State Tax Commission of Missouri
COOK COMPOSITES & POLYMERS,)
)
Complainant,)
)Appeal Nos. 03-32096 & 04-32002
v.)
)
CATHY RINEHART, ASSESSOR,)
CLAYCOUNTY,MISSOURI,)
ORDER SUSTAINING HEARING OFFICER’S
DECISION AND ORDER
The above appeals involve the valuation of business personal property on January 1, 2003, and January 1, 2004.An evidentiary hearing was held on May 23 and 24, 2006, before Senior Hearing Officer Luann Johnson.Thereafter on November 14, 2006, Senior Hearing Officer Johnson issued her decision and order affirming the valuation placed upon the property by the Clay County Board of Equalization.
On December 14, 2006, Complainant filed its application for review of the Hearing Officer decision.OnJanuary 16, 2007, Respondent filed her response to said application for review.
CONCLUSIONS OF LAW AND DECISION
As grounds for its allegations of error, Complainant raises the following points:
1.Misapplication of the Law
A.Misapplication of RSMo. Sec. 137.122.
The Hearing Officer is not bound by any single formula, rule or method in determining true value in money, but is free to consider all pertinent facts and estimates and give them such weight as reasonably they may be deemed entitled.The relative weight to be accorded any relevant factor in a particular case is for the Hearing Office to decide. St. Louis County v. Security Bonhomme, Inc. 558 S.W.2d 655, 659 (Mo. banc 1977); St. Louis County v. STC, 515 S.W.2d 446, 450 (Mo. 1974); Chicago, Burlington & Quincy Railroad Company v. STC, 436 S.W.2d 650 (Mo. 1968).
The Decision and Order issued on November 14, 2006, discussed the market approach and the cost approach with historical cost and residual value.The Decision and Order sets out the standard of valuation as required by Section 137.115, RSMo 2000, that being the true value in money.The Hearing Officer did not apply the assessment formula described in Section 137.122, RSMo 2005
B.Misapplication of Valuation Standard.
Section 137.115, RSMo 2000, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.Mo. Const. Art X, Section 4(b) (1945, amended 1982); St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.Hermel Inc.v. STC, 564 S.W.2d 888, 897, (Mo. banc 1978).
The market value standard does not require appraisers to discard transactions or market demand for assembled machinery and equipment just because the market finds the property valuable for the same use that it is being put to by the owner.Such evidence should be fully considered in a market value appraisal.Conversely, if there is no evidence that there is demand for machinery and equipment assembled and in place, it would be inappropriate to value the property as assembled and in place since such valuation would not be indicative of a market value in exchange.See, Daly v. P.D. George, 2002 WL 553712 (Mo. App. E.D. 2002).
2.Misapplication of Generally Accepted Appraisals Standards and Techniques.
Other than merely disagreeing with the Hearing Officer’s decision, Complainant failed to state any facts which would support an argument that the Hearing Officer “misapplied the cost approach” or misapplied any other generally accepted appraisal standards and techniques.
3.The Record Does Not Support the Decision and Order.
A.Improper Characterization of Complainant’s Appraiser’s Market Approach.
B.The Record Does Not Support the Conclusion that there was a Failure to Support Opinions.
C.The Record Does Not Support the Conclusion That There Was a Failure to Adequately Describe and Adjust for Age and Condition.
D.The Record Does not Support the Conclusion that There was a Failure to Support the Economic Obsolescence Development.
E. Bias and Prejudgment by the Hearing Officer.
F.The Record as a Whole Requires a Finding in Favor of Complainant.
The Hearing Officer as the trier of fact may consider the testimony of an expert witness and give it as much weight and credit as he may deem it entitled to when viewed in connection with all other circumstances.The Hearing Officer is not bound by the opinions of experts or other witnesses who testify on the issue of reasonable value, but may believe all or none of the testimony and accept it in part or reject it in part.St. Louis County v. Boatman’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993)Vincent by Vincent v. Johnson 833 S.W.2d 859, 865.Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).
