Peruque, LLC v. Shipman
| Decision Date | 11 October 2011 |
| Docket Number | No. ED 96232.,ED 96232. |
| Parties | PERUQUE, LLC, Appellant, v. Scott SHIPMAN, Assessor of St. Charles County, Missouri, Respondent. |
| Court | Missouri Court of Appeals |
OPINION TEXT STARTS HERE
Supreme Court Denied Nov. 14, 2011.
Application for Transfer Denied Jan. 31, 2012.
James P. Bick, Jr., Sean M. Elam, St. Louis, MO, for appellant.
Charissa L. Mayes, St. Charles, MO, for respondent.
Peruque, LLC (Peruque) appeals from the decision of the trial court affirming the State Tax Commission's (STC) decision in a tax assessment case. Peruque raises five points on appeal. We reverse and remand.
Peruque's business is to develop raw land into buildable lots that can be sold to home builders. (LF 40) Peruque filed a subdivision plat in 2003 for the Carlton Glen Estates subdivision in Wentzville, Missouri, consisting of 504 lots. Peruque had developed and sold 336 lots, and at issue were the 168 remaining lots, which were in the process of being developed into buildable residential lots.
The parties agreed that 38 of those 168 lots were fully developed and ready for home construction, in that they had utilities and paved roads on all frontages (fully developed properties). The St. Charles County Assessor (the Assessor) contended that ten additional properties were fully developed, in that they were adjacent to the fully developed properties, had paved frontage, and had utilities accessible to the lots. Peruque disputed the Assessor's determination that they were fully developed (disputed properties). The parties agreed that the remaining 120 properties were partially developed (partially developed properties). The developed properties were scattered throughout the subdivision, and the partially developed properties were located in two contiguous groups in Village C and Village D.
John Pearson, the independent project manager hired by Peruque for the Carlton Glen Estates subdivision, submitted written testimony that on January 1, 2007, the partially developed properties were cleared and rough graded, but they did not have utility services, which he defined as “a sanitary sewer lateral, access to tap a water main with a service line, the required storm sewers for site drainages, electrical service and/or gas services.” As of January 1, 2007, a sanitary sewer was available but sewer mains had not been installed to serve all partially developed properties; water was available but water mains had not been installed; electric and gas were available but electric lines and gas mains had not been installed; and storm sewers were available but had not been installed to drain or serve the partially developed properties.
The Assessor initially assessed the partially developed properties as individual lots valued at $44,000 each, as of January 1, 2007. The St. Charles County Board of Equalization (Board) sustained this assessment. Peruque then appealed, on the ground of overvaluation, to the STC. The following evidence was adduced at a hearing before an STC hearing officer.
An appraiser hired by Peruque used the cost approach to determine the value of the 28.26 acres of partially developed land (120 partially developed properties plus 10 disputed properties) at $93,843/acre, for a total parcel value of $2,652,000. Peruque's appraiser recommended that the highest and best use of the partially developed land was to hold it for future development until sufficient demand returned after absorption of the currently oversupplied market. Peruque's appraiser also noted that the cost to complete the partially developed properties as a group was $11,589 per lot.
Steven Riney, an employee for the Assessor, submitted an appraisal report valuing the 120 partially developed properties at $45,000 per lot, based on a comparable sales approach. Riney compared 18 sales in the close or immediate vicinity with an average sale price of $53,437. Noting the “poor” access to the partially developed properties, Riney adjusted the value of each lot downward by an average amount of $5,344 (10%).
The Assessor initially appraised the fully developed properties at $55,000 per lot, as of January 1, 2007. The Board sustained this assessment. Peruque appealed to the STC on the ground of overvaluation. The following evidence was adduced at a hearing before the hearing officer.
For the value of the fully developed properties, Peruque's appraiser determined an average lot price of $50,000, relying on a combination of a “bulk lot sales comparison” approach and a “discounted wholesale lot value” approach. Peruque's appraiser identified the fully developed properties as a “package” of medium-density residential lots, primarily with 70–foot frontages.
