Shoshone County v. S&W OPS LLC
| Decision Date | 30 June 2022 |
| Docket Number | Docket No. 48418 |
| Citation | 512 P.3d 1110 |
| Parties | SHOSHONE COUNTY, a political subdivision of the State of Idaho acting through the Shoshone County Board of Equalization, and the Shoshone County Assessor, Petitioners-Appellants, v. S&W OPS LLC; Powder, LLC; H2O, LLC; Golf, LLC; Apartment, LLC ; F&B, LLC ; and Village Management, LLC, Respondents-Appellees. |
| Court | Idaho Supreme Court |
Hawley, Troxell Ennis & Hawley, LLP, Boise, attorneys for Appellants. Richard G. Smith argued.
Smith + Malek, PLLC, Coeur d'Alene, attorneys for Respondents. Peter J. Smith IV argued.
This is a property tax appeal brought by a county. In 2017, Appellant Shoshone County ("the County") assessed properties owned by Respondents S&W OPS, LLC; POWDER, LLC; H2O, LLC; GOLF, LLC; APARTMENT, LLC; F&B, LLC; and VILLAGE MANAGEMENT, LLC (collectively "Taxpayers"). Taxpayers disputed the valuation and sought review by the Board of Equalization, and subsequently the Board of Tax Appeals ("BTA"). The BTA reduced the assessed value, and the County appealed to the district court. After a four-day bench trial in a de novo proceeding, the district court upheld the BTA decision. The district court determined that the County's appraisal evidence was more credible than Taxpayers’ evidence; however, the district court ultimately held the County had not satisfied its burden of showing how the BTA decision was erroneous by a preponderance of the evidence. The County now appeals to this Court, arguing that the district court applied the wrong standard of review by requiring the County to prove "how or why" the BTA decision was erroneous instead of simply concluding that the market value of the property was different than what was found by the BTA. We agree with the County's position. The district court's decision is reversed, the judgment is vacated, and the case is remanded with instructions for the district court to consider whether the BTA's decision on valuation was erroneous given the evidence submitted during the de novo trial. If that decision on valuation was erroneous, the district court, as the fact-finder, must set the valuation.
The subject property at issue is collectively known as the Silver Mountain Resort in Kellogg, Idaho. Multiple properties combine to comprise the resort: Silver Mountain Ski Resort; Silver Rapids Indoor Water Park; Galena Ridge Golf Course and undeveloped excess land; Shoshone House Apartments; Vacant Land with Site Improvements; Morningstar Lodge Commercial Condominium Unit 10; Two Utility Condominium Units in Morningstar Lodge; and a Commercial Lot on Wildcat Way.
Jeld-Wen Holdings, Inc., listed Silver Mountain for sale in 2009, and the property remained on the market for about six years. Purchase offers between $8 million and $10 million were rejected in the beginning as they were considered too low. Later, higher offers were accepted, but they fell through for various reasons.
Tryg Fortun set up several limited liability companies, referred to collectively as Taxpayers, to own and operate the properties that are the subject of this appeal. In early 2016, Taxpayers offered $8,200,000 to purchase Silver Mountain. Jeld-Wen countered at $8,750,000 and Taxpayers accepted. Following due diligence, Taxpayers reduced their offer to $5 million. The reduced offer resulted from Taxpayers’ discovery there was a great deal of deferred maintenance across the resort. Around $27,000,000 to $30,000,000 in future repairs or replacements was estimated for the ski area alone, and this estimate did not account for deferred maintenance associated with many of the subject buildings.
On January 1, 2017, the properties were assessed by the Shoshone County Assessor, who reached an approximate valuation of $23,700,000. Taxpayers protested, contending the total value of the property was about $5,650,000. The Shoshone County Board of Equalization upheld the Shoshone County Assessor's values, and Taxpayers appealed to the Idaho Board of Tax Appeals ("BTA").
