Wirth v. State Bd. of Tax Com'rs

• Decision Date: 04 May 1993
• Docket Number: No. 49T10-9204-TA-00021,49T10-9204-TA-00021
• Citation: 613 N.E.2d 874
• Parties: Gary G. WIRTH, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 874

613 N.E.2d 874

Gary G. WIRTH, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 49T10-9204-TA-00021.

Tax Court of Indiana.

May 4, 1993.

John R. Rumple, Sharpnack Bigley David & Rumple, Columbus, for petitioner.

Pamela Carter, Atty. Gen. of Indiana and Ted J. Holaday, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

The Petitioner, Gary G. Wirth, appeals the final determination of the Respondent, the State Board of Tax Commissioners (the State Board), assessing a parcel of Wirth's Bartholomew county commercial property for the March 1, 1989, assessment.

ISSUES

Wirth raises the following restated issues for review:

I. Whether the State Board properly refused to rely on reassessment bulletin RO-33 in assessing Wirth's property.

II. Whether the State Board abused its discretion by valuing the property at $160 per front foot.

III. Whether the State Board abused its discretion in denying an influence factor to allow for the property's proximity to a water tower.

IV. Whether the State Board abused its discretion in assessing the ratio of use between "general office" and "general retail."

V. Whether the State Board abused its discretion in adding four masonry stoops to the assessment for the final determination.

FACTS

Wirth owns a commercially zoned platted lot on State Road 46 East in Columbus, near a large water tower. The building on the property has four masonry stoops leading up to several rear doors. It is devoted to two uses, the office Wirth uses in his construction business and Wirth's wife's retail diet business. In addition to the building, the property contains a paved parking area and a grassy area. Additional facts will be supplied as necessary.

DISCUSSION AND DECISION

STANDARD OF REVIEW

The State Board is accorded great deference when acting within the scope of its authority. Centrium Group v. State Bd. of Tax Comm'rs (1992), Ind.Tax, 599 N.E.2d 242, 243 (citing Rogers v. State Bd. of Tax Comm'rs (1991), Ind.Tax, 565 N.E.2d 398, 399). Accordingly, this court will reverse a final determination by the State Board only when it is unsupported by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is arbitrary and capricious. Hatcher v. State Bd. of Tax Comm'rs (1992), 601 N.E.2d 19, 20 (quoting Bailey Seed Farms, Inc. v. State Bd. of Tax Comm'rs (1989), Ind.Tax, 542 N.E.2d 1389, 1391).

Like any other party appealing an administrative decision, Wirth, the taxpayer, bears the burden to show the State Board's assessment was inaccurate. See Meridian Hills Country Club v. State Bd. of Tax Comm'rs (1987), Ind.Tax, 512 N.E.2d 911, 913 (quoting State Bd. of Tax Comm'rs v. Traylor (1967), 141 Ind.App. 324, 228 N.E.2d 46, 52, trans. denied ). He has chosen to bear his burden using a contingently paid expert witness. Transcript at 69. The witness, who operates a property tax consulting business, Transcript at 5-7, prosecuted Wirth's appeal, Transcript at 7-8, and demonstrated familiarity with Wirth's case, as well as with Indiana's property taxation system.

The parties have not raised the expert's contingent fee as an issue, and the State Board did not base a challenge to the admissibility of the expert's testimony on the contingent fee. Nonetheless, the question of the propriety of the witness's testimony exists, and the court therefore addresses the question as part of its inherent power and obligation to control the proceedings before it. See State ex rel. Gannon v. Lake Circuit Court (1945), 223 Ind. 375, 383, 61 N.E.2d 168, 172; Parker v. State (1991), Ind.App., 567 N.E.2d 105, 110 (citing Games v. State (1989), Ind., 535 N.E.2d 530, cert. denied (1989), 493 U.S. 874, 110 S.Ct. 205, 107 L.Ed.2d 158), trans. denied.

Indiana courts have not previously addressed this question, but the court is mindful of the prevailing general rule that it is inappropriate to pay an expert witness a contingent fee. See, e.g., Comment, Ind. Professional Conduct Rule 3.4(b); J. Gray, ed., Annotated Model Rules of Professional Conduct (2d ed., 1992) 356-57; Matter of Arkansas Bar Ass'n (1985), 287 Ark. 495, 562, 702 S.W.2d 326, 371; Rules Regulating the Florida Bar (1986), Fla., 494 So.2d 977, 1061; Schackow v. Medical-Legal Consulting Service, Inc. (1980), 46 Md.App. 179, 416 A.2d 1303 (contingent fee agreement with consulting firm did not violate public policy when experts who were to testify were not employees or officers of firm and were paid by the hour); Blair v. Washington State Univ. (1987), 108 Wash.2d 558, 740 P.2d 1379, 1387-88. Indeed, some states have gone so far as to hold expert witness contingent fee contracts, in at least some areas, void as against public policy. See, e.g., Dupree v. Malpractice Research, Inc. (1989), 179 Mich.App. 254, 445 N.W.2d 498 and statues cited therein; Polo v. Gotchel (1987), 225 N.J.Super 429, 542 A.2d 947.

