G & R Development v. Koons (Jackson)

State Tax Commission of Missouri

G & R DEVELOPMENT, LLC, )

)

Complainant, )

)

v. ) Appeals No. 11-30095 to 11-30102

)

CURTIS KOONS, )

DIRECTOR OF ASSESSMENT, )

JACKSON COUNTY, MISSOURI )

)

Respondent. )

 

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

 

On September 12, 2012, Senior Hearing Officer Luann Johnson issued her Decision and Order (“Decision”) in the above matter, affirming the residential sub-classifications placed upon the subject properties by the Assessor and affirmed by the Board of Equalization.

On October 11, 2012, Complainant filed its Application for Review of Decision. Respondent did not file a response.

CONCLUSIONS OF LAW

Standard Upon Review

The State Tax Commission is the agency established to address the specialized field of ad valorem taxation.^[1] The proper methods of valuation and assessment of property are delegated to the Commission.^[2] The Commission is vested with discretion to choose the proper valuation method.^[3] The Commission shall correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious.^[4]

The Tax Commission has the authority to appoint hearing officers to hear and decide appeals.^[5] A hearing officer, after affording the parties reasonable opportunity for fair hearing, shall issue a decision and order affirming, modifying, or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. A party subject to a Decision and Order of a hearing officer with the State Tax Commission may file an application requesting the case be reviewed by the Commission. The Commission may then summarily allow or deny their request. The Commission may affirm, modify, reverse or set aside the decision. The Commission may take any additional evidence and conduct further hearings.^[6]

COMPLAINANT’S ALLEGATIONS OF ERROR

Complainant asserts that the Hearing Officer erred in finding that the property was properly classified as residential as the Complainant did not establish an agricultural use; more specifically the Complainant alleged the following errors:

1. The Hearing Officer fails to recognize that G & R Development caused no “improvements” to be built upon any of the subject properties and that the immediate adjoining property to the north is used for livestock and agricultural uses, the land to the east is a park and the land to the west is a lake;

2. The Hearing Officer bases her decision on the fact that the property was not fertilized but Complainant believes the evidence may show that the property was fertilized;

3. The Hearing Officer bases her opinion almost exclusively upon information from 2010 and fails to consider the County Assessor’s own admission that there is no evidence of any non-agricultural use in 2011 and 2012;

4. The property has been continuously used as hay cultivation land since 2010 with Complainant entering into a verbal hay lease in 2010; hay baling in the summer of 2010; a formal lease in December 2010; and grass cut and baled in 2011;

5. The Hearing Officer places too much weight on the fact that only five or six little bales were produced in 2010 and about ten bales in 2011 in contradiction to the court’s decision in Rinehart v. Bateman that agricultural classification does not hinge on profitability; and

6. The Hearing Officer failed to consider that it would be impossible for the subject property to be used for residential purposes as none of the lots have any homeowner improvements upon them.

DECISION

Section 137.016, RSMo, provides that property is classified as agricultural when “real property [is] used for agricultural purposes and devoted primarily to the raising and harvesting of crops . . .” (emphasis added). The Hearing Officer reviewed the facts as presented at hearing and found that the property was not devoted primarily to agricultural use.

The Hearing Officer found that the totality of the facts established that the most appropriate classification for the property was residential. Facts persuading the Hearing Officer to determine such classification included:

(1) The subdivision had been platted for residential use;

(2) Roads, water and electricity were immediately available to the property; and

(3) The lots were continuously marketed for residential use.

The Hearing Officer specifically found that the property was not “devoted primarily” to agricultural use as required by Section 137.016, RSMo, in order to grant an agricultural classification.

The Complainant argues that their agricultural activity on the property was sufficient for classification as agricultural. The Hearing Officer found that cutting hay is an agricultural purpose but that not every time someone cuts their grass can it be said that they are primarily devoting their property to raising and harvesting crops. Cutting grass is entirely consistent with a residential use. Likewise, a great number of property owners collect their grass clippings in some form – bagging, composting, baling. It is not the form in which the clippings are gathered into that creates the agricultural use; it is the purpose and the devotion.

