In re IBM Credit Corp.

• Court: North Carolina Court of Appeals
• Writing for the Court: STROUD
• Citation: In re IBM Credit Corp., 731 S.E.2d 444 (N.C. App. 2012)
• Decision Date: 21 August 2012
• Docket Number: No. COA11–1144.,COA11–1144.
• Parties: In the Matter of Appeal of IBM CREDIT CORPORATION from the decision of the Durham County Board of County Commissioners concerning the valuation of business personal property for tax year 2001.

731 S.E.2d 444

In the Matter of Appeal of IBM CREDIT CORPORATION from the decision of the Durham County Board of County Commissioners concerning the valuation of business personal property for tax year 2001.

No. COA11–1144.

Court of Appeals of North Carolina.

Aug. 21, 2012.

Appeal by IBM Credit Corporation from a final decision entered 24 June 2011 by the North Carolina Property Tax Commission. Heard in the Court of Appeals 9 February 2012.

Manning Fulton Skinner, P.A., Raleigh, by Michael T. Medford, for taxpayer-appellant IBM Credit Corporation.

Parker Poe Adams & Bernstein LLP, Raleigh, by Charles C. Meeker, for respondent-appellee Durham County.

STROUD, Judge.

IBM Credit Corporation (“IBM”) appeals from a final decision of the Property Tax Commission (the “Tax Commission”) regarding the tax valuation of 40,779 pieces of leased computer equipment for business personal property taxes in tax year 2001. Based on this Court's mandates in the prior decisions in In re Appeal of IBM Credit Corp., 186 N.C.App. 223, 650 S.E.2d 828 (2007), aff'd per curiam,362 N.C. 228, 657 S.E.2d 355 (2008)(“ IBM I ”) and In re Appeal of IBM Credit Corp., 201 N.C.App. 343, 689 S.E.2d 487 (2009), disc. review denied and appeal dismissed,363 N.C. 854, 694 S.E.2d 204 (2010)(“ IBM II ”), which held that the Tax Commission failed to comply with its previous decision, and the unchallenged findings and conclusions of the third final decision by the Tax Commission, we reverse the third final decision and remand to the Tax Commission for entry of a decision finding that the property is valued at the value as listed by taxpayer IBM, due to the failure of the County to meet its burden of proof to demonstrate that its valuation is the “true value” of the property.

I. Procedural Background

This is the third appeal arising from the 2001 tax valuation of IBM's 40,779 pieces of computer and computer-related equipment leased to 364 customers in Durham County. We will not repeat in detail the long procedural history of this case, as we have previously stated this in IBM I and IBM II. See IBM I, 186 N.C.App. at 224–25, 650 S.E.2d at 829–30;IBM II, 201 N.C.App. at 343–45, 689 S.E.2d at 488–89. Briefly stated, in the first appeal, this Court vacated the Tax Commission's affirmance of the County's valuation of the property in the amount of $144,277,140, “on the grounds that the Commission's prior order had failed to properly employ the burden of proof required in tax appraisal cases.” See IBM II, 201 N.C.App. at 345, 689 S.E.2d at 489;IBM I, 186 N.C.App. at 228–29, 650 S.E.2d at 831–32. On remand, the Commission, after receiving new briefing from the parties, but no additional evidence, issued a second decision, “which again upheld Durham County's tax appraisal of $144,277,140.00.” IBM II, 201 N.C.App. at 345, 689 S.E.2d at 489. Once again, IBM appealed, and on the second appeal, we again reversed and remanded to the Tax Commission. Id. at 354, 689 S.E.2d at 494. In that opinion, we directed the Tax Commission as to the specific issues to consider and address on remand. Id.

In IBM II, this Court made two specific holdings:

[ (1) ] Although the Commission does not explicitly state what effect, if any, all this evidence ¹ has on the legal presumption of correctness, for purposes of this decision we hold that it is “ ‘competent, material and substantial’ evidence” tending to show that “the county tax supervisor used an arbitrary method of valuation” which led to “the assessment substantially exceed[ing] the true value in money of the property.” [ In re Appeal of AMP, Inc., 287 N.C. 547, 563, 215 S.E.2d 752, 762 (1975) ] (emphasis omitted) (internal quotation marks omitted). Therefore, the burden of persuasion and going forward with evidence that the methods used do in fact produce “true value” shifts to Durham County. [ In re Southern Railway, 313 N.C. 177, 182, 328 S.E.2d 235, 239 (1985) ]; N.C.G.S. § 105–283.

....

[ (2) ] In appraising IBM Credit's property, Durham County did not meet the statutory standards required of N.C.G.S. § 105–283. In reviewing the methods applied by Durham County, we hold that the county did not make adequate deductions for depreciation by applying Schedule U5 and its transmittal instructions. The failure to make additional depreciation deductions due to functional and economic obsolescence due to market conditions results in an appraisal which does not reflect “true value.” The decision of the Commission upholding the appraisal is unsupported by substantial evidence based upon a review of all the evidence in the record.