The rationale underlying the general disfavor with which these contingent agreements are viewed goes to the heart of the judicial process. Courts exist to resolve disputes, and the main formal element of the proceedings they employ in their work is the trial. Trials are events that normally embrace the hearing of evidence to decide factual issues. See, e.g., McAllister v. State ex rel. Bryant (1972), 258 Ind. 238, 280 N.E.2d 311; Gulf Oil Corp. v. McManus (1977), 173 Ind.App. 147, 363 N.E.2d 223. The truth of a given matter is to be determined by the fact-finder, whether it be judge or jury, after a full and fair hearing of both sides in an adversarial setting. The adversaries present their witnesses who are bound by their oath to tell the truth. See IND.CODE 35-44-2-1. A contingent witness fee agreement, however, raises the specter of an auctioning of the truth and casts a pall over the entire fact finding process. "The payment of a sum of money to a witness to 'tell the truth' is as clearly subversive of the proper administration of justice as to pay him to testify to what is not true." In re Robinson (1912), 151 A.D. 589, 600, 136 N.Y.S. 548, 556.

Despite the disapproval expert witness contingent fee agreements have received, there is no absolute prohibition on the admission of a contingently paid expert's testimony, and in this court, which operates exclusively without a jury, IND.CODE 33-3-5-13(a), the potential for abuse is less than would be the case in a trial to a jury. Moreover, our supreme court has not ruled on any aspect of the matter, and the only Indiana guidance is, as cited above, the Comment to Rule of Professional Conduct 3.4(b).

The court therefore holds the testimony of contingently paid experts is not subject to exclusion in tax court cases solely on the basis of the expert's contingent fee. Such a witness's testimony will be admitted or excluded on the same basis as the testimony of any expert. In other words, the contingent nature of an expert witness's fee goes to the weight, not the admissibility, of the expert's testimony. The court will therefore review such testimony in light of the expert's fee arrangement.

I

Wirth asserts the State Board's reassessment bulletin RO-33 (the Bulletin) is contrary to 50 I.A.C. 2.1-4-2(f) and is therefore an abuse of discretion. He claims he is entitled to have his land assessed under the terms of the regulation. The record reveals, however, that both the regulation and the Bulletin are inapplicable to Wirth's property and that the State Board did not use either of them to assess Wirth's property.

The property is a platted lot, Petitioner's Exhibit 3, and is located in Zone 6 of the Bartholomew County Land Valuation Order (the Land Order). See 50 I.A.C. 2.1-2-1(a). Under the Land Order, lots in Zone 6 are to be assessed by the front foot method, Respondent's Exhibit 1 at 4, which is described in 50 I.A.C. 2.1-2-1(b). "A front foot is a strip of land one foot wide that fronts on a desirable feature (such as a street, or body of water) and extends for the entire depth of the parcel." 50 I.A.C. 2.1-2-1(b). The front foot method is based on a lot's location relative to the desirable front and the features surrounding the other bounds of the lot, see, e.g., 50 I.A.C. 2.1-2-1(e) and (f), and the entire lot is valued as a unit based on its front footage, regardless of primary and secondary use. ¹

The concepts of primary and secondary use, on the other hand, apply to land valued by either square footage or acreage. Both the square footage and the acreage methods of valuation view a lot by its area, not by its shape and location relative to street frontage or other features. It is possible to divide lots assessed by their area into two or more parts, each part representing a different type of use. In the case at bar, the Land Order, as is typical, provides a range of base prices of four classes of land valued by acreage or square footage: primary, secondary, undeveloped and usable, and undeveloped and unusable. Respondent's Exhibit 1 at 4. See Hendrickson, How to Challenge an Indiana Realty Assessment, 9 INTERSTATE TAX REPORT No. 4, at 2 (1992). This is the idea underlying the portion of 50 I.A.C. 2.1-4-2(f) governing primary and secondary use, and it is the reason that portion specifically applies only to acreage and square footage valuation. ² The Bulletin, like 50 I.A.C. 2.1-4- 2(f), addresses questions of primary and secondary use applicable to land valued by the acre or the square foot.

Wirth's property was properly valued under the Land Order on a front foot basis. There was no error in the State Board's refusal to apply primary and secondary designations to portions of the property.

II

Wirth claims the State Board abused its discretion by valuing the property at $160 per front foot. The Land Order provides a range of values for lots in Zone 6 from $50 per front foot to $175 per front foot. Respondent's Exhibit 1 at 4. The State Board has the final authority under IND.CODE 6-1.1-4-13.6 to set the values in county land valuation...