Detroit Lions, Inc. v. City of Dearborn

• Citation: 302 Mich.App. 676,840 N.W.2d 168
• Decision Date: 22 October 2013
• Docket Number: 300830.,Docket Nos. 299414
• Parties: DETROIT LIONS, INC. v. CITY OF DEARBORN.
• Court: Court of Appeal of Michigan (US)

302 Mich.App. 676

840 N.W.2d 168

DETROIT LIONS, INC.

v.CITY OF DEARBORN.

Docket Nos. 299414, 300830.

Court of Appeals of Michigan.

Submitted May 8, 2013, at Detroit.

Decided Oct. 22, 2013, at 9:00 a.m.

Hoffert & Associates, PC, Farmington Hills (by Myles B. Hoffert and David B. Marmon), for Detroit Lions, Inc. and WCF Land, LLC.

Secrest Wardle (by Stephanie Simon Morita, Farmington Hills) for the city of Dearborn.

Dykema Gossett PLLC, Detroit (by Carl Rashid, Jr. and Paul M. Mersino), for city of Allen Park.

Before: BECKERING, P.J., and JANSEN and M.J. KELLY, JJ.

JANSEN, J.

The instant consolidated appeals involve the ad valorem taxation of certain real property, commonly known as the Detroit Lions headquarters and practice facility (“practice facility” or “the real property”), as well as the associated tangible personal property (“the personal property”), by the city of Dearborn (“Dearborn”) and the city of Allen Park (“Allen Park”) (collectively “respondents”). In Docket No. 299414, Allen Park appeals by right the final decision of the Michigan Tax Tribunal (“MTT” or “tribunal”) prohibiting it from uncapping the taxable value of the practice facility following a sale and transfer of the real property on March 25, 2004. Petitioners Detroit Lions, Inc. (“Detroit Lions”) and WCF Land, LLC (“WCF Land”) (collectively “petitioners”) cross-appeal a different provision of that MTT decision determining the true cash value of the real property. In Docket No. 300830, petitioners appeal by right a second MTT decision, specifically challenging the MTT's method of determining the true cash value of the personal property. In Docket No. 299414, we affirm in part and reverse in part. In Docket No. 300830, we reverse and remand for further proceedings consistent with this opinion.

I. BACKGROUND AND PROCEDURAL HISTORY

The factual background of these appeals, while complex and protracted, is not in serious dispute. The practice facility consists of approximately 232.25 acres of land, a two-story office building, a practice building with an indoor football field, an outdoor football field, a par-three golf hole, and certain other outbuildings. The practice facility is situated partly in Dearborn and partly in Allen Park. The personal property located at the practice facility includes, but is not limited to, furniture, athletic training equipment, computer equipment, office machines, video and broadcast equipment, telephones, kitchen equipment, file cabinets, a chiropractic table, turf care equipment, and certain collectibles and antiques. Eighty-two percent of the real property is taxed by Dearborn and 18 percent of the real property is taxed by Allen Park. This 82/18 split generally governs the taxation of the personal property as well.

The practice facility was originally constructed by Ford Motor Land Development Corporation (“Ford Land”) and was completed in 2000 or 2001. In 2001, Ford Land and the Detroit Lions entered into a renewable, 30–year lease by which the Detroit Lions agreed to lease the practice facility with an option to purchase. According to Detroit Lions Senior Vice President and Chief Financial Officer J. Thomas Lesnau, the Detroit Lions never exercised this option to purchase the practice facility because “[t]he Lions did not have the money to do that.” Instead, the option to buy was assigned to William Clay Ford, Sr. Mr. Ford formed a single-member limited liability company, WCF Land, which exercised the option and purchased the practice facility from Ford Land on March 25, 2004. WCF Land paid $44,015,000 for the practice facility, of which $2,386,731 represented the value of the personal property, and $41,628,269 represented the value of the real property. As part of the sale, WCF Land acquired all of Ford Land's interest in the long-term lease with the Detroit Lions, and the Detroit Lions continued as lessee under the original lease agreement.

On June 14, 2004, the Detroit Lions commenced MTT Docket No. 00–307900 by filing a petition requesting a review of Dearborn's assessment of the practice facility for tax year 2004. On May 3, 2005, WCF Land commenced MTT Docket No. 00–314349 by filing a petition requesting a review of Allen Park's assessment of the practice facility for tax year 2005. Over the course of the next several years, the Detroit Lions and WCF Land filed numerous motions seeking to amend their petitions to add subsequent tax years. These motions were granted, and petitioners ultimately challenged both respondents' assessments of the practice facility for tax years 2004 through 2009. MTT Docket Nos. 00–307900 and 00–314349 were eventually consolidated.

