11 Haw. 235 | Haw. | 1897
OPINION OF THE COURT BY
These are appeals under the general tax law of 1896, (Act 51), the scope and effect of which were set forth at some length in Inter-Island Steam Nav. Co. v. Shaw, 10 Haw. 624. The distinguishing feature of the Act, so far as it relates to the present cases, is that it requires several kinds or parcels of property when combined as the basis of an enterprise for profit to be assessed as a whole, whereas previously the several parts of such property had been assessed separately. In 1896, the year the law went into effect, the sugar planters for the most part returned their property as under the old law, and the several assessors raised the valuations to the amounts which they deemed
The first question that naturally arises relates to the status of a tax appeal case in this court. In our opinion the decision of a tax appeal court is to be regarded in this court, not in the light of a verdict of a jury or of the court in a jury waived law case, but rather in the light of a decision by a Circuit Judge at Chambers. In other words, this court while giving a certain weight to a decision of a tax appeal court, is authorized to form its own estimate of the proper assessment as shown by the evidence. A tax appeal occupies about the same position as an equity appeal in this court. This is substantially the view taken in the Inter-Island case above cited. See pp. 625, 639. See, upon an equity appeal, Cha Fook v. Lau Piu, Ib. 308. Of course, this court can in no case place a valuation outside of the limits fixed by the appeals.
As to whether the compromise valuations of last year should
We however fully agree with counsel that valuations should not be changed from year to year for light reasons. Under the old law when the various items of property composing a plantation were assessed separately, the total valuation of the plantation, which was merely the sum of the values of the parts regarded separately, naturally would change from year to year even if only to a very slight extent in some cases. But under the new law the value of the property as a whole should not vary with every little change in the sum of the values of the parts regarded separately. Eor instance the value of the plantation as a whole would not vary materially merely because there was on hand more sugar or fertilizer, or because the price of sugar was higher, or because there were more acres of matured cane, at one time than at another time. No doubt such changes as these may properly be considered, but not only is it desirable that valuations for the purposes of taxation should be of a some-W'hat lasting character, but in valuing the property of an enterprise as a whole, intending purchasers consider chiefly the earning power of the property in the long run as shown by its past history and future prospects and possibilities.
The main consideration is the future; the past being of im
A distinction should be made 'between properties yielding steady profits for a number of years and those the profits from which are variable.
Dividends should not be confounded with net profits. In most of the case's now before us we have the net profits for only one or two years, and only the dividends for other years. In some cases planters have returned as running expenses what is really capital expenditure, as, for example, sums expended in purchasing lands or otherwise increasing the pérmanent property
An important question in considering the past of a plantation is whether it has been a growing or a declining plantation, as, for example, through changes in its water supply or the extent of its area of cultivation or in other respects, — this, of course, in so far as such changes tend to indicate what the future will be. In some districts for instance the rainfall, perhaps the only or principal source of the water supply, has been gradually diminishing, while in other cases, the supply, whether from rain, streams or wells, seems assured indefinitely. In some cases, a plantation may have apparently just taken a fresh start, or entered upon a new lease of life, as it were, through the acquisition of additional lands or water supply or a change in its variety of cane or a more extensive use of fertilizers, or for some other reason. In such a case the net profits of the past would not be
Of course the amount and character of the actual tangible property has an important bearing on the value of a plantation as a whole. The extent of its land, its location and topography, the character of .the soil, transportation and shipping facilities, the character and extent of the water supply, and numerous other matters may and should be considered and yet after all the resultant or effect of these is shown largely by the net profits. Each of these elements is considered to some extent in considering the net profits, for each as a rule helps to increase or diminish these. Still this is not always the case. A plantation may, for example, own vast tracts of forest land in fee simple of which it makes no use at present and which does not affect the profits of the plantation and yet such land may contribute materially to the value of its property as a whole, as, for example, if it should be suitable for the cultivation of coffee or other products although not at present devoted to those purposes.
In connection with this matter of the actual specific property of a plantation may be noticed an error under which at least one company labored. This company, or at least its principal witness, failed to distinguish between the value of its leasehold interest and the value of its lessor’s interest and was under the impression that if it paid the lessor’s taxes under a covenant in its lease to do so, the value of the lessor’s interest should be deducted from the total value of the plantation in determining what taxes of its own the company should pay. A payment of taxes under a covenant in a lease is clearly in the nature of a payment of rent to the lessor'and is not a payment of taxes so far as the lessee is concerned. It is true, of course, that the lessor’s interest should
Having considered to some extent the past and present as; throwing light upon the future, let us now turn to what lies more-particularly in the future. Eacts or events that have transpired since the date of assessment and prior to the date of the hearing of the tax appeal are, of course, not to be considered. The cash, value of property at a given time is determined hy what people-then believe it to be worth, not by what it may turn out after- • wards to have been worth. Consequently future prospects but.: not subsequent events may be considered.
