Rinehart v. Bateman

• Decision Date: 21 February 2012
• Docket Number: No. WD 73954.,WD 73954.
• Citation: 363 S.W.3d 357
• Parties: Cathy RINEHART, Assessor, Clay County, Missouri, Respondent, v. Robert and Donna BATEMAN, Appellants.
• Court: Missouri Court of Appeals

363 S.W.3d 357

Cathy RINEHART, Assessor, Clay County, Missouri, Respondent,

v.Robert and Donna BATEMAN, Appellants.

No. WD 73954.

Missouri Court of Appeals, Western District.

Feb. 21, 2012.

Jonathan Sternberg, Kansas City, MO, for appellants.

Patricia L. Hughes, Liberty, MO, for respondent.

Before Special Division: JAMES E. WELSH, Presiding Judge, CYNTHIA L. MARTIN, Judge and GARY D. WITT, Judge.

CYNTHIA L. MARTIN, Judge.

Robert and Donna Bateman (collectively, the “Batemans”) appeal from the judgment of the Clay County Circuit Court reversing the decision of the State Tax Commission (the “STC”) finding that agriculturally classified property (the “Property”) ¹ owned by the Batemans met the statutory requirements to be valued at its productive capability rather than at its fair market value.

We find the STC did not err in concluding that the Property, which all parties agree was properly classified as agricultural, met the statutory requirements to be valued at its productive capability and not at its fair market value. We reverse the judgment of the trial court reversing the decision of the STC.

Factual and Procedural History

The material facts are not in dispute. In approximately 1996, the Batemans purchased the Property, which is located at N.W. 68th Street and N. Broadway Avenue in Clay County, for $240,000. The Property consists of 3.3 unimproved acres. The Property is zoned commercial. Beginning in 2007, and continuing through the proceedings relevant to this appeal, the Batemans began using the Property for hay cultivation. Mr. Bateman planted red clover on the Property and hired McKinnie's Custom Hay Baling (“McKinnie”) to cut, rake, and bale the clover into hay. Although the Batemans sell the hay they cultivate, their efforts have not been profitable.

In 2009, the Assessor classified the Property as agricultural, and assigned it a fair market value of $374,500, resulting in an assessed value of $44,940. ² The Batemans appealed the assessment to the Clay County Board of Equalization which affirmed the Assessor's determination on July 16, 2009. The Batemans then filed a complaint for review of assessment with the STC.

An evidentiary hearing was held before the STC's Senior Hearing Officer Luann Johnson (“Hearing Officer Johnson”). At the hearing, both the Assessor and the Batemans agreed the Property should be classified as agricultural, though the parties reached this conclusion in different ways.

The Assessor argued that the Batemans' Property did not fall within the definition of “agricultural” set forth at section 137.016.1(2).³ Instead, the Assessor argued the Property should be classified as agricultural pursuant to section 137.016.5, a statute which describes the factors to be evaluated to determine the classification of vacant and unused property based on its “immediate most suitable economic use.” As a result, the Assessor argued that section 137.017.4, which addresses the assessment of vacant and unused agricultural property, requires the true value of the Property to be determined based on its fair market value. The Assessor presented the expert testimony of Gary Maurer (“Maurer”), a commercial appraiser. Maurer testified that the Property's “immediate most suitable economic use” was commercial.⁴ Maurer testified that the Property should be assigned a fair market value, therefore, based on sales of comparable commercial property. However, Maurer felt the agricultural assessment rate of 12% should be applied to this fair market value.⁵ Maurer thus opined that the Property's fair market value was $575,000, and that its assessed value should be 12% of this true value.⁶

In contrast, the Batemans argued that the Property is being used for an agricultural purpose, consistent with the definition of “agricultural” set forth in section 137.016.1(2). As such, the Batemans argued that section 137.017.1 requires the true value of the Property to be determined based on its productive capability. The Batemans argued this value should be $400.

The Batemans presented evidence about their hay baling operations on the Property. The Assessor did not contest that the Batemans are conducting hay baling operations on the Property. The Assessor argued, however, that because the operations were neither profitable nor likely to become profitable, the use was not truly agricultural, but instead a ruse to secure a more favorable valuation of the Property.

