13 Haw. 699 | Haw. | 1901
OPINION OF THE COURT BY
Appeal by the Tax Assessor from the valuation of a leasehold interest. The lease covers 3|- acres of land at Palama on
This appeal is taken in order- to determine the method of ascertaining the value of a leasehold interest. The assessor contends that the values of the lessor’s and the lessee’s interests together make up the total value of the land, and that the way to ascertain the value of the lesseeis interest is to deduct the value of the lessor’s interest from the total value of the land; that the value of the land in question, at $4,400 an acre, is $16,400, that the value of the lessor’s interest, by the eight year rental rule, is $4,400, and that therefore the value- of the lessee’s interest is $12,000, besides the value of the improvements, $7,000, or a total of $19,000, whereas the assessment was only $17,500, or $1,500 too low, as contended' by the assessor.
No doubt .the values of the lessor’s and the lessee’s interests together make up the total value of the land, but this is not always the same as the value that the land would have if it were not subject to- the lease. Eor instance, if the reserved rent were less than the rental value and the unexpired term of the lease were too- short to justify the lessee’s making such improvements as ought to be made in order to obtain the greatest profit, the combined interests would together be of less value than the land would be if it were unincumbered by the lease, while if the unexpired term were for a long period at a higher than the market rental and the lessee were a responsible person, the combined values would be greater than the value of the land would be if there were no lease. In the present case we may assume that these combined v-alues approximately equal’ that of the land alone without the lease. But it is not satis-
This lease was made only a few months before the date of the assessment. Apparently it was made as a matter of business and between parties who were familiar with land values. Presumably they bargained for a fair rental. There is no evidence that they made the rental too low or that the land has since increased in value. Hnder such circumstances to value the lessee’s interest at $12,000 and the lessor’s interest at only $4,400, would be absurd. One or the other or both estimates would obviously be incorrect. If those figures were correct tide lessor made a ridiculous blunder and for a nominal consideration exchanged an interest worth $16,400 for an interest worth only $4,400 while the lessee acquired an interest that had an immediate cash value of $12,000. The only direct evidence tending to
The valuation of $8,000 by the Tax Appeal Court is affirmed.