A very important point of difference between plantations is found in the character of their landed estates. A plantation which owns its land in fee simple is worth more than one which has only a leasehold interest. Some leases are long, others short. Generally only a portion of the land is held under lease, the proportion varying greatly. Often there are many leases expiring at different times. The probability of being able to renew the leases at fair rates or to purchase the land varies greatly. In-some cases the lands can probably be made use of as profitably for other purposes as for cane cultivation; in other cases not. In-some cases they are so situated that there may be competition forth em between different cane planters; in other cases there would probably be no such competition. In some cases the plantation could continue well without the leased land, in other cases the land from its location or extent or for other reasons would be-almost indispensable. Thus there are many circumstances to be-considered. Somewhat analogous to a leasehold interest held by a plantation which has its own mill is a contract under which a planter who does not own a mill, has his cane ground by a plantation which has a mill. In this connection we may notice some points of comparison made especially in the Kauai cases. It was shown in those cases that the planters were paying a much larger tax per ton of sugar produced than was paid by many other plantations. Such a comparison clearly is entitled to little if any weight. It leaves out of account not only the varying cost:
There are two principal matters of uncertainty that affect the plantations as a whole — the “Treaty” and labor. The uncertainty in regard to the supply of labor depends largely upon whether “annexation” takes place or not. Without annexation, there would be comparatively little uncertainty in regard to labor, — treaty or no treaty. With annexation there would be no uncertainty in regard to the benefits hitherto enjoyed under the Treaty, but there would be at least for a time great uncertainty in regard to labor. An attempt was made in the present cases to show that on the first of January of this year the Treaty was in great danger. It appears that news had already been received here of an attack upon the Treaty before Congressional com
The last point to which we shall refer is that relating to the prices of sugar stocks. Just as the effect of many factors that go to determine the value of the property is shown largely by the net profits, so the effect of all the factors is shown largely by the actual sales of stock, for this shows what persons who actually invest consider the property to be worth. And yet here also distinctions must be made. Small blocks would generally sell at higher prices than large blocks. A large number of sales would be a surer test than a small number. It makes a difference also whether the purchasers are persons competent to judge or not. Allowances must also be made for high prices paid for special reasons, such as to obtain control, or because of sentiment, etc. The value of a plantation may even be greater than the
In view of the foregoing considerations and others which it is not necessary to mention, we shall now state the principal features and our conclusion in each case. In these statements many matters of detail, although considered by us, must necessarily be omitted. Valuations cannot be accurately estimated. It is shown in these very cases that the most experienced men in the sugar business differ widely in their estimates of the value of the same plantation. In some cases we have not all the evidence that we should like. We can only exercise our best judgment upon the evidence before us in each case. We shall consider the Kauai cases first, then the Hawaii cases beginning with the Waiakea Mill Company and proceeding in geographical order around the island and lastly the Oahu cases.
Lihue Plantation Company. District of Lihue, Island of Kauai.
Taxpayer’s valuation.................$1,000,000
Assessor’s valuation.................. 1,409,000
Tax Appeal Court’s valuation.......... 1,210,615
Appeal by Assessor.
Land, 18,579 acres fee simple; 17,000 leasehold. Tonnage of sugar increased from 5,548 in 1892 to 8,803 in 1896.
Area of cultivated land not given. The yield is large per acre. 1-8 to 1-10 of cane land is leasehold.
Land mainly irrigated. Supply of water abundant.
Detailed value of property as returned, including Hanamaulu Mill, $923,915.50.
Dividends in 1892 $42,000; 1893-1896 average annual dividends $169,750.
Gross receipts for 1896..............$588,231.71
Actual running expenses, 1896........ 354,683.83
Net profits to 1st January, 1897. . $233,547.88
Capital stock $700,000, par value $100 a share. Stock sold in 1896 at $275 and $300. It is claimed by the taxpayer that $300 per share was paid in some cases for sentimental reasons and to secure control of the stock. An appraisement made in 1896 by W. F. Allen, P. C. Jones and B. F. Dillingham to fix a legacy duty, valued a block of 500 shares at a little over $285 a share. At this rate the whole plantation would be worth $2,000,000.
We place the valuation of the property in question at $1,300,000.
