Stephen & Stephen Properties, Inc. v. State Tax Commission

• Court: Missouri Supreme Court
• Writing for the Court: SEILER
• Citation: Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798 (Mo. 1973)
• Decision Date: 10 September 1973
• Docket Number: No. 57018,No. 1,57018,1
• Parties: STEPHEN AND STEPHEN PROPERTIES, INC., Appellant, v. STATE TAX COMMISSION of Missouri, Respondent

Page 798

499 S.W.2d 798

STEPHEN AND STEPHEN PROPERTIES, INC., Appellant, v. STATE TAX COMMISSION of Missouri, Respondent.

No. 57018.

Supreme Court of Missouri, Division No. 1.

Sept. 10, 1973.

Motion for Rehearing or for Transfer to Court En Banc or for

Modification of

Court's Opinion Denied Oct. 8, 1973.

Lashly, Caruthers, Rava, Hyndman & Rutherford, William E. Buckley, Albert J. Stephan, Jr., St. Louis, for appellant.

George F. Gunn, Jr., St. Louis County Counselor, Thomas W. Wehrle, Deputy County Counselor, James H. White, Associate County Counselor, Clayton, for respondent.

SEILER, Judge.

This appeal from the action of the circuit court of St. Louis County affirming a decision of the State Tax Commission is here under Sec. 3, Art. V, Mo.Const., V.A.M.S., as involving construction of the revenue laws, specifically, the phrase 'true value in money', as appearing in Sec. 137.115, RSMo 1969, V.A.M.S., with respect to the tax assessment of real property. Appellant is challenging the tax assessment of a new private tennis club. The assessment is based solely on the cost of reproduction of the improvements. Appellant contends that several other factors, which in its opinion depreciate the value of the property, must be considered in arriving at the 'true value in money' of the property. We agree and accordingly reverse and remand.

On December 26, 1967, in anticipation of the construction of a private tennis club, the city of Creve Coeur passed an ordinance granting Creve Coeur Racquet Club a special use permit on land zoned 'one acre single family residential'. On January 2, 1968, Stephen and Barbara Apted purchased the land on which the permit was issued (15.022 acres of unimproved real estate on Conway Road in Creve Coeur) for $86,500. On March 22, 1968, appellant purchased this land from the Apteds for $86,500.

On April 1, 1968, appellant leased the land to Miss Hulling's Coffee House, Inc. for a 20-year term at $9,000 rent per year, with the additional agreement that Miss Hulling's would become obligated to construct racquet club improvements and to pay all taxes. On June 1, 1968, Miss Hulling's subleased the land to the racquet club, a pro forma corporation, for a term of ten years at an annual rent of $41,000, with the additional agreement that the racquet club would provide $300,000 for construction and pay all taxes.

As of January 1, 1969, the work was finished and the club was in operation. The total cost of land and improvements was $657,176. The facility contained a club house, five indoor courts, nine outdoor courts, parking area, and a swimming pool.

The St. Louis County assessor's office valued the property and improvements at $614,918. Mr. John McDonald, chief appraiser in the St. Louis County assessor's office, testified 'The property was appraised by the cost approach to value which considers the cost of reproduction less any depreciation, which wasn't applicable in this case, because it was a new building, plus the improved value of the land'. The cost of reproduction of the improvements was determined by classifying various sections of the building according to type of construction and determining a square foot value under the Marshall Stevens Valuation Engineering Service, for a total of $484,160.

Mr. Schneider, real estate appraiser for appellant, testified that the total cost of improvements as of January 1, 1969, was $570,676. In his opinion the cost of the improvements should be reduced by 50% to determine the 'true value in money' of the property because of the following factors:

1. The existence of the special use permit, which allowed construction of the improvements subject to various conditions which include: (a) the use of land is for a private racquet club; (b) the food and drink facilities at said club shall be limited to a snack bar with modest seating capacity; (c) no area wide tennis tournaments are permitted; (d) the operation of the club shall be controlled by its members; (e) the hours of operation are limited; and (f) the land is restricted to this singular use.

2. The improvements are designed for the special purpose of a swimming pool and tennis club.

3. The existence of a ten-year lease to a non-profit corporation.

4. The speculative nature of the success of the use for which the property was constructed.

The transcript of hearings before the commission contains the following exchange in reference to Mr. Schneider's testimony on depreciation:

'COMMISSIONER DAVIS: Do you, Mr. Schneider, say that this economic depreciation would be half the value of it in one year's time?

