Moreno Boudreau v. Minister of National Revenue, [1984] CTC 2863, 84 DTC 1789

Kempo, TCJ:—

Part I — Issue

This appeal is in respect of the amount of tax payable by the appellant for the 1977 and 1978 taxation years. The only issue for determination by the Court is the fair market value of nine parcels of land located in and about Shediac in the province of New Brunswick as at Valuation Day, December 31, 1971.

The following is a succinct description of the properties involved in the appellant’s 1977 and 1978 sales transactions which are the subject matter of this appeal and the respective positions of each of the parties hereto:

As to the 1977 taxation year

		V-Day Value
Item	Description	Respondent Appellant
No 1	29.32 acres near Dorchester County
(the “Dump”)		$ 1,500.00 $10,000.00
No 2	8.88 acres with buildings at Chapman
(the “Sobey property”) Corner		37,700.00	57,000.00

No 3	33,000 sq ft of land with buildings on
(the “Shediac Tire	West Main Street,
property”)	Parish of Shediac	36,500.00	42,500.00
No 4	58.76 acres off Route #140, Parish of
(the “Dosco property”) Shediac		6,100.00	15,000.00
No 5	2.25 acres of beach front land on
(the “sand pit”)	Buctouche Bay	2,000.00	5,000.00
No 6	lots 9 and 10 in Block 8, Tipperary
(the “Tipperary St lots”)Street, Shediac		300.00	4,000.00
	TOTALS:	$84,100.00 $133,500.00
As to the 1978 taxation year
		V-Day Value
Item	Description	Respondent Appellant
No 7	lots 16, 19, 20, 21 and 22 in Block 2,
(the “Second Avenue	Second Avenue,
lots”)	Shediac	$ 500.00 $ 10,000.00
No 8	5.52 acres of land adjoining a railway
(the “Meadowbrook	line at Meadow
property”)	brook	3,300.00	5,500.00
No 9	12 acres of land off Gallagher Street,
(the “O’Blenis property”)Shediac		6,100.00	13,000.00
	TOTALS:	$ 9,900.00 $ 28,500.00

Testimony as to value was received from the appellant and his appraiser, Mr R E Poirier. Evidence for the respondent was given by an appraiser, Mr David G Stilwell.

Part II — Decision

The appeal is allowed as to both the 1977 and 1978 taxation years and the matter is to be referred back to the respondent for reconsideration and reassessment on the basis that the fair market value of the subject properties on Valuation Day, December 31, 1971 was as follows:

Part III — Reasons

III. 1 As to No 1: 29.32 Acres — The Dump

The evidence points to the fact that this parcel was, at Valuation Day, part of a larger parcel of farm land of a size of at least 100 acres. The evidence was unclear as to when negotiations began between the appellant and the officials of the Department of Highways, province of New Brunswick, relating to the sale of the first parcel (10 acres) therefrom for use as a dump site, however the documentary evidence (Exhibits R-1A and R-1B) reflects this first sale as having occurred in August of 1972. Neither of the appraisers were of the opinion that this property was in fact a dump site at Valuation Day.

In view of the foregoing, the land use of the 29.32-acre parcel in issue at December 31, 1971 would be that of vacant farm land as described by Mr Stilwell. Mr Poirier’s conclusion that the V-Day value of this property was in the order of $10,000 was not supported and is therefore of little value. On the other hand Mr Stilwell’s value of $1,500 was supported by presentation and analysis of five sales of farming land in the area with appropriate adjusting factors.

I would therefore adopt Mr Stilwell’s approach and his valuation of the subject parcel as being $1,500 as of Valuation Day.

111.2 As to No 2: 8.88 Acres — The Solby Property

This property was comprised of 8.88 acres of land with a building thereon of 5,100 square feet. The building was described as a warehouse type structure and in 1971 had been rented to to Atlantic Ski Doo for $600 per month which included the use of the building and the surrounding yard area of about 1-116 acres. The balance of the land, ie approximately 7/2 acres, was of farming use. Though not inside the town of Shediac on Valuation Day, the land and building was located at a strategic roadway entrance to the town. The highest and best use of the land was stated by both appraisers to be of a commercial/industrial nature and both relied essentially on one sale dated November 1972 for $20,500 of 6.48 acres of land approximately 5 miles east of the subject property and which had been purchased as an extension to an already existing golf course. To Mr Poirier this was an indicator that the V-Day land value of the subject land would be $3,000 per acre or $27,000. Similarly, but with a time adjustment, Mr Stilwell would employ a value of $2,933 per acre as being the upper limit that could be transposed therefrom to the subject land but, because of adjusting factors involving site, use and the reasons for purchase (ie for business expansion), he was of the opinion that the lesser figure of $2,700 or $24,000 should be employed.

