Dodge City Coop. Exch. v. Bd. of Cnty. Commissioners of Gray Cnty.

• Decision Date: 22 July 2022
• Docket Number: 122,499
• Citation: 62 Kan.App.2d 391,516 P.3d 615
• Parties: DODGE CITY COOPERATIVE EXCHANGE, Appellee/Cross-appellant, v. BOARD OF COUNTY COMMISSIONERS OF GRAY COUNTY, Kansas, Appellant/Cross-appellee.
• Court: Kansas Court of Appeals

62 Kan.App.2d 391
516 P.3d 615

DODGE CITY COOPERATIVE EXCHANGE, Appellee/Cross-appellant,
v.
BOARD OF COUNTY COMMISSIONERS OF GRAY COUNTY, Kansas, Appellant/Cross-appellee.

No. 122,499

Court of Appeals of Kansas.

Opinion filed July 22, 2022.

Michael Giardine, assistant county attorney, for appellant/cross-appellee.

Marc E. Kliewer and Klint A. Spiller, of Kennedy Berkley Yarnevich & Williamson, Chartered, of Salina, for appellee/cross-appellant.

Before Atcheson, P.J., Warner, J., and Anthony J. Powell, Court of Appeals Judge, Retired.

Warner, J.:

62 Kan.App.2d 392

This appeal involves the classification for tax purposes of various equipment associated with grain storage bins in Gray County. The County assessed ad valorem taxes for tax years 2013 and 2014 for the equipment, which was bolted to the storage bins to allow for transfer and monitoring of grain, based on its conclusion that the pieces of equipment were taxable fixtures rather than personal property.

The owner of the equipment—the Dodge City Cooperative Exchange (the Co-op)—appealed this assessment to the Board of Tax Appeals. When the Board affirmed the County's assessment, the Co-op petitioned for judicial review by the district court, seeking a trial de novo under K.S.A. 2016 Supp. 74-2426(c)(4)(B). After considering the parties’ arguments and the evidence presented, the district court reversed the taxing authorities. The court ordered the County to refund the taxes collected based on the equipment's value for both the 2013 and 2014 tax years and all subsequent tax years.

516 P.3d 619

The County has now appealed the district court's decision, arguing the court imposed an incorrect burden of proof and erred in concluding that the various pieces of equipment were not fixtures. The Co-op has cross-appealed, claiming some of the district court's findings were not supported by the record but asking this court to affirm the district court's ultimate conclusion. After carefully considering the parties’ arguments and reviewing the record before us, we affirm the district court's finding that the equipment was not taxable property. We vacate the district court's prospective judgment regarding tax years after 2014, as that judgment went beyond the scope of the Co-op's petition for judicial review.

FACTUAL AND PROCEDURAL BACKGROUND

In 2009, the Co-op built two grain storage bins at its facility in Ensign. It also purchased equipment to move, blend, aerate, monitor, and dispense the stored grain. The additional pieces of equipment included:

62 Kan.App.2d 393

• An 80-foot, 45,000 bushels per hour (bph) Essmueller drag conveyor;

• A 107-foot, 45,000 bph Essmueller drag conveyor;

• A 235-foot, 40,000 bph Hi Roller belt conveyor;

• Two 18-inch by 57-foot bin unloading screw conveyors;

• Two 18-inch by 35-foot belt feeder square spouts;

• Two 18-inch square transitions;

• Two 24-inch by 15-foot square unloading spouts with side draw slide gates;

• Two overhead connecting bridges;

• Aeration-system components;

• Temperature-monitoring system components; and

• A Compuweigh Train Loadout remote communications module and components.

These pieces of equipment were assembled at the site of storage bins and were installed by bolting the equipment either to the bins or to the ground. Fred Norwood, whose company installed the equipment, explained that the equipment could be removed for repair or replacement with "relative ease." According to Jerald Kemmerer, the Co-op's CEO, the Co-op had removed similar equipment from other grain elevators in the past for use in other locations. When the equipment was moved, it would not damage the storage bin (though there might be an open hole where a conveyor or some other equipment had been).

For the 2011 tax year, the Gray County Appraiser assessed ad valorem taxes for the various pieces of equipment based on its finding that the equipment had become affixed to (and thus become part of) the real property. Apparently, the Co-op contested this classification and brought its claims before the Board. The record and disposition of that case are not before us, however.

This appeal involves a similar classification in tax years 2013 and 2014. During those years, the Gray County Appraiser again classified the Co-op's various equipment as fixtures and assessed ad valorem taxes based on the equipment's value. The Co-op again contested the County's classification, appealing the County's assessment to the Board of Tax Appeals.

62 Kan.App.2d 394

Our review of the proceedings before the Board is hampered by the fact that the record on appeal does not include the administrative record. Instead, we must rely on the summary contained in the Board's final order and the parties’ later submissions to the district court to ascertain what occurred there.

The Board's order indicates that an evidentiary hearing was held on both years’ assessments in April 2015. During the hearing, Kemmerer, Norwood, and Jerry Denney, the Gray County Appraiser, testified. According to the Board's summary, Norwood explained that the equipment could easily be removed from the storage bins, but the bins could not operate properly without the equipment. Kemmerer described how similar pieces of equipment had been removed from and installed on other bins. And the County Appraiser discussed why he classified the equipment as fixtures.

After considering the evidence, the Board issued its order in September 2015 affirming the County's classification of all equipment,

516 P.3d 620

except the temperature-monitoring system, as taxable fixtures to the real estate. To reach this conclusion, the Board first found that the Co-op—not the County—bore the burden of proving that the various pieces of equipment were personal property. The Board then applied a three-part test to determine whether the various equipment were fixtures. The Board found that the equipment became annexed to the realty when it was bolted to the bins, was adapted to the bins’ function of moving and storing grain, and—given the size and weight of the equipment—was intended to be annexed until the equipment broke or became obsolete. The Board thus affirmed the County's assessment of all equipment except the temperature-monitoring system.

The Co-op petitioned for judicial review of the Board's decision, filing its petition with the district court and requesting a trial de novo under K.S.A. 2016 Supp. 74-2426(c)(4)(B). In its petition, the Co-op challenged all aspects of the Board's decision, except its analysis of the temperature-monitoring system (which the Board found to be personal property) and the overhead connecting bridges.

Though K.S.A. 2016 Supp. 74-2426(c)(4)(B) contemplates a "trial de novo" before the district court, the parties did not conduct a new evidentiary hearing. Instead, after a series of delays in the

62 Kan.App.2d 395

litigation, the parties submitted testimony by affidavit from Kemmerer, as well as various stipulations. The parties did not dispute the short summary of the evidence provided to the Board, with both parties referencing the Board's decision in their respective factual recitations. In addition to this written evidentiary record, the parties submitted written argument on the appropriate burden of proof and the application of the fixture test to the equipment in question.

In his affidavit, Kemmerer explained in detail how each piece of equipment subject to the assessment could be easily removed and how removal would not affect the bins’ value because similar replacement equipment could be installed. He also described three...