In re Owens

• Court: North Carolina Court of Appeals
• Writing for the Court: BRYANT.
• Citation: In re Owens, 144 N.C.App. 349, 547 S.E.2d 827 (N.C. App. 2001)
• Decision Date: 19 June 2001
• Docket Number: No. COA00-686.,COA00-686.
• Parties: In the Matter of the Appeal of Charles D. OWENS and John F. Padgett d/b/a Forest City Associates from the decision of the Rutherford County Board of Equalization and Review concerning property taxation for 1994.

547 S.E.2d 827

144 NC App. 349

In the Matter of the Appeal of Charles D. OWENS and John F. Padgett d/b/a Forest City Associates from the decision of the Rutherford County Board of Equalization and Review concerning property taxation for 1994.

No. COA00-686.

Court of Appeals of North Carolina.

June 19, 2001.

J. Thomas Davis, Forest City, for appellant-taxpayer.

Shelley T. Eason, Raleigh, and Walter H. Dalton, Rutherfordton, for appellee-Rutherford County.

BRYANT, Judge.

The preliminary procedural history and facts for this case are set forth in our previous decision, In re Appeal of Owens, 132 N.C.App. 281, 511 S.E.2d 319 (1999).

On remand, the Property Tax Commission (Commission) reviewed the transcript and evidence presented at its 1997 hearing. The Commission affirmed Rutherford County's (County) revaluation of taxpayers' property. Specifically, the Commission found that: no probative evidence was offered as to the cost and comparable sales approach; at the time of the general appraisal, there was a lack of comparable sales in the County and surrounding areas; the parties stipulated for the record that a market approach was not an appropriate method to determine the value of taxpayers' property subject to this appeal; even though the Commission considered all three approaches to value, the income approach is most reliable to determine the values of taxpayers' property; the yield capitalization approach is more appropriate in determining the value of the subject properties than the direct capitalization method because there were no comparable sales available in the County or the surrounding areas, and the direct capitalization approach could not be employed without comparable sales; the County's use of the yield capitalization approach was proper; and the County's appraisals of the subject nine parcels did not substantially exceed the true value in money of the subject properties as of 1 January 1994.

Further, the Commission determined that the taxpayers failed to produce competent, material and substantial evidence: 1) that the County used an arbitrary or illegal method to appraise the subject properties, and 2) that the County's values substantially exceeded the fair market values of the subject properties. Taxpayers appealed to this Court on 25 March 2000.

Taxpayers make four arguments on appeal, all challenging the Commission's findings regarding valuation of the property. This Court's review of a final decision of the Commission is governed by N.C.G.S. § 105-345.2, which states:

(b) So far as necessary to the decision and where presented, the court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning and applicability of the terms of any Commission action. The court may affirm or reverse the decision of the Commission, declare the same null and void, or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the appellants have been prejudiced because the Commission's findings, inferences, conclusions or decisions are:

(1) In violation of constitutional provisions; or

(2) In excess of statutory authority or jurisdiction of the Commission; or

(3) Made upon unlawful proceedings; or

(4) Affected by other errors of law; or

(5) Unsupported by competent, material and substantial evidence in view of the entire record as submitted; or

(6) Arbitrary or capricious.

Pursuant to N.C.G.S. § 105-345.2(b), this Court will review the decision of the Commission analyzing the `whole record' to determine whether the decision has a rational basis in evidence. See In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979) ("The []whole record[] test is not a tool of judicial intrusion; instead, it merely gives a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence."). The reviewing court is not afforded unlimited discretion to substitute its decision for that of the Commission. Id. Even if the evidence is susceptible to supporting alternate rational decisions, the decision of the Commission will not be disturbed if that decision is based on substantial evidence from the record. See Mendenhall v. North Carolina Dep't of Human Resources, 119 N.C.App. 644, 650, 459 S.E.2d 820, 824 (1995)("This standard, the [ ]whole record[ ] test, does not allow the reviewing court to replace the agency's judgment as between two reasonably conflicting views, even though the court could justifiably have reached a different result had the matter been before it de novo.").

It is the responsibility of the Commission to determine the weight and credibility of the evidence presented. In re Southern, Railway, 59 N.C.App. 119, 123, 296 S.E.2d 463, 467, rev'd on other grounds, 313 N.C. 177, 328 S.E.2d 235 (1985). It is presumed that ad valorem tax assessments are correct and that the tax assessors acted in good faith in reaching a valid decision. In re McElwee, 304 N.C. 68, 75, 283 S.E.2d 115, 120 (1981). To overcome those presumptions, the taxpayer carries the burden to show that an illegal or arbitrary method of valuation was used, and that the assessed value substantially exceeds the properties fair market value. In re Appeal of AMP, Inc., 287 N.C. 547, 563, 215 S.E.2d 752, 762 (1975)(emphasis added).

For property tax purposes, "[a]ll property, real and personal, shall as far as practicable be appraised or valued at its true value in money." N.C.G.S. § 105-283. All real property located in a particular county must be appraised at its true value-the fair market value—at least every eight years in that county's general reappraisal. N.C.G.S. § 105-286. The true value is the price willing and financially able buyers would pay to purchase the property from a willing seller. N.C.G.S. § 105-283.

The relevant portions of N.C.G.S. § 105-317 provide, the elements to considered in the appraisal of real property as:

(a) Whenever any real property is appraised it shall be the duty of the persons making appraisals:

(1) In determining the true value of land, to consider as to each tract, parcel, or lot separately listed at least its advantages and disadvantages as to location; zoning; quality of soil; waterpower; water privileges; dedication as a nature preserve; conservation or preservation agreements; mineral, quarry, or other valuable deposits; fertility; adaptability for agricultural, timber-producing, commercial, industrial, or other uses; past income; probable future income; and any other factors that may affect its value except growing crops of a seasonal or annual nature.

(2) In determining the true value of a building or other improvement, to consider at least its location; type of construction; age; replacement cost; cost; adaptability for residence, commercial, industrial, or other uses; past income; probable future income; and any other factors that may affect its value.

Our courts have recognized three approaches to valuing real property in accordance with the requirements of N.C.G.S. § 105-317(a)—the cost approach, the comparable sales approach, and the income approach. See In re Appeal of Stroh Brewery, 116 N.C.App. 178, 186, 447 S.E.2d 803, 807 (1994); City of Statesville v. Cloaninger, 106 N.C.App. 10, 16, 415 S.E.2d 111, 115 (1992).

I.

The taxpayers assert that the Commission erred in finding no probative evidence of the cost approach method. They contend that the cost approach should be used to establish a limitation on the valuation of the property.

The evidence in the record reveals that the County presented evidence of value under the three valuation approaches recognized by our courts. The County introduced out-of-county sales for consideration under the sales comparison approach. In addition, the County's expert, Charles Long, testified that the County's property cards "lend themselves to a cost approach methodology but are adjusted through the income approach and compared with the sales comparison approach". Ultimately, Long testified that in his expert opinion, the income approach was the most reliable indicator of value for taxpayers' properties.

On cross-examination, Long suggested that the value determined by the cost approach should support the value derived from the income approach. He added that the difference between the County's and the taxpayers' assessment of the cost for the improved property, may stem from the fact that the taxpayers did not include evidence of "soft costs" in their evidence.

There appears to be substantial evidence in the record supporting the Commission's decision to accept the income approach to valuing the...