Grove Farm (G. N. Wilcox). District of Lihue, Island of Kauai.
Taxpayer’s valuation...................$130,000
Assessor’s valuation.................... 168,450
Tax Appeal Court’s valuation............ 168,450
Appeal by Taxpayer.
Land, 9,269 acres fee simple; about 1,600 in cultivation. Tonnage of sugar increased from 1,903 in 1895 to 2,627 in 1896. Land irrigated. Good supply of water.
No detailed valuation given. Returned in 1896 by taxpayer as worth $171,505.68.
Gross receipts for 1896..............$117,318.63
Actual running expenses, 1896........ 67,082.70
Net profits to 1st Januarv, 1897. .$ 50,235.93
Has contract with Lihue Plantation Co. to manufacture his sugar giving f, retaining f of product; contract has 12 years unexpired. Average net income for five years, 1892-1896, $20,115. Average yield per acre 6 tons.
We see no reason for lowering the valuation of the Tax Appeal Court and place the same at $168,450.
Taxpayer’s valuation ..................$640,000
Assessor’s valuation.................... 710,000
Tax Appeal Court’s valuation............ 675,000
Appeal by both parties.
Land of “Waiakea” leasehold 95,000 acres, 21 years unexpired. 5,000 acres available cane land; about 3,500 acres in use. Tonnage of sugar increased from 2,541 in 1887 to 6,410 in 1896. Has abundance of rain; has superior transportation and shipping-facilities.
Detailed value of property as returned, $345,245.00; annual average dividends, 1887-1896, $112,200.00.
Gross receipts, 1896.................$408,189.88
Actual running expenses, 1896.-....... 235,261.64
Net profits to 1st January, 1897. .$172,928.24
Capital stock $300,000. No stock quotations.
We consider that the assessor’s valuation is not too high and place the value at $710,000.
Hilo Sugar Company. District of Hilo, Island of Hawaii.
Taxpayer’s valuation ..................$700,000
Assessor’s valuation.................... 750,000
Tax Appeal Court’s valuation............ 725,000
Appeal by both parties.
Land, 4,295 'acres fee simple, of which 2,400 is cane land;leasehold 5,117 acres, of which 1,600 is cane land. Tonnage not in evidence. Eor 1896, 7,216 tons. Has abundance of rain. Has superior transportation and shipping facilities.
Detailed value of property as returned, $446,882; annual average dividends, 1887-1896, $165,500.
Gross receipts, 1896..................$463,122.84
Actual running expenses, 1896........ 265;259.10
Net profits to 1st January, 1897. .$197,863.74
We consider .that the Assessor’s valuation is not too high and nplace the value at $750,000.
'Onomea Sugar Company. District of Hilo, Island of Hawaii.
Taxpayer’s valuation ..................$825,000
Assessor’s valuation.................... 936,619
Tax Appeal Court’s valuation............ 875,000
Appeal by both parties.
Land, fee simple 5,399 acres; leasehold, 12,382 acres. Cane land 3,956 acres fee simple, 1,443 acres leasehold. Leaseholds of small pieces expire in 9 to 11 years. Tonnage not in evidence. Tor 1896, 10,013 tons of sugar; crop has doubled since 1888. Abundance of rain.
Detailed value of property as returned $652,473.00; dividends (somewhat variable) annual average, 1889-1896, $81,534.29.
Cross Receipts, 1896.................$644,003.59
Actual running expenses, 4-896........ 519,347.39
Net profits to 1st January, 1897. .$124,656.20
Capital stock $600,000. No stock quotations. An expensive ■plantation to run. Profits in addition to dividends have been •expended in enlarging plantation and in increasing general ■efficiency. Have acquired fee simple of Paukaa Plantation, 'T^ll acres in fee.
We consider that the Tax Appeal Court’s valuation is not too High and place it at $875,000.
Pepeekeo Sugar Company. District of Hilo, Island of Llawaii.
Taxpayer’s valuation ..................$700,000
Assessor’s valuation.................... 750,000
Tax Appeal Court’s valuation............ 700,000
Appeal by Assessor.
Xancl, 12,061 acres fee simple. Leasehold about 450 acres,
Dividends somewhat variable. Annual average, 1890-1896, $82,500; rainfall sufficient.
Detailed value of property as returned, $455,056.
Gross receipts, 1896..................$402,521.58
Actual running expenses, 1896......... 214,082.29
Net profits to 1st January, 1897. .$188,439.29
Capital stock $750,000. Plantation sold in 1889 for $600,000. Stock sold in 1896 for $137.50, par value being $100. Comparatively inexpensive plantation to run, the land being smooth.
