Jerry & June Rowlett v. Jama Berry, Assessor Ozark County

November 13th, 2018

STATE TAX COMMISSION OF MISSOURI

 

JERRY & JUNE ROWLETT, )    
  )    
              Complainants, )    
  )    
v. ) Appeal No. 18-76000  
  ) Parcel 23-0.2-03-000-000-0014.00  
JAMA BERRY,  ASSESSOR, )  
OZARK COUNTY, MISSOURI, )    
  )    
              Respondent )    

 

DECISION AND ORDER

 

HOLDING

 

The assessment made by the Board of Equalization of Ozark County (BOE) is AFFIRMED in part, and SET ASIDE, in part.  Complainants Jerry and June Rowlett (Complainants) presented substantial and persuasive evidence to rebut the presumption of correct classification by the BOE but did not present substantial and persuasive evidence to rebut the presumption of correct valuation of the subject property as of January 1, 2017.

Complainants appeared pro se.

Respondent Jama Berry, Assessor, Ozark County, Missouri, (Respondent) appeared pro se.

Case heard and decided by Senior Hearing Officer John Treu (Hearing Officer).

ISSUE

Complainants appealed on the grounds of overvaluation and classification.  Respondent set the true value in money (TVM) of the subject property, as residential property, at $18,300.  The BOE set the TVM at $18,300, as residential property.  The State Tax Commission (STC) takes this appeal to determine the TVM and classification for the subject property.

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

FINDINGS OF FACT

  1. Jurisdiction. Jurisdiction over this appeal is proper.  Complainants timely appealed to the State Tax Commission.
  2. Evidentiary Hearing. The issues of classification and overvaluation were presented at an evidentiary hearing on October 17, 2018, at the Ozark County Courthouse, Gainesville, Missouri.
  3. Identification of Subject Property. The subject property is identified by parcel/locator number 23-0.2-03-000-000-0014.000.  It is further identified as lying along County Road 522, in Gainesville, Missouri.  (Complaint)
  4. Description of Subject Property. The subject property is vacant land consisting of 1.4 acres.  No structures for human habitation are present on the subject property.  Currently, there is no road access to the property.   The property is adjacent to Rock Lodge, which consists of small apartments and vacant land belonging to the Corp of Engineers.     The property is rocky and has a 16% slope.
  5. Assessment. In 2018 Respondent initially valued the subject property at $18,300 residential, as of January 1, 2017.  The subject property was assessed at the statutory rate of 19%.
  6. Board of Equalization. The BOE set the TVM at $18,300, as residential.
  7. Complainants’ Evidence. Complainants opined that the subject property should be classified as agricultural with a productivity value of Grade 7, as of January 1, 2017.  To support their opinion of classification and value, Complainants offered the following evidence:
Exhibit Description Ruling
Exhibit A Photograph Admitted
Exhibit B Property Record Card (PRC) Admitted
Exhibit C Impact Notice Admitted
Exhibit D 12 CSR 30-4.010 Admitted
Exhibit E Letter from Century 21 Agent Admitted
Exhibit F Emails Admitted
Exhibit G Sales Letter Admitted
Exhibit H Complainants’ Comparables Admitted

 

Respondent did not object to Complainants’ exhibits, all of which were admitted into the record.

Complainants testified that they purchased the property in 2003 for $3,500.  Complainants testified that the subject property has a slope of 16%.  Complainants testified that although a road goes to the property, it is owned by the Corps of Engineers which has denied them the use of such road.  Complainants testified that they have no other road access.

  1. Respondent’s Evidence. Respondent testified that she wants the subject property to be classified as agricultural, but that due to the fact the property is not at least 10 acres, she cannot classify the subject as such.  Respondent also testified that the TVM of the subject property as of January 1, 2017, was $18,300, based upon her small acreage study.  Respondent testified the subject property is considered to be “lake influenced” property.  Respondent testified that at least since 2003 the subject property has been classified as residential.  Respondent offered the following evidence:
Exhibit Description Ruling
Exhibit 1 Small Acreage Study Admitted
Exhibit 2 Average Cost of Well Drilling Admitted
Exhibit 3 Average Cost of Septic System Installation Admitted
Exhibit 4 Map and 10 CSR 23-3.090 Admitted
Exhibit 5 Estimate of Cost of Well Admitted
Exhibit 6 Cost of Well Receipt Admitted
Exhibit 7 Map Admitted
Exhibit 8 PRC for Subject Admitted
Exhibit 9 PRC of Other Property Admitted
Exhibit 10 Septic Tank and Well Drilling Quotes Admitted
Exhibit 11 Small Acreage Chart by Category and Acres Admitted

 

  1. Presumption of Correct Classification Rebutted – Correct Classification Established; Presumption of Correct Valuation Not Rebutted. Complainants’ evidence was substantial and persuasive to rebut the presumption of correct classification but not to rebut the presumption of correct valuation as of January 1, 2017.

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, including the application of any abatement.  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.  Article X, Section 14, Mo. Const. of 1945; Sections 138.430, 138.431, 138.431.4, RSMo

Basis of Assessment

The Constitution mandates that real property and tangible personal property be assessed at its value or such percentage of its value as may be fixed by law for each class and for each subclass.  Article X, Sections 4(a) and 4(b), Mo. Const. of 1945.  The constitutional mandate is to find the TVM for the property under appeal.  By statute, real property and tangible personal property are assessed at set percentages of TVM:  residential property at 19%; commercial property at 32%; and agricultural property at 12%.  Section 137.115.5 RSMo (2000) as amended.

