Cont'l Retail Llc v. County of Hennepin

• Decision Date: 17 August 2011
• Docket Number: No. A11–0345.,A11–0345.
• Parties: CONTINENTAL RETAIL, LLC, Relator,v.COUNTY OF HENNEPIN, Respondent.
• Court: Minnesota Supreme Court

801 N.W.2d 395

CONTINENTAL RETAIL, LLC, Relator,

v.COUNTY OF HENNEPIN, Respondent.

No. A11–0345.

Supreme Court of Minnesota.

Aug. 17, 2011.

Syllabus by the Court

1. The failure to bring a timely motion for a new trial or amended findings

precludes appellate review of an evidentiary ruling of the tax court.

2. The tax court's determinations of market value are supported by the record and are not clearly erroneous.

William R. Skolnick, Amy D. Joyce, Skolnick & Shiff, P.A., Minneapolis, Minnesota, for relator.Michael O. Freeman, Hennepin County Attorney, Lisa C. Hahn–Cordes, Assistant County Attorney, Minneapolis, Minnesota, for respondent.Considered and decided by the court without oral argument.

OPINION

DIETZEN, Justice.

Relator Continental Retail, LLC, seeks certiorari review of the market value determinations by the Minnesota Tax Court for a commercial building located in Brooklyn Park, Minnesota, for the assessment dates of January 2, 2006, January 2, 2007, and January 2, 2008. At trial, the tax court increased the market value determinations for all three years. Continental argues that the tax court's value determinations are excessive and not supported by the record over the assessed value of the property. Because we conclude that the tax court's value determinations are supported by the record and are not clearly erroneous, we affirm the decision of the tax court.

Continental Retail owns real property located at 8570 Edinburgh Centre Drive North, Brooklyn Park, Minnesota. Continental is a development company owned and operated by Bradley Hoyt. The subject property consists of approximately 124,432 square feet, and is improved with a multi-tenant building consisting of one floor with a gross building area of approximately 23,325 square feet, and a gross leasing area of approximately 22,767 square feet.

The improvements to the property were constructed in 2004 at an estimated cost of $2,432,195, excluding land, entrepreneurial profit, and other soft costs. Prior to construction of the building, soil corrections were carried out on the property and building pads were prepared. In February 2001, GME Consultants, Inc. prepared a soil assessment and recommended that a Geopier foundational support system be used to prepare the site for the proposed building using the existing building pads. A certificate of occupancy was issued in February 2005. Prior to occupancy of the building by tenants, wall cracks in the fire riser room in the northeast portion of the building were investigated by Fischer Engineering, Inc. The engineer recommended filling the cracks and monitoring the area for further movement.

In 2007, Edina Realty, a tenant of the building, reported to the property manager a physical separation between the ceiling and walls in its lease space. The building maintenance company investigated the problem and submitted a July 2007 report to the property manager that identified three areas of concern related to settlement of soils and movement of building components; however, the company noted that the movement was not a safety issue. Edina Realty vacated its lease space in late 2008 and entered into a settlement to terminate the lease for a lump sum payment of approximately $300,000.

Before it made repairs to the building, the building maintenance company hired American Engineering Testing, Inc., to conduct a building monitoring program. The monitoring program was initiated in September 2007 and continued through the spring of 2009. In 2010, LJM Group, Inc., another property consultant, submitted a report outlining the results of their inspection of the property and made several recommendations regarding repairs to address building movement concerns.

The occupancy for the building varied over the three assessment years. The parties stipulated that as of January 2, 2006, 16,653 square feet of the gross leasable area was occupied, for an occupancy rate of 73%. The occupancy rate for the second assessment date was 66%, and the occupancy rate for the third assessment date was 62%.

Continental filed petitions challenging the Hennepin County assessor's estimated market value of $2,216,000 for the January 2, 2006, January 2, 2007, and January 2, 2008 assessment dates. At trial, Continental introduced the expert testimony and appraisal report of Lawrence Kramer. Kramer testified that the value of the property was $1,490,000 on January 2, 2006, $1,340,000 on January 2, 2007, and $1,100,000 on January 2, 2008. Continental also introduced the testimony of, among others, the property owner and the property manager.

