Fuchs v. Robbins
| Decision Date | 30 June 1999 |
| Docket Number | 3,98-275 |
| Parties | Lawrence FUCHS, as the Executive Director of the Department of Revenue, State of Florida, and The Miami Beach Ocean Resort, Inc., Appellants, v. Joel W. ROBBINS, Property Appraiser, Dade County, Florida, Appellee. |
| Court | Florida District Court of Appeals |
Appeals from the Circuit Court of Dade County, Margarita Esquiroz, Judge.
Robert A. Butterworth, Attorney General, and Joseph C. Mellichamp, III, Assistant Attorney General; Arnaldo Velez; Bloom & Minsker, for appellants.
Robert A. Ginsburg, County Attorney, and Jay W. Williams, Assistant County Attorney, for appellee.
Before SCHWARTZ, C.J., and NESBITT, JORGENSON, COPE, LEVY, GE0RSTEN, * GODERICH, GREEN, FLETCHER, SHEVIN, and SORONDO, JJ.
ON REHEARING EN BANC
We grant rehearing en banc and affirm the decision of the trial court which held section 192.042(1), Florida Statutes (1991) to be unconstitutional. 1 The statute requires that a zero valuation, for ad valorem property tax purposes, be placed on buildings under construction and not substantially completed on the taxing date (January first of each year). We conclude that the statute is unconstitutional because it violates the mandate of the Florida Constitution that all real property 2 (with certain inapplicable exceptions) be assessed and taxed at just valuation 3 (fair market value). Here, the real property improvement (an incomplete hotel) on the owner's land had an uncontested fair market value of $3,790,227, on January 1, 1992 (the tax year in question), but the subject statute requires this incomplete improvement to be assessed and taxed at a zero value. As this result is in direct conflict with the constitution's mandate to assess all real property at just valuation, it follows that the statute contravenes the constitution; which, of course, means that the legislature was not, and is not, empowered to enact the statute. If we were to conclude otherwise, the owners would not be required to pay their fair share of the 1992 cost of local governmental services, such as police and fire protection, planning, building, zoning, public works, and others funded by ad valorem taxes. 4 , 5
We start our analysis with article VII, section 4, Florida Constitution (1968), which reads in pertinent part:
"By general law regulations shall be prescribed which shall secure a just valuation of all property for ad valorem taxation...." 6
The "just valuation" of article VII, section 4, which the legislature is mandated to guarantee, 7 is synonymous with "fair market value," Valencia Center, Inc. v. Bystrom, 543 So.2d 214 (Fla.1989); Walter v. Schuler, 176 So.2d 81 (Fla.1965). The supreme court has defined fair market value as:
"The amount a purchaser willing but not obliged to buy, would pay to one willing but not obliged to sell."
Id.; see also Valencia Center; ITT Community Dev.
This court in McNayr v. Claughton, 198 So.2d 366 (Fla. 3d DCA 1967) added that, in arriving at the willing buyer/willing seller amount (fair market value):
"[T]here are three well recognized guides to appraisal: (1) the cost approach; (2) the comparable sales and (3) the income or economic approach."
Id. at 368. The constitutional mandate of just valuation thus comes down to the classic, well-understood appraisal practice which is to be utilized in arriving at fair market value.
The trial court referred the case to General Master John R. Farrell, whose Findings of Fact, Conclusions, and Recommendations were adopted by the trial judge as her own and were incorporated into the Final Judgment. The Master's Report informs us that the property appraiser's expert, Mr. Frank Jacobs, using the comparable sales approach to value, arrived at the $3,790,227 tax assessment valuation on the improvements. 8 The Report further tells us that Mr. Jacob's testimony was given without objection and there was no contrary testimony. The parties' briefs reveal that the owners have not challenged the value placed on the incomplete improvements by the property appraiser, as a result of which, the established just valuation (fair market value) of the incomplete hotel structure on January 1, 1992, was $3,790,227.
