same as if such property had been "declaredto him in person."
This demonstrates that the legislature contemplated that the assessor must rely in part upon the list and declaration required to be made by the property owner, to the assessor.
Sec. 11 provides that the assessor shall by public notice inform all taxpayers of the date or dates upon which he will visit each school district "for the purpose of receiving declaration of taxable property, and it shall be the duty of each and all taxpayers, property owners or persons in charge of any taxable property to cooperate with, and assist in the prompt assessment of property."
Sec. 12 declares that if any person owning or in control of any taxable property shall willfully and knowingly make a false declaration of property, either for himself or for another, he shall be guilty of perjury and punishable therefor as is provided *Page 62 by law, and further that if any person owning or in control of any taxable property shall willfully seek to or evade declaration of or refuse to declare property as is herein provided for, the assessor shall make a true and complete list of said property, value the same, and when extending the taxes against such property shall add to such taxes an amount equal to 25 per cent thereof as a penalty for such "evasion" or refusal to declare the same. If the tax assessor shall ascertain that any property subject to taxation has not been declared, listed and valued as in the Act provided, he shall present a schedule therefor whereon the same shall be listed and valued and shall indicate upon such schedule that the property therein listed and valued was therein "non-listed" during the assessment period and that when extending the taxes against such property he shall add thereto an amount equal to 5 per cent.
Sec. 13 provides that assessment lists theretofore provided shall be made in duplicate, the original to be returned to the tax assessor as a permanent record of his office and from which he shall prepare tax rolls after the final determination of values by the County Board of Equalization, and the duplicate shall be delivered to the taxpayer and shall constitute his notice of the valuation fixed upon the property thereon listed by the assessor and that "Such list or schedule shall contain anitemization of the property, or properties thereon shown and the valuations thereof as fixed by the Tax Assessor and shall be considered final, subject however, to appeal * * *." (Italics ours.)
These provisions demonstrate a legislative intent that the assessor may rely upon the declaration made by the taxpayer until it is proven to be false.
What was adjudicated by the county assessor in 1934 with respect to fixing the valuation for the purpose of taxation of the property "contained in such declaration" was that the land listed by the appellant as grazing land in Classes C, E, and G were of the value of $1.50, $1 and 50¢, respectively.
What appellant sought in his suit in equity was to have the county assessor restrained from carrying out the order of the State Tax Commission that the said county assessor should "reclassify a sufficient number of acres of grazing land assessed to said Vermejo Club so that the same is reclassified as timber land, with a total increase of valuation as a result of such reclassification in the sum of $75,000 for the year 1937."
It is suggested on behalf of the appellee taxing authority that the statute relied upon by appellant has no application to the classification of real property and that the provisions of Ch. 86, L. 1933, giving finality to the valuation fixed on property in 1934 and each succeeding fourth year thereafter, assumes that the classification of real property stated in the declaration of the taxpayer in the year 1934 was a correct classification and that there has been no change therein. It is argued that since *Page 63 the legislature in 1933 by Chapter 86 specifically provided that where there was a change in the physical condition of real estate after the valuation in 1934 and each succeeding fourth year thereafter by placing improvements on such property, the valuation theretofore fixed should not be final and that where improvements that had existed on such real estate had been destroyed or removed, the valuation theretofore fixed lost its aspect of finality and therefore it is just and reasonable to suppose that the legislature did not intend that where a distinct component part of the property, such as timber, was destroyed by fire or otherwise during the quadrennial period that its classification as timber land should remain the same. It has been suggested that land which has been classified as farming land should during the quadrennial period be reclassified for purposes of taxation if its qualities and value as farm land had been destroyed by flood or by other ravages of nature which have grown familiar to us in what is known as the dust bowl conditions. Also it has been suggested that if grazing lands have become farm lands during the quadrennial period, such lands should be reclassified accordingly. Also it has been urged that as to classifying lands which have been classified by the State Tax Commission and valuations placed thereon appropriate to each class that if due to changing conditions acreage which at one time fell in Class C at $1.50 an acre should thereafter during the quadrennial period properly be classified as Class G at 50¢ an acre that justice requires such reclassification. In other words, it is contended that since Ch. 86, L. 1933, deals with valuation and not with classification, we should not by construction read classification into the statute.