We see no reason to raise the valuation made by the Tax Appeal Court and place it at $700,000.
Hakalau Plantation Company. District of Hilo, Island of Hawaii.
Taxpayer’s valuation ..................$625,000
Assessor’s valuation ................... 700,000
Tax Appeal Court’s valuation............ 700,000
Appeal by Taxpayer.
Land, 12,749 acres fee simple, of which 680 acres is cane land; about 9,850 acres leasehold, of which 3,630 acres is cane land. Leaseholds expire in from 5 to 15 years. Tonnage not in evidence. For 1896, 7,675 tons. Annual average dividends, 1890-1895, $101,666. Hainfall sufficient.
Detailed value of property as returned, $246,041.
Gross receipts, 1896.................$463,486.27
Actual running expenses, 1896........ 311,793.22
Net profits to 1st January, 1897. .$151,693.05
Foreign corporation. Capital stock $1,000,000.
We place the valuation of the property in question at $650,000.
Taxpayer’s valuation ..................$560,000
Assessor’s valuation.................... 654,000
Tax Appeal Court’s valuation............ 600,000
Appeal by both parties.
Land, 3,553 acres fee simple, of which 2,548 is cane land. Leasehold 1,515 acres, of which 1,414 is cane land, from 6 to 9 years unexpired. Tonnage not in evidence. Eor 1896, 7,330 tons.
Annual average dividends, 1886-1896, $75,980. Rainfall not so great as in Hilo District. Detailed value of property as returned $429,423.00.
Gross receipts, 1896.................$347,617.47
Actual running expenses, 1896........ 190,487.27
Net profits to 1st January, 1897. .$157,130.20
Incorporated in 1896. Capital stock $500,000.
We place the valuation of the property in question at $600,-000, the amount fixed by the Tax Appeal Court.
Paauhau Plantation Company. District of Hamakua, Island of Hawaii.
Taxpayer’s valuation ..................$632,172
Assessor’s valuation.................... 800,000
Tax Appeal Court’s valuation............ 700,000
Appeal by both parties.
Land, 834 acres fee simple, cane land. 3,166 acres leasehold, mostly cane land; leases expire from 6 to 13 years.
Dividends prior to 1892 not in evidence. Erom 1892 to 1894 no dividends paid, spent in improvements. Eor 1895, $140,000, 1896, $360,000.
Rainfall precarious, varies from 36 to 96 inches per annum, subject to occasional droughts. No water for irrigation.
Detailed value of property as returned $196,153.09.
Gross receipts, 1896.................$638,575.56
Actual running expenses, 1896........ 275,327.26
Net profits to 1st January, 1897. .$363,218.30
Foreign corporation. Capital stock $1,000,000. Comparatively inexpensive plantation to run.
We do not find sufficient grounds for changing the valuation made by the Tax Appeal Court and place it at $700,000.
Union Mill Company. District of North Kohala, Island of Hawaii.
Taxpayer’s valuation................$119,771.29
Assessor’s valuation................. 175,000.00
Tax Appeal Court’s valuation.......... 160,000.00
Appeal hy both parties.
Land, 1,527 acres fee simple, of which 985 is cane land; leasehold 515 acres, of which 386 is cane land. Most of the leases expire within five years.
Detailed value of property as returned $119,771.29; annual average dividends, 1891-1896, $18,800. Plantation is in a dry district; rainfall lessening. Tonnage not in evidence. Average yield per acre 2.11 tons.
Gross receipts, 1896.................$109,770.82
Actual running expenses, 1896......... 70,347.26
Net profits to 1st January, 1897. .$ 39,423.56
Capital stock $160,000. Grinds cane for others.
We reduce the valuation of the Tax Appeal Court to that of the taxpayer and place it at $119,771.29.
P. P. Hind (Hawi Mill). District of North Kohala, Island of Hawaii.
Assessor’s valuation ................... 325,000
Tax Appeal Court’s valuation............ 300,000
Appeal by both parties.
Land, 2,361 acres fee simple, of which 920 is cane land; 640 acres leasehold, of which 537 is cane land. Leases expire from 5 to 15 years.
Detailed value of property as returned $210,444. Annual profits previous to 1894 from $40,000 to $45,000; for 1895, $35,000; for 1896, $88,941.
Tonnage has varied from 1,250 to 2,881, 1891-1896. Average yield per acre 2.55 tons. Grinds cane for others. Plantation is in a dry district. Rainfall scarce and lessening. Has store, landing and small steamer.
