Montgomery Ward & Co., Inc. v. County of Hennepin

• Decision Date: 19 January 1990
• Docket Number: No. C5-89-1477,C5-89-1477
• Citation: 450 N.W.2d 299
• Court: Minnesota Supreme Court
• Parties: MONTGOMERY WARD & CO., INC., Relator, v. COUNTY OF HENNEPIN, Respondent.

Page 299

450 N.W.2d 299

MONTGOMERY WARD & CO., INC., Relator, v. COUNTY OF HENNEPIN, Respondent.

No. C5-89-1477.

Supreme Court of Minnesota.

Jan. 19, 1990.

Syllabus by the Court

1. A party does not waive its right to seek discovery of information by failing to make repetitive motions following a trial court's informal ruling on the party's previous motion to compel discovery which had been taken under advisement by the trial court.

2. The tax court abused its discretion in refusing to apply the two-part test, mandated by Minn.Stat. § 13.03, subd. 6 (1988), to a taxpayer's motion to compel discovery of property value data contained in government files.

3. Relevant valuation data contained in government files must be made available, subject to an appropriate protective order, to a taxpayer who petitions for review of the government's property tax assessment on the taxpayer's property.

4. There was insufficient evidence to support the tax court's finding that the relator failed to prove that the assessor's estimated market value exceeded the actual fair market value of the property.

Thomas R. Wilhelmy, Michael A. Trittipo, Fredrikson & Byron, Minneapolis, for relator.

Thomas L. Johnson, Mark V. Chapin, Hennepin County Atty., Minneapolis, for respondent.

Heard, considered and decided by the court en banc.

YETKA, Justice.

This is an appeal from the Minnesota Tax Court of a valuation placed on relator's department store for real estate tax purposes. The appeal is based on the tax court's refusal to allow relator to discover information in Hennepin County's possession regarding the operation, leasing and sale of other department stores which relator maintains would have a bearing on valuation of its property. We reverse the tax court and remand for a new trial.

This case presents questions regarding the Minnesota Government Data Practices Act, Minn.Stat. ch. 13 (1988), and the scope of discovery under the Minnesota Rules of Civil Procedure. Before the trial in this case, Ward's requested from Hennepin County various information contained in Hennepin County's files regarding the operation, leasing or sale of department stores and other comparable property. The requested information included exhibits and other evidence submitted to the tax court in an earlier tax abatement matter involving a different department store located in Hennepin County. In the earlier case, Allied Central Stores (Eden Prairie) v. Hennepin County, Minn. Tax Court File Nos. TC-4720 and TC-5542, 1988 WL 21105 (Feb. 11, 1988) (hereinafter "Eden Prairie Donaldson's "), the taxpayer introduced a "tabulation" of imputed base rent per square foot on 13 stores in the Midwest, including three stores in Minnesota, derived from the stores' level of retail sales. ¹ Hennepin County refused to produce the tabulation or any other information regarding the retail sales or rents paid by other stores on the grounds that the information was protected by the Minnesota Government Data Practices Act and, therefore, not discoverable.

Before the tax court trial, both parties made motions to compel discovery. A motion hearing was held in the judge's chambers off the record. Thereafter, the tax court ordered a simultaneous exchange of all information that the parties intended to introduce into evidence, but took under advisement Ward's request for data concerning the retail sales and rent paid by other department stores.

The trial was held on February 7 and 8, 1989. At trial, two basic issues were considered: (1) whether the assessor's estimated value exceeded the actual fair market value and (2) whether the property was unequally assessed. At trial, both parties presented expert testimony regarding the value of the subject property. Hennepin County's expert estimated that the property's value was $4,500,000. Ward's expert estimated that the property's value was $2,900,000.

During Ward's cross-examination of Hennepin County's expert, counsel for Hennepin County objected to inquiries about the evidence introduced in the Eden Prairie Donaldson's case; the court sustained the objection. The court apparently concluded that the expert had not relied on the requested data and, therefore, the data was not relevant.

By order dated June 2, 1989, the court found that Ward's failed to sustain its burden of proving that the assessor's estimated market value exceeds the actual fair market value of the property as of January 2, 1987. In the same order, however, the court concluded that the subject property had been unequally assessed according to the prevailing assessment ratio and, therefore, ordered that the assessor's estimated value for the subject property be reduced from $3,695,700 to $3,289,178.