From Crozer v. People, 206 Ill. 464, 69 N.E. 489, we learn that Illinois has had for many years a statute providing for quadrennial valuation of real property. The Illinois legislature provided that the assessor should before the 1st day of June in the year 1899 and every fourth year thereafter value the land listed by the taxpayer and similarly to our statute provided that in the annual intervening assessment years the assessor should return a list of all new or added buildings, structures or improvements of any kind, the value of which shall not have been previously added or included in the valuation of the tract or lot on which such improvements had been erected or placed, and in case of the destruction or injury by fire, flood, cyclone, storm or otherwise, or removal of any structures of any kind, "or of the destruction of or any injury to orchard, timber, ornamental trees or groves, the value of which shall have been included in any former valuation of the tract or lot on which the same stood, the assessor shall determine as near as practicable how much the value of such tract or lot has been diminished in consequence of such destruction or injury, and make return thereof." Smith-Hurd Stats. Ill. c. 120, § 291. *Page 64
And it was further provided that the former valuation should be abated proportionately to such destruction of the component parts of the property which went to make up the valuation.
It is argued that the absence of some such provision in our statute does not necessarily signify a lack of foresight by our legislature but that on the other hand our legislature thought that the same result could be accomplished by change of classification from time to time. We find it unnecessary to express an opinion as to the merits of these interesting suggestions.
In order to invoke Ch. 86, L. 1933, appellant must take the position that classification is merely an incident to valuation and that the assessor's acceptance of appellant's list and declaration of 1934 was not only an adjudication that grazing lands in Class C, E, and G were of the value of $1.50, $1 and 50¢ an acre, respectively, but that the assessor also adjudicated that of its 176,984 acres of land listed, 1,600 acres thereof were agricultural land, 40 acres vega land, 200 acres coal land, 35,029 acres grazing land in Class C, 105,085 acres in Class E, and 35,029 acres in Class G, and that Ch. 86, L. 1933, is a pronouncement that such classification made in 1934 must so remain until 1938 regardless of the truth of the situation. It has been held that the approval of an assessment list by the tax officials is not conclusive that the taxpayer has listed or that the roll contains all of the property owned by him. Such approval was an adjudication of the property listed as to its value. Adams v. Clarke, supra.
The appellant assumes a very burdensome position. It would be manifestly impossible for the assessor between the time Ch. 86 became effective in the summer of 1933, and January 1, 1934, to personally or through his deputies go upon and estimate and inspect each acre of land or each subdivision of land to see whether it had merchantable timber growing thereon or not, or whether a part of the lands listed were coal lands or agricultural lands or vega lands in order to discharge the new and far-reaching function of placing a valuation on all of the property in his county, which valuation should endure for four succeeding years. The law imposes the duty upon the taxpayer not only to give such a description of his real estate as would be sufficient in a deed to identify it, but also requires him to give information as to the classes of property he owns and requires him to submit a list thereof containing an "itemization" of his property, and these disclosures are required to be under oath. The forms which are prepared by the State Tax Commission pursuant to the provisions of Ch. 107, L. 1933, heretofore referred to, and which are furnished to the taxpayer and upon which he must make a list and declaration of all his property, contains a demand for information as to "classification of lands." *Page 65 One of the sections of this familiar form is as follows:
Classification of Lands ---------------------------------------------------------- Class Acres at Value Improvements ---------------------------------------------------------- | | | | | Residence | | | | | | Barns and Other | | | | | | Buildings | | | | | | Wind Mills, Wells, | | | | | | Pumps and Misc. | | | | | | Fence: miles at $ | | | | | | per mile | — --------------------------------------------------------
It is noted that the different classes of lands are not printed and presumably the property owner will insert the proper classification. The assessor and the other taxing boards have the right to assume that the taxpayer has truly listed his property and no judgment can be res judicata where the pleadings or what is in lieu of pleadings do not state the facts calling for adjudication. If the taxpayer does not list his timber land or his timber as a component part of the land he describes in his declaration, the taxing authorities have the right to assume that he has no timber thereon of commercial value. There is no reason to suppose that the appellant's officer or agent did not know the duty and purposes of classification when it classified 1,600 acres as agricultural land, 40 acres as vega land, 200 acres as coal land and 175,163 acres as grazing land, failing to classify any of the said acreage as timber lands. As we have heretofore seen, the taxpayer made oath to the list and declaration that "the classification of lands * * * as is herein set forth is true and correct in all particulars."