An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995). The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995).
Conclusions
The test in any and all cases remains the same.In order to prevail, the Complainant must present an opinion of market value and present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on the tax day.
A review of the record in the present appeal provides support for the determinations made by the Hearing Officer.The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused her discretion as the trier of fact and concluder of law in this appeal.Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. 1978); Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Holt v. Clarke, 965 S.W.2d 241 (Mo. App. W.D. 1998); Smith v. Morton, 890 S.W.2d403 (Mo. App. E.D. 1995); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).
ORDER
The Commission upon review of the record and Decision in this appeal, finds no grounds upon which the Decision of the Hearing Officer should be reversed or modified.Accordingly, the Decision is affirmed.
Judicial review of this Order may be had in the manner provided in Sections 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.
SO ORDERED February 26, 2007.
STATE TAX COMMISSION OFMISSOURI
Bruce E. Davis, Chairman
Jennifer Tidwell, Commissioner
Charles Nordwald, Commissioner
DECISION AND ORDER
HOLDING
The decisions of the Clay County Board of Equalization approving the assessments made by the Assessor, are affirmed.
This appeal was heard and this Decision is rendered by Senior Hearing Officer Luann Johnson.Complainant appeared by Counsel, Thomas Caradonna,St. Louis,Missouri.Respondent appeared by Counsel, Patricia Hughes,Liberty,Missouri.
ISSUE
The issue in these appeals is the true value in money as of January 1, 2003, and
January 1, 2004, of Complainant’s machinery and equipment, specifically, what is the most probable price that could be commanded for the machinery and equipment in an open-market, competitive exchange with buyer and seller both acting knowledgeably and prudently?
SUMMARY
The original acquisition cost of the property was $44,153,725.49.
Respondent originally valued the property at $16,644,869 (assessed value $5,547,735) for tax year 2003, which value was approved by the Board of Equalization.In its sworn statement to the Commission, Complainant asserted a value of $1,664,487 (assessed value $554,774).At hearing, Respondent asserted a value of $20,409,000 (assessed value $6,803,000).At hearing, Complainant asserted a value of $5,254,488 (assessed value $1,751,496).
For tax year 2004, Respondent originally valued the property at $14,439,345 (assessed value $4,813,115), which value was approved by the Board of Equalization.In its sworn statement to the Commission, Complainant asserted a value of $1,443,935 (assessed value $481,312).At hearing Respondent asserted a value of $18,886,000 (assessed value $6,295,333).At hearing, Complainant asserted a value of $4,260,036 (assessed value $1,420,012).
A hearing was held on May 23 and 24, 2006, at theClayCountyAdministrationBuilding,Liberty,Missouri.Complainant presented the testimony of an appraiser, Allen Bealmear.Respondent’s appraiser was J.S. Sutterfield.
Complainant’s Evidence
Complainant offered the following exhibits:
Exhibit A – Appraisal Report03-32096
Exhibit B – Appraisal Report 04-32002
Exhibit C — Written Direct Testimony of Mr. Bealmear
Exhibit D – Internet Research on Cook Composite
Respondent’s Evidence
Respondent offered the following exhibits:
Exhibit 1-03 – Appraisal Report 03-32096
Exhibit 1-04 – Appraisal Report 04-32002
Exhibit 2-03 – Appeal Documents 03-32096
Exhibit 2-04 – Appeal Documents 04-32002
Exhibit 3-03 — Business Personal Property Declaration 2003
Exhibit 3-04 – Business Personal Property Assessment form 2004 and
Business Personal Property Declaration for 2004
Exhibit 4 – Withdrawn
Exhibit 5 – Written Direct Testimony of Mr. Sutterfield 03 and 04 Appeals
Exhibit 6 – Economic Obsolescence Development
Exhibit 7 – Work File
Exhibit 8 – Initial Research Print
Exhibit 9 – Page 26 from Appraisal Report
Exhibit 10 – Page 106 from Work File
Exhibit 11 – Appraisal & Work File Information ( Page 131)
Exhibit 12 – Appraisal & Work File Information (Page 41)
Exhibit 13 – Appraisal Report Page 46
Exhibit 14 – Pages 112 and 113 from Work File
Exhibit 15 –WabashPress
Exhibit 16 – Page 64 and Work File on Drill Press
Exhibit 17 – Page 76 of Work File
FINDINGS OF FACT
1.Jurisdiction.Jurisdiction is proper.Complainant timely filed its appeals from the decisions of the Board of Equalization.