Following a hearing, the BTA issued a final decision and order reducing the aggregate value of the properties to $6,310,000. At the outset of its decision, the BTA provided an extensive summary of the evidence and testimony elicited by each party. There are three generally accepted methods for determining market value: the cost approach, the income approach, and the sales comparison approach. Merris v. Ada Cnty , 100 Idaho 59, 63, 593 P.2d 394, 398 (1979). The BTA acknowledged that both parties developed value opinions using these approved methods, though the parties’ respective valuations were widely divergent, with Taxpayers asking the assessed value to be reduced to $5,647,000 and the County valuing the property at $14,971,000. Examining the evidence, the BTA found the income approach, in most instances, provided the better evidence of market value for the property. The BTA also found supportive evidence to afford the $5,000,000 purchase price some credence in its decision-making, given that the resort was on the market roughly six years and had considerable future replacement costs and deferred maintenance that had not been done. The BTA then reduced the aggregate value of the collective properties to $6,310,000, affirming parts of the Board of Equalization's conclusions while modifying or reducing others. The BTA assigned each component part of the resort its own valuation without further explanation for how each individual valuation was reached:
The County petitioned for judicial review of the BTA's decision under Idaho Code section 63-3812. In discovery, the parties exchanged appraisal reports from the same appraisers who testified before the BTA. The parties took the appraisers’ depositions, and deposed other witnesses who had testified before the BTA. The County also provided rebuttal reports from experts who had not testified before the BTA. The district court then held a four-day trial that it described as a de novo proceeding. In its case-in-chief, the County offered testimony from Jerry White, the Shoshone County Assessor, and its lead appraisal expert, Kenneth Voss. Taxpayers offered testimony from Tryg Fortun, the owner of the Taxpayer LLCs, Karey Lynn Scholey, Jeff Colburn, and two Silver Mountain employees: Daniel Cox, a ski lift expert, and its lead appraisal expert, John Arney. The County later solicited testimony from its two rebuttal witnesses: Peter Butler, a business appraiser, and Mark Richey, a real estate appraiser.
At the beginning of trial the district court judge stated:
THE COURT: And just to let you know ... I will inform the parties I purposely did not read the order from the Board of Tax Appeals except for the last page. I didn't want that coming into the mix as this is a trial de novo.
The last page of the BTA decision concluded that the properties should be valued at $6,310,000.
During the County's case-in-chief, Kenneth Voss testified about the value of all the properties in dispute. He testified he considered the three recognized methods of appraisals (sales comparison, cost, and income approaches); however, he only applied the method or combination of methods he believed best suited to the type of property being appraised. The district court found Voss's testimony to be credible, with a few perceived inaccuracies raised during cross-examination.
Taxpayers’ valuations for the properties came from its expert witness, John Arney. The district court found Arney's testimony difficult to follow, describing his valuations as "fluid." For example, Arney changed his valuations as to the ski resort several times. It was pointed out on cross-examination that Arney originally valued the ski resort at $980,000 when testifying before the BTA, but that he later changed his opinion at the same hearing to $1,380,000 after discovering a calculation error. Arney again changed his valuation, increasing it to $1,760,000 before the district court. Upon further cross-examination and reexamination of his own calculations at trial, Arney valued the ski resort at $2,460,000. Arney's testimony for the Waterpark also changed. Originally, Arney valued the Waterpark at $1,450,000; however, he later increased that valuation to $1,840,000. By the time of trial, Arney testified the Waterpark had a value of $2,620,000, nearly $800,000 more than he had opined previously. The district court determined "[t]he evolving appraisal figures as to the ski resort and Waterpark [ ] colored the [c]ourt's view of Mr. Arney's capabilities in having accurately appraised the other properties."
Following the trial, the district court entered its findings of fact, conclusions of law, and order. The district court affirmed the BTA's decision after finding the County failed to meet its burden of proof establishing how the decision of the BTA was in error. The court determined "[s]imply presenting a new and different appraisal of the properties is not enough, for it does not satisfy the burden of proof requirements of [ Idaho Code section 63-3812 ]." (Emphasis in original). In reaching this conclusion, the district court acknowledged this was "a harsh result" given that it found the County's appraisal expert to be more credible than Taxpayers’ expert. Still, the court found the County did not carry its burden to prove the BTA's decision was erroneous by a preponderance of the evidence.
The County filed a motion for reconsideration or, in the alternative, a petition for rehearing or for...
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