Wigwam Holdings LLC v. Madison Cnty. Assessor

• Decision Date: 14 December 2018
• Docket Number: Cause No. 18T-TA-00015
• Parties: WIGWAM HOLDINGS LLC, Petitioner, v. MADISON COUNTY ASSESSOR, Respondent.
• Court: Indiana Tax Court

115 N.E.3d 531

WIGWAM HOLDINGS LLC, Petitioner,

v.MADISON COUNTY ASSESSOR, Respondent.

Cause No. 18T-TA-00015

Tax Court of Indiana.

FILED December 14, 2018

ATTORNEYS FOR PETITIONER: MATTHEW S. CARR, JACOB V. BRADLEY, COURTNEY S. FIGG, QUARLES & BRADY LLP, Indianapolis, IN

ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR., ATTORNEY GENERAL OF INDIANA, ZACHARY D. PRICE, KELLY S. THOMPSON, DEPUTY ATTORNEYS GENERAL, Indianapolis, IN

ORDER ON PETITIONER'S PETITION TO ENJOIN THE COLLECTION OF TAX

WENTWORTH, J.

Wigwam Holdings LLC has appealed the Indiana Board of Tax Review's final determination that upheld the assessment of its real property for the 2015 tax year. Pending its appeal, Holdings seeks to enjoin the collection of property taxes. The Court finds that Holdings is not entitled to an injunction.

FACTS AND PROCEDURAL HISTORY

During the 2015 tax year, Holdings owned four parcels consisting of approximately 18 acres of land in Anderson, Indiana. (See Cert. Admin. R. at 189, 273-301.) On September 2, 2014, Holdings acquired these parcels by Quitclaim Deed from the City of Anderson Department of Redevelopment, which had contemporaneously acquired them that day by Quitclaim Deed from the Anderson Community School Corporation (referred to together as the "Quitclaim Deeds"). (See Cert. Admin. R. at 278-92.) The only parcel at issue in this matter contained a 220,000 square foot building with, among other things, a natatorium, maintenance shops, an auditorium, band and choral rooms, offices, a cafeteria/kitchen, a two-story classroom, and an 8,996 seat basketball facility situated on the 8.56 acre parcel (the "Wigwam"). (See Cert. Admin. R. at 189, 218-20, 473-76.) The property was unoccupied on the March 1, 2015, assessment date. (See Cert. Admin. R. at 462, 484, 551.)

For the year at issue, the Madison County Assessor assigned the property an assessed value of $11,415,000 ($428,000 for land and $10,987,000 for improvements). On December 12, 2015, Holdings appealed the assessment to the Madison County Property Tax Assessment Board of Appeals (PTABOA). On September 19, 2016, after a hearing, the PTABOA reduced the assessment to $2,115,200 ($423,700 for land and $1,691,500 for improvements).¹ Believing the assessment was still too high, Holdings sought review with the Indiana Board on November 3, 2016.

On April 18, 2017, the Indiana Board conducted a hearing on the matter, during which Holdings claimed its assessment should be reduced to $68,500 ($68,500 for land and $0 for improvements). (See Cert. Admin. R. at 460.) To support its claim, Holdings presented, among other things, an appraisal completed in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP); the testimony of one of the appraisal's preparers, Mr. Jay Allardt (an Indiana certified general appraiser and SRA designated member of the Appraisal Institute); and the documentation associated with its acquisition of the property. (See, e.g., Cert. Admin. R. at 187-267, 273-92, 471-72.)

Allardt's appraisal had been prepared prior to the 2015 assessment date at the request of the Anderson Department of Redevelopment for use "in considering a possible acquisition of the [ ] property." (Cert. Admin. R. at 188.) In substance, the appraisal provided that the Wigwam's highest and best use was as vacant land because its building contained asbestos, was not ADA compliant, lacked air conditioning and a sprinkler system, and was generally in poor condition. (See Cert. Admin. R. at 243-47, 477-80.) Allardt subtracted his estimated land value of $68,500 from his estimate of the building's demolition and remediation costs of $559,000 to conclude that the Wigwam's market value was negative $490,500 as of May 30, 2014. (See Cert. Admin. R. at 193, 248-50, 494-98.)

Holdings also maintained the "building wasn't worth anything" because it was acquired for $0 on September 2, 2014. (See Cert. Admin. R. at 505, 623-24.) The Quitclaim Deeds required the gymnasium to "be repaired, restored, and maintained in a first class manner" by December 31, 2018, and simultaneously, Holdings and the Anderson Community School Corporation entered into an Escrow Agreement that required the School Corporation to deposit $630,000 in an escrow account for Holdings to use to restore the property. (See Cert. Admin. R. at 273-92, 396-97, 400, 533-35, 605-16.) The Quitclaim Deeds further provided that upon completion of the restoration, the Anderson Community School Corporation would receive the "irrevocable right" to use the Wigwam gymnasium for up to 12 days each year for a period of 10 years with an option to extend another 5 years. (See Cert. Admin. R. at 278-79.) If Holdings did not fulfill its obligations by December 31, 2018, however, the escrow funds were to be returned to the Anderson Community School Corporation. (See Cert. Admin. R. at 274.)