2.Complainant. Cook Composites & Polymers produces industrial chemicals, specifically gel coats, composite polymer resins, coating resins and emulsions.Complainant is the world’s leading producer of gel coats; North America’s largest distributor of composites; and the second largest producer of resins in the world.Besides providing products for other manufacturers’ raw materials, they are end-product manufacturers of various types of items used in maintenance, graphic arts, and industrial cleaning.Complainant’s location in North Kansas City, Missouri serves as its corporate headquarters, pilot lab, primary research facility, and powder coating resins plant. Respondent’s Ex.1-04, pg. 9-10.
3.Subject Property.The personal property which is the subject of this appeal consists of some 2500+ items of machinery, equipment, and furniture including office equipment, computers, lab equipment, resin coating systems, tanks, pumps, blowers, conveyors, cleaning systems, forklifts, mixers, hoists, and other similar equipment as more completely set out the parties’ appraisal reports.
4.Values.The original acquisition cost of Complainant’s personal property was $44,153,725.49.Tr. 4.Complainant’s appraiser estimated a value of $5,254,488 for tax year 2003 and $4,260,036 for tax year 2004.Respondent’s appraiser estimated a value of $20,409,000 for tax year 2003 and $18,886,000 for tax year 2004.Tr. 5. Complainant’s appraiser utilized a market approach while Respondent’s appraiser utilized a cost approach.Both the market approach and the cost approach are appropriate methods of valuing personal property.Daly v. P.D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. banc 2005).
5.Legislative Guidance.In 2005, the legislature enacted Section 137.122, RSMo, indicating a preference for the use of the cost approach to determine value for business personal property.Under this section, the assessor is instructed to use “original cost” [the price the current owner paid for the property without freight, installation or sales or use tax], and to depreciate said original cost by the “class life” as set forth in the federal Modified Accelerated Cost Recovery System life tables under the Internal Revenue Code.Depending on class, recovery periods range between 3 and 20 years.Also under this Section, all property maintains a residual value between 10% and 20% and cannot be assigned a scrap value while still in use.This Section does not apply to business personal property placed in service beforeJanuary 2, 2006, such as the subject property, but it is useful for ascertaining the Legislature’s position on issues such as historical cost vs. original cost; class life; and the appropriateness of residual values.
6.Respondent’s Cost Approach.Respondent’s appraiser prepared a cost approach to value.He determined the assets owned by Complainant by a review of Complainant’s sworn2003 and 2004 fixed asset lists filed with the Assessor.He divided those assets into classes according to their nature and economic life.Economic life was based upon recommendation from Marshall Valuation Service.Most durable manufacturing equipment and furniture was assigned an economic life of 12 years.Computers, lab, and office equipment was assigned an economic life of 7 years.The appraiser utilized historic cost, adjusted for inflation, to determine current cost new.He then depreciated those assets according to their actual age and predetermined life.A substantial portion of the equipment was at or near the end of its economic life and was assigned a residual value of 20%.
Mark Huff, tax administrator for Complainant, testified that the asset list provided to Respondent might have contained some items of freight, taxes and installation.However, because of the way Complainant keeps its books, Mr. Huff was unable to identify any such charges on any item of personal property.Tr. 125-134.