For the “bulk lot sales comparison” approach, Peruque's appraiser compared the package of properties with the following four bulk sales of developed properties in surrounding areas. Bulk Lot Sale # 1: 28 lots with 80–foot frontages for $62,000; Bulk Sale Lot # 2: 11 lots with 80–foot frontages for $53,300; Bulk Lot Sale # 3: 55 lots with 62–foot frontages for $62,500; and Bulk Lot Sale # 4: 68 lots with 60–foot frontages for $60,500. Peruque's appraiser then adjusted the sale price in comparison to the lots at issue here for sale condition, sale date, lot frontage and size, location, and amenities. Based on the market data, Peruque's appraiser concluded $50,500 was the most reasonable wholesale lot value for the fully developed properties here.
For the “discounted wholesale lot value” approach, Peruque's appraiser looked at 12 individual sales of medium density properties with frontages averaging 80 feet and an average size of 12,620 square feet, occurring in the last 9 months in the immediate market area, for sale prices ranging between $60,000 and $75,000 with an average of $63,542 and a median of $60,000. Based on these comparables, Peruque's appraiser concluded a lot price of $65,000 if purchased by an individual buyer. However, noting that it was much more common for developed land to be purchased by a builder than an individual buyer, Peruque's appraiser assumed a builder would purchase the lots in bulk, and therefore calculated a discount rate of 16 percent for a discounted wholesale value of $42,000 per lot.
Using a comparable sales approach, Riney assessed a value for the fully developed properties of $55,000 per each of the 48 individual lots. Riney again looked to the 18 comparable sales in the close or immediate vicinity with an average sale price of $53,437. The comparison homes had an average of .23 acres per lot, and were all sold between March 2006 and December 2007.
After the hearing, the hearing officer (1) concluded that the partially developed property consisted of 120 individual lots, and sustained the Board's valuation for 105 lots at $44,000 each but adopted the Assessor's valuation for 15 lots at $45,000 each; and (2) determined that 48 lots were fully developed and sustained the Board's valuation of $55,000 for each. The hearing officer specifically rejected Peruque's appraisal methods for the fully developed properties, noting that “[n]o statute, case law, or administrative rule in Missouri [had set] forth the method of determining true value as suggested by [Peruque] by using a bulk sale or a discounted cash flow.” The hearing officer likewise rejected Peruque's valuation of the partially developed properties as a single parcel, finding that because the property here had been improved and was not contiguous, Section 137.119, RSMo. (2000)'s single-parcel valuation approach was not proper.
Peruque applied to the STC for review of the hearing officer's decision and order. The STC affirmed the decision of the hearing officer, finding no grounds upon which to reverse or modify. The STC incorporated the hearing officer's decision into its final order “as if set out in full.” Peruque filed an application for review with the St. Charles County Circuit Court, which affirmed the STC's decision. This appeal follows.
We review the underlying decision of the administrative agency, the STC, rather than the judgment of the trial court. Algonquin Golf Club v. State Tax Comm'n, 220 S.W.3d 415, 418 (Mo.App. E.D.2007). Our review is limited to determining whether the agency decision is supported by competent and substantial evidence, or whether it was an abuse of discretion and was arbitrary, capricious, or unreasonable. Id. Absent an abuse of discretion, we consider the evidence in the light most favorable to the STC and “[i]f the evidence supports either of two opposing findings, we are bound by the STC's determination.” Id. However, if the administrative decision is based on its interpretation and application of law, we review the agency's decision and the conclusions of law de novo. Id. In reaching its decision, the STC construed Section 137.115, RSMo. (2008) and Section 137.119, and, accordingly, our review is de novo.
This court reviews the decision of the STC and not the hearing officer, Cohen v. Bushmeyer, 251 S.W.3d 345, 350 n. 4 (Mo.App. E.D.2008), unless, as here, the STC incorporated the decision of hearing officer, in which case we consider both together, Loven v. Greene County, 94 S.W.3d 475, 477 (Mo.App. S.D.2003).
For points A and B, Peruque in essence argues that the STC erred in determining that the partially developed lots must be valued as individual lots rather than as two single parcels of undeveloped land. We agree.
Section 137.119 provides that, ...
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