Finally, Allardt testified that the Assessor incorrectly determined the assessed value. Allardt claimed it was incorrect because it classified the property under the wrong use type (i.e., utility/storage) and failed to account for abnormal obsolescence in its cost approach, an omission that negatively impacted the value of the property.² (See Cert. Admin. R. at 508-10, 761-66, 777-78.)

In response, the Assessor asserted that Holdings' evidence lacked probative value because it did not establish the property's actual market value-in-use. (See Cert. Admin. R. at 377.) As support, the Assessor offered a variety of property tax assessment materials, Indiana case law, and the testimony of an expert witness, Mr. Anthony Garrison, an Indiana certified Level III Assessor-Appraiser. (See, e.g., 376-85, 680.) Garrison testified that there were "issues" with Allardt's appraisal because it estimated the Wigwam's market value, not its market value-in-use, even though the two standards are not necessarily equivalent. (See Cert. Admin. R. at 701-04, 710-18.) Indeed, Garrison explained that Allardt's appraisal was inconsistent with the market value-in-use standard because it was based on a hypothetical use of the property as vacant land rather than its current use as improved land. (See Cert. Admin. R. at 704-06, 709-18, 731.) Moreover, Garrison testified that Allardt's appraisal failed to account for the requirement in the Quitclaim Deeds and associated Escrow Agreement that Holdings restore the Wigwam's gymnasium. (See Cert. Admin. R. at 709, 717-18, 723-25.) Finally, Garrison stated that the September 2014 sale was not a market transaction because the seller was atypically motivated by its desire to restore the iconic Wigwam for the community's future use, as implied by the restrictions in the Quitclaim Deeds and the Escrow Agreement. (Cert. Admin. R. at 706-09.) (See also Cert. Admin. R. at 273-92.)

On March 29, 2018, the Indiana Board issued its final determination upholding the assessment. (Cert. Admin. R. at 407-22.) In so doing, the Indiana Board explained that it had weighed the evidence and determined that Holdings did not make a prima facie case for reducing its assessment because Allardt's appraisal did not credibly value the Wigwam and the September 2014 sale was not a probative, market transaction. (See Cert. Admin. R. at 418-21 ¶¶ 43-52.) The Indiana Board also determined that Holdings' use type and abnormal obsolescence claims were unpersuasive because they were not evidence of value, but merely attacked the assessment methodology. (See Cert. Admin. R. at 421 ¶ 50.)

On May 11, 2018, Holdings initiated an original tax appeal and filed a Petition to Enjoin the Collection of Tax pursuant to Indiana Code § 33-26-6-2. On October 5, 2018, Holdings filed an emergency motion to remove the property at issue from a tax sale, which the Court granted on October 10, 2018. Then, on November 27, 2018, after the Certified Administrative Record was filed and the parties submitted their briefs, the Court conducted a hearing on Holdings' Petition to Enjoin. Additional facts will be supplied when necessary.

LAW AND ANALYSIS

When, as here, a taxpayer appeals the assessment of its real property to the Tax Court, it must "pay taxes on the tangible property when the property tax installments come due, unless the collection of the taxes is enjoined under [ Indiana Code § 33-26-6-2 ] pending" the resolution of the appeal. IND. CODE § 6-1.1-15-10(a) (2018). To enjoin the collection of the tax, Holdings must show the Court that (1) it has a reasonable opportunity to prevail in the appeal; (2) the issues raised by its appeal are substantial; and (3) the equitable considerations favoring the enjoining of the collection of the tax outweigh the state's interest in collecting the tax pending the appeal. See IND. CODE 33-26-6-2(c) (2018). All three factors must exist for the Court to enjoin the collection of tax. I.C. § 33-26-6-2(c).

Reasonable Opportunity to Prevail

A reasonable opportunity to prevail is a tolerable, moderate, rational, honest, or equitable chance of success on the merits of the appeal. See Video Tape Exch. Coop of Am., Inc. v. Indiana Dep't of State Revenue, 512 N.E.2d 476, 477 (Ind. Tax Ct. 1986). Thus, when a party seeks to enjoin the collection of property taxes, it must demonstrate that it has a reasonable opportunity to prevail by showing that the Indiana Board's final determination may be reversed by the Tax Court because it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; in excess of or short of statutory jurisdiction, authority, or limitations; without observance of the procedure required by law; or unsupported by substantial evidence. See IND. CODE § 33-26-6-6(e)(1)-(5) (2018). To that end, Holdings claims that it has a "reasonable likelihood of success on the merits" because the Indiana Board's final determination regarding the credibility of Allardt's appraisal, the probative value of the September 2014 sale, and its abnormal obsolescence claim are arbitrary, capricious, an abuse of discretion, in excess of...