7.Complainant’s Market Approach. Complainant’s appraiser and his assistant walked through the subject plant to attempt to identify assets.During this walk through, they recorded their findings along with their initial opinions of value for each piece of property.Those initial opinions of value were based upon “empirical evidence” based upon years of looking at similar equipment.Tr. 13-14.Most of the equipment was rated as being in “average appearing for age” but no significant attempt was made to determine the age of most of the equipment and age is not generally disclosed in Complainant’s appraisal report.
From the recording made on site, an “initial research print” is generated which contains a listing of the asset and the preliminary opinion of value. This list goes to unnamed “market analysts” who look for market data.Tr. 14.The initial print is divided into ‘priority” and “non-priority” items based on value or type of equipment.Tr. 24, 39.These market analysts use their “training and experience” to determine which items of property on the initial print need market research.Tr. 24.
The market analysts look for information in unspecified electronic data bases.Tr. 14.If a data base is used, the market analyst may or may not include a note on the initial print discussing a possible comparable sale.Tr. 14.If no notation is made by the market analyst, there is no way of knowing whether he/she used an electronic database to gather information.Tr. 20, 21.But, if there is no notation made on the initial research print, the market analyst agreed with the on site appraisal.Tr. 108.
Older items are generally “appraised” on site and no attempt is made to find verifying data.Tr. 20.Although said older items are designated as having been valued by the “market approach” in Complainant’s appraisal report, no actual calculations were created and market information outside Complainant’s appraiser’s memory may not have been considered.Tr. 39-40.
Complainant’s appraiser testified that he drew upon many difference sources to determine market value, and that the information contained in the work file was merely what had been gathered by his researchers.However, he later testified that everything he had used to value the subjectproperty was contained within the work file supplied to Respondent as required by Commission order of January 12, 2006.Tr. 189-195.
Complainant’s Evidence is Not Substantial and Persuasive
8.Failure to Support Opinions.The law is clear that it takes more than expertise and an opinion to justify using an expert.The essential test of admissibility of expert opinion evidence is whether it will be helpful to the fact finder.Hendricks v. M-K-T R. Co., 709 S.W.2d 483, 493.“Even if a witness is qualified as an expert, as required by Section 490.065.1, his testimony, in the form of an opinion or otherwise, is admissible conditionally.The condition is that the specialized knowledge of the expert will assist the trier of fact to understand the evidence or to determine a fact issue.”Stucker v. Chitwood, 841 S.W.2d 816 (Mo. App. S.D. 1992).An expert must bring some facts or specific information to the table.The use of an expert envisions the sharing of technical or specialized information.
“The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.”Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (Mo. App. S.D. 1995).
Thus, opinions must be supported by market derived facts.It is simply not possible to find that Bealmear’s opinions of value rise to the level of substantial and persuasive evidence because we have not been provided the “facts upon which the expert’s opinion is based.”The test requires that we test the underlying market data for accuracy before we conclude that the appraiser’s opinion is accurate.
9.Failure to Adequately Describe and Adjust for Age and Condition.Complainant’s appraiser frequently referred to an item of property as being “average for its age,” without disclosing the age of the identified property in his appraisal report.[i]Thus, all of Complainant’s property was rated as average or below, even though some of the property was virtually new according to Complainant’s asset list.Complainant’s appraiser’s demonstrations of market approach show that he has made no adjustments for age or condition of his comparable sales as compared to the subject property.Indeed, many of the sales contained in the appraiser’s work file have no listed age or condition.And, while we are willing to concede to the appraiser’s assertion that the auctioneers would have disclosed defects, we are not willing to concede that every unit that is “average for its age” needs no condition and age adjustments to make it comparable to the property that is being appraised.
10.Failure to Support Economic Obsolescence Adjustment.Economic obsolescence is the loss in value of a property caused by factors external to the property.These may include such things as the economics of the industry; availability of financing; loss of material and/or labor sources; passage of new legislation; changes in ordinances; increased cost of raw materials; labor or utilities (without an offsetting increase in product price); reduced demand for the product; increased competition; inflation or higher interest rates; or similar factors.Valuing Machinery and Equipment:The Fundamentals of Appraising Machinery and Technical Assets, Second Edition, American Society of Appraisers, 2005, p. 67.