Upon consideration of the evidence, and having regard to the prime location of the subject property, I am of the opinion that the fair market value of the subject land at Valuation Day would be $25,500.

With respect to the 5,100 square foot structure located thereon the opinion of value given by Mr Poirier could not be given too much weight as he stated that the best that he could come up with was $5 per square foot or $25,500 based on his “bare experience” and with an eye to the rental income then being generated.

On the other hand Mr Stilwell’s basic approach by the use of Broeckh’s costing manual was not seriously challenged. He extrapolated therefrom an indicated cost of $4.10 per square foot using a barn construction model rather than a warehouse model as he felt the former was a more accurate description of the construction. To the $20,900 figure then arrived at he applied a time-location factor of 0.86 taken from the manual for a value of $17,983 before depreciation. Because the structure was considered to be in average condition for its type and use and, having regard to his experience, he applied a depreciation factor of 30 per cent which resulted in his opinion of V-Day value as being $12,600 in a rounded figure.

Upon consideration of the evidence, and noting that the structure was of a mixed type of construction of barn/warehouse or warehouse/barn, I am of the opinion that Mr Stilwell’s value would be too conservative and that a fair figure to be attributed to the fair market value of the building as at Valuation Day would be $15,000.

III. 3 As to No 3: 33,000 sq ft of Land with Buildings — the Shediac Tire Property

The general description of this property was that it was commercial land comprising of two buildings. An analysis and opinion was provided by both appraisers as to the fair market value of the two buildings on the land. Having regard to the evidence and the submissions of Counsel I see no reason why the opinion of Mr Stilwell should not be adopted as it was the highest. Accordingly I would find that the fair market value of the buildings as at Valuation Day would be $29,600.

The difficulty herein related to the value of the land as neither appraiser could find any comparable sales. Notwithstanding that it was probably outside the legal boundaries of the town of Shediac on Valuation Day, its location and actual use was such that it would be almost immaterial in any event. Both appraisers used their experience as the foundation of their respective opinions: Mr Poirier’s experience led him to estimate a value of 50¢ per square foot and Mr Stilwell’s experience led him to estimate a value of 20¢ a square foot.

In coming to a decision I have noted that the evidence disclosed that the highest and best use of the land was as a commercial property, that two sides fronted on two major highways (one of which was the new highway to the northshore) and that its situs was a corner which was major to Shediac. Smaller residential lots inside the town had been sold for between 12¢ to 17¢ per square foot. With a per square foot value range of 20¢ to 50¢ for commercial and 12¢ to 17¢ for residential, and in order to resolve the matter notwithstanding the paucity of sales indices, it is my judgment that a fair figure as to the fair market value of the land as at Valuation Day would be 30¢ per square foot or $10,000 as an upwardly rounded amount.

III.4 As to No 4: 58.76 Acres — The Dosco Property

The land to be valued had been divided into two separate parcels by virtue of the appellant’s sale in 1968 of 10 to 11 acres for a four lane highway at a price of approximately $6,000. Drawing on this event and on two sales which had occurred at or near the city of Moncton at $500 per acre, Mr Poirier was of the opinion that the value of the subject property would be $250 per acre or $15,000 rounded out. However it must be noted that the Moncton sales would require many adjustments because of their situs qua Moncton, their distance from the subject property and the purposes of their purchase. The subject property was undeveloped vacant land which was its undisputed highest and best as at V-Day. Having regard to the evidence as a whole I am of the view that Mr Stilwell’s approach and conclusions should be adopted and accordingly the fair market value of this property as at Valuation Day would be $100 per acre or, as rounded out, $6,100.

111.5 As to No 5: 2.25 acres — The Sand Pit

This parcel of land had originally been acquired by the appellant for the commercial purposes of the taking and selling of sand therefrom. Apparently this practice had been continuing to some unspecified degree on V-Day notwithstanding that in 1968 it had been expressly forbidden by Order-in-Council. From that year forward sand could have been taken only on permit. The appellant stated that he had been aware sometime in 1971 or 1972 that the government had decided to stop the uncontrolled commercial sand taking from the beaches and therefore the property use reverted to that of cottage/vacation. No evidence was led wherein the appellant either had applied for or had been granted a sand-removal permit. By 1975 the entire south coast had been affected by the Order-in-Council. Mr Poirier valued the property at $5,000 on the assumption that commercial sand taking and selling activity was then a legally permitted use. Mr Stilwell valued it at $1,400 on the basis that sand removal, without a permit, would have been prohibited and therefore proceeded to value it on the sole basis of vacation type shore-lot property sales.

