APPEAL from the Circuit Court of Cook County; the Hon. ROBERT
J. DEMPSEY, Judge, presiding.
MR. PRESIDING JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:
These consolidated appeals arise from judgments of the circuit court of Cook County denying the relief sought by appellants, Bulk Terminals Company (Bulk) and North Pier Terminals Company (North Pier), in specific objections to the Cook County collector's application for judgment and for the determination of the correct amount of 1973 real estate taxes paid under protest. The principal issues on appeal are: (1) whether the assessor's imposition in 1973 of a back tax on the leasehold estates of Bulk and North Pier for the tax years 1971 and 1972 is valid; and (2) whether the 1973 assessed value of Bulk's leasehold interest is excessive and constructively fraudulent. *fn1 The pertinent facts follow.
Bulk and North Pier are lessees of real property from the Chicago Regional Port District. Section 19.19 of the Revenue Act of 1939 exempts from taxation all property owned by that or any other port district created by the legislature, "* * * provided that a tax may be levied upon a lessee of such a District by reason of the value of a leasehold estate separate and apart from the fee, or upon such improvements as are constructed and owned by others than the Port District." (Ill. Rev. Stat. 1973, ch. 120, par. 500.19.) Pursuant to section 19.19, in 1970, 1971, and 1972, all the real property owned by the Port District was listed on the tax records of Cook County as "Vol. 293, Permanent Index Number 25-26-600-001-000 (Ex. Leasehold estates and Improvements)" and the fee or reversionary interest of this parcel was marked exempt.
Prior to tax years 1971 and 1972, the assessor made assessments on Bulk and North Pier's leasehold interests pursuant to section 26 of the Revenue Act of 1939, which provides:
"When real estate which is exempt from taxation is leased to another whose property is not exempt, and the leasing of which does not make the real estate taxable, the leasehold estate and the appurtenances shall be listed as the property of the lessee thereof, or his assignee, as real estate." Ill. Rev. Stat. 1967, ch. 120, par. 507.
For tax years 1971 and 1972, however, the assessor relied in making his assessments on section 26 of the Revenue Act as amended effective September 16, 1969. Amended section 26 provided:
"When any real property which for any reason is exempt from taxation or is for any other reason not taxed under the provisions of this Act is leased, loaned, or otherwise made available to and used by a private individual, association, or corporation for a use which is not otherwise exempt under the provisions of Section 19, that use is subject to taxation to be paid by the lessee or occupant thereof in the same manner and to the same extent as though the lessee or occupant were the owner of the property. The taxes shall be assessed to the lessees or occupants of that property and collected in the same manner as herein provided, excepting, however, that such taxes do not become a lien against the exempt real property. When due, the taxes under this Section constitute an actionable debt and upon collection the proceeds shall be distributed as provided in Section 280." (Ill. Rev. Stat. 1969, ch. 120, par. 507.)
At trial, Theodore Swain, chief deputy assessor, testified that in 1971 and 1972, the reversionary interests in property leased by exempt lessors were assigned permanent index numbers ending in -8001 in Volume 293 and were marked exempt, while the leasehold interests were assigned index numbers ending in -8002 or higher in a separate tax volume created to implement the use tax, Volume 608, and were accompanied by assessed values. However, the parties later entered into a stipulation of facts stating that Swain's testimony (of which this is only a part) was given without knowledge of all the facts and that any inconsistency between the testimony and the stipulation was to be resolved in favor of the stipulation. The stipulation does not reflect so literal a division into reversionary and leasehold interests. Nevertheless, the stipulation does reveal that the leased parcels were each assigned an index number in Volume 293, ending in -8001, which number was marked "Exempt," as well as an index number in Volume 608, ending in -8002, which number was marked "(Use Tax On)" and next to which there appear assessed values.
On October 2, 1972, the Illinois Supreme Court issued its opinion in Dee-El Garage, Inc. v. Korzen (1972), 53 Ill.2d 1, 289 N.E.2d 431, holding amended section 26 unconstitutional. Although the court expressly held that the provision for taxing leasehold interests in exempt property as contained in section 26 prior to the 1969 amendment at all times remained in effect, the court declined to consider the question of the authority of the taxing officials to impose a back tax on the leasehold interests. The assessor was enjoined from assessing, extending, or collecting taxes based on amended section 26, and the funds collected under the invalid section were eventually refunded.
Following the decision in Dee-El Garage, the assessor sent notice to various lessees of real property from exempt lessors, informing them that they would be "subjected to a back tax for use tax years." In the case at bar, notice was sent to Thomas Flanagan, one of the attorneys for Bulk and North Pier, on April 10, 1974. The notice described the parcels in question, the years for the proposed back taxes, and a date and time at which a hearing on the matter would be conducted at the assessor's office. In response to the notice, attorney Flanagan and his partner met with Chief Deputy Assessor Swain and an attorney for the assessor two or three times in order to discuss the proposed back tax. Much of the discussion revolved around the applicability of the valuation method established in People ex rel. Korzen v. American Airlines, Inc. (1967), 39 Ill.2d 11, 233 N.E.2d 568, but the parties were unable to reach any agreement.
On August 28, 1973, as required by section 97 of the Revenue Act of 1939 (Ill. Rev. Stat. 1973, ch. 120, par. 578), the assessor certified the completion of the assessments and sent Volume 293 of the assessment books to the board of appeals. The back tax assessments were not then included in the assessment books. On or about June 8, 1974, the assessor and the board of appeals executed joint affidavits certifying the assessment books in accord with section 125 of the Act. (Ill. Rev. Stat. 1973, ch. 120, par. 606.) Sometime after June 18, 1974, the assessor inserted the instant back tax assessments for 1971 and 1972 in the 1973 assessment books. Back tax bills were issued to Bulk and North Pier on or about November 1, 1974. On December 5, 1974, the assessor certified that the additional sheets containing the back tax assessments were inserted at the direction of the county clerk subsequent to the date of the original certification of the books by the assessor and the board of appeals.
Bulk and North Pier paid the back tax bills and filed the instant specific objections on December 6, 1974. After hearing evidence the trial court made findings and entered orders granting North Pier valuation relief but otherwise denying all relief sought. From these orders, Bulk and North Pier have brought the instant appeal.
The first issue is whether the assessor was authorized to make the back tax assessments involved in this case. Section 220 of the Revenue Act of 1939 (Ill. Rev. Stat. 1973, ch. 120, par. 701) provides in part:
"If any real or personal property is omitted in the assessment of any year or number of years, so that the taxes thereon, for which such property was liable, have not been paid, or if any such property, by reason of defective description or assessment thereon, fails to pay taxes for any year or years, in either case the same property, when discovered, shall be listed and assessed by the board of review or, in counties having a board of appeals, by the assessor either on his own initiative or when so directed by the board of appeals. For purposes of this Section, `defective description or assessment' includes a description or assessment ...