Ward's timely moved for amended findings of fact, conclusions of law and order for judgment or for a new trial on the grounds that the June 2, 1989, order was not justified by the evidence of record and that the court committed abuse of discretion by refusing to order Hennepin County to produce data concerning other department stores that was submitted in the Eden Prairie Donaldson's case. Ward's specifically renewed its motion to compel discovery of the data introduced by the taxpayer in Eden Prairie Donaldson's. At the hearing on the post-trial motions and in its brief to this court, Hennepin County argued that Ward's waived its right to seek discovery of the requested data by failing to renew formally its discovery motion until after trial.

The subject property is a Montgomery Ward department store attached to a shopping center commonly known as Terrace Mall located in the City of Robbinsdale. Robbinsdale is a first-tier suburb with a population of approximately 15,000 and is located in the northwest quadrant of the Twin Cities' metropolitan area. The subject property is approximately 4 miles northwest of downtown Minneapolis and well inside the 494/694 freeway system that surrounds Minneapolis and St. Paul.

The department store was constructed by Ward's in 1966 as a free-standing store. In 1980, an adjoining shopping center known as Terrace Mall was constructed. The shopping center now consists of the subject property (Ward's department store and automotive center) with 181,111 square feet, approximately 27 mall shops consisting of about 75,000 square feet, a Rainbow Foods grocery store of approximately 46,000 square feet, and the detached Terrace Mall movie theatre of approximately 20,000 square feet.

The Terrace Mall is not owned by Ward's. Ward's and the owners of the mall are parties to a "Reciprocal Construction, Operation and Easement Agreement" dated October 3, 1979, which controls the parties' rights concerning, among other things, maintainence, use of common areas, parking, mall hours, and advertising.

The buildings are of average-to-good construction quality. The department store, however, has some unutilized space. The partial second floor is unsuitable for sales and is essentially unused. In addition, considerable portions of the first floor were also vacant at the time the assessor's inspection was made in December of 1986 during the Christmas rush season. Testimony at trial indicated that the mall shops were 67 percent vacant on the assessment date (18 out of 27 were empty) and that, at the time of trial, 23 of 27 shops were empty.

The average size of a modern department store is approximately 100,000 square feet. The size of Ward's was based on projections about the community's development that failed to materialize. This was attributed to the location of the I-94/494/694 freeway system and major revisions to east-west highways which diverted traffic away from Highway 52. In addition, there has been a large increase in retail shopping centers in the northwest quadrant of the Twin Cities' metropolitan area which has contributed to a decline in real sales (inflation adjusted) for the store. ² At trial, Ward's introduced evidence that the subject's sales volume was approximately $73 per square foot and compared this to the "normal or expected" sales volume of $130 per square foot. Hennepin County's valuation expert did not dispute the fact that the subject department store is performing poorly, however, he attributed the poor performance to factors other than the inherent characteristics of the property.

There are three traditional approaches to determining the market value of improved real property: (1) the cost approach, (2) the market approach, and (3) the income approach. These three approaches were used by both parties' experts, as well as the court, in placing a value on the subject property.

The cost approach is based on the assumption that an informed purchaser would pay no more than the cost of reproducing a substitute property with the same utility as the subject. Am. Inst. of Real Estate Appraisers, The Appraisal of Real Estate, 345 (1987). Under this approach, appraisers rely on industry publications to determine the cost of constructing a similar building and then decrease this figure to account for accrued depreciation. Id. Although the cost approach is considered to be somewhat imprecise, especially for older buildings, it is generally accepted as a useful method for putting a ceiling on the value of the property. In this case, neither the parties nor the court put much weight on the cost approach.

The market approach to value is based on the premise that an informed buyer will pay no more for a property than the purchase price of another property of similar size and utility. See id. at 311. Under this approach, appraisers attempt to ascertain the sales price of comparable property. Id. The validity of this approach in the present case is questionable because, as both parties acknowledged, anchor department stores rarely sell; when they do, it is typically in connection with the sale of a chain of stores, and the purchase price usually includes fixtures and inventory. At trial in this case, both parties introduced...