78th St. Ownerco, LLC v. Cnty. of Hennepin, No. A11–0128.

• Decision Date: 16 May 2012
• Docket Number: No. A11–0128.
• Citation: 813 N.W.2d 409
• Parties: 78TH STREET OWNERCO, LLC, Relator, v. COUNTY OF HENNEPIN, Respondent.
• Court: Minnesota Supreme Court

813 N.W.2d 409

78TH STREET OWNERCO, LLC, Relator,

v.COUNTY OF HENNEPIN, Respondent.

No. A11–0128.

Supreme Court of Minnesota.

May 16, 2012.

Syllabus by the Court

1. A taxpayer is not permitted to evaluate relevancy under the 60–day rule, Minn.Stat. § 278.05, subd. 6(a) (2006), in declining to provide percentage rent information available to the taxpayer.

2. Under the 60–day rule, Minn.Stat. § 278.05, subd. 6(a) (2008), neither the relevancy standard nor the unavailability exception excuses a taxpayer from providing information contained within a rent roll that is available to the taxpayer.

3. Neither Minn.Stat. § 278.05, subd. 6(a) (2006), nor Minn.Stat. § 278.05, subd. 6(a) (2008), is unconstitutionally vague as applied to relator.

Thomas R. Wilhelmy, Judy S. Engel, Fredrikson & Byron, P.A., Minneapolis, MN, for relator.

Michael O. Freeman, Hennepin County Attorney, Lisa C. Hahn–Cordes, Assistant County Attorney, Minneapolis, MN, for respondent.

OPINION

PAGE, Justice.

Relator 78th Street OwnerCo, LLC (78th Street), filed petitions contesting respondent Hennepin County's assessments of its property for property taxes payable in 2008 and 2009, along with the taxes due in 2008 and 2009.¹ 78th Street is the owner and landlord of the property identified by the County with Property Identification Number 16–116–21–21–0005 and located at 5601 78th Street West, in Bloomington, Minnesota. The property is the site of the Sofitel Hotel. 78th Street LeaseCo, LLC, and 78th Street are subsidiaries of the same ownership entities. One of the intermediate investors in 78th Street is a real estate investment trust (REIT), which invests in 78th Street LeaseCo through what is known as a taxable REIT subsidiary. 78th Street LeaseCo leases the property from 78th Street pursuant to a March 30, 2006, hotel lease. The county assessor assessed the property for real estate taxes payable in 2008 and 2009 with assessments on January 2, 2007, and January 2, 2008, respectively. ² 78th Street filed a petition in Hennepin County district court for each year, alleging that the property had been “unfairly and unequally assessed ... [b]ased on comparison[s] with property of the same class and in comparable localities.” After receiving each petition, the City of Bloomington assessor's office, while not required to do so, sent a letter to 78th Street's counsel requesting, among other items, lease summaries and a rent roll/tenant list as of January 2, 2005, 2006, and 2007.³ As part of the petition process, 78th Street was required by Minn.Stat. § 278.05, subd. 6(a) (2008), and Minn.Stat. § 278.05, subd. 6(a) (2006),⁴ to provide certain documentation within 60 days of filing its petition to assist the County in evaluating the property's value. Failure to submit required documentation within 60 days results in automatic dismissal of the petition. Minn.Stat. § 278.05, subd. 6(a) (2008); Minn.Stat. § 278.05, subd. 6(a) (2006).

The January 2, 2007, assessment is governed by Minn.Stat. § 278.05, subd. 6(a) (2006), which is the version of the statute enacted in 2003. Under that section, 78th Street was required, when contesting valuation, to submit “[i]nformation, including income and expense figures, verified net rentable areas, and anticipated income and expenses, for income-producing propert[ies]” by June 29, 2008. Minn.Stat. § 278.05, subd. 6(a) (2006). On June 27, 2008, 78th Street submitted: (1) profit and loss statements, including budget forecast amounts; (2) 2007 and 2008 operating budgets; and (3) asset register and depreciation reports. These documents included line-item reports of lease payments. The documents did not include the lease itself or a calculation of percentage rent paid. In its submission, 78th Street also contended that Minn.Stat. § 278.05, subd. 6(a) (2006), did not require production of all of the information requested by the County.

The January 2, 2008, assessment is governed by Minn.Stat. § 278.05, subd. 6(a) (2008). Pursuant to that section, 78th Street was required to submit by June 29, 2009, information that included

income and expense figures in the form of (1) year-end financial statements for the year prior to the assessment date, (2) year-end financial statements for the year of the assessment date, and (3) rent rolls on the assessment date including tenant name, lease start and end dates, option terms, base rent, square footage leased and vacant space, verified net rentable areas in the form of net rentable square footage of the building or buildings, and anticipated income and expenses in the form of proposed budgets for the year subsequent to the year of the assessment date.

