Recreation Centers of Sun City, Inc. v. Maricopa County, 1

• Decision Date: 18 November 1986
• Docket Number: CA-CIV,No. 1,1
• Citation: 162 Ariz. 277,782 P.2d 1170
• Parties: RECREATION CENTERS OF SUN CITY, INC., a nonprofit corporation, Plaintiff-Appellee, v. MARICOPA COUNTY, a body politic, and the Arizona Department of Revenue, Defendants-Appellants. 8248.
• Court: Arizona Court of Appeals

Page 1170

782 P.2d 1170

162 Ariz. 277

RECREATION CENTERS OF SUN CITY, INC., a nonprofit corporation, Plaintiff-Appellee, v. MARICOPA COUNTY, a body politic, and the Arizona Department of Revenue, Defendants-Appellants.

No. 1 CA-CIV 8248.

Court of Appeals of Arizona, Division 1, Department D.

Nov. 18, 1986.

Review Granted April 15, 1987.

[162 Ariz. 278] Evans, Kitchel & Jenckes, P.C. by James R. Hienton and David J. Ouimette, Phoenix, for plaintiff-appellee.

Robert K. Corbin, Atty. Gen. by Anthony B. Ching, Sol. Gen., and Robert A. Zumoff, Asst. Atty. Gen., Phoenix, for defendants-appellants.

OPINION

FROEB, Chief Judge.

The six parcels of land and their improvements which are the subject of this decision comprise community recreation facilities owned and operated by a nonprofit corporation in Sun City, Arizona. The question is whether the trial court correctly found that the valuation of the property by the Arizona Department of Revenue (Revenue) was excessive.

The property is owned by Recreation Centers of Sun City, Inc. (Recreation Centers), which operates recreation complexes consisting generally of swimming pools, social and meeting halls, auditoriums, craft rooms and other facilities. The corporation also owns and maintains golf courses and a facility for bowling.

Recreation Centers received the parcels of land by deed from Del E. Webb Development Company. The facilities were constructed at no cost to Recreation Centers by Del E. Webb Development Company and transferred under an agreement which provided that Recreation Centers would operate the facilities. Del E. Webb Development Company sold nearby residential property to homeowners and devoted a portion of the selling price of each unit to the cost of constructing the recreation facilities.

The deed to Recreation Centers contained restrictions limiting the use of the property to recreation purposes for the benefit of Sun City residential property owners. The deed restrictions further provide that the recreation facilities must be operated "without pecuniary gain or profit." The lot owners in Sun City have the right to enforce the restrictions set forth in the deed.

Upon the purchase of a home in Sun City, the signing of a facilities agreement and the payment of an annual membership assessment, the purchaser becomes a member of the recreation center. As such, the member is entitled to use all of the recreation facilities in accordance with posted rules and regulations. Recreation Centers' articles of incorporation and bylaws govern its operation and the rights and obligations of its members.

This appeal by Revenue arises from two superior court appeals taken from decisions of the Board of Tax Appeals. The superior court appeals were filed by Recreation Centers challenging tax assessments for the years 1981 and 1982. Several legal bases for the claim of overevaluation were presented to the trial court but were dismissed by stipulation. The resulting in quiry in the trial court and on appeal relates to how the use restrictions set forth in the deed affect the valuation of the property for tax purposes and the sufficiency of the evidence concerning the valuation of the property. Recreation Centers took the position in the trial court that either the property had no value for tax purposes or that Revenue's valuation was correct. The trial court ruled in favor of Recreation Centers and found no value.

In an earlier appeal to this court by Recreation Centers concerning 1980 taxes, this court held that Recreation Centers failed to meet its burden of proving that the property had no value and did not overcome the presumption of validity of the assessor's valuation. Recreation Centers of Sun City, Inc. v. Maricopa County, 1 CA-CIV 6476 (Memorandum Decision filed November 25, 1983). Recreation Centers has overcome the presumption in this case by its proof.

On the present appeal to this court, Revenue contends that the trial court erred in concluding that Revenue's valuation of the property was excessive. As we discuss later, the only proof of value presented to the trial court consisted of the testimony of two witnesses offered by Recreation Centers. The witnesses testified that the property had no value because no one would buy it in view of the use restrictions in the deed. The specific issue underlying Revenue's argument is that the presence of deed restrictions upon the property cannot, as a matter of law, decrease its value for tax purposes.

For Arizona property tax purposes, property must be assessed at its "full cash value." "Full cash value" is synonymous with "market value." See, e.g., Caldwell v. Department of Revenue, 122 Ariz. 519, 596 P.2d 45 (App.1979). "Market value" is defined as "the highest price estimated in terms of money which the property will bring if exposed to sale on the open market allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adopted and for which it is capable of being used." Department of Revenue v. Transamerica Title Insurance Co., 117 Ariz. 26, 28, 570 P.2d 797, 800 (App.1977) (emphasis added). In Department of Revenue v. Transamerica Title Insurance Co., this court defined market value in terms of a purchaser who buys with knowledge of all the uses "for which [the property] is capable of being used." 117 Ariz. at 28, 570 P.2d at 799. Further, the value of the property for property tax purposes must reflect the realities of the market place. Department of Revenue v. Transamerica Title Insurance Co. The value of the property may not rest on mere abstract fiction, such as the nonexistence of the deed restrictions.

"Market value" is a value estimate "derived annually by the use of standard appraisal methods and techniques or as provided by law." A.R.S. § 42-201(4). See, e.g., Caldwell v. Department of Revenue, 122 Ariz. 519, 596 P.2d 45 (App.1979). The standard appraisal method employed by Revenue in valuing Recreation Centers' property was the market data approach. However, in valuing the property under the market data approach, Revenue specifically did not take into account the use restrictions set forth in the deed.

The superior court has broad de novo authority to review tax valuations. Once the superior court concludes, based on evidence of evaluation derived from standard appraisal methods and techniques, that the statutory presumption of the correctness of the taxing authority valuation has been overcome and that the valuation is excessive, it may determine a new cash value for the property. Inspiration Consolidated Copper v. Arizona Department of Revenue, 147 Ariz. 216, 709 P.2d 573 (App.1985).

In the present case, the superior court found that the statutory presumption of correctness was overcome and that the taxing authority's valuation was excessive. The statutory presumption of correctness disappears if competent valuation evidence is presented by the taxpayer. Inspiration Consolidated Copper v. Arizona Department of Revenue.

Recreation Centers met its burden of presenting competent evidence to rebut the presumption. At trial, Recreation Centers presented the testimony of two expert witnesses, Roger Blakey and Lawrence Howorth. Both gave the opinion that the property had no market value because of the use restrictions in the deed. Howorth pointed out that the property had no market value because it could not be sold. Unlike Revenue, Recreation Centers' witnesses took...