To determine the value of an $11,000,000 powder coating resin process system installed new in 2002, Complainant’s appraiser used (1) a single stainless steel column of unknown age and unknown use, with a replacement cost new of $130,000 and an offering price of $39,500 (2) a single column of unknown age with a replacement cost new of $30,000 and an asking price of $10,000 (3) a 12 year old heat exchanger with a replacement cost new of $18,945 and an asking price of $5,000 and (4) a reactor of unknown age with a replacement cost new of $85,000 and an asking price of $32,000.Based on this information Complainant’s appraiser indicated that his opinion of value for this nearly new $11,000,000 powder coating resin process system was $3,500,000 on January 1, 2003, and only $2,525,000 on January 1, 2004.Complainant’s appraiser determined that the evidence presented supported a 60% obsolescence adjustment for 2003 and a 70% economic obsolescence adjustment for 2004. Ex. A, demonstration pages, Ex.B, demonstration pages, Tr. 49-83.Complainant’s appraiser went on to say that he didn’t feel that additional information was necessary because his firm has, over time, developed this as a reasonable range of economic obsolescence for facilities of this type.Tr. 91-92.
Economic obsolescence requires strict proof and necessarily requires a demonstration that there is something outside the property impacting the value of that property.Evidence was not presented which clearly demonstrates that something outside the property was impacting the value of the property.Further, Complainant’s appraiser failed to present sales for a substantial number of the components of the processing system to support his opinion of economic obsolescence, and the information he has supplied is inadequately described and not clearly comparable to the subject property.
There are any number of reasons that old equipment can have a low resale value that has nothing at all to do with economic or external conditions.Age, condition, capacity, location, time of sale, and prior use all impact value.Before we will even consider if external obsolescence exists, Complainant must first establish that there can be no physical or functional obsolescence left unaccounted for in the comparables.Complainant’s appraiser has failed to establish that any economic obsolescence exists.
11.Failure to Use the Appropriate Valuation Standard.In Missouri, property is valued based upon its “true value in money”, Article X, Section 4(b), Missouri Constitution of 1945, Section 137.115, RSMo.True value in money is defined as which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.
Complainant’s appraiser indicated that many sales prices had to be discounted from 30% to 50% because the sale was being made by a dealer rather than an end user. Tr. 143.He testified as follows:
Q:Okay.But are you saying that the only sales that are at the appropriate trap—trade level are from one end user to another end user?
A.Fair market value, the concept, forces the assumption of user to user.It’s not equal to retail, it’s not equal to a dealer’s selling price, it’s not equal to replacement cost, it’s not equal to selling price of manufacturer to a user, it is user to user.Tr. 138.
* * * * *
Q.Okay.Because-Excuse me.So you don’t have any trouble with the idea that a dealer can sell it to a user and have a market sale?
A.No, that’s not a market.The dealer to a user was not a market sale.That’s like – That’s like retail.It’s used, but it’s retail.It’s a used piece of equipment being sold by a dealer in that kind of equipment.That’s not the same as fair market value.Tr. 143-144.
Likewise, counsel for Complainant argues:“Missouri’s fair market value standard, which encompasses the willing buyer/willing seller concept, requires that an appraiser ultimately value personal property based on the value from an end-user to an end-user”, citing to California Board of Equalization regulations.Counsel also argues that Ambassador Envelope Co. v. Zimmerman, STC Appeal No. 00-33004 (November 6, 2001); Holnam, Inc. v. Prior, STC Appeal No. 99-78503 (April 4, 2002) and Pohlman, Inc. v. Zimmerman, STC appeal No. 00-33006 (November 6, 2001), support his argument that the standard for valuation in Missouriis end-user to end-user.Complainant’s post hearing brief.
