Tatten Partners, L.P. v. New Castle County Bd. of Assessment Review

• Decision Date: 18 June 1993
• Docket Number: No. 92A-07-005,92A-07-005
• Parties: TATTEN PARTNERS, L.P., Appellant, v. NEW CASTLE COUNTY BOARD OF ASSESSMENT REVIEW and New Castle County, Delaware, Appellees. . Submitted:
• Court: Delaware Superior Court

Page 1251

642 A.2d 1251

TATTEN PARTNERS, L.P., Appellant, v. NEW CASTLE COUNTY BOARD OF ASSESSMENT REVIEW and New Castle

County, Delaware, Appellees.

No. 92A-07-005.

Superior Court of Delaware,

New Castle County.

Submitted: June 18, 1993.

Decided: Sept. 9, 1993.

Motion for Reargument: Sept. 24, 1993.

Decided: Oct. 19, 1993.

Appeal of a Decision of the Board of Assessment Review. Set Aside and Modified. Appellant's Motion for Reargument. Denied.

Gordon W. Stewart, and Richard A. Forsten, of Duane, Morris & Heckscher, Wilmington, for appellant.

Dennis J. Siebold, and Stephen L. Nowak, argued, of New Castle County Law Dept., Wilmington, for appellees.

OPINION

BARRON, Judge.

On March 15, 1988, Tatten Partners, L.P. (Tatten) filed an annual assessment appeal to the Board of Assessment Review of New Castle County (the Board), alleging that its property at 22 Delaware Avenue, Wilmington, Delaware (the property) was substantially overassessed. The County had originally assessed the value of the property at $39,762,600, in terms of July 1, 1983 values. ¹ In its appeal to the Board, Tatten sought a reduction to $31,000,000, which it later increased to $31,500,000. A hearing was initiated before the Board on April 20, 1989, but one day did not provide sufficient time to hear all the testimony. The Board therefore continued the hearing to a "mutually convenient time." I-104. ² The hearing was reconvened on May 14, 1992, and concluded June 9, 1992. In its Notice of Decision, dated June 9, 1992, the Board reduced the assessment value from $39,762,600 to $37,659,000 in order "to reflect revised cap-rate and other testimony that property [was] over-assessed." III-141.

On July 8, 1992, Tatten filed a "Petition, Complaint and Notice of Appeal Pursuant to 9 Del.C., § 8312 and Superior Court Rule 72." In addition to appealing the Board's decision, Tatten alleged that the County and the Board violated its constitutional rights to due process and equal protection of law, seeking damages and attorney's fees pursuant to 42 U.S.C. §§ 1983 and 1988. When the County failed to file the record within 20 days of receiving the Citation, Tatten filed a Motion for Default Judgment. This Court denied that Motion and directed the County to file the record no later than March 5, 1993. The Board filed the record on March 5, 1993.

In its brief, Tatten argues first that the Board's decision should be reversed because it was not supported by competent or substantial evidence in that the County (1) ignored actual construction costs, (2) applied rental rates in excess of actual area rates, (3) presented no evidence to support its capitalization rate, and (4) performed no sales comparison analysis. Tatten also argues that the Board violated its constitutional right to substantive due process by delaying the hearing for four years and by failing to adjust the assessment of record, thereby forcing Tatten to pay taxes on the full $39,762,600 assessment amount for the years 1988 through 1991 and on the $37,659,000 amount in 1992.

The County responds that the Board's decision was supported by substantial evidence on the record and was not arbitrary, capricious or contrary to law. In response to Tatten's civil rights claim, the County has filed a Motion to Strike the relevant portions of Tatten's petition and opening brief on the grounds that this Court lacks jurisdiction over matters not raised before the Board.

FACTS

In 1985, Tatten acquired the land parcels that now constitute the property in question for a purchase price of $4,252,168. The property is located at the corner of Delaware Avenue and Tatnall Street in the central business district of the City of Wilmington. During 1987, Tatten constructed a 17-story building comprising 282,562 square feet of rentable floor area, which includes parking, retail and office space. The construction costs were $31,597,638. Thus the total cost of the property, now known as the Bank of Delaware Plaza, was approximately $35,849,806.

For the tax year beginning on July 1, 1989, New Castle County assessed the property for ad valorem tax purposes at $39,762,600, expressed in July 1, 1983 values. After receiving notice of the assessment in January 1988, Tatten filed an appeal with the Board on March 15, 1988, seeking a reduction to $31,000,000, which it later increased to $31,500,000. With its appeal, Tatten supplied extensive data and materials, including an appraisal made by its expert, Robert Hickman. Tatten requested that the County provide Tatten with any appraisal report or other documentation upon which the County intended to rely. The County failed to provide any information and apparently indicated that none was available.

