Fraughton v. Utah State Tax Comm'n

• Decision Date: 10 January 2019
• Docket Number: No. 20170430-CA,20170430-CA
• Citation: 438 P.3d 961
• Parties: Edward J. FRAUGHTON, Petitioner, v. UTAH STATE TAX COMMISSION and Board of Equalization of Salt Lake County, Respondents.
• Court: Utah Court of Appeals

438 P.3d 961

Edward J. FRAUGHTON, Petitioner,

v.UTAH STATE TAX COMMISSION and Board of Equalization of Salt Lake County, Respondents.

No. 20170430-CA

Court of Appeals of Utah.

Filed January 10, 2019

Edwin S. Wall, Salt Lake City, Attorney for Petitioner

Bradley C. Johnson, Attorney for Respondent Board of Equalization of Salt Lake County

Judge David N. Mortensen authored this Opinion, in which Judges Kate Appleby and Ryan M. Harris concurred.

Opinion

MORTENSEN, Judge:

¶1 In 2015, Edward J. Fraughton challenged the assessed value on his residence, claiming that promises made in 1973 by unidentified persons from South Jordan City (the City) were key to determining the correct value. Fraughton's challenge was, in large part, successful, resulting in just a three percent difference in the assessed value from Fraughton's claimed value. But Fraughton refused to stipulate to the new assessed value and appealed to the Utah State Tax Commission (the Commission). Fraughton now seeks review of the Commission's final decision that Fraughton had neither shown an error in the assessment nor provided a sound evidentiary basis for a lower residential property value. We are unpersuaded by Fraughton's arguments and decline to disturb the decision of the Commission.

BACKGROUND

¶2 Edward Fraughton purchased an abandoned brick church in the City in 1973. Fraughton, an artist, planned to preserve the historic building and the 2.41 acres of land on which it sat (the Property) for use as his workshop and as a residence for his family.

¶3 For the 2015 tax year, the Property was assessed at $1,163,780. In September 2015, Fraughton appealed that assessment to the Salt Lake County Board of Equalization (the Board), arguing that the fair market value of the Property was $704,480. In a March 2016 hearing, the Board reduced the assessed value to $947,000 based on evidence submitted by the Salt Lake County Assessor. The Board noted that Fraughton had not "provided evidence to establish a value." Fraughton then appealed the Board's decision to the Commission.

¶4 At the Commission hearing in April 2017, Fraughton did not provide comparable sales values, an appraisal, or any other evidence of the Property's value. Instead, he argued that the fair market value of the Property should be based on a "reasonable adjustment" to the purchase price instead of "speculative" market value. In contrast, the Commission based its conclusion on a report submitted by an appraiser for Salt Lake County. The appraiser, relying primarily on comparable land sales, valued 1.48 acres of the Property at $8.65 per square foot and .93 acres of the Property at $4.11 per square-foot, for a total value of $724,155 in land. The appraiser noted that nearly all of the value consisted of the land, with the building valued at only $1,500, for a total rounded value of $725,700 for the Property.

¶5 The Salt Lake County appraiser also stated that the county assessor's office contacted Fraughton and offered to stipulate to a value of $725,700 for the Property. Fraughton had requested an assessed value of $704,480 from the Board in August 2015, but in October 2015, he declined to stipulate to Salt Lake County's adjusted lower value. These two values differ by $21,200, or about three percent.

¶6 The Commission also received evidence at the hearing, in the form of a letter from the City, that the Property was zoned—current as of October 2015—as RM or "Residential Multi-Family" by the City, and it had been in that zoning category since at least 1987. Allowed uses in RM zoning include various residential dwellings, community and public safety services, worship, public utilities, and daycare. Fraughton testified that the Property was indeed zoned RM, but he contended that this designation meant "Rural Mix," which allowed "a mix of agricultural and residential uses as well as an art studio." He further contended that the City had agreed to this special zoning designation when he purchased the property in 1973.¹

¶7 After considering the evidence presented, the Commission set the fair market value of the Property at $725,700. The Commission limited its decision to determining the Property's value and did not address the zoning issue. Fraughton petitions for judicial review.

ISSUES AND STANDARDS OF REVIEW

¶8 Fraughton brings two claims. First, he contends the Commission erred in its determination of the fair market value of the Property. When reviewing proceedings before the Commission, this court "grant[s] the Commission deference concerning its written findings of fact, applying a substantial evidence standard on review," and grants "no deference concerning its conclusions of law, applying a correction of error standard, unless there is an explicit grant of discretion contained in a statute at issue before the appellate court." Utah Code Ann. § 59-1-610(1) (LexisNexis 2015); see also Atlas Steel, Inc. v. Utah State Tax Comm'n , 2002 UT 112, ¶ 14, 61 P.3d 1053 (stating that the Commission's findings of fact receive a substantial evidence standard of review, but its conclusions of law receive no deference).