A review of the Tax Commission decisions clearly indicated that they recognize user to user sales — along with many other types of sales and market data – as a source of information.However, there is not a single thing in those decisions that says that the Commission endorses valuing personal property “based on the value from an end-user to an end-user.”
Market value is what a willing buyer would pay a willing seller.The sale may be from a user to a user.But, if a willing seller happens to be a used equipment dealer and the willing buyer happens to want to buy from a used equipment dealer, it is still a valid market sale.It needs no adjustment because of the nature of the parties or because the dealer may anticipate making a profit.
Missourilaw does not sanction Mr. Bealmear’s valuation methodology.The standard in Missouri is what it says it is — willing buyer/willing seller; not end-user/end-user.
Respondent’s Evidence Not Substantial and Persuasive
12.Valuing Unknown Items.We find Mr. Sutterfield’s appraisal to be better reasoned and understandable that Mr. Bealmear’s appraisal, but we nevertheless find that Mr. Sutterfield has failed to prove value inasmuch as, by his own testimony, he may have assigned value to certain items from the asset list which were not clearly tangible property.We cannot say with certainty that Mr. Sutterfield has overvalued the property, but we choose to err on the side of caution.
Board Value Affirmed
13.Neither party has presented substantial and persuasive evidence tending to demonstrate that the value approved by the Board of Equalization is incorrect.
CONCLUSIONS OF LAW
Jurisdiction
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo.
Board of Equalization Presumption
There is a presumption of validity, good faith and correctness of assessment by the Pettis County Board of Equalization.Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).
Standard for Valuation
Section 137.115, RSMo 1994, requires that property be assessed based upon its true value in money which is defined as the price a property would bring when offered for sale by one willing or desirous to sell and bought by one who is willing or desirous to purchase but who is not compelled to do so.Mo. Const. Art X, Section 4(b) (1945, amended 1982); St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993).It is the fair market value of the subject property on the valuation date.Hermel, supra, at 897.
Market Value
“Market value” is defined as “…[t]he most probable price which a property would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
a.buyer and seller are typically motivated;
b. both parties are well informed or well advised, and acting in what they consider their best interests;
c.a reasonable time is allowed for exposure in the open market;
d.payment is made in terms of cash inUnited Statesdollars or in terms of financial arrangements comparable thereto; and
e.the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”
Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229; also quoted in the Definitions section of the Uniform Standards of Professional Appraisal Practice, 1996 ed.Exhibits A-11 and A-12, at 2.
Comparison of Value in Exchange and Value in Use
“Value in exchange” or “exchange value” is defined as “[t]he value of a commodity in terms of money to persons generally, as distinguished from use value to a specific person.” (The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute, 1993, at 125.) “Value in use” or “use value” is defined as “the value a specific property has for a specific use” (Ibid., at 383) and “the value of property which reflects a value to a specific user, recognizing the extent to which the property contributes to the personal requirements of the owner.”(The Appraisal of Personal Property, American Society of Appraisers, 1994 at 2).
An exchange value is an objective value determined by transactions between buyers and sellers in the open market.A use value is a subjective value of an owner, user, or potential owner based solely upon his or her personal needs for the property.By definition then, market value is the value determined by the exchange of property between an informed seller and an informed buyer after exposure in the open market and not a subjective opinion of some individual or entity.However, there is a distinction between a value in use to a specific user and a value recognized by a group of informed potential buyers that a property has for a specific use.The latter should be fully considered under a market value appraisal.Further, if there is sufficient demand for the property for the use to which it is being put by the owner, exchange value can be equivalent to the use value to the owner.The market value standard does not require appraisers to discard transactions or market demand for assembled machinery and equipment just because the market finds the property valuable for the same use that it is being put to by the owner.Such evidence should be fully considered in a market value appraisal.Conversely, if there is no evidence that there is demand for machinery and equipment assembled and in place, it would be inappropriate to value the property as assembled and in place since such valuation would not be indicative of a market value in exchange.See, Daly v. P.D. George, 2002 WL 553712 (Mo. App. E.D. 2002).