It is suggested and we are aware that there may be land upon which there exists standing trees and that this circumstance does not necessarily take the land out of a proper classification as grazing land. We apprehend that there may be instances where there may be timber standing on land and yet such timber may not add to the market value of the land. The timber as such may not be merchantable and it may not have a market value. There may be trees standing on land even in large numbers and still the size, variety and quality may exclude them from the class of merchantable timber. Also the timber may be merchantable in the sense that it is of good quality, and yet not in sufficient quantity as to add to the market value of the land. The usual and customary method of ascertaining the value of merchantable timber involves the essential consideration of location, topography and accessibility. The best of timber would likely add nothing to the market value of the land on which it stands if such timber is inaccessible. And again such timber might be physically accessible but the topography be such that the logging cost would render getting it out unprofitable. There might not be enough of it to warrant the setting up of a saw mill and the construction of a tram road, installation of logging cars, engines, skidders, loaders, etc. If any of these essential considerations necessary to make timber a component part of the land value or an "essential element" for the purpose of valuation in the case at bar were absent we are not advised of it. It *Page 66 must be remembered that the appellant is plaintiff in a suit in equity who has brought the assessor into court as a party defendant asking injunctive relief against him. The assessor has said in effect that he had been misled by the taxpayer in classifying his land as grazing land, whereas information received later showed that a portion of the lands should have been classified as timber land, and seeks to reclassify it preparatory to making an assessment for a year embraced within the unexpired portion of the four-year period for which valuations had been fixed. It would have been open to the plaintiff taxpayer to challenge the facts upon which the assessor asserts his right to make the reclassification. The plaintiff taxpayer did not allege that the assessor had consciously and intentionally classified its timber land as grazing land. It did not assert that it did not know in 1934 that its acreage containing one hundred million board feet of merchantable timber added to the market value of its land because of conditions of location, topography and accessibility. It made no claim that there was any physical or economic condition which rendered the timber unmarketable so as to render the lands properly classifiable as grazing land instead of timber land. It admits that there is in excess of one hundred million board feet of merchantable lumber growing upon its lands which were listed as grazing lands and that said timber has been sold and that the purchaser is now engaged in cutting and removing said timber. It is manifest that if the contention of appellant is sustained, a large portion of the timber will be removed and the state will lose the revenues it was entitled to receive. There is no claim by the appellant that the timber as a component part of its land so improperly classified is not of a value in excess of $75,000 for the purposes of taxation. Nor could it well do so, because by Sec. 132-177, N.M.S.A. 1929, it appears that the State Land Commissioner was prohibited from selling timber on state lands except such as is fit only for firewood, at less than $1.50 per thousand feet board measure, and this minimum figure was raised by Ch. 106, L. 1935, to $2 per thousand feet. It would appear then that the valuation fixed by the assessor for the purpose of taxation is less than half of the prevailing price of timber on state lands.
We are not in the case at bar dealing merely with a case of undervaluation. We apprehend that most of the instances of undervaluation do not involve an erroneous classification and also they usually do not involve the failure to consider in the process of valuation some distinct component part or element of value of the property. These distinct component parts or elements of value are few in number. Broadly speaking they are timber, water and minerals. These are so distinct as component parts of real property that they are frequently the subject of separate ownership in different persons. The effect of our holding in State v. Jemez Land Co., 30 N.M. 24, 226 P. 890, is that growing timber is a part of the real estate and that where the land itself and the timber is owned by the same person it should be properly *Page 67 assessed as a part of the realty. Where the land is owned by one person and the timber by another the timber is assessable to the owner of the timber, and in that case we held that the taxpayer is in no wise injured by having the value of his land arrived at by consideration and summing up of the several "elements of value," so long as the total value thus obtained does not exceed the actual value of the real estate.
