District of Columbia v. Craig, 06-TX-177.

• Decision Date: 19 July 2007
• Docket Number: No. 06-TX-178.,No. 06-TX-177.,06-TX-177.,06-TX-178.
• Citation: 930 A.2d 946
• Parties: DISTRICT OF COLUMBIA, et al., Appellants, v. Peter S. CRAIG, et al., Appellees. District of Columbia, et al., Appellants, v. Polly H. Ernst, et al., Appellees.
• Court: D.C. Court of Appeals

930 A.2d 946

DISTRICT OF COLUMBIA, et al., Appellants, v. Peter S. CRAIG, et al., Appellees.

District of Columbia, et al., Appellants, v. Polly H. Ernst, et al., Appellees.

No. 06-TX-177.

No. 06-TX-178.

District of Columbia Court of Appeals.

Argued January 12, 2007.

Decided July 19, 2007.

Mary L. Wilson, Senior Assistant Attorney General, with whom Robert J. Spagnoletti, Attorney General for the District of Columbia at the time the brief was filed, Eugene A. Adams, Interim Attorney General at the time the reply brief was filed, Todd S. Kim, Solicitor General, and Edward E. Schwab, Deputy Solicitor General, were on the brief for appellants.

Peter S. Craig, with whom Nathalie V. Black, Stephen M. Truitt and Stephen B.

Ives, Jr. were on the brief, for appellees in 06-TX-177.

Gilbert Hahn, Jr. for appellees in 06-TX-178.

John M. Goodman filed a brief for amicus curiae Federation of Citizens Associations of the District of Columbia.

Before WASHINGTON, Chief Judge, THOMPSON, Associate Judge, and KERN, Senior Judge.

THOMPSON, Associate Judge:

These consolidated appeals are from decisions of the Superior Court Tax Division (the "Tax Division") in two certified class actions in which the court entered summary judgment against respondents/appellants the District of Columbia and several District officials (together, "the District").¹ In Case No. 06-TX-177, petitioner/appellee Peter Craig sued on behalf of a class of taxpayers owning Class 1 (i.e., residential) properties in a section of the District designated for real property tax purposes as Triennial Group I, to invalidate the District's real property tax assessments for tax year 2002. As relief, Craig asked the Tax Division to "find that the assessments ... of Class 1 properties in former Triennial Group I, made in 2001 for Tax Year 2002 ... are arbitrary, capricious and contrary to law and the Constitution and are hence void," to order the District to "reinstate the assessments effective for Tax Year 2001," and to "refund for Tax Year 2002 to each [class] member ... the difference ... between the taxes paid on the assessments voided herein" and the 2001 tax assessment. In Case No. 06-TX-178, petitioners Polly Ernst and Margot Hahn brought a similar action on behalf of a "class in formation," challenging assessments for tax years 2002 and 2003, which suit the Tax Division consolidated with Craig as to claims regarding tax year 2002 assessments.²

On September 23, 2005, the Tax Division entered an order in Craig concluding that "the assessments made by [the District] for Class 1 residential properties in Triennial Group I for Tax Year 2002 are arbitrary, capricious, and [an] abuse of discretion, and otherwise not in conformity with the Constitution of the United States or the law of the District of Columbia, and are, therefore, void." The court ordered the District to "make refunds ... to all owners of Class 1 residential properties in Triennial Group I who were finally assessed at a higher level in tax year 2002 than in tax year 2001 and who paid taxes on such higher assessment." On November 10, 2005, the court ordered similar relief in the consolidated portion of Ernst.

The District appellants contend that the Tax Division lacked jurisdiction to entertain the class action suits and to award the declaratory and injunctive relief that it ordered. The District also urges that, even assuming that the Tax Division had jurisdiction, the court erred in granting summary judgment to the petitioners/appellees. We agree, and therefore vacate the class certification order and injunction reverse the Tax Division's summary judgment ruling, and remand.

I. Factual and Procedural Background

The primary objective of real property taxation in the District of Columbia is to ensure "[e]quitable sharing of the financial burden of the government...." D.C.Code § 47-801(1). Under the statutory scheme, a rate of taxation established by the D.C. Council is applied to the "assessed value" of all real property subject to taxation. D.C.Code § 47-812(a). The dispute in these appeals relates to the methodology that the District used to arrive at the assessed value of so-called Triennial Group I residential properties for tax year 2002.