The Hearing Officer’s reference to the size and number of bales produced on the property was not in contravention to the Rinehart v. Bateman decision that profit should not be a consideration for determining agricultural use but was, rather, discussed to demonstrate what level of “devotion” the landowner was putting into producing a crop. Similarly the discussion of soil testing, planting, and fertilization were not specific requirements for classification as agriculture, but a discussion as to devotion to agricultural use.

The Hearing Officer was persuaded that the totality of the facts established that the property platted, developed and marketed for residential use was not primarily devoted to agricultural use and would be most appropriately classified as residential.

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. The Decision and Order of the Hearing Officer, including the findings of fact and conclusions of law therein, is incorporated by reference, as if set out in full, in this final decision of the Commission.

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 mailing date set forth in the Certificate of Service for this Order.

If judicial review of this decision is made, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the courts unless disbursed pursuant to Section 139.031.8, RSMo.

If no judicial review is made within thirty days, this decision and order is deemed final and the Collector of Jackson 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 this appeal.

SO ORDERED March 12, 2013.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Randy B. Holman, Commissioner

Victor Callahan, Commissioner

 

DECISION AND ORDER

 

HOLDING

 

Decisions of the Jackson County Board of Equalization are SUSTAINED. Hearing Officer finds Complainant did not rebut the presumption of correct assessment/classification by the Board.

Complainant appeared by Counsel, James F. Freeman III.

Respondent appeared by Counsel, William Snyder.

Case heard and decided by Senior Hearing Officer Luann Johnson.

ISSUE

The Commission takes these appeals to determine the classification for the subject properties on January 1, 2011, and January 1, 2012.

SUMMARY

Complainant appeals the decision of the Jackson County Board of Equalization, which determined the appropriate classification for the subject properties as residential and set value as follows:

 

 

Complainant argued that the correct classification of the subject properties was agricultural and proposed an assessed value of $100 per parcel. A hearing was conducted on July 10, 2012, at the Jackson County Courthouse, Kansas City, Missouri.

The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.

Complainant’s Evidence

 

Respondent’s Evidence

 

Official Notice

On July 16, 2012, pursuant to Section 536.070(6), RSMo, the hearing officer advised the parties that she intended to take official notice of University of Missouri Extension publications No. G4650 – Establishing Forages, and No. G4646 – Tall Fescue, for the purpose of determining recommended procedures for producing a good hay crop.

FINDINGS OF FACT

1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decisions of the Jackson County Board of Equalization.

2. In order to prevail, Complainant must demonstrate that the subject properties were devoted primarily (principally, fundamentally, first in intention, most importantly) to agricultural use during the period in question. See Conclusions of Law.

3. The subject properties consist of eight residential lots located within the city limits of Lee’s Summit, Missouri.

4. The lots have been platted for residential use. Streets, sanitary and storm sewers, electrical, telephone and cable lines have been installed to the platted areas.[8] The properties have been continuously marketed for residential use since 2005. Many of the subject lots are surrounded by residential improvements. Market conditions have been improving since 2010.

5. The properties were planted with fescue. No documentary evidence was presented which supported how or when these plantings occurred. There is no evidence that a soil test was performed. The seed was not fertilized. No evidence was presented which suggests Complainant made any attempt to learn about establishing forage or to follow any recommendations for creating good forage.[9]

6. Seeds can germinate with or without fertilizer, but young plants will soon use the small amounts of nutrients in the seed. They are then dependent on the level of fertility around them for development. Most research shows that available phosphorus, applied at seeding time and properly placed, is the key element in establishing legumes and grasses.[10]

7. Soil testing prior to seeding determines fertility practices. Fescue has limited response to rock phosphate. Unless legumes are to be maintained with the fescue, only processed phosphate should be used to meet the phosphorus requirements. Grasses are very inefficient users of rock phosphate and must depend upon the legumes to make it available for them.

