City and County of Denver, Colo. v. Board of Assessment Appeals of State of Colo.

• Decision Date: 10 November 1997
• Citation: 947 P.2d 1373
• Docket Number: 96SC785
• Parties: 97 CJ C.A.R. 2680 CITY AND COUNTY OF DENVER, COLORADO, a municipal corporation; and Board of Equalization of the City and County of Denver, Petitioners, v. BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO and Constellation Properties, Respondents. CITY AND COUNTY OF DENVER, COLORADO, a municipal corporation; and Board of Equalization of the City and County of Denver, Petitioners, v. BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO and Teachers Insurance Annuity Association of America, Respondents. ARAPAHOE COUNTY BOARD OF EQUALIZATION, Petitioner, v. BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO and the Writer Corporation, Respondents.
• Court: Colorado Supreme Court

Page 1373

947 P.2d 1373

97 CJ C.A.R. 2680

CITY AND COUNTY OF DENVER, COLORADO, a municipal

corporation; and Board of Equalization of the

City and County of Denver, Petitioners, v.BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO andConstellation Properties, Respondents.

CITY AND COUNTY OF DENVER, COLORADO, a municipal

corporation; and Board of Equalization of the

City and County of Denver, Petitioners, v.BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO andTeachers Insurance Annuity Association of America,

Respondents.

ARAPAHOE COUNTY BOARD OF EQUALIZATION, Petitioner, v.BOARD OF ASSESSMENT APPEALS OF the STATE OF COLORADO and the

Writer Corporation, Respondents.

No. 96SC785.

Supreme Court of Colorado En Banc.

Nov. 10, 1997.

Rehearing Denied Dec. 2, 1997.

Daniel E. Muse, City Attorney, Alice J. Major, Assistant City Attorney, Denver, for Petitioner City and County of Denver.

Kathryn L. Schroeder, Arapahoe County Attorney, Richard F. Mutzebaugh, Special Assistant County Attorney, Littleton, for Petitioner Arapahoe County Board of Equalization.

Gale A. Norton, Attorney General, Martha Allbright Phillips, Chief Deputy Attorney General, Richard Westfall, Solicitor General, Paul Farley, Deputy Attorney General, Larry A. Williams, First Assistant Attorney General, Mark W. Gerganoff, Assistant Attorney General, Denver, for Respondent Board of Assessment Appeals.

Brega & Winters, P.C., Ronald S. Loser, Brian A. Magoon, Denver, for Respondents Constellation Properties and Teachers Insurance Annuity Association of America.

Susan R. Fox, Denver, for Amicus Curiae Colorado State Board of Appraisers.

Justice HOBBSdelivered the Opinion of the Court.

We exercised our jurisdiction under C.A.R. 50¹ to consider whether the Board of Assessment Appeals(BAA) erred in allowing persons to act as "appraisers" or "expert witnesses" and present testimony in property valuation proceedings under contingent fee agreements, contrary to section 12-61-712(1)(b), 5B C.R.S. (1991 & 1996 Supp.).In the three cases before us, two from the City and County of Denver and one from Arapahoe County(the Counties), the persons who testified in the BAA proceedings were salaried employees of appraisal firms that had executed contingent fee agreements with taxpayer clients.In each case, the fee to be paid depended upon the firm's assigned appraiser obtaining an outcome favorable to the firm's taxpayer client.We conclude that the appraiser appearances were unlawful and the BAA should not have allowed them.We reverse the agency actions, vacate the BAA determinations establishing the property valuations, and remand the three cases to the BAA for new proceedings consistent with this opinion.

I.

The taxpayers in the three cases are Constellation Properties (Constellation), Teachers Insurance Annuity Association of America(Teachers), and The Writer Corporation(Writer).Each of the taxpayers protested assessor determinations to their County Boards of Equalization (CBOE) and then appealed to the BAA, in accordance with section 39-5-122(3), ll C.R.S. (1997).Each taxpaying entity hired an appraisal firm for the purpose of having one of its appraisers appear before the BAA.

Patrick Sullivan(Sullivan) of Marvin F. Poer & Company appeared for Constellation and Teachers in two of the proceedings.Todd J. Stevens(Stevens) of Stevens & Associates Cost Reduction Specialists appeared on behalf of Writer in the third.In each instance, the appraisal firm executed a contingent fee agreement with the taxpayer client.The fee to be paid was to be a percentage of the tax savings realized from the proceedings.

The agreement which procured Sullivan's appearance provided that the fee for appraisal services would be "[t]hirty percent (30%) of the 1995 tax savings.However, it is agreed that the fee shall not exceed seven thousand five hundred dollars ($7,500.00)."Stevens testified that the contract with his company provided for a fee of forty percent of the tax savings.

In each case, it is clear that the persons who testified on behalf of the taxpayers were acting as appraisers and expert witnesses.In the Constellation and Teachers cases, Sullivan issued appraisal reports to each of the taxpayers, which formed the basis of the appeal to the BAA.During the appeal proceedings in both cases, Sullivan was recognized by the BAA as an expert to give an opinion of value on the properties at issue.Likewise, Stevens issued an appraisal opinion for Writer, which served as the basis for the taxpayer appeal to the BAA.The BAA accepted Stevens as an expert and allowed him to testify concerning his appraisal opinion.

