Weil v. Supervisor of Assessments

Smith, J., delivered the opinion of the Court. H. H. Walker Lewis in his article Equality in Property Assessments, 9 Md. L. Rev. 246 (1948), tells us that the Maryland Constitution of 1776 established equality as a basic principle of property taxation, brought about by such pre-1776 actions as the Act of 1756 which “placed twice as heavy a tax on the property of papists as on that of non-papists.” That act also placed a “duty on all Bachelors of twenty-five years of Age and upwards” varying according to their worth. Differences of opinion as to what constitutes equality continue on into the present and produce this litigation. Appellants own land in Washington County improved by gasoline service stations.

As is frequently the case, there is a difference of opinion between them and the assessing authorities as to the value of that land. They question the propriety of the method used by the assessor in reaching his valuation. They see four questions presented, namely: 1. Does Maryland law permit the land of properties actually devoted to service station use to be assessed at values disproportionate to the land values at which comparable commercial-use properties in the same neighborhood are assessed? 2.

Does Maryland law permit, for assessment purposes, the independent administrative sub-classification of the land, only, of properties actually devoted to service station use, separate and apart from all other assessable land? 3. If so, does the record contain credible evidence upon which the land of properties actually devoted to service station use may be independently subclassified for assessment purposes, ²⁴¹ separate and apart from all other land available for such commercial use? 4. Was the land of either property assessed at greater than its full cash value as of January 1, 1967? We shall not answer each question directly because in part they seem to be based upon assumptions similar to the age-old question of when one stopped beating his wife.

We join the Circuit Court for Washington County and the Maryland Tax Court in finding no error. Therefore, we shall affirm. This case reaches us under Code (1957, 1969 Repl. Vol.) Art. 81, § 229 (1), (m), since the matter was decided by the tax court and appealed to the circuit court prior to the effective date of Chapter 385 of the Acts of 1971 providing for a direct appeal from the tax court to us.

Under the applicable statute, the circuit court was obliged to affirm the tax court’s order “unless such order [was] erroneous as a matter of law or unsupported by substantial evidence appearing in the record.” The new assessment for land on one tract was $19,500, compared with the prior assessment of $4,170, while the new assessment on the second tract containing two parcels was a total of $21,000, compared with the prior assessment of $5,130. The date of finality here involved was January 1, 1967. Appellants presented an expert appraiser. He contended that the market data approach was the proper one because he said a market existed, although he used no service station sales for comparable sales on the ground he found none close enough.

He placed a valuation of $12,000 on one land site and $16,000 on the other. He made no study of the income of either property, claiming that the income approach was the weakest of the possible approaches because it constituted an appraisement of management. The assessor testified as to the manner of approach he had devised. The tax court in its opinion quoted from ²⁴² the written summary he had submitted, which basically was that to which he testified: “In preparation for a general re-assessment program in 1966 it was discovered that gasoline service station assessments were not in proper ratio to market value.

The improvements were properly assessed according to Boeckh’s Manual and depreciated in line with their age and condition but the land was where the greater attention was required. “We determined several facts regarding service station sites. (1) A minimum site for prime land is 12,-000 square feet. (2) Prime land represents approximately 85% of the total site value. (3) A minimum gallonage for a successful station is 20,000 gallons per month.

(4) A reasonable land rental would be 1140 per gallon net. (5) 20,000 gallons X 1%0 = $250 rent per month — $3000 per year capitalized @ 6% = $50,000 value. Since 85% is prime land ($50,000 X 85%) = $42,-500 for value of prime land. The prime land is set at 12,000 square feet therefore $42,500 -s- 12,000 sq. ft. = $3.54 value of prime land per sq. ft. $3.54 X 60% = $2.12 — our assessment rate is $2.00. “This was tested with a number of sales and leases, a few of which are referred to here, to prove our rates in practical application. “To prove our method of assessing by market data: Sale #1 Sun Oil purchased a successful service station along with a contiguous residential property for a total of $51,000.

