Equitable Life Assur. Soc. of U.S./Marriott Hotels, Inc. v. State Tax Com'n of Missouri, Nos. 62286

• Decision Date: 20 April 1993
• Docket Number: Nos. 62286
• Parties: EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES/MARRIOTT HOTELS, INC., Appellant/Cross Respondent, v. STATE TAX COMMISSION OF MISSOURI, et al., Kenneth D. MORTON, Assessor for St. Louis County, Missouri, Respondent/Cross Appellant, v. STATE TAX COMMISSION OF MISSOURI, et al., Defendants/Respondents. & 61574.
• Court: Missouri Court of Appeals

Page 376

852 S.W.2d 376

EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED

STATES/MARRIOTT HOTELS, INC., Appellant/Cross Respondent, v. STATE TAX COMMISSION OF MISSOURI, et al., Kenneth D. MORTON, Assessor for St. Louis County, Missouri, Respondent/Cross Appellant, v. STATE TAX COMMISSION OF MISSOURI, et al., Defendants/Respondents.

Nos. 62286 & 61574.

Missouri Court of Appeals,

Eastern District,

Division Four.

April 20, 1993.

Motions for Rehearing and/or Transfer to

Supreme Court Denied May 18, 1993.

Jerome Wallach, Cathy Steele, St. Louis, for appellant/cross-respondent.

Dennis C. Affolter, Clayton, for respondent/cross appellant.

Richard L. Wieler, Jefferson City, for defendants/respondents.

CRAHAN, Judge.

These are consolidated appeals from separate decisions of the State Tax Commission of Missouri ("Commission") relating to the valuation and assessment of real property located in St. Louis County, Missouri, commonly known as the St. Louis Marriott Hotel ("the property") for the year 1984. ¹ Kenneth D. Morton, St. Louis County Assessor ("Assessor") appeals from the Commission's valuation of the property, contending that the Commission's use of a gross income figure from a "discredited appraisal" rendered its valuation based on the income capitalization approach arbitrary and unsupported by competent and substantial evidence. Equitable Life Assurance Society of the United States/Marriott Hotels, Inc. ("Taxpayer") appeals the ratio applied by the Commission for equalization of the assessment. Specifically Taxpayer maintains that the Commission erred in applying the arithmetic mean instead of the median ratio derived from the Commission's annual ratio study to satisfy the requirements of Article X, Section 3 of the Missouri Constitution for uniformity of taxation upon the same class of property within each taxing jurisdiction. We affirm the decisions of the Commission in both appeals.

The parties agree that Assessor's appeal does not require construction of the revenue laws but only the valuation placed upon specific property, thereby vesting this Court with jurisdiction pursuant to Mo. Const. art. V, § 3 (1945). See Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978). Relying on the same constitutional provision, Taxpayer originally filed its appeal in the Missouri Supreme Court, alleging that construction of the revenue laws was required. The Missouri Supreme Court transferred Taxpayer's appeal to this Court and the appeals were consolidated. Under such circumstances, we are required to examine the jurisdictional issue anew and to retransfer the appeal if jurisdiction is lacking. Collector of Revenue v. Parcels of Land, 566 S.W.2d 475, 476 (Mo. banc 1978); State v. Woods, 645 S.W.2d 745, 746 (Mo.App.1983) (en banc). Because the analysis of this issue is intertwined with our analysis of the precise issue presented by Taxpayer's appeal, we will consider those issues together after considering the merits of Assessor's appeal.

The property in question contains approximately 12.15 acres, zoned commercial, and is improved by a 604 room hotel consisting of six interconnecting buildings, five of which were constructed in 1972 and one of which was constructed in 1981. The improvements include various restaurant and banquet facilities, tennis courts, swimming pools and concrete and asphalt driveways and parking areas.

The neighborhood in which the property is located is strongly influenced by Lambert St. Louis Airport, situated directly to the north. The area contains one of the largest concentrations of transient hotel facilities in the area, including over 4,000 hotel rooms. Adjoining properties include another hotel, a car rental agency, long-term airport parking and the airport entrance itself. The property is directly accessible from Interstate 70 and locally accessible from Interstates 270 and 170.

The property is owned by Equitable Life Assurance Society of the U.S. and is leased to Marriott Hotels, Inc. The original term of the lease is twenty-five years, renewable at lessee's option for five ten-year periods on the same terms and conditions.

