Untitled Texas Attorney General Opinion ( 1940 )

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OBEY GENERAL
OFTEXAS
Honorable L. A. Woods
State Superintendent of Public Instruction
Austin, Texas
Dear Sir: Opinion No. O-2921
Re: Constitutionality of the method
of establfshing tax values used
by the Board.of Equalization of
the Cayuga Independent School
District.
You have requested the opinion of this department
as to the constitutionality of the procedure followedby
the Board of Equalization of the Cayuga Independent School
District in establishing tax values.
The procedure set out In the letter which you en-
close is as follows:
"1st - Established overall value for all
properties within District. (Such value might
be termed arbltrarg, since it was not based on
current potential recovery, but on a per acre
recovery established in year 1935, which has
been scaled down yearly by arbitrary percentage.
However, overall valuatton for January lst, 1940
unquestionably is below true and marketable value.
In other words, engineering survey and valuation
of remaining recovery of 011 and gas would give
a value in excess of valuatlon established by
Board of Equalization after all reasonable dis-
count factors.)
"2nd - Tabulated Gross revenue from all
sources for individual properties and total for
District.
"3rd - Established earning factor by divld-
ing total District earnLngs Into total overall
District valuation.
"4th - Base valuation for indFvidua1 prop-
erty computed by multiplying Individual property
earnings times factor above established.
.
Honorable L. A. Woods, page 2 Q-2921
"5th - For all individual properties above
base valuation used for assessed valuation for
gas value and oil value, where all oil wells
were flowing natural and producing 100 percent
pipe line oil.
“6th - For individual propertles having one
or more oil wells making water or employing any
form of artificial lift, compensating factors
were used, graduating in percentage reductions
for barrel earnage for the lndivldual wells in-
volved and their particular criticalness.
"While this may appear as a streamlined
method of valuation, it permits what we think,
when overall field va1ue.i~ establlshed below
true and market value, equitable allocation of
values to respective properties, with conslder-
atlon to Individual wells and productivity of
properties."
Section 1, of'Article VIII, of the Constltutlon of
Texas, reads ln part as follows:
"Taxation shall be equal and Uniform. ``A11
property in this State; whether owned by nat-
ural persons or corporations, other than munici-
pal, shall be taxed In proportion to its value,
which shall be ascertained as may be provided
by law. + + *"
Article VIII, Section 20, reads in part as follows:
"No property of any kind in this Stat6 shall
ever be assessed for ad valorem taxes at a great-
er value than Its fair cash market value nor
shall any Board of Equalization of any govern-
ment or polltlcal subdlvislon or taxing district
within this State fix the value of any property
for tax purposes at more than its fair cash mar-
ket value; + * *It
It Is a general rule that the decision of a Board of
Equalization upon a particular assessment is final In the
absence of a showing of fraud, illegality or the adoption of
a fundamental wrong method of assessment. This rule was
stated In the case of Menardville Independent School Dlstrlct
v. Moser;90 S.W. (2d) 5’78. The Court stated as follows:
Honorable L. A. Woods, page 3 O-2921
"'As a general rule, the decision of a board
of equalization upon a partlaular assessment, in
the absence ~of fraud or Illegalit Is conclusive.
Cooleg on Taxation (2d Ed.) p. 216: Such valua-
tion cannot be set asLde merely upon a showing that.
the same is, in fact, excessive. If the board fair-
ly and honestly endeavors to reach~a correct valu-
ation, a mistake upon its part under such clrcum-
stances is not subject to review by the courts.
Sunday Lake Iron ,Co;,v. Wakefield Tp., 247 U.S.
350, 38 S. Ct. 495, 62 L. Ed. 11 4; Druesdow v.
Baker (Tex.,Com. App.) 229 S-W: z93.' Rowland v.
City of Tyler (Tex. Corn.App.) 5 S. W. (2d) 756,~
760. Also, see,Gonzalez v. State (Tex. Civ. App.)
81 S.W. (2d) 180; Port Arthur Ind. School District,
et al. v. Baumer, et al. (Tex. Civ. App.) 64 S.W.
(2d) 412; Nederland Ind. School Dist. et al v.
Carter, et al. (Tex. Civ. App.) 73 S.W. (2d) 935.
Early v. City of Waco (Tex. Civ. App.) 3 S.W. (2df
131; Lubbock Hotel Co. et al v. Lubbock Ind.
School Dist. et al. (Tex. Civ. App.) 85 S.W. (2d)
776; Rachford v. City of Port Neches (Tex. Civ. App.)
46 S.W. (2d) 1057; Allen v. Emery Ind. School
Dist. (Tex. Civ. App.) 283 S.W. 674; City of.Comanche
v. Brightman (Tex. Civ. App.) 88 S.W. (26) 741."
The same rule of law was stated lnthe case of Neder-
land Independent School District v. Carter, 93 S.W. (2d) 487.
The Court stated as follows:
"We fully recognize the rule contended for by
the appellant that the decision of a board of
equalization upon a particular assessment, in the
absence
. ,*. of Iillegalityl
. fraud, or
-. something
. equlva-
Lent tnereto, 13 conclusive. It 1s unquestionably
the settled rule in this state that the courts have
no supervisory control over boards of equalization.