Mr. Jacob's ability to use the comparable sales approach meant that similar property was commonly bought and sold, enabling him to extrapolate therefrom the value of the incomplete improvements. In the absence of comparable sales, however, the courts have upheld the use of the cost approach, 9 including in those situations involving incomplete improvements. See Aeronautical Communications Equip. v. Metropolitan Dade County, 219 So.2d 101 (Fla. 3d DCA 1969)(where there is no established market, incompleted work in process is properly valued by the cost approach); 10 see also United States v. Savannah Shipyards, 139 F.2d 953 (5th Cir.1944)(evidence as to cost approach admissible to place value on partially completed shipyard which was subjected to eminent domain suit); State v. Willett Holding Co., 62 N.J. 59, 298 A.2d 69 (N.J.1972)(where a partially completed nursing home was subjected to an eminent domain action, use of cost approach "entirely appropriate").
Thus, on January 1, 1992, the incomplete hotel structure had an uncontested just valuation of $3,790,227. The owners, however, invoked section 192.042, Florida Statutes (1991) which provides in relevant part:
This statute requires the subject improvements to be valued for ad valorem tax purposes at zero for the tax year 1992 as they were not substantially complete on January 1, 1992, thus eliminating from taxation the $3,790,227 of existing improvements. The statute's conflict with article VII, section 4, Florida Constitution, which mandates that all property is to be taxed at fair market value, could not be clearer.
The Florida Supreme Court has held unconstitutional other statutes which called for real property to be assessed and taxed at less than fair market value. In Interlachen Lakes Estates v. Snyder, 304 So.2d 433 (Fla.1973) the court dealt with former section 195.062(1), Florida Statutes (1973), which statute created a classification of property (certain platted lots) which was to receive required special tax valuation treatment. The court found that the special treatment for the classification would have resulted in the lots there involved being assessed at less than their fair market value. The court struck down the statute as unconstitutional, concluding that article VII, section 4 prohibits the legislature from enacting legislation creating classifications (other than those specifically set out in article VII, section 4) which results in property taxation at less than fair market value.
In ITT Community Dev. Corp. v. Seay, 347 So.2d 1024 (Fla.1977), the Florida Supreme Court dealt with section 194.042, Florida Statutes, 11 which made available to taxpayers an alternate method (as opposed to administrative appeals) of challenging the tax assessment valuation placed on their property. This method, an "auction" of the property at a date ten months after January 1st, would of necessity (because property values fluctuate) have resulted in a sale price, and thus an assessment, which differed (either higher or lower) from fair market value on January 1st of the tax year. The court struck down the statute as violating the constitutional injunction that all property must be assessed at its just valuation on the taxing date, stating:
"The trial court found Section 194.042, Florida Statutes (1975), unconstitutional on its face as providing a method of determining valuation for ad valorem taxation purposes which violates the 'just valuation' criterion of Article VII, Section 4 of the Florida Constitution. That constitutional provision states:
'By general law regulations shall be prescribed which shall secure a just valuation of all property for ad valorem taxation....'
While we admire the conceptual simplicity with which Pope's law attempts to determine value, we must affirm the conclusion reached by the court below that the statute is incapable of arriving at 'just valuation' as mandated by our organic document." [emphasis supplied]
In 1989, the Florida Supreme Court held unconstitutional section 193.023(6), Florida Statutes (1987), which called for properties subject to long-term leases which were entered into prior to 1965 to be assessed for taxation based solely on the use permitted by the lease agreement and not on higher and better uses which may have been allowed by zoning ordinances. Such a limitation would have resulted in ad valorem tax valuations below fair market value. Valencia Center, Inc. v. Bystrom, 543 So.2d 214 (Fla.1989). The court again concluded that the legislature cannot require property tax valuations at anything other than fair market value in the absence of specific constitutional provision therefor:
12
Nonetheless, the owner urges us to conclude that section 192.042(1), even though it leads inexorably to tax assessment valuations at less than just valuation, is not in violation of the state constitution. Their urgings have their genesis in the legal history of an earlier version of the subject statute, section 193.11(4), Florida Statutes (1967),...
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