Shipman v. Dns Electronic Materials, Inc.

• Decision Date: 02 September 2008
• Docket Number: No. ED 90597.,ED 90597.
• Citation: 267 S.W.3d 751
• Parties: Scott SHIPMAN, St. Charles Assessor, Appellant, v. DNS ELECTRONIC MATERIALS, INC., Respondent.
• Court: Missouri Court of Appeals

267 S.W.3d 751

Scott SHIPMAN, St. Charles Assessor, Appellant, v. DNS ELECTRONIC MATERIALS, INC., Respondent.

No. ED 90597.

Missouri Court of Appeals, Eastern District, Division Three.

September 2, 2008.

Motion for Rehearing and/or Transfer to Supreme Court Denied October 9, 2008.

Application for Transfer Denied November 25, 2008.

Charissa L. Mayes, St. Charles, MO, for appellant.

Joel D. Brett, St. Charles, MO, for respondent.

CLIFFORD H. AHRENS, Judge.

Scott Shipman, the St. Charles County Assessor ("Assessor") appeals from the judgment of the circuit court that reversed the decision of the State Tax Commission of Missouri ("STC") and ordered the Assessor to base any future assessments on the property of the taxpayer, DNS Electronic Materials, Inc. ("Taxpayer"), on the appraised value established after appeal in 2001, consistent with section 137.345.5 RSMo 2000.¹ We affirm the judgment of the circuit court reversing the decision of the STC.

Taxpayer has a manufacturing facility on several parcels of property totaling approximately 188 acres in St. Charles County ("Property"). The Property consists of industrial office space and buildings for manufacturing.² In 2001, Assessor appraised the value of the Property at $13,448,870. Taxpayer appealed to the St. Charles County Board of Equalization ("BOE"), which adopted the valuation of the Assessor. Taxpayer appealed to the STC, which valued the property at $3,906,595 for the years 2001-2002.

At the STC hearing on the 2001-2002 valuation, Taxpayer presented the testimony of a state-certified appraiser, Thomas McReynolds ("Taxpayer Appraiser"). Taxpayer Appraiser testified that he had appraised the Property in May 2002, using the comparable sales approach and the cost approach, relying principally on the former. He concluded the valuation of the taxable Property was $5,440,000.³ There was also evidence part of the Property had been classified as agricultural, and the Hearing Officer found that the fair market value of the total Property had to be adjusted for this, and accordingly deducted $1,580,575.

The Hearing Officer found that the evidence presented by Taxpayer was substantial and persuasive enough to rebut the presumption in favor of the BOE's assessment. He concluded that this evidence established the true value in money as of January 1, 2001, after deductions and adjustment for the non-taxable portion and the parcels classified as agricultural to be $3,906,595. The decision of the Hearing Officer ("2001 Decision") was not appealed further by Assessor.

Assessor reassessed the Property for the years 2003-2004, and valued the Property at $12,034,890. The BOE affirmed the assessment. Taxpayer appealed. Taxpayer and Assessor both presented evidence, which included testimony and reports from Taxpayer Appraiser and Charles Arginas ("Assessor Appraiser"), who appraised the Property for Assessor. Taxpayer Appraiser's valuation was identical to his valuation for 2001-2002, and relied principally on the comparable sales approach. Assessor Appraiser relied principally on the cost approach and determined that the true value of the taxable portion of the Property was $38,000,000.⁴

The Hearing Officer found Taxpayer's evidence to be persuasive, and found Assessor's evidence to be not persuasive. He also found that the Assessor did not comply with section 137.345.5, which mandates that:

In every instance where a taxpayer has appealed to the board of equalization or the state tax commission the assessment of the taxpayer's property, real or personal, and that appeal has been successful, then in the next following and all subsequent years the basis upon which the assessor must base future assessments of the subject property shall be the basis established by the successful appeal and any increases must be established from that basis.

(Emphasis added). The Hearing Officer stated that "[a] negative inference is so drawn to the extent that in light of the mandate of Section 137.345.5 no presumption can exist that the Assessor's or the Board's value of $12,031,000 is correct." He noted that there was a further negative inference against the Assessor's Exhibits, based on the Assessor Appraiser's failure to acquaint himself with the 2001 Decision, and that Assessor should have brought the 2001 Decision and the terms of section 137.345.5 to the Assessor Appraiser's attention. The Hearing Officer set aside the assessed valuation of the several parcels that constitute the Property, and determined that the true value in money for the years 2003 and 2004 to be $3,868,080.