'THE WITNESS: In my opinion, your Honor, it was there the day they laid the last brick, it was there while this was in the planning stage.

'. . .

'. . . In my opinion cost is not true measure of value at all times. Just because you spent the money, because someone invested the money doesn't always mean it is worth it.

'. . .

'COMMISSIONER DAVIS: I don't think that a private racquet club would build this place with the hopes of selling it in two or three years to make a profit as a private club, I don't think it built it with the purpose of re-selling it at all.

'THE WITNESS: Well, your Honor, as I understand this term true value in money is what would it bring if exposed on the open market, what would you obtain for it. In my opinion, this is all an investory (sic) would pay for this property . . . Now, whether they hold it and they are happy with it I have no way of knowing.'

When asked about Mr. Schneider's depreciation of the property by 50%, the appraiser for the St. Louis County assessor replied:

'. . . I personally think this is a special purpose building built for special purpose use by the present owners who are informed businessmen who have demonstrated their astuteness in other ventures, Miss Hulling's venture is quite successful, and in my opinion I can see this venture going on and on and growing, and I would hesitate myself to assign any depreciation for the value in use. I don't believe this building was built for resale, and there are other special properties in St. Louis County that have to be valued at their value in use such as refineries and there is no market for some of these unique buildings. In my opinion, this is one of these unique buildings and we believe the cost approach accurately reflects the value in use to the present owners'.

On cross examination the following was stated:

'Q In arriving at your appraisal of the land and improvements, did you give any consideration to the existence of the special use permit which runs in favor of Creve Coeur Racquet Club and the basic zoning on the property which is one acre single family residential, except for Creve Coeur Racquet Club which is entitled to use it for present purposes under the conditions enumerated?

'A At the time of my assigning land value I didn't know that this was special purpose. . . . (A)s an appraiser and as a businessman it is my opinion that the officials in Creve Coeur granted special permit use and if the present owners cease to exist that any new owners would enjoy the same use even though it is not spelled out.

'Q That is speculative on your part?

'A It is entirely speculative on my part, that is right.

'Q Did you consider in arriving at your appraisal of land and improvements the fact that the lessee of this property was a not for profit corporation which had no stockholders?

'A It didn't enter into my calculations at all.

'Q How about the functional depreciation of this building, the non-purpose nature of it, did that enter--

'A I believe the building is functionally perfect for its purpose.

'. . .

'Q And I take it from your testimony that you did not consider the zoning on this property as having a depreciating effect on the special use permit under which it was constructed, as having a depreciating effect on its assessment--

'A That is right.'

As to the value of the land, appellant's appraiser testified to a value of $90,000 overall. The St. Louis County appraiser, however, valued the land in two parts. The 'in use' land which had been improved was valued at 40cents a square foot, or $101,280. He arrived at this figure by valuing the land the same way he would value commercial land on which similar improvements were situated, in this case warehouse property, and then discounting the valuation because of the fact that the property was of a more limited use. The balance he appraised at $4,300 per acre, or $29,460, for a total of $130,740 on the land.

The commission made its decision in this case on December 10, 1969. The decision was not accompanied by findings of fact and conclusions of law as required by Sec. 536.090, RSMo 1969, V.A.M.S. On December 30, 1969, appellant filed its petition for review of the commission's decision. The commission did not file its findings of fact and conclusions of law until June 10, 1970. Appellant filed a motion to quash the findings for the reason that they were not prepared until almost six months after the filing of appellant's petition for review after the commission was afforded an opportunity to consider the grounds raised in the petition for review, and therefore were not included in and did not accompany the decision of the commission as required by statute. The circuit court sustained appellant's motion to quash, but in due course affirmed the decision of the commission.

Appellant contends that the commission order is not supported by substantial and competent evidence because the St. Louis County assessor's valuation of the property considered only the cost of reproduction of the property, and failed to take into account all relevant undisputed factors which have a depreciating effect on the property's 'true value in money'. Secondly, appellant contends that the appraised value of the land is not supported by substantial and competent evidence because of the failure of the commission to take into account the sale price of the land in the...