Crown Diversified Indus., Corp. v. Zimmerman
| Docket Number | ED110120 |
| Decision Date | 30 June 2023 |
| Parties | CROWN DIVERSIFIED INDUSTRIES, CORP., ET AL., Respondent, v. JAKE ZIMMERMAN, ASSESSOR, ST. LOUIS COUNTY, MISSOURI, Appellant. |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of St. Louis County Cause No 19SL-CC05809 19SL-CC05809-01 Honorable Brian H. May
Appellant Jake Zimmerman, the Assessor for St. Louis County, Missouri (Assessor), appeals from the St. Louis County circuit court's judgment in favor of Crown Diversified Industries, Corp. and other St. Louis County commercial property owners et al. (Taxpayers), reversing the order of the Missouri State Tax Commission (STC) and remanding for retrial. The STC found the Taxpayers did not produce persuasive evidence supporting their discrimination claims following the Assessor's 2017 reassessment. The STC also found that the hearing officer did not abuse her discretion when quashing the subpoenas directing the Assessor and some of his appraisers to appear for depositions and denying certain discovery requests. Following review, the circuit court found the STC erred, reversed the STC's decision and remanded the matter for retrial. When doing so, the circuit court ordered the STC to: 1) determine the actual level of assessment pursuant to the formula in Zimmerman v Mid-America Fin. Corp., 481 S.W.3d 564 (Mo. App. E.D. 2015); 2) apply a 3% threshold or difference between sold and unsold properties to determine if sales chasing is practically significant; 3) determine if there is unlawful discrimination against Taxpayers following Assessor's 2017 reassessment; and 4) allow Taxpayers to conduct further discovery, including the deposition of Assessor and additional appraisers as well as analyze additional data Assessor's program and other assessment practices. We reverse the circuit court's judgment because we conclude that the STC decision rejecting Taxpayers' discrimination claims is supported by competent and substantial evidence and the STC did not abuse its discretion when ruling on the discovery matters.
Taxpayers are approximately 2,625 St. Louis County commercial property owners who allege that the Assessor assigned discriminatory assessments to their properties. In 2017, Assessor performed a statutorily mandated biennial appraisal of the commercial properties in St. Louis County. When calculating the commercial property assessments, Assessor utilized the Computer Assisted Mass. Appraisal (CAMA) system where property data is entered and a computerized mathematical formula applies the relevant numerical factors before ultimately identifying the value. 1[] Following the CAMA determination, an appraiser completes a final review of all improved properties to decide whether or not any adjustments to the CAMA value are necessary. Following a final review with or without an adjustment, the appraiser determines the fair market value (FMV). Next the Assessor multiplies the FMV by the applicable Assessment Ratio, or 32%, to determine the Assessed Value.
In short, this mathematical equation is used to determine the tax liability or the amount of the property owner's bill. The Assessment Ratio is determined by statute and varies depending on the type of real property. Since Taxpayers' properties are commercial properties as defined by Section 137.016.1(3) RSMo (Cum. Supp. 2008),[2] 32% is the Assessment Ratio or the applicable rate pursuant to Section 137.115.5(1)(c).[3] For example, if a commercial property's FMV is $1 million, then this property has an Assessed Value of $320,000 because 1,000,000 x 0.32 = 320,000.
A St. Louis County property owner may appeal the Assessor's valuation to the St. Louis County Board of Equalization ("BOE") pursuant to Section 138.180, RSMo. It reads:
Any person may appeal in writing to the board of equalization from the assessment of his property, which appeal shall specify the matter of which he complains and which shall be filed at the office of the assessor of the city on or before the second Monday in July of each year, and any person so appealing shall have the right of appeal from decisions of the local board to the state tax commission as provided by law.
If a taxpayer is successful at the BOE and the FMV or valuation is reduced, then the 32% assessment rate is applied to the reduced value.[4] If a taxpayer is unsuccessful at the BOE, the taxpayer may appeal to the STC, pursuant to Section 138.430.1.