Assessor appealed to the STC for a review of the decision and order of the Hearing Officer. The STC reviewed the record of the hearing. The deposition of Assessor was also made a part of the STC record. In this deposition, the Assessor addressed how his office used the 2001 Decision as a basis for the assessment for 2003 and 2004. He repeatedly stated that his office did use the 2001 Decision as a basis, but then applied their own assessment tools, such as "internal ratios, goodness to fit statistics, and adjust[ed] it accordingly for fair market value and uniformity throughout the county." Assessor conceded that the 2003-2004 valuation was more than three times higher than the true value of the Property as determined by the STC in the 2001 Decision. Assessor also testified that there had been no new construction of improvements to the Property since the valuation date of January 1, 2001, and that his office assumed from its records that there was no change in condition of the Property between January 1, 2001 and January 1, 2003. Assessor denied that he disagreed with the STC's valuation in the 2001 Decision, and would not opine that the Property was unfairly assessed in the 2001 Decision. He stated that his office increased the true value of the Property for 2003-2004 over that established in the 2001 Decision "based on economic data."

The STC reviewed the decision of the Hearing Officer and set it aside. It found that neither the income approach nor the sales comparison approach were reliable indicators of value for the Property, noting that the sales used by Taxpayer Appraiser were "too remote in time and location to provide persuasive evidence of value." It found that the cost approach used by Assessor Appraiser was correctly applied and supported the opinion of value of Assessor and the BOE, while that used by Taxpayer Appraiser was not a reliable indicator of value. The STC found that Taxpayer failed to meet its burden of proof that the value placed on the Property was excessive, unlawful, unfair, arbitrary or capricious. The STC discussed section 138.060.1, finding that the use of Assessor Appraiser's report, which valued the Property at $38,000,000, did not violate the former statute where that report did not advocate a higher valuation, but was used to support the Assessor's valuation. It also analyzed section 137.345.5 and its application as follows:

... In his deposition, [Assessor] testified repeatedly that he has used the [2001 Decision] as the basis for his value for tax year 2003 but that a multitude of factors, including sales, pointed to the fact that the 2001 decision understated the value of the [Property].

In [Taxpayer]'s post trial brief, it concedes that the 2001 decision does not freeze the market[,] but [Taxpayer] would read Section 137.345.5 to require the Assessor to use the same methodology used by the [STC] in the previous decision.

We cannot read Section 137.345.5 so restrictively. It is clear that the legislature wants the Assessors to give due regard to [STC] decisions. However, once the Assessor has considered the [STC] decision, nothing prohibits the Assessor from raising value if he or she determines that the prior [STC] decision does not represent market value for the tax day in question.

The [STC] strives to produce the best decision it can based upon the information provided. But where — as in our 2001 decision — one party fails to present evidence, we would be remiss in holding that our decision was infallible. When either party comes upon better evidence of market value, it is our duty to consider same. And, in the case of the Assessor, it is his duty to provide same to us.

Likewise, the methodology used in a prior decision is not necessarily binding upon the Assessor. There are three generally approved methods for determining value, all of which may be applicable in a given situation.

The STC ordered that the decision of the hearing officer be set aside, and affirmed the assessed values approved by the BOE.

Taxpayer appealed to the circuit court. The circuit court found that section 137.345.5 controlled the disposition of the case. It found that the Assessor did not follow the statutory mandate and base the 2003-2004 assessment of the Property on the valuation established in the 2001 Decision, and did not "consider" the prior BOE and STC decisions "other than to flatly reject them." The circuit court also found that the STC did not follow the statutory mandate. It noted that the Assessor testified that he did look at the 2001 Decision, considered it a base value and then reappraised the Property, "in relation to similar properties and other sales in the market to determine its `market value' and to `adjust to be uniform and consistent throughout the county.'" It noted that "[o]n that `basis' and not the one prescribed by statute, the Property was appraised at more than three times its 2001/2002 value." The circuit court noted that Assessor and the STC admitted that there were no improvements to the Property, no rezoning thereof, and no change in its use between 2001 and 2003. It further noted that the Assessor opined that the more than tripling of the property valuation indicated that "they `possibly mismeasured' or `just missed the value' of the Property in previous assessments and that `the basis of the 2001 value suggested that the prices per...