A liberal supply of processed phosphorus helps to promote root development and plant establishment. While small amounts of nitrogen and potash also are beneficial at seeding time.[11]

8. Five or six little bales were produced off the property (and the property owned by Woodland Shores in the companion case) in 2010 and about ten bales were produced off this property and the Woodland Shores property in 2011. The individual who baled the hay, did not perceive this property to yield good hay.[12]

9. Complainant’s witness had life long experience feeding horses, including feeding fescue. The 2010 hay was not used to feed animals but was, rather, allowed to get wet and put in a ditch for erosion control. No evidence was presented as to the ultimate use of the bales from 2011.

CONCLUSIONS OF LAW AND DECISION

Jurisdiction

The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. The hearing officer shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious.[13]

Official and Judicial Notice

Agencies shall take official notice of all matters of which the courts take judicial notice.[14]

Courts will take judicial notice of their own records in the same cases.[15] In addition, courts may take judicial notice of records in earlier cases when justice requires[16] or when it is necessary for a full understanding of the instant appeal.[17] Courts may take judicial notice of their own records in prior proceedings involving the same parties and basically the same facts.[18]

Agencies may take official notice of technical or scientific facts, not judicially cognizable, within their competence, if they notify the parties, either during a hearing or in writing before a hearing, or before findings are made after hearing, of the facts of which they propose to take such notice and give the parties reasonable opportunity to contest such facts or otherwise show that it would not be proper for the agency to take such notice of them.[19]

Presumptions In Appeals

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization.[20]

The presumption of correct assessment is rebutted when the taxpayer, or respondent when advocating a value different than that determined by the Board, presents substantial and persuasive evidence to establish that the Board’s valuation is erroneous and what the fair market value (classification) should have been placed on the property.[21]

Agricultural Land

Under Missouri statutory law, property shall be classified as agricultural and horticultural property when “real property [is] used for agricultural purposes and devoted primarily to the raising and harvesting of crops . . .” Section 137.016.1(2), RSMo. The classification is determined by the actual use put to the property.[22] Cutting hay is an agricultural activity and such activity can be sufficient to cause real property to be classified as “agricultural property.”[23]

The determination of whether or not a property is being used for agricultural purposes does not turn upon the profitability of the endeavor but upon whether the property is primarily devoted to the raising and harvesting of an agricultural crop. Hay is an agricultural crop.[24]

Devoted Primarily

“Primary purpose” means that which is first in intention; which is fundamental. “Primarily means principally.”[25] Principal means chief; primary; most important. Black’s Law Dictionary, 7^th Edition, 1999. Whether a property is devoted primarily to the raising and harvesting of crops is a fact driven inquiry dependent, therefore, on the evidence presented.[26]

Statutory Construction

Statutory construction is a matter of law. The primary rule of statutory construction is to determine the legislative intent from the language used in the statute by considering the plain and ordinary meaning of the words used therein. Where the language is clear and unambiguous, [the courts] will give effect to the language as written, and will not engage in statutory construction. [The] Court presumes that the legislature intended that every word, clause, sentence, and provision of the statute have effect and should be given meaning. Conversely, [the court] presumes that the legislature did not include excess language or idle verbiage in a statute. Courts are not authorized to read a legislative intent into a statute that is contrary to the intent made evident by the plain and ordinary meaning of the statutory language.[27]

Standard for Valuation

Section 137.017.1, RSMo provides “For general property assessment purposes, the true value in money of land which is in use as agricultural and horticultural property, as defined in Section 137.016, shall be that value which such land has for agricultural or horticultural use. . .”

Land Grades

Section 137.021.1 RSMo. provides “ . . . .the state tax commission shall promulgate by regulation and publish a value based on productive capability for each of the several grades of agricultural and horticultural land. . . .”