Complainant’s Burden of Proof
In order to prevail, Complainant must present an opinion of market value and substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on January 1, 2004.Hermel, supra, at 897.Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact.The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief.Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Experts – Requirement for Substantial Evidence
An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion.Missouri Pipeline Co. v. Wilmes, 898 S.W. 2d 682, 687 (Mo. App. E.D. 1995). The facts upon which an expert’s opinion is based, like the facts sufficient to support a verdict, must measure up to the legal requirements of substantiality and probative force; the question of whether such opinion is based on and supported by sufficient facts or evidence to sustain the same is a question of law for the court.Robinson v. Empiregas Inc. of Hartville, 906 S.W.2d 829 (S.D. 1995).
The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach.Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961), Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d, 341, 348 (Mo. 2005).
The testimony of an expert is to be considered like any other testimony, is to be tried by the same test, and receives just so much weight and credit as the trier of fact may deem it entitled to when viewed in connection with all other circumstances.The hearing officer, as the trier of fact, has the authority to weigh the evidence and is not bound by the opinions of experts who testify on the issue of reasonable value, but may believe all or none of the expert’s testimony and may accept it in part or reject it in part.Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. 1981); Scanlon v. Kansas City, 28 S.W.2d 84, 95 (Mo. 1930).
Limitations on Experts
The essential test of admissibility of expert opinion evidence is whether it will be helpful to the jury or trier of fact.Hendricks v. M-K-T R. Co., 709 S.W.2d 483 (Mo. App. 1986).
“Even if the witness is qualified as an expert as required by Section 490.065.1, his testimony, in the form of an opinion or otherwise, is admissible conditionally.The condition is that the specialized knowledge of the expert will assist the trier of fact to understand the evidence or to determine a fact in issue.Section 490.065.2 refers to expert testimony which is “otherwise admissible.”An overall reading of the statute makes it clear that even if the witness is an expert and has an opinion, those two factors alone will not make the opinion admissible.There is the additional requirement that scientific, technical or other specialized knowledge will assist the trier of fact to understand or to determine a fact issue.
In its note following Rule 704, Federal Rules of Evidence, the Federal Advisory Committee commented:
The abolition of the ultimate issue rule does not lower the bars so as to admit all opinions.Under Rules 701 and 702, opinions must be helpful to the trier of fact, and Rule 403 provides for exclusion of evidence which wastes time.These provisions afford ample assurances against the admission of opinions which would merely tell the jury what result to reach, somewhat in the manner of oath-helpers of an earlier day.”Stucker v. Chitwood,841 S.W.2d 816 (Mo. App. 1992), Williams, et al. v. McCoy, 854 S.W.2d 545 (S.D. 1993).
There is no absolute right of a party to present expert testimony on any subject the party desires, and no absolute right to present testimony by any expert a party desires.State ex rel. McCloud v. Seier, 567 S.W.2d 127 (Mo. 1978).
The trial court has broad discretion in fashioning a remedy for the failure of a party to properly disclose the opinions of its experts or the factual basis for reaching their conclusions.Bailey v. Norfolk and Western Ry. Co., 942 S.W.2d 404 (Mo. App. E.D. 1997).
Discussion
In order to prevail, the taxpayer must prove that the value assigned to the subject property is too high.Complainant has failed to meet that burden of proof.
ORDER
The assessed valuation for the subject property as determined by the Assessor and approved by the Clay County Board of Equalization for the subject tax days is AFFIRMED.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision.The application shall contain specific grounds upon which it is claimed the decision is erroneous.Failure to state specific facts or law upon which the appeal is based will result in summary denial.Section 138.432, RSMo 1994.
If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with these appeals shall be held pending the final decision of the Commission.If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector ofClay County, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in these appeals.If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed.Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED November 14, 2006.
STATE TAX COMMISSION OFMISSOURI
Luann Johnson
Senior Hearing Officer