Appeal of v. V.P. Partnership

• Citation: 167 Pa.Cmwlth. 282,647 A.2d 990
• Parties: In re Appeal of V.V.P. PARTNERSHIP from the Decision of the Board of Assessment Appeals of the County of Delaware in Connection with Premises at 1440 Wallingford Road, Springfield Township, Delaware County, Pennsylvania Relating to 1991 Real Estate Assessment and all Subsequent Assessments During the Pendency of the Appeal Folio No.: 42-00-07267-08 Springfield School District and Springfield Township, Appellants.
• Decision Date: 15 March 1995
• Court: Pennsylvania Commonwealth Court

Page 990

647 A.2d 990

167 Pa.Cmwlth. 282

In re Appeal of V.V.P. PARTNERSHIP from the Decision of the Board of Assessment Appeals of the County of Delaware in Connection with Premises at 1440 Wallingford Road Springfield Township, Delaware County, Pennsylvania Relating to 1991 Real Estate Assessment and all Subsequent Assessments During the Pendency of the Appeal Folio No 42-00-07267-08 Springfield School District and Springfield Township, Appellants.

Commonwealth Court of Pennsylvania.

Argued Oct. 7, 1993.

Decided Sept. 1, 1994.

Reargument Denied Oct. 25, 1994.

Petition for Allowance of Appeal Denied March 15, 1995.

Mark A. Sereni, for appellants.

Joseph Patrick O'Brien, for appellee, V.V.P. Partnership.

Before DOYLE and COLINS, JJ., and DELLA PORTA, Senior Judge.

DOYLE, Judge.

This is a consolidated appeal from two orders of the Court of common Pleas of Delaware County by two taxing authorities, Springfield Township and Springfield School District (collectively, Authorities), which orders sustained the appeals of V.V.P. Partnership d/b/a/ Victoria Tennis Club (Property Owner or Taxpayer), and set the subject property's fair market value at $400,000 for the purpose of tax assessment for the tax years 1991, 1992, and 1993.

Taxpayer operates a tennis, racquetball, and squash facility located 274 feet from the intersection of Wallingford Road and Baltimore Pike which are state highways in Springfield Township, Delaware County. The lot upon which the club is located is 1.78 acres, but the usable space is severely limited by the slope of the property and the proximity of Baltimore Pike and Wallingford Road. The facility, originally constructed in 1968, consists of a main tennis court area, several squash and racquetball courts, a service core with rest rooms, a jacuzzi room, pro shop, and a utility room on the first floor. The second floor consists of two small offices, a lounge with a small service kitchen, a laundry room and a storage closet. The court area is small, and all the courts combined can only accommodate twenty-eight players at any one time. The parking lot, located a distance from the building, can only accommodate twenty-two cars. The zoning for the area is RB-Residential, and since October 1985 the property's use as a tennis, squash and racquetball facility is a previously existing nonconforming use. Moreover, the property does not comply with current setback requirements and is therefore nonconforming in this regard as well.

The Delaware County Board of Assessment Appeals determined the assessed value to be $30,000 for the 1991 tax year, based on a fair market value of $909,100. The Board denied Taxpayer's request for modification, and Taxpayer appealed to the trial court. The Authorities properly intervened.

A hearing was held, and both the Authorities and the Taxpayer presented expert testimony regarding the fair market value of the property. The Authorities' expert, Andrew L. Mozino, testified and provided a comprehensive appraisal report wherein he concluded that the fair market value of the property was $800,000. He relied on both the "income approach" ¹ and the "sales comparison approach." ² Taxpayer's expert, Joseph F. Summers, also testified and provided an appraisal report. He concluded that the fair market value of the property was between $330,000 and $420,000, relying primarily on the income approach to establish its market value. His report also contained an analysis of the fair market value of the property under the "cost approach." ³

The trial court found the opinion of Taxpayer's expert, Summers, to be more convincing than Authorities' expert, Mozino. The trial court reasoned that Summers' estimate of expenses incurred in the operation of the business on the property was closer to the actual expenses incurred during 1991, at 68.78% of gross income, and therefore his estimate of the fair market value based on the income approach was more accurate. Conversely, Mozino based his valuation under the income approach on an estimate of expenses that were only 15.05% of gross income. Moreover, his sales comparison approach analysis was based on a comparison of four properties that were not located in Delaware County and were significantly larger than the subject property. Hence, the trial court, unpersuaded by Mozino's valuation, set a fair market value of the property of $400,000. The Authorities appealed.

Our scope of review in a tax assessment appeal is narrow. A verdict of the trial court will be affirmed unless it is not supported by substantial evidence, or the court abused its discretion or made an error of law. Cedarbrook Realty. The trial court is the fact finder, and as such it determines the weight to be accorded to an expert witness's testimony regarding the valuation of the property. Id. We give the trial court's findings great deference and will not disturb its decision unless there is clear error. Id.

Section 402 of the Law requires property assessments to be based upon the "actual value" of the property. 72 P.S. § 5020-402. Actual, or fair market value, is defined as "the price which a purchaser, willing but not obliged to buy, would pay an owner, willing but not obliged to sell, taking into consideration all uses to which the property is adapted and might in reason be applied." Buhl Foundation v. Board of Property Assessment, Appeals and Review, 407 Pa. 567, 570, 180 A.2d 900, 902 (1962).

The Authorities sole argument is that Summers' income approach method of appraisal, using actual business income and expense figures, was in fact based on the value of the property to the current owners, a so called "value-in-use" application or theory and is thus not competent pursuant to the Supreme Court's opinion in F & M Schaeffer, and, therefore, the trial court's conclusion concerning the fair market value of the property is erroneous. We disagree.

F & M Schaeffer involved a brewery's challenge to an assessment of its property. In assessing the value of the property, the experts employed by the taxing authorities determined that the property's highest and best use was as a "special purpose" brewery and then applied a cost approach valuation to arrive at a fair market value of $34 million. To determine the replacement costs, the taxing authorities calculated the cost of the facility based upon an industry standard of $48 per barrel of beer to be produced at the facility. They then factored out the machinery and equipment using a ratio of one third real estate to two-thirds machinery, subtracted depreciation and added the cost of the land. Using sweeping language, Justice Larsen condemned this assessment method as utilizing "value-in-use."

Value-in-use, therefore, is not a reflection of fair market value and is not relevant in tax assessment cases because only the fair market value (or value-in-exchange) is relevant in tax assessment cases. Thus, we hold that a property's use and its resulting value-in-use cannot be considered in assessing the fair market value of property for tax assessment purposes in Pennsylvania. (Emphasis in original; citations omitted.)

F & M Schaeffer, 530 Pa. at 458, 610 A.2d at 4. However, we conclude that the Authorities' reliance on this language is misplaced for several reasons.

First, and most obviously, F & M Schaeffer and the case before us now are factually dissimilar because the appraisal for Taxpayer utilized the income approach and not the cost approach. ⁴ Second, in analyzing Summers' methodology it becomes clear that his approach was logical and reasonable, and...