391 S.W.3d 441 (Mo. 2013), SC 92486, Bateman v. Rinehart

Docket Nº:SC 92486.
Citation:391 S.W.3d 441
Opinion Judge:GEORGE W. DRAPER III, Judge.
Party Name:Robert and Donna BATEMAN, Appellants, v. Cathy RINEHART, Assessor, Respondent.
Attorney:Jonathan Sternberg of Jonathan Sternberg, Attorney, PC in Kansas City, for the Batemans. Patricia L. Hughes, Clay County counselor's office in Liberty, for the Assessor.
Judge Panel:RUSSELL, BRECKENRIDGE and FISCHER, JJ., concur. TEITELMAN, C.J., dissents in separate opinion filed. STITH, J., concurs in opinion of TEITELMAN, C.J. WILSON, J., not participating. RICHARD B. TEITELMAN, Chief Justice.
Case Date:February 26, 2013
Court:Supreme Court of Missouri

Page 441

391 S.W.3d 441 (Mo. 2013)

Robert and Donna BATEMAN, Appellants,


Cathy RINEHART, Assessor, Respondent.

No. SC 92486.

Supreme Court of Missouri, En Banc.

February 26, 2013

Page 442

Jonathan Sternberg of Jonathan Sternberg, Attorney, PC in Kansas City, for the Batemans.

Patricia L. Hughes, Clay County counselor's office in Liberty, for the Assessor.


Robert and Donna Bateman (hereinafter, "Taxpayers") appeal from the circuit court's judgment affirming the State Tax Commission's (hereinafter, "STC") classification of their property as commercial and assessing taxes accordingly. The STC's application of the factors set forth in section 137.016.5, RSMo 20001 to Taxpayers' property was supported by substantial and competent evidence in the record. The judgment is affirmed. 2

Factual and Procedural History

The facts are not disputed. The property at issue contains two parcels located within a residential subdivision in the City of Gladstone. The property is located at Northeast 68th Street and North Oak

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Trafficway and zoned residential. The two parcels are contiguous and approximately 1.22 total acres in size. One parcel was vacant, and the other parcel contained a residential structure. Commercial land uses are adjacent to the property on the north and west, while there are single-family land uses adjoining the property on the south and east.

In 2000, an applicant sought a zoning change from residential to commercial to develop the property for the installation and operation of three unattended gasoline pumps with an overhead canopy. The applicant requested a buffer zone variance. The planning commission unanimously rejected this application, citing many potential concerns with the twenty-four hour operation of an unmanned gas station directly adjoining residential property. Specifically, the planning commission found, "Without a primary building and staff management of the facility in terms of controlling noise and activity on the property, the use of the site becomes very intense." The city also found there were other vacant gas stations in town that would serve as more appropriate sites in light of the concerns about safety, noise, and disturbing residents at night.

In 2001, Taxpayers bought both parcels. Taxpayers demolished the residential structure because it was in a "bad condition" and could only be fixed "with a lot of expense." The parcels remained vacant and unused for many years.

In 2008, Taxpayers listed the property for sale with a realtor for $450,000. The realtor's listing described the property as "retail-pad." The property was characterized "as an assemblage for commercial development" although Taxpayers took no steps to have the property rezoned as commercial. The listing indicated the property was across the street from two car dealerships and had access to "lots of rooftops all around—almost 12,000 people within 1 mile." The property was listed for more than a year, but no offers were made for its purchase. The listing expired in October 2009.

Effective January 1, 2009, Cathy Rinehart, the Clay County Assessor (hereinafter, "the Assessor"), reclassified the property from residential to agricultural and assessed the property at the agricultural rate of twelve percent of the fair market value, although she placed a fair market value on the property of $322,100 assuming a commercial use. Taxpayers appealed the assessment to the Clay County Board of Equalization which affirmed the Assessor's determinations. Taxpayers then filed a complaint for review with the STC.

An evidentiary hearing was held before a hearing officer in November 2009. Both parties agreed the property is vacant and unused; therefore, the factors set forth in section 137.016.5 provide guidance for how to classify the property for assessment purposes. The parties disputed what the property's classification should be after application of the factors.