Duty to Investigate

In order to investigate appeals filed with the Commission, the Hearing Officer has the duty to inquire of the owner of the property or of any other party to the appeal regarding any matter or issue relevant to the valuation, subclassification or assessment of the property. The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon its inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties.[28]

Weight to be Given Evidence

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 Officer to decide.[29]

Trier of Fact

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 she may deem it entitled to when viewed in connection with all other circumstances. The Hearing Officer 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 accept it in part or reject it in part.[30]

Complainant’s Burden of Proof

In order to prevail, Complainant must present substantial and persuasive evidence that the property was “devoted primarily” to raising and harvesting crops on January 1, 2011.[31] There is no presumption that the taxpayer’s opinion is correct. The taxpayer in a Commission appeal still bears the burden of proof. The taxpayer is the moving party seeking affirmative relief. Therefore, the Complainant bears the burden of proving the vital elements of the case.

Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[32] 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.[33]

Decision

This case is substantially different from the Rinehart v. Bateman case. In Bateman, the assessor agreed that the proper classification of the subject property was agricultural. The disagreement was whether it should be valued according to productive use value or as vacant and unused agricultural property. In this case, Respondent, and the Board of Equalization, do not agree that the proper classification of the property is agricultural.

Also in Bateman, the evidence was that the taxpayer had a long history of harvesting hay from the property. The history included soil testing, seeding with red clover and fertilizing the property to maximize hay production. Although profitability is not mandated by statute, we would anticipate that a reasonably prudent person who was “primarily devoting” land to hay production would take logical and reasonable steps to create a good hay crop. Although there is no bright line, there should at least be more evidence that the property was devoted to agricultural use than that the property was devoted to residential use.

The Hearing Officer takes notice that advice on raising fescue and various other forms of forage is available on the University of Missouri Extension website.[34] None of the suggestions on proper management contained in this publication were discussed by Complainant.

Here Complainant’s witness testified that fescue had been planted on the property but no documentary evidence was presented in support of this self serving statement. Complainant’s witness testified that he did not attempt to fertilize the fescue. No testimony was presented concerning any soil testing. He further testified that the individuals who cut the hay did not consider it to be good quality and the photographs presented of the hay bales suggest that the bales were inadequate inasmuch as they did not represent what a normal bale of hay would look like, size wise, to anyone who observed such things in a field along any roadside in Missouri. And, although Complainant’s witness testified that he had horses that he fed on a daily basis, he did not use the hay generated from the property to feed farm animals. The hay generated in 2010 was used to fill ditches. The use of the 2011 hay was not provided for the record.

Finally, Complainant’s witness testified that the intent was to sell the property for residential use. The lots were developed for residential use including being platted for same; roads were put in and access to water and electricity was immediately available on adjacent residentially developed properties. The lots were continuously marketed for residential use during the period in question. Even the contract with the individuals who baled the hay was written in such a way as to exclude any lots which were subsequently sold for residential use.

Given all these facts, we cannot find that the subject properties were “devoted primarily” to raising and harvesting crops. The lots are devoted primarily to residential development. It is not enough to just cut and bale the grass on a residential lot and call it “hay.” A reasonable person wishing to devote his/her property to hay production would do much more.

Bulk Sale Discount

Complainant requested a 16% across the board adjustment to value due to a “bulk sale discount” relying on the Eastern District’s decision in Peruque LLC v. Shipman, 352 S.W.3d 370 (Mo. App. ED 2011). Such an across the board discount, as proposed by Complainant, is inappropriate and is not what the Peruque court reviewed, and has never been approved by the Tax Commission or any court.[35] The Peruque court reviewed actual market sales of contiguous unimproved lots as reliable market data under Section 137.119, RSMo. Complainant failed to show that its’ property qualified for Section 137.119 treatment. Further, Complainant presented no market sales in support of its proposed 16% adjustment.

ORDER

The assessed valuations for the subject parcels as determined by the Board of Equalization for Jackson County for the subject tax day are AFFIRMED.

A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing date shown in the Certificate of Service. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. [36]

The Collector of Jackson County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending a filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of 139.031.8 RSMo.

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 September 12, 2012.

 

STATE TAX COMMISSION OF MISSOURI

Luann Johnson

Senior Hearing Officer