Our land assess ²⁴³ ment for the enlarged service station site, using the same method used in assessing the subject property is $26,000 (less than 60%). Sale #2 Humble Oil purchased a piece of land on which they owned the building and leased the land. The purchase price for land only was $40,000. Our land assessment, using the same method used in assessing subject property is $16,900 (less than 60%).

Sale #3 Cities Service purchased an improved piece of land for $30,000. Our land assessment, using the same method in assessing subject property is $16,000 (less than 60 % of raw land sale price). “To prove our method of assessing by income: Income #4 Humble’s lease of the property which is the subject of Appeal #35 is a net lease of land only for $2160 plus overage to a maximum of $2910 per year with an option to buy for $45,-000. The $2160 capitalized @ 6% indicates a minimum value of $36,000 and the $2910 capitalized @6% indicates a maximum value of $48,500. The land assessment is $19,500 (less than 60 % of the minimum capitalized value).

Income #3 Shell Oil lease of land only is a net lease of $4,200 per year with an option to purchase for $75,000. The $4,200 capitalized @6% indicates a market value of $70,000. The land as ²⁴⁴ sessment, using the same method used in assessing the subject property, is $40,500 (less than 60% of indicated value). Income #5 Humble lease of the lot which was cleared and made a part of the existing station site at Cannon Avenue and Dual Highway and which is a part of Appeal #36, is a net lease of land only for $1080 per year.

This $1080 capitalized @6% indicates a market value of $18,000. The land assessment is $10,-200 (less than 60% of indicated value). “We have also found that in most instances, successful ‘full service’ service station sites have a different land value from other adjacent sites of a different commercial use. “To support this: Sale #4 & #5 Gulf Oil bought two separate 1.4 acre tracts for $16,500 each. Berkley Rohrer bought a 1.5 acre tract contiguous to Gulf’s tract for $7,500. Lease #1 & #2 Mr. & Mrs. A. E. Stahl leased a part of their property to Shell for $225 per month net indicating a value of $2.73 per square foot and a contiguous part to a car wash enterprise for $50.00 per month (owner paying taxes) indicating 430 per square foot. ²⁴⁵ Income #6 Ambrose Used Car Sales has leased a property contiguous to Humble Appeal #35.

This property which includes land and buildings indicates a total market value of $31,000 which by the land residual method shows a land value of 940 per square foot. The Humble land value is indicated at $3.33 per square foot.” It is the contention of the appellants that the assessment schedule which imposes a unit rate of $2.00 per square foot on prime land actually devoted to service station use if the station pumps 20,000 gallons or more a month establishes an illegally disproportionate, nonuniform, discriminatory assessment method, and is an illegal administrative subclassification of land. They contend “that the assessment of all parcels of land located along a given highway and similarly available for highway commercial uses in the same immediate neighborhood must begin with the same method of valuation, which means the same unit values where the unit value method is applied.” They further argue: “If commercial land is to be assessed on the basis of its highest and best use, then all similarly situated commercial land similarly available for that same highest and best use must be similarly assessed, that is, by the same standards. But, if one piece of commercial land is to be assessed at $2.00 a square foot because it has something called a ‘full service’ service station on it, or at $1.50 if it has less than ‘full service’ service station on it, and another piece of commercial land in the same business area is to be assessed at $.60 a square foot because it is used as a new car sales outlet, then only the service station land is being assessed at its highest and best use and the car sales land is being ²⁴⁶ assessed at its lower actual use.” (Emphasis in brief.) The command of Code (1957, 1969 Repl.