Taxpayers presented evidence regarding the obstacles to commercial development of the property, including: the current residential zoning; the buffer and set-back requirements that would require variances before the property could be developed commercially; the need to negotiate access easements; the city's previous rejection of an application for rezoning in 2000; and the lack of offers to purchase the property when it was listed and marketed as commercial. In light of these obstacles, Taxpayers argued the property should have been classified residential, had a fair market value of $21,100, and should have been assessed accordingly. The hearing officer questioned Taxpayers about demolishing the residence on the property. The hearing

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officer asked, "Is it fair to say that you figured that the best use for it would be commercial, so why go ahead and rehab ... the residential home?" Taxpayers replied, "I was—I knew that there was a possibility that someday it might be some type of use, whether that be, you know, an office or some type of commercial or something."

The Assessor argued the property should be classified and assessed as agricultural, but valued as commercial. The Assessor presented expert testimony from Clay County's commercial appraiser, who testified the property should be assigned a fair market value of $345,400 based upon sales of comparable commercial property. However, the appraiser believed the agricultural assessment rate should be applied to the fair market value to be consistent with the way other vacant and unused property was being treated in the county. The appraiser testified he received three inquiries about the value of the property, its classification, and other questions based upon the realtor's listing. Once the appraiser informed the potential buyers that the property was not zoned commercial, they "backed away" from purchasing it. The appraiser conceded the property could not be used for a commercial purpose during the current assessment cycle. The appraiser also testified he spoke with the city, reviewed the previous commercial proposal for the property that was rejected in 2000, and indicated the city would be amenable to a "less intense" commercial use.

The hearing officer applied the eight factors enumerated in section 137.016.5 and determined that most of the factors supported a finding of either residential or commercial use. Ultimately, the hearing officer found the appropriate classification for the property was commercial, and it should be assessed at the commercial rate as opposed to the agricultural rate. The STC affirmed the hearing officer's decision, finding the marketing of the property for commercial development was an admission that the highest and best use of the property would be for commercial use, not residential development. Further, the STC found the current zoning of the property was neither conclusive nor persuasive on the point of its most suitable economic use. The STC reasoned that the fact that a proposed change in zoning in the past for a specific commercial use was rejected provided no basis to conclude that the property could not be used for some other commercial use in the future.

Taxpayers filed a petition for judicial review of the STC's decision. Taxpayers moved for summary judgment, arguing they were entitled to judgment as a matter of law regarding the property's classification. The circuit court overruled Taxpayer's motion for summary judgment and affirmed the STC's decision as being supported by competent and substantial evidence. The circuit court asserted whether commercial improvements are likely in the assessment cycle was not one of the factors set forth in section 137.016.5 for consideration. Taxpayers appeal.

Standard of Review

On appeal, this Court examines the STC's decision, rather than the circuit court's judgment. Shipman v. Dominion Hospitality, 148 S.W.3d 821, 822 (Mo. banc 2004). This Court must determine whether the STC's decision: "(1) is in violation of constitutional provisions; (2) is in excess of the statutory authority or jurisdiction of the agency; (3) is unsupported by competent and substantial evidence upon the whole record; (4) is, for any other reason, unauthorized by law; (5) is made upon unlawful procedure or without a fair trial; (6) is arbitrary, capricious or unreasonable;

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or (7) involves an abuse of discretion." J.H. Berra Const. Co., Inc. v. Holman, 152 S.W.3d 281, 282 (Mo. banc 2005); section 536.140. This Court is hesitant to substitute its judgment for the STC in matters of property tax assessment. Savage v. State Tax Com'n, 722 S.W.2d 72, 75 (Mo. banc 1986). This Court will defer to the STC's judgment regarding factual matters; however, the STC's decision interpreting statutory law is reviewed de novo and will be upheld only when its decision is authorized by law and supported by competent and substantial evidence upon the record. State Bd. of Registration for Healing Arts v. McDonagh, 123 S.W.3d 146, 152 (Mo. banc 2003). "In all cases, the taxpayer has the burden of proof when challenging the STC's assessment of property." Algonquin Golf Club v. State Tax Com'n, 220 S.W.3d 415, 420 (Mo.App. E.D.2007). Here, Taxpayers carry the burden of proving the proper classification of the property is residential rather than commercial.


In their sole point on appeal, Taxpayers argue the STC erred in holding that the "immediate most suitable economic use" of the property was commercial rather than residential. Taxpayers argue any commercial use of the property could not have been immediate, was speculative, was unsupported by sufficient competent and substantial evidence, and was unreasonable in that the property was zoned residential, solely used as residential, and all commercial uses were prohibited by the city's zoning ordinances. The Assessor disagrees, arguing the STC's decision should be upheld because there was competent and substantial...

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