Garrett LLC v. Noble Cnty. Assessor

• Decision Date: 24 September 2018
• Docket Number: Cause No. 49T10-1712-TA-00022
• Citation: 112 N.E.3d 1168
• Parties: GARRETT LLC, Petitioner, v. NOBLE COUNTY ASSESSOR, Respondent.
• Court: Indiana Tax Court

112 N.E.3d 1168

GARRETT LLC, Petitioner,

v.NOBLE COUNTY ASSESSOR, Respondent.

Cause No. 49T10-1712-TA-00022

Tax Court of Indiana.

FILED September 24, 2018

ATTORNEYS FOR PETITIONER: PATRICK L. JESSUP, MICHAEL M. YODER, YODER & KRAUS P.C., Kendallville, IN

ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR., ATTORNEY GENERAL OF INDIANA, MATTHEW R. ELLIOTT, REBECCA MCCLAIN, WINSTON LIN, DEPUTY ATTORNEYS GENERAL, Indianapolis, IN

WENTWORTH, Judge

Garrett LLC challenges the final determination of the Indiana Board of Tax Review that established the assessed value of its real property for the 2016 tax year. Upon review, the Court affirms the Indiana Board's final determination.

FACTS AND PROCEDURAL HISTORY

Garrett is in the business of acquiring, remediating, and reselling contaminated properties. (Cert. Admin. R. at 162.) In June 2014, Garrett purchased for $1.00 the former Dalton Foundry, a property located in Kendallville, Indiana that was owned by the Dalton Corporation and had been vacant since 2009. (Cert. Admin. R. at 55, 59-60.)

After purchasing the property, Garrett hired contractors to do both a Phase I and Phase II evaluation of the property's environmental contamination, which disclosed that its soil and ground water contained chlorinated solvents and metal contamination. (See Cert. Admin. R. at 164-65, 182.) In addition, the evaluations revealed that the property was covered with foundry sand, requiring two feet of clay surface and a foot of topsoil in order to build on it. (Cert. Admin. R. at 183-84.)

Garrett entered a Voluntary Remediation Program with the State of Indiana that exchanged a covenant not to sue for the remediation of the property. (See Cert. Admin. R. at 185-86.) Garrett sold a ten-acre portion of the property, referred to as The Mound, at a discount to East Noble School Corporation for building a new middle school. (Cert. Admin. R. at 165-67, 177-78.) The sale proceeds helped Garrett fund both the demolition of the old Dalton factory and the environmental cleanup costs. (Cert. Admin. R. at 178.)

For the assessment date of March 1, 2015, the Noble County Assessor valued the property at $200,000: $72,600 for 25.03 acres of land and $127,400 for the improvements. (Cert. Admin. R. at 87-88, 154-55.) Garrett protested the assessment to the Noble County Property Tax Assessment Board of Appeals (PTABOA). After an informal meeting, the Assessor did not lower the $200,000 assessed value, but did agree to reallocate the property's assessed value by reducing the land value to $68,900 and increasing the value of the improvements to $131,100. (See Cert. Admin. R. at 56-58, 87.) The parties signed a Form 134 - Joint Report by Taxpayer / Assessor to the County Board of Appeals of a Preliminary Informal Meeting (Form 134) to that effect on March 16, 2015. (Cert. Admin. R. at 56-58.)

On May 20, 2015, Garrett transferred 4.75 acres of the property to Garrett Well, LLC. (Cert. Admin. R. at 67-68, 168.) Thereafter, Garrett demolished all the buildings on the portion of the property it retained. (See Cert. Admin. R. at 169-71, 177-78.)

For the assessment date of January 1, 2016, the Assessor valued the property at $131,700: $121,700 for 20.28 acres of land and $10,000 for improvements. (Cert. Admin. R. at 89-90.) Garrett protested the 2016 assessment to the PTABOA and the PTABOA reduced the total assessed value to $105,400: $95,400 for the land and $10,000 for the improvements. (See Cert. Admin. R. at 5 - 9, 89.) Still dissatisfied, Garrett pursued an appeal with the Indiana Board. (Cert. Admin. R. at 1 - 2.)

On August 3, 2017, the Indiana Board conducted a hearing on Garrett's appeal. During the hearing, Garrett claimed that its land had zero value, but indicated it would be willing to accept the previously agreed upon land value of $68,900 because the property had not been changed since then. (Cert. Admin. R. at 160-61, 193.) In support, Garrett presented: (1) evidence that it purchased the contaminated property for $1.00 from Dalton Corporation in 2014, (2) a list of properties it considered "comparable" with their property tax records, and (3) the Form 134 from its 2015 PTABOA appeal. (See Cert. Admin. R. at 55-66, 84, 181-89.)