Taking into account that the subject land would have had some latent and potential commercial value as to sand sales following removal authorized by permit, it is my view that the fair market value of this property as at Valuation Day would be $2,000.

111.6 As to No 6: Two lots (9 and 10) — The Tipperary St lots

The explanation for the wide divergence of opinion as to value, supra, is explicable by reference to the comparable sales indices that each employed. Mr Poirier’s six sales were not in the immediate area whereas Mr Stilwell’s four sales were; the latter being sales made between July 11, 1979 and February 11, 1972 by the appellant himself. The closest comparable sale available in the evidence would be the appellant’s sale of lot 2 in block 8 in October 1971 for $600. Lot 7 had been sold by him in the summer of 1970 for $550. As prices for cottage lots would be higher if sold during the summer months some adjusting factor should be considered in this respect.

Having regard to the evidence I am of the opinion that the fair market value of the two subject lots as at Valuation Day would be $600 each or $1,200.

111.7 As to No 7: Five lots (16, 19, 20, 21 and 22) on Second Avenue, Shediac

The wide divergence of opinion which occurred in the valuation approach regarding the Tipperary lots, supra, continued with respect to these five lots. The evidence indicates that lots 19 to 22 inclusive were inferior to those on Tipperary St in that they were located on an ill-defined road access which normally had not been usable in the spring. Also they were low-lying and wet and therefore would have required fill and grading. On October 13, 1971 the appellant did sell the adjoining lots 23, 24 and 25 to an arm’s length purchaser for $150 or $50 per lot. He testified that these three lots were really wet and therefore would have required a great deal of fill.

The southeast corner of lot 5 meets with the northwest corner of the subject lot 19 and is located on a well defined roadway known as First Avenue. Lot 5 was sold by the appellant to a non-arm’s length purchaser on February 11, 1972 for $300 which he described as a time sale but otherwise was a fair deal. The topography of subject lot 16 was not described in evidence.

What is clear, however, is that the two nearby Tipperary lots were superior and were worth $600 each, supra', lot 5 in block 2 was also superior and sold for $300 and lots 23 and 25 inclusive in block 2 were inferior and sold for $50 per lot. Having regard to the evidence it is my opinion that the fair market value of the subject five lots as at Valuation Day would be $600.

111.8 As to No 8: 5.52 acres — The Meadowbrook Property

Mr Poirier’s valuation of $5,500 was admittedly based on his opinion as to the highest and best use of this property as being vacant land but with commercial potential because of its frontage to a main railway line and a secondary highway which accessed the TransCanada highway approximately one mile away. Mr Stilwell’s valuation of $3,300 was made on the basis that the highest and best use thereof was as vacant land held for speculation. The sales indices reported by both appraisers reflected the difficulty in producing acceptable comparables in either case.

I am of the view that it would be reasonable for the speculative holding to have included an element of commercial potential as well, and accordingly am of the opinion that the fair market value of the subject land as at Valuation Day would be $4,500.

111.9 As to No 9: 12 acres — The O’Blenis Property

This 12-acre parcel of raw land was situated off Gallagher Street in Shediac. Of the total six sales indices presented in evidence the one relied on by Mr Poirier is the only one that could be described as acceptably comparable. That transaction was for $8,500, occurred in the summer of 1971 and involved a vacant 8-acre parcel of land at Chapmans Corner some three miles from the subject property, was not beach property but was described as ripe for residential development. Mr Stilwell had not been aware of this transaction and therefore did not refer to it. The subject property was vacant land, was very close to the beach, was in the town of Shediac and was admittedly a holding property for residential development.

Therefore I am of the view that Mr Poirier’s approach and conclusions are to be adopted save and except that of his error in the number of acres involved which should be 12 and not 13. Accordingly the fair market value of the subject 12 acres as at Valuation Day would be $12,000.

IV Conclusion

Accordingly the appeal is allowed as to each of the taxation years 1977 and 1978 and the matter is to be referred back to the Minister for reconsideration and reassessment on the basis of value on Valuation Day as is stated aforesaid.

Appeals allowed.