On April 20, 1989, the hearing began. Tatten presented its evidence and the testimony of Hickman, a licensed appraiser with 30 years of real estate experience. II-118, 119; III-35. Hickman presented the results of his analysis, using the capitalization of income approach, the cost approach and the market (or sales comparison) approach, which are the three recognized methods of determining a property's value. ³ Although he made separate analyses using each of the three methods, Hickman relied most heavily on the income approach. Hickman testified that the fair market value of the property stated in terms of July 1, 1983, values is $31,500,000. At the end of the day, counsel for the County concluded his cross-examination of Hickman, and the hearing was continued until a "mutually convenient time." I-104.

On May 14, 1992, Tatten appeared before the Board and asked the Board to (1) rule that Tatten had carried its burden of producing competent evidence of substantial overvaluation, (2) require the County to present evidence in support of the assessment of record, and (3) rely on the record from the 1989 hearing so Tatten would not have to put on its case again. The County opposed Tatten's request to rely on the record and asked the Board to require that Tatten present its case a second time. The Board ruled in favor of the County.

The hearing continued on June 9, 1992. After Tatten presented its evidence, Albert A. Valiante testified for the County. Valiante is an Assessor III who supervises other County assessors and who has worked for the Assessment Division for 15 years. Valiante testified that he had originally placed the assessment of record against the property. In arriving at a valuation of $39,326,700, he considered all three approaches to valuation but did not reach a value under the market approach because at the time of the original assessment he found no comparable property sales.

At the conclusion of the hearing, the Board concluded that the capitalization rate of 8.8 percent used by the County was too low and that the appropriate rate was 9.1 percent. As a consequence, the Board lowered the total appraisal value from $39,762,600 to 37,659,000. The Board made no comment on any of the other evidence presented by Tatten. In its Notice of Decision dated June 9, 1992, the Board recorded the monetary reduction

                and stated that "[this reduction is] to reflect revised cap-rate and other testimony that property [was] over-assessed."   The Notice did not specify which part or parts of the evidence the Board found to support overvaluation, and the numbers reflect only the result of the slightly higher capitalization rate--despite the acknowledgement that "other testimony" also evidenced overvaluation
                

STANDARD OF REVIEW

A taxpayer aggrieved by the assessment of his property has the right to bring an appeal before the Board of Assessment Review and then to appeal the Board's decision to this Court. 9 Del.C., § 8311(a) and 8312(b) and (c). The taxpayer who chooses this path faces "a substantial evidential burden at both the administrative and appellate levels." Seaford Associates, L.P. v. Board of Assessment Review, Del.Supr., 539 A.2d 1045, 1047 (1988). On a taxpayer's appeal of the assessment of record made against his property,

a prima facie case of accuracy is made by the assessment record. The burden of presenting evidence to meet the prima facie case and to rebut the presumption rests upon the property owner. To fulfill the purpose, the owner's evidence must not only be competent; it must be sufficient to show a substantial overvaluation. If rebutted by such evidence, the presumption in favor of the accuracy of the assessment ceases to exist. (Emphasis added.)

Fitzsimmons v. McCorkle, Del.Supr., 214 A.2d 334, 337 (1965). See also Delaware Racing Association v. McMahon, Del.Supr., 340 A.2d 837 (1975); Seaford Associates, L.P. v. Board of Assessment Review, 539 A.2d at 1047. If the Board "should find that the assessment is greater than it should be ...," the Board shall order the assessment to be reduced. 9 Del.C., § 1305(2).

On appeal to this Court, "[t]he decision of each board of assessment or department of finance shall be prima facie correct and the burden of proof shall be on the appellant to show that such body acted contrary to law, fraudulently, arbitrarily or capriciously." 9 Del.C., § 8312(c); Board of Assessment Review v. Stewart, Del.Supr., 378 A.2d 113, 116 (1977). The reviewing court is not to reverse if it finds that the Board relied in part on incompetent evidence but only if "the Board's findings are clearly wrong and its conclusions not the product of an orderly and logical deductive process." Rodney Square Investors, L.P. v. Board of Assessment Review, Del.Supr., No. 256, 1982, Horsey, J. (April 7, 1983) (ORDER) (citing Levitt v. Bouvier, Del.Supr., 287 A.2d 671 (1972)).

DISCUSSION OF THE APPEAL

Tatten argues that the Board acted arbitrarily and capriciously in ignoring Tatten's extensive testimony and documentation in support of its contention that the value of the property, expressed in July 1, 1983 terms is $31.5 million. Tatten also argues that its evidence was sufficient to rebut the presumption of accuracy and was unrebutted by the County...