Vol.) Art. 81, § 14 is that “ [a] 11 real property . . . shall be assessed at the full cash value thereof on the date of finality,” the full cash value being defined as “current value less an allowance for inflation, if in fact inflation exists.” As Judge (later Chief Judge) Henderson put it in Bornstein v. State Tax Comm., 227 Md. 331, 337 , 176 A. 2d 859 , 96 A.L.R.2d 661 (1962), “ [o] rdinarily the cash value would be the current market value, or what a willing purchaser would pay to a willing seller in the open market.” In Northern Cent. Ry. v. Mayor and City Council of Baltimore, 132 Md. 497 , 104 A. 44 (1918), the statute then in effect, Code (1912) Art. 81, § 193 and Art. 23, § 313 provided that real property of railroad companies was to be assessed “for county and municipal purposes in the same manner as the property of individuals [was then] assessed and taxed.” It was claimed that the taxing authorities were prohibited “from considering the utility of the property for railroad purposes in ascertaining its value for municipal taxation.” Judge Pattison said for the Court: “In assessing real estate of individuals for the purpose of taxation its full cash value is to be ascertained (Chapter 120 of the Acts of 1896) without looking to a forced sale; and in ascertaining its value all utilities of which the property is capable, and which have the effect of enhancing its value, are elements to be considered, Brack v. Baltimore, 125 Md. 382 , and Bonaparte v. Baltimore, 131 Md. 80 , and cases therein cited. [Both are condemnation cases.] “If the lots of land in question, which are shown to possess special utility for railroad purposes by all the witnesses who testified before the Commission, were owned by individuals, there could be no doubt as to the authority of the taxing powers to consider that utility in ²⁴⁷ ascertaining their value for taxable purposes; or if there are other lots owned by individuals, similarly located in Jones Falls valley, possessing special utility for railroad purposes, the taxing powers of the City have the undoubted authority to consider that utility in ascertaining the value of such lots for taxable purposes. “It is not, as suggested by the appellant’s counsel, the increased value of the lots of land, resulting from the fact that they are parts or units of the railroad system, which the Commission has said may be considered in ascertaining their value, but it is the utility they possess for railroad purposes, without regard to the fact that said lots of land are parts or units of the railroad system.” Id. at 500. Capitalization of income has long been recognized in Maryland as a tool for assessment purposes. In County Commissioners of Frederick County v. Sisters of Charity of St. Joseph, 48 Md. 34 (1878), our predecessors had before them the question of an assessment for lands comprising 398 acres, part of which was used for educational purposes and was exempt from taxation, but all of which was not so used and, therefore, not exempt.

In the concluding paragraph of the opinion Judge Bowie said for the Court: “If the property is indivisible, so that the value of the several parts cannot be ascertained, the amount of the net income from the academy or school may be capitalized as the basis of assessment.” Id. at 43 . That case was followed by Appeal Tax Court of Baltimore City v. The Grand Lodge of A.F. & A.M. of Maryland, 50 Md. 421 (1879), relative to the assessment on the Masonic Temple in Baltimore. It was conceded “that the lower stories of ‘The Masonic Temple’ [were] not used by the [corporation], but [were] rented for various purposes, thus yielding a profit to the corporation.” It had been contended that the whole was exempt. Our ²⁴⁸ predecessors held otherwise and Judge Robinson said for the Court, “It is a case for the application of the principle of capitalization, heretofore recognized by this court.” (Emphasis in the original.) The Court cited County Comm’rs v. Sisters of St. Joseph, supra, in its opinion, although not on the point of capitalization.

The matter again came before the Court in Mayor and City Council of Baltimore v. Grand Lodge of A.F. & A.M., 60 Md. 280 (1883), with a similar contention. Judge Alvey in the course of that opinion said, “It is upon the capitalization of such rentals that the assessment in question has been made, and not upon the whole building itself . . . .” The Court held that “the slight change of phraseology employed in the subsequent statutes to extend the exemption to the ground appurtenant to the building” did not “clearly justify the conclusion that the Legislature intended to change the principle settled in the case of The County Commissioners of Frederick Co. v. The Sisters of Charity of St. Joseph, 48 Md. 34 , and which was applied in deciding the case in reference to this same property, in 50 Md. 421 .” In Meade Heights v. Tax Comm. of Md., 202 Md. 20 , 95 A. 2d 280