On May 3, 2005, WCF Land commenced MTT Docket No. 00–314348 by filing a petition requesting review of the assessment of a certain portion of the personal property for tax year 2005. The Detroit Lions thereafter commenced MTT Docket No. 00–315349 by filing a petition requesting a review of the assessment of a differentportion of the personal property for tax year 2005. The following year, the Detroit Lions commenced MTT Docket No. 00–327111 by filing a separate petition challenging the assessment of certain items of personal property for tax year 2006. WCF Land commenced MTT Docket No. 00–327112 by filing a separate petition challenging the assessment of certain other items of personal property for tax year 2006. On June 28, 2008, the Detroit Lions commenced MTT Docket No. 00–352900 by filing a petition claiming that Dearborn had improperly taxed certain items of personal property. MTT Docket Nos. 00–314348, 00–315349, 00–327111, 00–327112, and 00–352900 were ultimately consolidated. The Detroit Lions and WCF Land filed numerous motions seeking to amend their petitions to add subsequent tax years. In the end, these motions were granted and petitioners challenged respondents' assessments of the personal property for tax years 2005 through 2009.

A hearing was conducted before the MTT during December 2009 and April 2010. The MTT considered Allen Park's contention that it was entitled to uncap the taxable value of the practice facility following its sale and transfer on March 25, 2004. Specifically, the MTT took evidence concerning whether WCF Land's purchase of the practice facility from Ford Land on March 25, 2004, was a transfer between entities under common control.

With regard to the personal property, petitioners introduced valuation evidence through the testimony of J. Michael Clarkson, a personal property appraiser from Austin, Texas. Clarkson testified that he had visited the practice facility once in 2003, and again in 2005, to inspect and inventory the personal property. Clarkson determined the value for each item of personal property according to its highest and best use, i.e., the purpose for which the item was originally designed or manufactured. Clarkson's appraisal encompassed approximately 1,000 items of personal property. Some items were owned by the Detroit Lions and some were owned by WCF Land. Clarkson testified that he did not know which items were owned by the Detroit Lions and which were owned by WCF Land.

Clarkson predominantly used the market-comparison method rather than the income method or cost-less-depreciation method to value the items of personalty. Clarkson opined that the market-comparison method best reflects the usual selling price, and therefore the true cash value, of an asset. Clarkson used market comparables from Internet e-commerce sites. Clarkson explained that many appraisers now use market comparable data from e-commerce sites instead of data from trade catalogues, as was used in times past. In appraising the personal property, Clarkson relied on current retail prices of comparable items, such as eBay “buy-it-now” prices. Clarkson did use the cost-less-depreciation method to appraise certain items of personal property that were unique and did not have an active secondary market.

After making his appraisal, Clarkson submitted a written report, which was admitted into evidence by the MTT over the objection of Dearborn's attorney. Clarkson concluded that the aggregate true cash value of the personal property was $1,620,000 for tax year 2005, $1,450,000 for tax year 2006, $1,280,000 for tax year 2007, $1,330,000 for tax year 2008, and $1,200,000 for tax year 2009.¹

The parties disagreed as to whether Clarkson had seen and taken into account every item of personal property at the practice facility. Counsel for Dearborn suggested that Clarkson had missed several items during his appraisal and repeatedly attacked Clarkson's market-comparables technique as unreliable. Clarkson admitted that he could not remember which depreciation tables he had used with respect to certain items and that he had missed a few items of personal property during his appraisal, such as a washer and dryer. Nonetheless, he maintained that his appraisal was accurate. Dearborn's attorney asserted that Clarkson was “being purposely evasive” or “incompetent.”

Lesnau testified that some of the personal property had been brought to the practice facility from the Detroit Lions' former headquarters in Pontiac, and some of the personal property had been acquired by the Detroit Lions after moving to the practice facility. Moreover, some of the personal property had been acquired directly from Ford Land. Lesnau testified that the NFL considered the practice facility to be “state of the art” when it was built, but that much of the equipment had become obsolete in the intervening years.

Lesnau testified that he provided Clarkson a list of new assets that were acquired and old assets that were discarded or eliminated for each tax year through 2008. Clarkson used this information in his report. However, counsel for Dearborn questioned whether Clarkson had actually received a list of new acquisitions for 2008.

Lesnau testified that he walked through the practice facility in 2003 with Mr. Lott, inspected the personal property, and...