D.C.Code § 47-820(a)(3) provides that the "assessed value for all real property shall be the estimated market value of such property" on the relevant date, "as determined by the Mayor." "Estimated market value" is defined as "the most probable price at which a particular piece of real property ... would be expected to transfer under prevailing market conditions" between parties dealing at arm's length. D.C.Code § 47-802(4). The Mayor may make assessments "manually or through the use of an automated system or systems such as the Computer-Assisted Mass Appraisal System," D.C.Code § 47-820(a)(3), and is required annually to compile an estimated assessment roll listing the assessed value of all real property as of the valuation date. See D.C.Code § 47-820(a)(1). Estimated assessments are subject to appeal under D.C.Code § 47-825.01(f-1), which provides for a first-level administrative review (to the Office of Tax and Revenue, "OTR") (see D.C.Code § 47-825.01(f-1)(1)(A) & (B)), which review may be followed by an appeal to the Board of Real Property Assessments and Appeals ("BRPAA") (see D.C.Code § 47-825.01(f-1)(2)) and thereafter to the Superior Court. See D.C.Code § 47-825.01(j-1). The Tax Division has exclusive jurisdiction of "all appeals from and petitions for review of assessments of tax ... made by the District of Columbia." D.C.Code § 11-1201(1).

Beginning in tax year 1999, the District began a triennial assessment system under which (subject to certain exceptions) all real property was assessed at least once every three years. See D.C.Code § 47-820(b-1)(1). Under the short-lived triennial system, each lot was assigned to one of three "Triennial Groups." For Triennial Group I, the assessed value for tax year 1999, based on valuation as of January 1, 1998, remained in effect for tax years 2000 and 2001 as well.³ Beginning with tax year 2002, each property that had completed a three-year cycle was returned to annual revaluation. See D.C.Code § 47-820(b-2). Accordingly, Class 1 properties in Triennial Group I (including the property of petitioner/appellee Craig and the certified class he represents) were reassessed for tax year 2002, based on valuation as of January 1, 2001.⁴

To determine proposed assessments for Triennial Group I residential properties (other than condominiums) for tax year 2002, OTR developed an across-the-board multiplier for each neighborhood or subneighborhood (the "neighborhood multiplier"). Each property's proposed assessment for tax year 2002 was the product of the applicable neighborhood multiplier and the property's prior (tax year 1999) assessed value. The dispute before us pertains to the methodology by which OTR developed the neighborhood multipliers.

Roughly described, the methodology entailed identifying properties in each Triennial Group I neighborhood that sold during calendar year 1999 or 2000; determining a ratio of each such property's tax year 1999 assessed value to the property's calendar year 1999 or 2000 sales price (the property's "assessment-sales ratio"); arraying the ratios from lowest to highest and identifying the median; expressing the reciprocal of the median ratio; designating the reciprocal as the neighborhood multiplier; and applying the neighborhood multiplier to the previous assessed value of each property. OTR Director Henry Riley explained that the foregoing methodology, which OTR refers to as a "trending methodology," was intended to capture the steady growth in value in the District real estate market. According to Mr. Riley, the methodology was an efficient application of OTR's limited resources and manpower to ascertain market value.

Using the trending methodology, OTR applied a multiplier of 1.492 to the previous assessed value of each residential property in the District neighborhood known as Cleveland Park to arrive at proposed tax year 2002 assessments. As a result, appellee Craig's tax year 1999 assessment of $401,529 for his property at 3406 Macomb Street, N.W., was multiplied by 1.492 to reach a proposed tax year 2002 assessment of $599,081. Neighborhood multipliers for neighborhoods in Triennial Group I ranged from the high of 1.492 for Cleveland Park to a low of .973 for Congress Heights.

On April 27, 2001, OTR mailed notices of the proposed tax year 2002 assessments to Triennial Group I property owners. Responding to the notice he received, petitioner Craig requested that OTR administratively review his proposed assessment. After OTR declined to reduce the assessment, Craig appealed to the BRPAA, contending that the proposed assessment exceeded his property's market value and also that OTR's trending methodology created systemic errors—i.e., resulted in some properties being over-assessed and others being under-assessed—thereby, Craig argued, violating both District law and the United States Constitution. Asserting that there had been no material improvements to his property since 1957 and that his house had interior damage because of a leaky roof, Craig asked the BRPAA to roll back his own assessment from the proposed assessed value of $599,081 to the prior assessed level of $401,529, or at least to his property's actual market value, which Craig claimed was $460,537. He also asked the BRPAA to roll back the assessments for all residential properties in Cleveland Park to their previous assessment levels unless and until the District made new "lawful" assessments. A number of other Cleveland Park residential property owners also filed appeals with OTR and then the BRPAA. The BRPAA held a hearing on common issues.⁵

The BRPAA concluded that the District's assessment methodology was consistent with the broad discretion given the Mayor and Deputy Chief Financial Officer by the...