Respondent Hennepin County introduced the expert testimony and appraisal report of Shelagh Stoerzinger. Stoerzinger testified that the value of the property was $3,776,600 on January 2, 2006, $3,967,200 on January 2, 2007, and $2,573,400 on January 2, 2008. A summary of the values given to the subject property by the county assessor and each of the experts for the relevant assessment dates are as follows:

+----------------------------------------------+
                ¦Year ¦County Assessor  ¦Kramer    ¦Stoerzinger¦
                +-----+-----------------+----------+-----------¦
                ¦2006 ¦$2,216,000       ¦$1,490,000¦$3,776,600 ¦
                +-----+-----------------+----------+-----------¦
                ¦2007 ¦$2,216,000       ¦$1,340,000¦$3,967,200 ¦
                +-----+-----------------+----------+-----------¦
                ¦2008 ¦$2,216,000       ¦$1,100,000¦$2,573,400 ¦
                +----------------------------------------------+
                

Following trial and the submission of post-trial briefs, the tax court filed its order concluding that the value of the subject property as of January 2, 2006 was $3,776,600, the value as of January 2, 2007 was $3,967,200, and the value as of January 2, 2008 was $2,416,600. Continental subsequently filed a petition for writ of certiorari to this court.

I.

On appeal, Continental argues that the tax court erred in determining that (1) the County's appraiser, Stoerzinger, was qualified to testify as an expert witness; (2) the settling of the building was not a detrimental condition that adversely affected the market value of the property until the January 2, 2008, assessment date; (3) Continental's appraiser, Kramer, did not value the fee simple interest of the property; and (4) the County's appraiser applied the proper approaches to valuing the property.

Our review of a final decision of the tax court is limited and deferential. See S. Minn. Beet Sugar Coop v. Cnty. of Renville ( SMBSC ), 737 N.W.2d 545, 551 (Minn.2007); see also Eden Prairie Mall, LLC v. Cnty. of Hennepin, 797 N.W.2d 186, 192 (Minn.2011). Specifically, a final order of the tax court is reviewable by this court on the grounds that the tax court lacked jurisdiction, that the order is not justified by the evidence or in conformity with the law, or that the order is affected by any other error of law. Minn.Stat. § 271.10, subd. 1 (2010).

Moreover, we review the tax court's legal determinations de novo, and its factual findings under the “clearly erroneous” standard. SMBSC, 737 N.W.2d at 551; see also Montgomery Ward & Co., Inc. v. Cnty. of Hennepin, 450 N.W.2d 299, 308 (Minn.1990). The tax court's decision is clearly erroneous if the decision is not reasonably supported by the evidence as a whole. Lewis v. Cnty. of Hennepin, 623 N.W.2d 258, 261 (Minn.2001). Our deferential review is premised on the separation of powers, and the inexact nature of the appraisal of real property. Eden Prairie Mall, 797 N.W.2d at 192. We will not defer, however, to the tax court's valuation determination when the tax court has clearly misvalued the property or has failed to explain its reasoning. Nw. Nat'l Life Ins. Co. v. Cnty. of Hennepin, 572 N.W.2d 51, 52 (Minn.1997); see also McNeilus Truck & Mfg., Inc. v. Cnty. of Dodge, 705 N.W.2d 410, 414 (Minn.2005).

Continental argues that Stoerzinger was not qualified to testify as an expert witness. The decision to admit or exclude evidence rests with the tax court, and its rulings will not be disturbed absent an error of law or abuse of discretion. See TMG Life Ins. Co. v. Cnty. of Goodhue, 540 N.W.2d 848, 851 (Minn.1995). Rule 702 of the Minnesota Rules of Evidence provides that a qualified expert witness may testify in the form of an opinion so long as the testimony has foundational reliability and is helpful to the fact-finder. Minn. R. Evid. 702. At trial, Continental's counsel objected to Stoerzinger's testimony on the ground that she was not qualified to appraise property with detrimental conditions. Following the tax court's final decision on the merits, Continental did not move for a new trial or amended findings; instead, Continental appealed directly to this court.

Previously, we have held that a motion for a new trial or amended findings is a prerequisite to appellate review regarding matters of “trial procedure, evidentiary rulings, and jury instructions” that arise “during the course of trial.” Alpha Real Estate Co. v. Delta Dental Plan, 664 N.W.2d 303, 310 (Minn.2003) (quoting Sauter v. Wasemiller, 389 N.W.2d 200, 201 (Minn.1986)) (internal quotation marks omitted). In Alpha Real Estate, we observed that a “general demarcation line” could be drawn between the assignment of errors that require a post-trial motion, referring to rulings of the district court that reside within the court's discretion, and substantive questions of law that we review de novo. 664 N.W.2d at 310–11. Thus, evidentiary rulings made at trial must be assigned as error in a motion for a new trial or amended findings in order to properly preserve an objection for appellate review. Sauter, 389 N.W.2d at 201. The failure to bring such a motion precludes appellate review. Id. at 202. We extended this rule to tax court proceedings in Carson Pirie Scott & Co. v. Cnty. of Hennepin, 576 N.W.2d 445, 446–47 (Minn.1998).

Applying Alpha Real Estate and Sauter, we conclude that the evidentiary ruling Continental challenges is a matter that required a post-trial motion to preserve it for...