¶9 Second, Fraughton argues that the Commission violated the federal and state constitutions by basing the fair market value of the Property on comparable property values without taking into consideration "non-intrinsic human values," such as open space, history, and aesthetics. This court reviews constitutional questions for correctness. State v. Van Dyke , 2009 UT App 369, ¶ 18, 223 P.3d 465.

ANALYSIS

I. The Commission Correctly Determined the Fair Market Value of the Property

¶10 When challenging an assessment made on property by the Commission, the "protesting taxpayer is required not only to show substantial error or impropriety in the assessment, but also to provide a sound evidentiary basis upon which the Commission could adopt a lower valuation." Utah Ry. Co. v. Utah State Tax Comm'n , 2000 UT 49, ¶ 6, 5 P.3d 652 (cleaned up). Thus, Fraughton, as the protesting taxpayer, has a two-pronged burden. He must (1) show that the Commission made a substantial error in arriving at the Property's current value and (2) provide a sound evidentiary basis for the Commission to change the valuation. See id.² We address each prong in turn.

A. Fraughton Fails to Show That the Commission Erred in Arriving at the Property's Current Value

¶11 On review, Fraughton does not challenge the actual dollar value the Commission placed on the Property; rather, he challenges the zoning designation. Fraughton contends that the City, in an effort to encourage completion of the purchase of the Property, agreed in 1973 to rezone, or spot zone,³ the Property as "Rural Mix." Fraughton argues that his testimony of what happened in 1973 shows that there has been an error in the zoning designation of the Property. He further argues that the Commission should have obtained from the City evidence of the Property being zoned Residential Multi-Family in 1973 if the Property had, in fact, been zoned Residential Multi-Family at that time. Because the City failed to provide such evidence to the Commission, Fraughton argues that the Rural Mix zoning designation should be grandfathered to the present. He asserts, "The zoning as of and from 1973 should not merely be presumed based on the [City planner's] evidence as to the zoning ... at least of 1987." In a nutshell, Fraughton's argument is that (1) he was told by an unidentified City official that the Property would be spot-zoned as Rural Mix in 1973 when he purchased it and (2) the Commission has not provided evidence that this putative Rural Mix zoning was ever changed.

¶12 Fraughton's argument is a classic red herring in that he is attempting to bring the Commission into a dispute that essentially involves a disagreement that he has with the City.⁴ Therefore, Fraughton's evidence about an oral pledge given in 1973 is largely irrelevant to the issue before this court. To persuade this court, Fraughton needed to provide material evidence that a pledge allegedly made in 1973 was acted upon and, therefore, that the Commission made a substantial error in arriving at the Property's current value. See Utah Ry. , 2000 UT 49, ¶ 6, 5 P.3d 652. Fraughton has failed to do so, and, more importantly, he has failed to provide evidence that the Property ever was zoned otherwise than as identified by the City in 2015.

¶13 In contrast, the Commission acted on evidence that the Property was zoned as Residential Multi-Family in October 2015 and that it has been so zoned since at least 1987. If the Property was zoned Residential Multi-Family in 1987, the presumption, in the absence of evidence of a pre-1987 change to the contrary, is that it was zoned Residential Multi-Family in the years before. Fraughton fails to explain why his assertion regarding how the Property was zoned in 1973 is any more credible than the Commission's evidence of the Property's 2015 and 1987 zoning designation. And as a protesting taxpayer, the evidentiary burden is on Fraughton. Id.

¶14 Fraughton admits that no change in zoning status can occur in the absence of notice and a hearing, implying that the Property must currently be zoned Rural Mix because there was no notice or hearing regarding a change in the zoning to Residential Multi-Family. Yet this is exactly what Fraughton infers happened between 1973 and 1987 when he contends that the Property's zoning was improperly changed from Rural Mix to Residential Multi-Family. One possible explanation for the lack of evidence about notice and a hearing is that the zoning change was done illicitly. Yet Fraughton offers no evidence of such an illicit change other than his personal, uncorroborated contention. A more likely and simpler explanation is that there is no evidence of a change in zoning because the zoning designation was never changed. In any event, even if the Property is not currently zoned correctly, that fact does not change the current market value. Ultimately, zoning is a...