Gross receipts, 1896....................$168,507
Actual running expenses................ 79,566
Net profits to 1st January, 1897... .$ 88,941
We place the valuation of the property in question at $287,500.
Hutchinson Sugar Plantation Company. District of Kau, Island of Hawaii.
Taxpayer’s valuation ..................$625,000
Assessor’s valuation.................... 750,000
Tax Appeal Court’s valuation............ 625,000
Appeal by Assessor.
Land, 19,500 acres fee simple, of which about 3,000 are in cane; leasehold about 38,000 acres, of which about 500 acres are in cane. Plantation is in a dry district. Rainfall variable, averages about 50 inches per annum.
Detailed value of property as returned $559,941. Has mercantile business and about 2,000 head of cattle. Runs three mills. Tonnage varied from 2,606 in 1890 to 8,931 in 1896.
Gross receipts, 1896....................$486,156
Actual running expenses, 1896.......... 300,610
Net profits to 1st January, 1896. .. .$185,546
Foreign corporation. Capital stock $2,500,000. 50,000 shares, par value $50. Stock sales variable in San Francisco. Sales 1896 from $20 to $28.50 per share.
We see no sufficient reason for increasing the valuation of the Tax Appeal Court and place it at $625,000.
Hawaiian Agricultural Company. District of Kau, Island of Hawaii.
(Judd, O. J., being a stockholder, took no part in this decision.)
Taxpayer’s valuation ..................$538,900
Assessor’s valuation.................... 649,250
Tax Appeal Court’s valuation............ 538,900
Appeal by Assessor.
Land, 14,800 acres fee simple, of which 2,884 acres are in cane. Leasehold about 211,000 acres, of which much is valueless and about 1,164 in cane.
Plantation is in a dry district. Hainfall variable.
Detailed value of property as returned $501,763.25. Has cattle ranch with about 6,500 head of cattle. Tonnage not in evidence. For 1896, 6,950 tons. Grinds cane for others. Average annual dividends, 1881-1896, $61,325.
Gross receipts, 1896.................$469,621.26
Actual running expenses, 1896........ 275,720.87
Net profits to January 1,1897.... $193,900.39
Capital stock $500,000. Stock sold at $137.50 in 1896.
We see no sufficient reason for increasing the valuation of the Tax Appeal Court and place it at $538,900.
Taxpayer’s valuation ..................$196,000
Assessor’s valuation ................... 265,465
Tax Appeal Court’s valuation............ 226,800
Appeal by Taxpayer.
Land, mainly leasehold, the Ahupuaa of “Waimanalo,” and other small parcels in fee simple and leasehold. 1,670 acres in growing cane. Relies partly on rainfall and partly on irrigation. Water supply increased in past ten years through tunnel from adjoining land and by pumping.
Detailed value of property as returned $165,584.82. Dividends 1890, $13,500; in 1891, $81,000. No dividends since; ran in debt. Tonnage not fully in evidence, 3,378 tons in 1895, 2,300 in 1896. Machinery old.
Gross receipts, 1896.................$182,084.50
Actual running expenses, 1896........ 138,760.00
Net profits to 1st January, 1897. .$ 43,324.50
Debt 1st January, 1897, $53,155.17. Debt reduced in 1896 by $44,299.51. Capital stock $252,000, par value $100. Some stock sold in 1895 at $70. A large block taken in 1896 under exceptional circumstances at par.
We see no reason to vary the valuation from the amount upon which the plantation paid taxes in 1896 and place the value at $196,000.
Ewa Plantation Company. District of Ewa, Island of Oahu.
Taxpayer’s valuation.................$ 850,000
Assessor’s valuation.................. 1,210,775
Tax Appeal Court’s valuation.......... 1,210,775
Appeal by Taxpayer.
Land, 4,211 acres leasehold, 43 years to run. Has 3,442 acres in growing cane. Depends upon irrigation by pumping from artesian wells. Yield per acre exceptionally large.
Detailed value of property as returned $564,652.35. Tonnage not fully in evidence; for 1896, 12,113. Dividends paid in 1896, 30% on capital, $225,000. Average net profits for 5 years, 1892-1896, $148,187.62; for four years, 1893-1896, $207,650.73. Superior shipping facilities.
Gross receipts, 1896.................$756,347.38
Actual running expenses, 1896........ 477,114.85
Net profits to 1st January, 1897. .$279,232.53
Capital stock $750,000; shares $100 par value. In latter part of 1896 small sales of stock at $190.
We find no reason for lowering the valuation of this property made by the Tax Appeal Court and place it at $1,210,775.