The Counties objected to the appraiser appearances as unlawful under section 12-61-712(1)(b), 5B C.R.S. (1991 & 1996 Supp.).Pursuant to the 1996amendments, sections 12-61-712(1)(a) and (b) provided that:

(1) It is unlawful for any person to:

(a) Violate any provision of this part 7, or on and after July 1, 1996, to perform a real estate appraisal in conjunction with a debt instrument that is federally guaranteed or in the federal secondary market and regulated pursuant to title 12, U.S.C., without first having obtained a registration, license, or certificate from the board pursuant to this part 7.

(b)Act as an appraiser or expert witness and receive a contingency fee; except that a person may act as an agent and receive a contingency fee if such person is not involved as an appraiser or expert witness in the same case.

(Emphasis added.)

During the hearing in the Teachers' case, the first of the three to be heard, the BAA acknowledged that it was

probably as perplexed about this law as everybody else is, and I don't think there's any clear-cut way for the Board to rule yet.We have discussed this with our attorney and we'll go forward with the hearing.If we're wrong, I'm sure somebody down the road is going to tell uswe're wrong.

By the time of the Writer case, the BAA had concluded that the statutory provision--in light of the language of paragraph (1)(a) quoted above--applied only to cases involving federal loans and transactions and, therefore, not to these cases.²

As a result of the three proceedings before the BAA, each of the taxpayers realized a substantial benefit from having brought an appeal and having an appraiser testify on its behalf.The resulting BAA valuations fell between the values presented by the government appraisers and the values presented by the taxpayers' appraisers.³

II.

We determine that the appraiser expert appearances in these proceedings before the BAA were unlawful under the 1996 provisions of section 12-61-712(1)(b) because payment of the fee depended upon the outcome of the proceedings.

A.Statutory History of Section 12-61-712

Actual value is the guiding principle for the taxation of real property in Colorado.SeeSan Miguel County Bd. of Equalization v. Telluride Co., 947 P.2d 1381, 1383(Colo.1997).Upon protest of an assessor's valuation, the CBOE shall correct any errors which the assessor may have made.Id. at 1384;see alsoGilpin County Bd. of Equalization v. Russell, 941 P.2d 257, 262(Colo.1997)(CBOE shall raise, lower, adjust, and equalize valuations whenever "justice and right so require").Under section 39-8-108(5)(a), 11 C.R.S.(1997), the valuations "shall not be adjusted to a value higher than the valuation set" by the CBOE on appeal to the BAA or district court.

Because the property's actual value is the subject matter of tax protest and appeal proceedings, appraisers often appear before the CBOE or BAA on behalf of taxpayer clients who seek a reduction.Appraisers are licensed by the Board of Real Estate Appraisers(Board).The Board consists of seven members appointed by the Governor with the consent of the senate.See§ 12-61-703.The Board is empowered to issue, deny, or refuse to renew an appraiser's registration, license, or certificate, see§ 12-61-704(1)(e), and may take disciplinary action for violation of the statutes and regulations governing appraisers and their work, see§ 12-61-704(1)(f).As a result of the 1996amendments, registration, licensure, or certification by the Board is now required only for appraisers who perform real estate appraisals in conjunction with a federal transaction.See§ 12-61-712(1)(a);§ 12-61-706(1);ch. 232, sec. 5, 9, § 12-61-706, 712, 1996 Colo. Sess. Laws 1188, 1192-96.

Under section 12-61-710(1)(c), adopted by the General Assembly in 1990, a real estate appraiser is in violation of the licensing Act if the appraiser "[h]as accepted any fees, compensation, or other valuable consideration to influence the outcome of an appraisal."In 1996, the General Assembly determined to be even more specific about prohibited appraiser fee arrangements, prescribing that it is "unlawful for any person to act as an appraiser or expert witness and receive a contingency fee."§ 12-61-712(1)(b), 5B C.R.S. (1991 & 1996 Supp.).An appraiser is "any person who provides for a fee or a salary an opinion of the ... value ... of an interest in ... identified real estate."§ 12-61-702(5)(a).The legislature left a narrow exception for a person to act as an "agent" and receive a contingency fee so long as that person was not also acting "as an appraiser or expert witness in the same case."§ 12-61-712(1)(b).

In 1997, the General Assembly acted to restate its aim by amending section 12-61-712(1)(b) to prohibit contingent fees in connection with an "independent appraisal assignment."Contingent fees are not prohibited when providing a "consulting service" which includes "counseling and advocacy in regard to property tax assessments and appeals thereof,"§ 12-61-702(2.5), ⁴ provided that the person discloses "the fact that a contingent fee is or will be paid."§ 12-61-712(1)(d);see alsoch. 148, sec. 1,§ 12-61-702, 712, 1997 Colo. Sess. Laws 569-70.

Section 12-61-712(1)(b) now reads as follows:

(1) It is unlawful for any person to:

...

(b) Accept a...