A case where a taxpayer has omitted to give an itemization of his property so that the assessor may be advised of the distinct component parts of the property or its distinct elements of value presents an easier case than one of mere undervaluation where no such distinct elements of value or component parts of property are apparent. Yet it has been stated that either gross undervaluation or gross overvaluation may be relieved against, if such overvaluation or undervaluation are so excessive as to amount to constructive fraud.
Cooley on Taxation, 4th Ed. Vol. 4, § 1645, says: "Fraud is ground for relief by injunction in tax cases. A tax founded on a fraudulent assessment will be enjoined; and this includes a valuation so excessive as to be constructively fraudulent, whether made by local assessors or by a state board or by a reviewing board. A valuation is necessarily fraudulent where it is so unreasonable that the assessor must have known that it was wrong. If the valuation is purposely made too high through prejudice or a reckless disregard of duty in opposition to what must necessarily be the judgment of all competent persons * * * the case is a plain one for the equitable remedy by injunction."
We recognized this principle in Scholle v. State Tax Commission, 42 N.M. 371, 78 P.2d 1116, April 26, 1938, where we quoted from In re Blatt, supra, to the effect that there is an exception to the pronouncement that there is no method whereby a taxpayer who is aggrieved because of excessive assessments may appeal from the ruling of the State Tax Commission to the courts [page 1117]: "* * * The exception is in a case where a court of equity may review upon facts specifically set forth showing the assessment to be so excessive as to be constructively fraudulent, and then only upon a showing that all other remedies designated by the statute have been exhausted."
It would seem singular that the taxpayer has this protection against a fraud committed by the assessor, and yet when he himself is in a court of equity with the assessor as a defendant, the assessor may not invoke a fraudulent classification of real property resulting in an undervaluation of his property so gross as to amount to constructive fraud. It is a poor rule that does not work both ways.
As we have said in State v. Jemez Land Co., supra, timber and improvements are in the same class with respect to the principle that they are not to be assessed separately, but may be considered as an element of value of the land itself in order to arrive *Page 68 at the proper valuation of such real estate. To hold as appellant requests us to hold would enable the taxpayer to inform the assessor that there were no improvements on grazing land, or by evasion mislead the assessor and thus obtain a classification thereof as grazing lands without improvements and a valuation accordingly, and thereafter, if the assessor at an intervening assessment year during the four-year period says that he does not intend to be longer bound by that valuation because he has found out that the land had improvements on it when the adjudication of value was made, he would be met with a cynical reply: "I know it was my duty to give you correct information but you were a foolish official to rely upon it." Such a holding would penalize the candid taxpayer, properly disposed to co-operate, to his disadvantage and to the advantage of the untruthful or evasive one.
It is no answer to this illustration to point to Ch. 86, L. 1933, as referring to improvements because that refers to improvements added or destroyed after the valuation has been fixed and not to the omission of them as a component part of the land or an element of value thereof existing at the time the adjudication of value of the real estate is made.
The judgment is conclusive because and only because the tribunal by which it is rendered is advised of the facts and on these facts has announced its conclusion. The appellant is in the unenviable position of contending that because it did not list any portion of its lands as timber land it was therefore adjudicated as grazing land; in other words, that it is to be conclusively presumed that things not brought to the attention of the assessor are to be treated as res judicata.
Two things are certain: first, in no event can appellant be required to pay on a greater amount than it justly ought; second, unless appellant was properly denied the assistance of a court of equity it unquestionably will escape the payment of taxes on $75,000 taxable element of value of property which it does not claim it did not own and which escaped the notice of the assessor when the classification and valuation were made in 1934, and which it does not even now claim was properly classified.
The foundation of appellant's contention rests upon the proposition that since the statute requires the taxpayer to return all his property with an itemization and classification thereof, when he returns any property, even in a false return, the presumption is conclusive that he has returned all and in the correct classifications. The contention of appellant would lead to the conclusion that if the taxpayer listed his property as grazing land whereas it was in fact timber land, and the assessor did not discover the fraud immediately, he would forever shield from taxation said land at its true quality and worth.