State v. Mallet Land & Cattle Co. (Tex. Sup.) 88
S.W. (2d) 471, and Menardville Independent School
Dist. v. Moser (Tex. Civ. App.) 90 S.W. (2d) 578,
and authorities cited. This court recognized and
applied such rule in the case of Port Arthur In-
dependent School District v. Baumer, 64 S.W. (2d)
412, cited by appellant. Were this not so, valu-
ations for purposes of taxation made by the
agency created by statute would be subject to
being overturned whenever the opinion of court or
jury might differ from the opinion of the boards
of equalization. Thus the functFons of such boards
even though honestly exercised, would be deprived
Honorable L. A. Woods, page 4 O-2921
of finality and the courts would become mere
boards of tax review in such matters. For
that reason courts are not primarily concerned
with.the matters oE ;at;ation placed by boards
of equalization.
It is true therefore that as a general principle
the Board of equalization of an Independ~entSchool District
IS to assess property for tax purposes at Its fair cash
market value. This would be subject to the qualification,
however, that where the property in a district is valued at
a percentage of its actual market value, the owner of a
particular piece of property would be entitled to have same
valued at such per cent of its actual market value. An
assessment cannot be set aside unless It is shown that the
Board acted Illegally or fraudulently or the equivalent
thereto or adopted a fundamentally wrong method of asaess-
ment which action resulted In a discrimination against a
particular taxpayer.
The fair cash market value of a particular piece
of property is a question of fact that must be determined
by the Board of Equalization itself. In Opinion No. 0-2800
this department was considering a certain set method of
valuation of the properties of the Comanche County Electric
Cooperative Association and our opinion had been requested
as to the constitutionality of such procedure. After stating
that the value of the property in question was a fact ques-
tion this department stated as follows:
'+ * * * The Legislature has vested in Boards
of Equalization, as constituted by statutes, the
sole discretion In the valuation and the equallza-
tion of the value of property subject to taxation.
Their action Is clothed with the presumption that
it has been rightly made on the basis of actual
value and courts will decline to disturb such assess-
ments unless shown to be arbitrary and grossly
excessive or based upon a fundamentally wrong prin-
ciple or method of determining value. 40 Tex. Jur.
155, Great Northern Ra~ilwayCompany v. Weeks, 297
U. 5. 195; 80 L. Ed. 532.
"Certainly if the courts are loath to dis-
turb the discretion of Boards of Equalization in
discharging their statutory duties of assessing
and valuing property for taxation, then, with
stronger reasons, this Department cannot proper-
ly, in advance of the exercise of such discre-
tlon by the Equalization Board of Eaatland County,
Honorable L. A. Woods. page 5 0 -2921
outline and prescrilbe,by the requested opinion,
any system, formula, rule or method for the con-
trol and guidance of said Board-ln the discharge
of its duties. Nor can said Bostidbe compelled
to submit to exadnation as to the operation of
their minds in arriving at the 'true and full value'
of the property before them."
We have considered the method of valuation which
you have submitted and we belleve that such a method may
properly be considered by the Board tifEquallzatlon in de-
termining the fact question of the value of the particular
piece of property In question. We believe, however, that
if one method is used to the exclusion of all others and
no other factors of value which might present themselves
in respect to any lndlvldual piece of property are taken
into consideration the same might possibly be taken as an
adoption of an arbitrary standard. The idea of adopting
one plan or set method of ascertaining values was discussed
in the~case of Port Arthur Independent School Dlstrlct v.
Baumer, 64 S.W. (2d) 412. The Court stated there as follows:
"It is true, as contended by appellees, that
our Supreme Court has held that the adoption by
a board of equallzatlon of a fundamentally wrong
principle or method of arriving at valuations,
the application of whlah substantially injures
the complainant, is ground for attacking its
judgment. Druesdow v. Baker (Tex. Corn.App.) 229
S.W. 493. Hence the use of any particular ele-
ment of value, such as rentals produced, as the
sole standard by which to fix~the value of property
yeyc~;y;;;fy ys"w& (;$";;g *v.,,"'i;gzY;g
zoning of a taxing district and the placing of
all property In a particular zone at the same
value per acre, without regard to the character of
the land and the nature of the improvements there-
Ward County Irrigation D'fstrict (Tex.
&. !$;7n2& s. w. 169. But in the case before
us the facts do not bring it wlthin the rule an-
nounced in those cases. Here the facts show that
no one particular element of value was conslder-
ed to the exclusion of all others, or that any
fixed scheme was followed, the application of which
worked injury to the complainants."
It IS the opinion of this department that the method
of valuation you describe may properly be taken lfitocon&Id-
eration by the Board of EqualizatFon of the Cayuga Indepen-
Honorable L. A. Woods, page 6 O-2921
dent School District in determining the fact questions of
value of the property In said district. Whether a velua-
tion arrived at by the use of the aforementioned method a-
lone would be a correct one Is something that we cannot
pass on as the same wou;d~be dependent upon the fact: o?'
the particular case.
Yours very truly
ATTORNEY GENERAL OF TEXAS
Ey s,fBillyGoldberg
Billy Goldberg
Assistant
BG:LM:wc
APPROVED MR 7; 1941
s/Gerald C. i\lann
ATTORNEY GENERAL OF TEXAS
Approved Opinion Committee By s/&Q? Chairman