Among other factors potentially affecting this process, sales chasing or selective reappraisal occurs when sold and unsold properties are appraised differently or, more specifically, when the Assessor assigns a value to the sold property based on the sales price instead of identifying the value following normal procedures. When sales chasing occurs, ratio studies used to determine the common level of assessment may become unreliable. As another potential disruptive influence, regressivity occurs where low-value properties are assessed at a higher percentage of FMV than high-value properties, triggering a higher tax burden for the low-value property owners and resulting in discrimination.
Represented by Joseph Sansone Company (Sansone) and Property Assessment Review (PAR), Taxpayers initially filed their appeals with the St. Louis County BOE challenging their 2017 reassessments. Of the 2,625 complainant number, 1,759 challenged the Assessor's valuation or FMV assignment to their properties when appealing to the BOE. Some of these property owners were successful and received adjustments while others were unsuccessful when attempting to lower their property valuations. The remaining 866 did not challenge the valuation or Assessor's assigned FMV, waived their BOE hearing and chose to present their discrimination claims directly to the STC.
In October 2017, all 2,625 commercial property owners appealed to the STC as allowed by statute. Initially, a STC hearing officer met with the parties and entered a scheduling order with their input and approval. The discovery process extended over several months, while the parties prepared, exchanged and submitted written testimony and numerous exhibits. Taxpayers submitted their first discovery request in May 2018 and the discovery period was extended on at least one occasion.
To prevail on this discrimination claim, Taxpayers must prove an intentional plan of discrimination, or in the absence of an intentional plan, the taxpayer must demonstrate the assessing authorities intentionally undervalued other similar properties. State ex rel. Ashby Road Partners, LLC v. State Tax Com'n, 297 S.W.3d 80, 85 (Mo. banc 2009). Discrimination exists if the taxpayer's level of assessment ratio is "grossly excessive" when compared to the common or average assessment ratio of the other similar properties. Cupples Hesse Corp. v. State Tax Com'n, 329 S.W.2d 696, 700 (Mo. 1959).
Among the approximate 2,625 litigant class asserting ratio discrimination claims before the STC, 2,156 Taxpayers relied on the FMV contained in the BOE decision letters. Of the 2,156, 1,887 did not witness any change from the FMV attributed to their properties by the Assessor and 269 utilized a FMV as reduced by the BOE. The remaining 469 litigants relied on the FMV as later adjusted by the STC.
When analyzing possible ratio discrimination, Taxpayers retained Robert Gloudemans and the Assessor retained Josh Myers as expert witnesses to more closely scrutinize the common or average level of assessment. Following a ratio study, an expert can analyze the level of assessment after comparing the Assessor's valuations of the representative sample to a market value figure typically influenced by sale prices. The ratio study allows an expert to determine the uniformity in the appraisal and assessment process after reviewing these calculations in a statistical format.
The expert calculations were within a narrow margin of separation; Gloudemans concluded a median level of appraisal of 93.7% and a median level of assessment of 29.98% while Myers concluded a median level of appraisal of 95.4% and a median level of assessment of 30.53%. The experts disagreed about existing sales chasing and regressivity affecting the median or common level of assessment. Gloudemans concluded that his calculations about existing sales chasing exceeded his preferred 3% tolerance level while Myers determined that any existing sales chasing did not exceed his preferred 5% tolerance level. In contrast to Myers, Gloudemans concluded the level of regressivity was also problematic.
Following the evidentiary hearing, the hearing officer found Taxpayers failed to provide persuasive evidence or argument supporting their discrimination claims. On December 4, 2019, the STC entered an order, affirming the hearing officer and adopting her decisions and order. Pursuant to Section 536.100, Taxpayers filed a petition for review with the St. Louis County circuit court. Following judicial review, the court granted Taxpayers' requested relief by reversing the STC Order and remanding for retrial with directions. In response, Assessor appeals the circuit court judgment favoring Taxpayers. Consequently, this court reviews the decision entered by the STC.[5]
We review the STC's decision and not the judgment of the circuit court. Bateman v. Rinehart, 391 S.W.3d 441 444 (Mo. banc 2013). This court must determine whether the STC's decision: (1) violates constitutional provisions (2) is in excess of the statutory authority or jurisdiction of the agency; (3) is not supported by competent and substantial evidence upon the record as a whole; (4) is, for any other reason, not authorized by law; (5) is made upon unlawful procedure or without a...
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