We are warned in argument that our view will be far-reaching and annoying. We should not be frightened by *Page 69 consequences. But we think the consequences will be wholesome. As was said in Adams v. Clarke, supra: "Every dishonest return of taxes is not only a violation of the law, and besides a wrong to the state, but it is the grossest injustice to those who honestly pay their taxes. If all citizens would take care to pay as they should, the tax rate would be lowered, probably one-half, and property in the hands of corporations and individuals would equally respond to its just burdens."
The taxing statutes should be construed so as to promote fairness rather than to promote fraud. As we said in State v. Southern Pacific Co., 34 N.M. 306, 281 P. 29: "Statutes will be construed in the most beneficial way which their language will permit, to prevent absurdity, hardship, or injustice, to favor public convenience, and to oppose all prejudice to public interests."
In Cooley on Taxation, 4th Ed., § 1665, it is said: "The rule that equity will not aid one who does not come into court with clean hands applies to injunction suits in tax cases. Thus, a taxpayer guilty of bad faith, fraud and tax dodging does not come into equity with clean hands and relief will be denied him."
One of the cases cited by Mr. Cooley is Reid v. Multnomah County, 100 Or. 310, 196 P. 394, where these principles are invoked against a taxpayer seeking equitable relief. The court cited many cases and Mr. Pomeroy's outstanding text on Equity Jurisprudence, 4th Ed., §§ 397 and 404, as follows [page 400]:
"Whenever a party who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience, or good faith, or other equitable principle, in his prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere on his behalf, to acknowledge his right, or to award him any remedy. * * *
"Any really unconscientious conduct, connected with a controversy to which he is a party, will repel him from the forum whose very foundation is good conscience."
And in Bell's Trustee v. City of Lexington, 120 Ky. 199,85 S.W. 1081, a suit by a taxpayer for injunction involving questions similar to those in the case at bar, the court said [page 1082]:
"* * * If appellant had submitted to the assessor the various bonds, mortgages, notes, and other securities which go to make up the aggregate values given in, and the officer, after surveying the whole, had assessed it for less than its real value, the city would have been bound by the valuation, and no reassessment would have been permitted as omitted property. But that is not the case here. The officer simply accepted the return made by the appellant without knowing what property went into the valuation. It was incumbent upon the appellant to make a fair and full disclosure by items of all the property subject to *Page 70 taxation it held in trust for Clara D. Bell, and it in no wise discharged its duty to the city by imposing upon the officer an aggregate valuation without the items of which it consisted, and without being sworn to as by law required. The officer, too, neglected his duty in accepting the illegal return; but his laches cannot avail the appellant.
"* * * Equity does not favor mere technical defenses to the collection of tax claims. Taxes are the very life blood of the government. The duty of paying a ratable share of this public burden is incumbent on every property holder. Whatever just part of this common burden is shirked by him whose duty it is to bear it, is necessarily cast as an additional burden upon other shoulders: and therefore, while at law one may sometimes be permitted to interpose mere irregularities as a defense to the imposition of taxes, when he asks the aid of the extraordinary power of the chancellor he should show, as a condition precedent to receiving it, that he has a meritorious defense to the tax claim he assails.
"* * * Judge Holt, in speaking of enjoining the collection of taxes, said: `This being so, it was the duty of the party asking relief to definitely point out the extent to which he was entitled to be relieved. If he seeks equity, he must do equity. He must show his willingness to pay what he in fact owes, or at least in a case like this he must show to the court how much he in fact does not owe. He must, inasmuch as an injunction is peculiarly an equitable remedy, separate the just from the unjust portion of the claim, and ask relief only as to the latter. This the appellee has failed to do, and the judgment is reversed, with directions to dismiss the petition.' The rule, then, is, when one comes into equity asking for relief against taxation, it is incumbent upon him to show clearly that he has paid or is willing to pay all that he justly owes toward the public burden. He must make a full, fair, and complete disclosure of the property he has subject to taxation, so that the court may judge as to whether or not he is unjustly taxed. He must come, not only with clean, but with open, hands."
In view of all these considerations, I think the valuation of the land of appellant in 1934 without the timber is not a final and conclusive adjudication of the value for the period for which such value was fixed, and I agree with the trial court that there was no equity in plaintiff's bill. I therefore dissent.
SADLER, J., concurs. *Page 71