On November 1, 2017, the Indiana Board issued its final determination, concluding that Garrett had provided undisputed probative evidence for reducing the 2016 assessment of improvements by demonstrating that no buildings remained on the property on the January 1, 2016, assessment date.¹ (Cert. Admin. R. at 111-12 ¶¶ 17(n), (o), (p), 18.) The Indiana Board further concluded, however, that Garrett's evidence was not probative of the property's 2016 market value-in-use. (Cert. Admin. R. at 111 ¶ 17(m).) Accordingly, the Indiana Board left the land valuation of $95,400 unchanged. (See Cert. Admin. R. at 112 ¶ 18.)

On December 13, 2017, Garrett initiated this original tax appeal. Additional facts will be supplied as necessary.

STANDARD OF REVIEW

The party seeking to overturn an Indiana Board final determination bears the burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Thus, to prevail Garrett must demonstrate to the Court that the Indiana Board's final determination is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to constitutional right, power, privilege or immunity; in excess of or short of statutory jurisdiction, authority, or limitations; without observance of the procedure required by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2018).

ANALYSIS

On appeal, Garrett claims the Indiana Board's final determination is an abuse of discretion, arbitrary and capricious, and unsupported by substantial evidence because it failed to find Garrett's evidence of 1) the property's 2014 sales price, 2) the comparable properties, and 3) the agreed land value for the 2015 assessment date probative of the subject property's 2016 market value-in-use. (See Pet'r Br. at 3, 6-10.)

1. 2014 Sales price

To support a reduction in its property's assessed value, Garrett had the burden to provide market-based evidence (e.g., sales data, appraisals, construction costs, etc.) showing that the assessment did not accurately reflect the property's market value-in-use. See 2011 REAL PROPERTY ASSESSMENT MANUAL ("Manual") (incorporated by reference at 50 IND. ADMIN. CODE 2.4-1-2 (2011) ) at 3. The Indiana Board determined, however, that the property's June 2014 sales price was not probative evidence of the property's 2016 market value-in-use because Garrett did not present evidence a) that the price was the result of a market value sale, b) that it was valueless because it was contaminated land, and c) how the June 2014 sales price related to the January 1, 2016 assessment date. (Cert. Admin. R. at 109-10 ¶¶ 17(d)-(h).)

a) Market Value Sale

During the period at issue, Indiana defined "market value" as

The most probable price, as of a specified date ... for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgably, and for self-interest, and assuming neither is under undue duress.

Manual at 5-6 (emphasis added). The Indiana Board stated that Garrett "failed to establish the property was exposed to the market for a reasonable time." (See Cert. Admin. R. at 110 ¶ 17(g), 163-64 (stating Garrett learned about the property through a personal meeting with the mayor and not from a sale listing).) The Indiana Board further stated that the 2014 sale appeared to be the result of undue duress because the property was vacant and up for tax sale.² (See Cert. Admin. R. at 110 ¶ 17(g) (stating that the Indiana Board assumed the Dalton Corporation abandoned the property).)

Even though the transaction was not a market value sale, the Indiana Board noted that it was possible that this transaction could still qualify as a reliable indicator of the property's 2016 market value-in-use. Garrett failed, however, to rebut "the preponderance of the evidence [ ] that the sale was not reliable "by providing some evidence the sale is reliable." (Cert. Admin. R. at 110 ¶ 17(h).) Accordingly, after weighing the evidence, the Indiana Board concluded that the 2014 sales price, by itself, was not probative of the property's 2016 market value-in-use. (See Cert. Admin. R. at 110 ¶ 17(h).)

The administrative record contains no evidence that the property was exposed to the market. (See generally Cert. Admin. R.; see also Pet'r Br. at 8-9 n.1.) Garrett argues, nonetheless, that in this case "[s]tandard exposure to the market would have been a useless act" because the property's contamination and need for environmental remediation made the property "effectively unmarketable." (See Pet'r Br. at 5, 8 (reasoning that "common sense explains [the property] is not marketable").) In addition, Garrett claims that the Dalton Corporation, a publicly held corporation, did not sell the property under undue duress, but fulfilled its fiduciary duty to its shareholders by selling the property, ostensibly a net liability, for a $1.00 net gain. (See Pet'r Br. at 8 (postulating that because "the property was a net liability does not [ ] mean that the seller was under undue duress[, i]t merely means that the property had no value in its current condition").) Garrett's arguments are unpersuasive, however, because they are conclusory statements masking the absence of evidence in the record that the 2014 sales price was reliable and thus probative of the 2016 market value-in-use.

b) Value of Contaminated Property

Next, Garrett claimed that the June 2014 sales price reflected the property's market-value-in-use on the 2016 assessment date because contaminated property is valueless. (See Pet'r Br. at 8-9.) Indeed, the Indiana Board acknowledged that contamination can have an...