Hearing Officer Johnson found that the Property's use fell within the definition of “agricultural” set forth at section 137.016.1(2). Hearing Officer Johnson found that because the Property was being used for an agricultural purpose, sections 137.016.5 and 137.017.4 (relating to vacant and unused land and its valuation if agricultural) were inapplicable. Hearing Officer Johnson thus concluded that section 137.017.1 mandated determining the true value of the Property based on its productive capability. Because the parties both agreed the appropriate land grade for the Property was a grade 7, Hearing Officer Johnson assigned a productive capability value to the Property of $75 per acre based on the STC's promulgated regulations. ⁷ Based on this true value, Hearing Officer Johnson determined the Property had an assessed value for tax years 2009 and 2010 of $30.⁸

The Assessor filed an application for review of Hearing Officer Johnson's decision with the STC. The STC entered its order affirming Hearing Officer Johnson's decision on April 13, 2010.

The Assessor then filed a petition for judicial review of the STC decision in the Circuit Court of Clay County. The trial court reversed the decision of the STC finding that the Batemans were not engaged in an agricultural use of the Property because an agricultural use presumes a potentially profitable business benefit. The trial court concluded, therefore, that the Property should be treated as vacant and unused and classified as agricultural following application of the statutory factors set forth at section 137.016.5. The trial court further concluded that section 137.017.4 required the vacant and unused agriculturally classified Property to be afforded a true value in the amount of its fair market value, and not its productive capability. The trial court found the assessed value of the Property for 2009 and 2010 to be $44,940, the amount originally assessed by the Assessor and affirmed by the Clay County Board of Equalization.⁹

This appeal followed. The Batemans filed the appeal as the party aggrieved by the trial court's decision. However, pursuant to Rule 84.05(e), we review the decision of the STC and not of the trial court.¹⁰ Thus, Cathy Rinehart, Clay County Assessor, (“the Assessor”) filed the appellant's brief as the party aggrieved by the STC's decision.

Standard of Review

On an appeal from a judgment of a trial court addressing the decision of an administrative agency, we review the decision of the administrative agency and not the judgment of the trial court. Bird v. Mo. Bd. of Architects, 259 S.W.3d 516, 520 n. 7 (Mo. banc 2008). Notwithstanding, in our mandate, we reverse, affirm or otherwise act upon the judgment of the trial court. Id.

“Pursuant to Mo. Const. art. V, section 18 and section 536.140, we must determine ‘whether the agency's findings are supported by competent and substantial evidence on the record as a whole; whether the decision is arbitrary, capricious, unreasonable or involves an abuse of discretion; or whether the decision is unauthorized by law.’ ” Henry v. Mo. Dept. of Mental Health, 351 S.W.3d 707, 712 (Mo.App. W.D.2011) (quoting Coffer v. Wasson–Hunt, 281 S.W.3d 308, 310 (Mo. banc 2009)).

“[A] court reviewing the actions of an administrative agency should make a ‘single determination whether, considering the whole record, there is sufficient competent and substantial evidence to support the award.’ ” Albanna v. State Bd. of Registration for Healing Arts, 293 S.W.3d 423, 428 (Mo. banc 2009) (quoting Hampton v. Big Boy Steel Erection, 121 S.W.3d 220, 223 (Mo. banc 2003)). Though we “consider[ ] the entire record to determine whether the decision is supported by competent and substantial evidence, ... ‘[w]e may not substitute our judgment on the evidence for that of the agency, and we must defer to the agency's determinations on the weight of the evidence and the credibility of witnesses.’ ” Henry, 351 S.W.3d at 712 (quoting Stacy v. Harris, 321 S.W.3d 388, 393–94 (Mo.App. S.D.2010)). “We ‘must look to the whole record in reviewing the Board's decision, not merely at that evidence that supports its decision, ‘and we no longer view the evidence in the light most favorable to the agency's decision.’ ” ¹¹ Id. (quoting Lagud v. Kansas City Bd. of Police Comm'rs, 136 S.W.3d 786, 791 (Mo. banc 2004) (emphasis added)).

When an administrative agency decision is based on the agency's interpretation and application of the law, we review the administrative agency's conclusions of law and its decision de novo, and we make corrections to erroneous interpretations of the law. Algonquin Golf Club v. State Tax Commission, 220 S.W.3d 415, 418 (Mo.App. E.D.2007).

In this case, the STC incorporated the decision of Hearing Officer Johnson into its order. “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).” Peruque, LLC v. Shipman, 352 S.W.3d 370, 374 (Mo.App. E.D.2011).

Analysis

The Assessor raises two points on appeal. For her first point, the Assessor claims that the STC erred in its decision because the Property should have been treated as vacant and unused property and assessed based on its fair market value instead of its productive capability. For her second point, the Assessor claims that treating the Property as devoted...