Id. at 348, 353–54, 689 S.E.2d at 491, 494(emphasis in original). Based upon these holdings, we reversed the Tax Commission's second final order, as follows:

Because we are not a fact-finding body, we do not make a finding as to the proper amount of additional depreciation deduction to be applied upon remand. We therefore reverse the Final Decision of the Commission, and again remand to the Commission for a reasoned decision with regard to what amount of depreciation deduction should have been deducted from the valuation to account for functional and economic obsolescence due to market conditions.Id. at 354, 689 S.E.2d at 494. In addition to these specific holdings, we noted six specific omissions in the Tax Commission's second final order, which led to “conclusions which lack evidentiary support and are therefore arbitrary and capricious.” Id. at 349–51, 689 S.E.2d at 491–93. We will discuss some of these specific omissions in detail below, but for now we will address the Tax Commission's misunderstanding of the law of the case as it has developed in IBM I and IBM II.

II. Law of the Case

First, the third final decision by the Tax Commission, entered on 24 June 2011, and the subject of this appeal, notes that certain points have been decided by the prior two decisions of this Court and are thus the “law of the case.” Our Supreme Court has described the “law of the case” doctrine as follows:

[A]s a general rule when an appellate court passes on a question and remands the cause for further proceedings, the questions there settled become the law of the case, both in subsequent proceedings in the trial court and on subsequent appeal, provided the same facts and the same questions which were determined in the previous appeal are involved in the second appeal.

However, the doctrine of the law of the case contemplates only such points as are actually presented and necessarily involved in determining the case. The doctrine does not apply to what is said by the reviewing court, or by the writing justice, on points arising outside of the case and not embodied in the determination made by the Court. Such expressions are obiter dicta and ordinarily do not become precedents in the sense of settling the law of the case.

In every case what is actually decided is the law applicable to the particular facts; all other legal conclusions therein are but obiter dicta.

Hayes v. City of Wilmington, 243 N.C. 525, 536, 91 S.E.2d 673, 681–82 (1956) (citations and quotation marks omitted).

The Tax Commission's third final decision noted, correctly, that this Court has previously ruled that “Durham County produced sufficient evidence ‘to establish a presumption of correctness' ” of its ad valorem assessment in IBM II; and that “IBM Credit presented evidence ‘tending to show’ that Durham County used an ‘arbitrary method of valuation’ ” so that “the burden is now shifted to Durham County, the taxing authority, to show ‘that the methods used do in fact produce ‘true value.’ ” See IBM II, 201 N.C.App. at 347–48, 689 S.E.2d at 489–91. The Tax Commission also correctly noted that this Court reversed the second final order and remanded with the direction to the Tax Commission to make “a reasoned decision with regard to what amount of depreciation deduction should have been deducted from the valuation to account for functional and economic obsolescence due to market conditions.” See id. at 354, 689 S.E.2d at 494.

The Tax Commission also specifically noted that it was bound by the “law of the case” as to the following findings or conclusions: (1) Its prior findings of fact as to Mr. Zises' NACOMEX Report, as these findings “have not been set aside on appeal[;]” (2) that Mr. “Zises' report is ‘not the appropriate methodology’ to assess the subject equipment[;]” (3) that “the NACOMEX Report's lack of credibility and persuasiveness remain the law of the case” and “the NACOMEX Report is based on the market sales method alone and does not use the income method[;]” and (4) that “[t]he North Carolina Court of Appeals has held that Durham County did not meet the statutory standards required by G.S[ ] § 105–283 in applying Schedule U5 and there is not sufficient evidence in the current record to answer the issues the Court raised about Schedule U5.... For these reasons, Schedule U5 and Durham County's application of that Schedule to IBM Credit's equipment will not be relied on or discussed further in this Final Decision.” The Tax Commission's determination that the first three findings or conclusions listed above are the “law of the case” is incorrect.

The County argues that the Tax Commission properly found that its prior findings and conclusions as to the NACOMEX report and Mr. Zises' testimony had not been “overturned” by this Court:

This Court, in IBM Credit II, expressly did not set aside the Property Tax Commission's prior finding as to the NACOMEX Report. See IBM Credit II at 493 (“The Commission found that the evidence produced by Mr. Zises was flawed with regard to several factors. For purposes of our review, we do not have to determine whether these findings are supported by the evidence or whether the values produced by Mr. Zises' depreciation tables are accurate.”) Hence, the Property Tax Commission's findings as to the flaws in the NACOMEX Report were appropriate.

Both the County and the Tax Commission appear to have...