The parties agreed and the Commission found that the highest and best use of the property was as improved for hotel use. Assessor valued the property on the general assessment rolls as of January 1, 1984 at $3,946,180. Taxpayer appealed that assessment to the County Board of Equalization which ordered the assessed value reduced to $3,775,000. Taxpayer then sought review of this assessment by the Commission. Following an evidentiary hearing, the Commission determined that the assessed value of the property should be further reduced to $3,443,000.

In support of its determination, the Commission issued extensive findings of fact and conclusions of law evaluating the property according to the three accepted methods for determining the property's true value in money: income capitalization, sales comparison and replacement cost less depreciation. There is no dispute that the Commission properly determined that the income capitalization approach was most reflective of market value in this instance, which was also the method ultimately relied upon by Assessor's and Taxpayer's experts. However, in calculating the market value of the property according to the income capitalization method, the Commission found that neither party presented an appraisal that could be accepted in its entirety. Instead, the Commission recalculated the market value based on facts contained in the analyses presented by each of the parties' experts. Based on these calculations, the Commission determined the true value of the property on January 1, 1984 to be $21,385,000. The Commission further found that application of the constitutionally-mandated assessment ratio of thirty-three and one-third percent would result in assessment of the property at a greater percentage of true value than other property, generally, of the same class within the taxing jurisdiction. Specifically, based on official notice of its assessment ratio study for St. Louis County for the 1984 tax year and the testimony of Mr. James Follina, Manager of Ratio Study for the Commission, the Commission determined that the average assessment ratio for St. Louis County for the tax year 1984 was 16.1 percent (rounded). Applying this ratio to the Commission's calculated market value of $21,385,000, the Commission found the proper assessed value of the subject property on January 1, 1984 to be $3,443,000.

Assessor's Appeal--Valuation Of The Property

The principles which constrain our review of the Commission's actions in assessing property for tax purposes were succinctly summarized in Savage v. State Tax Comm'n of Missouri, 722 S.W.2d 72, 74-75 (Mo. banc 1986):

Our review of the Commission's decision is ordinarily limited to whether that decision is "supported by competent and substantial evidence upon the whole record or whether it was arbitrary, capricious, unreasonable, unlawful or in excess of its jurisdiction." Evangelical Retirement Homes of Greater St. Louis, Inc. v. State Tax Commission, 669 S.W.2d 548, 552 (Mo. banc 1984); § 536.140.2, RSMo 1978. In matters of property tax assessment, this Court has acknowledged "the wisdom of the General Assembly in providing an administrative agency to deal with this specialized field." State ex rel. Cassilly v. Riney, 576 S.W.2d 325, 328 (Mo. banc 1979). Thus, we recognize that the courts may not assess property for tax purposes, Drey v. State Tax Commission, 345 S.W.2d 228, 238-9 (Mo.1961), that proper methods of evaluation and assessment of property are delegated to the Commission, C & D Investment Co. v. Bestor, 624 S.W.2d 835, 838 (Mo. banc 1981) and that on review, "[t]he evidence must be considered in the light most favorable to the administrative body, together with all reasonable inferences which support it, and if the evidence would support either of two opposed findings, the reviewing court is bound by the administrative determination." Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, 894 (Mo. banc 1978) (citation omitted). When read together, our cases demonstrate that this Court is loathe to substitute its judgment for the expertise of the Commission in matters of property tax assessment. Absent clear abuse, we will "stay our hand[s]." Pierre Chouteau Condominiums v. State Tax Commission, 662 S.W.2d 513, 517 (Mo. banc 1984) (Blackmar, J. concurring).

Assessor's attack on the Commission's market valuation of the property is a narrow one. Assessor does not dispute the Commission's selection of the income capitalization method or the actual mechanics of the Commission's calculation. Rather, Assessor claims that the starting point for the Commission's calculations, which he agrees is and should be the "gross possible annual income" for the property, is understated, thereby inherently producing a market value that is understated to the same degree. Acknowledging that the "gross possible annual income" figure utilized by the Commission is contained in the analysis presented by Taxpayer's expert, Assessor nevertheless maintains that such figure is arbitrary, capricious and unsupported by substantial evidence because: (1) the Commission found that Taxpayer's expert was "not credible"; (2) Taxpayer's expert did not adequately explain or quantify or justify his estimate; and (3) the "gross possible annual income" figure accepted by the Commission was against the overwhelming weight of the evidence which showed that the actual gross income for the subject property was substantially higher in both 1983 and 1984. We disagree.

Assessor's first contention is based on a mischaracterization of the Commission's findings. Contrary to Assessor's contention, the Commission did not find that Taxpayer's expert was "not credible." Rather, the Commission found certain of his analyses "not credible" based on its determination that other factual components of such...