Minn.Stat. § 278.05, subd. 6(a) (2008).

On June 29, 2009, 78th Street submitted: (1) profit and loss statements, including budget forecast amounts; (2) operating budgets; and (3) asset register and depreciation reports. These documents included line items for lease payments and budgets including lease payment amounts. The documents did not include the lease, a rent roll/tenant list, or any calculation of percentage rent paid. On July 1, 2010, well after June 29, 2009, 78th Street finally submitted a copy of the lease.

78th Street's petitions were consolidated and transferred to the tax court. Subsequently, the County moved to dismiss both petitions for failure to comply with the 60–day rule, arguing that each petition should have included a copy of 78th Street's lease and a calculation of percentage rent paid, but did not, and that the 2008 petition should have included a rent roll/tenant list, but did not. 78th Street contested the motions to dismiss with an affidavit from its own expert, whose opinion was that the lease was not relevant to an assessment of market value of the Sofitel Hotel.

After a hearing on the motion, the tax court agreed with the County and dismissed the petitions. In its order, the tax court held that the information at issue was necessary under the “broad relevancy” language of Irongate Enters., Inc. v. Cnty. of St. Louis, 736 N.W.2d 326 (Minn.2007), and that there was information in the lease that could be relevant to calculation of rental income. 78th Street then moved for amended findings of fact and conclusions of law, arguing, among other things, that the court's ruling rendered the 60–day rule unconstitutionally vague.

Before the tax court issued its ruling on 78th Street's motion for amended findings, 78th Street petitioned our court for a writ of certiorari, arguing: (1) that 78th Street was not required to submit leases with either the 2007 or the 2008 petitions in order to comply with the 60–day rule; (2) that 78th Street was not required to submit a rent roll/tenant list with the 2008 petition in order to comply with the 60–day rule; (3) that 78th Street was not required to submit percentage rent calculations for either the 2007 or the 2008 petitions in order to comply with the 60–day rule; and (4) that the tax court's decision rendered the 60–day rule unconstitutionally vague as applied to 78th Street. We discharged the writ of certiorari and remanded the case to allow the tax court to rule on 78th Street's pending motion, which the tax court eventually denied. In denying 78th Street's motion with respect to the argument that the tax court's November 23 order rendered the 60–day rule unconstitutionally vague, the tax court held that 78th Street's vagueness argument was not properly beforethe tax court because it had not been raised at the initial hearing on the County's motion to dismiss. After the tax court denied 78th Street's motion, we reinstated the appeal and now affirm.

I.

78th Street contends that the tax court erred in requiring submission of the lease and percentage rent information for both the 2007 and 2008 petitions and in requiring submission of a rent roll/tenant list for the 2008 petition because none of the information requested was relevant to the assessment of the property value of the Sofitel Hotel. 78th Street also contends that the tax court's ruling requiring 78th Street to produce such information renders the 60–day rule unconstitutionally vague as applied. The County argues that all of the information requested was available to 78th Street and thus should have been produced under the 60–day rule, even if that information might not allow the county assessor to reach a final conclusion regarding the property's value. The County argues that 78th Street's vagueness argument fails for two reasons: (1) it was not preserved for argument at the tax court; and (2) the statute is not vague.

When the facts are undisputed, we review questions of statutory interpretation and the tax court's rulings of law on a de novo basis. Kmart Corp. v. Cnty. of Stearns, 710 N.W.2d 761, 765 (Minn.2006); BFW Co. v. Cnty. of Ramsey, 566 N.W.2d 702, 704 (Minn.1997). Constitutional challenges to a statute also receive de novo review. ILHC of Eagan, LLC v. Cnty. of Dakota, 693 N.W.2d 412, 421 (Minn.2005).

We have held that the 60–day rule, as set out in the pre–2008 version of Minn.Stat. § 278.05, subd. 6(a), is designed “to provide information [to a county] that would be useful to the determination of value,” and to provide “an adequate, speedy, and simple remedy” to petitioners who wish to contest a county's assessment of property taxes. Kmart Corp. v. Cnty. of Becker, 639 N.W.2d 856, 859–60 (Minn.2002). We have noted that the rule contains a broad standard of relevancy that requires a petitioner to provide “all information to which the petitioner has access, even if that information might not allow the county assessor to reach a final conclusion regarding the property's value.” Irongate Enters., Inc. v. Cnty. of St. Louis, 736 N.W.2d 326, 331 (Minn.2007) (quoting BFW, 566 N.W.2d at 705) (internal quotation marks omitted). We have upheld the penalty of dismissal for failure to timely submit required information. Cnty. of Becker, 639 N.W.2d at 861. Moreover, in BFW we held that the ultimate...