 

Investigation by Hearing Officer

In order to investigate appeals filed with the Commission, the Hearing Officer may 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.  Section 138.430.2 RSMo (2000) as amended.  The Hearing Officer’s decision regarding the assessment or valuation of the property may be based solely upon his inquiry and any evidence presented by the parties or based solely upon evidence presented by the parties.  Id.

The Hearing Officer heard the testimony and reviewed the exhibits provided as evidence on the issues of the classification and the productivity value for the subject property.

Complainant’s Burden of Proof

There exists a presumption of correct assessment by the BOE – the BOE presumption.  The BOE presumption operates in every case to require the taxpayer to present evidence to rebut it.  In the present appeal, the BOE sustained both the valuation and classification of Respondent.  The issues before the STC are (1) whether the BOE properly classified the subject property as residential; and (2) whether the BOE properly valued the subject property at $18,300.  Complainants are seeking to change the classification and the valuation.  Respondent is seeking to affirm the BOE’s determination of classification and valuation.  Therefore, the BOE presumption applies to Complainant with regard to both issues, i.e., Complainant must rebut the presumption by substantial and persuasive evidence to prevail.

Substantial evidence can be defined as such relevant evidence that a reasonable mind might accept as adequate to support a conclusion.  Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).  Persuasive evidence is evidence that has sufficient weight and probative value to convince the trier of fact.  Cupples Hesse Corp., 329 S.W.2d at 702.  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)See also, Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003).

There is no presumption that the taxpayer’s opinion is correct.  The taxpayer in a STC 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, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”  Westwood Partnership, 103 S.W.3d 152 (Mo. App. E.D. 2003); Daly v. P. D. George Co., 77 S.W.3d 645 (Mo. App. E.D. 2002); Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003); Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. W.D. 1991).

Classification of Real Property

The classification of real property is determined by the actual use put to the property.  Chesterfield Village, Inc., and Chesterfield Center Corporation v. Jake Zimmerman, Assessor, St. Louis County, Mo., STC Appeal Nos. 15-13823 through 15-13825 and 15-13826 (March 27, 2018); Northtown Village v. Don Davis, Assessor, Jasper County. Mo., STC Appeal No. 03-62558 (May 27, 2004).

Under Missouri law, “residential property” is all real property (1) improved by a structure which is used or intended to be used for residential living by human occupants; (2) vacant land in connection with an airport; (3) land used as a golf course; (4) manufactured home parks; (5) bed and breakfast inns in which the owner resides and uses as a primary residence with six or fewer rooms for rent; and (6) time-share units as defined in Section 407.600 except to the extent such units are actually rented and subject to sales tax under Section 144.020.1(6); but residential property shall not include other similar facilities used primarily for transient housing.  Section 137.016.1(1).

“Agricultural and horticultural property” is all real property used for agricultural purposes and devoted primarily to the raising and harvesting of crops; to the feeding, breeding and management of livestock which shall include breeding, showing, and boarding of horses; to dairying, or to any other combination thereof; and buildings and structures customarily associated with farming, agricultural, and horticultural uses.  Section 137.016.1(2).  Agricultural and horticultural property shall also include land devoted to and qualifying for payments or other compensation under a soil conservation or agricultural assistance program under an agreement with an agency of the federal government.  Id.

All real property which is vacant, unused, or held for future use; which is used for a private club, a not-for-profit or other nonexempt lodge, club, business, trade, service organization, or similar entity; or for which a determination as to its classification cannot be made under the definitions set out in subsection 1 of this section, shall be classified according to its immediate most suitable economic use, which use shall be determined after consideration of:

(1)  Immediate prior use, if any, of such property;

(2)  Location of such property;

(3)  Zoning classification of such property; except that, such zoning classification shall not be considered conclusive if, upon consideration of all factors, it is determined that such zoning classification does not reflect the immediate most suitable economic use of the property;

(4)  Other legal restrictions on the use of such property;

(5)  Availability of water, electricity, gas, sewers, street lighting, and other public services for such property;

(6)  Size of such property;

(7)  Access of such property to public thoroughfares; and

(8)  Any other factors relevant to a determination of the immediate most suitable economic use of such property.

 

Section 137.016.5 (emphasis added).

Valuation of Agricultural Land

Land devoted primarily to the raising and harvesting of crops is valued by its productivity value.  The STC sets forth those valuations, based upon grades, in the Code of State Regulations (CSR).  As relevant to this decision, 12 CSR 30-4.010(1) provides, in pertinent part:

(F) Grade #6. Soils are generally unsuited for cultivation and are limited largely to pasture and sparse woodland. Limitations—

  1. Moderate to steep slopes (eight to twenty percent (8–20%));
  2. Severe erosion hazards present;
  3. Grades #3 and #4 bottomland subject to frequent damaging flooding (more than once in two (2) years), and Grade #5 bottomland subject to occasional damaging flooding (once every three to five (3–5) years); and
  4. Intensive management required for crops.

Use value: one hundred fifty-eight dollars ($147);

 

(G) Grade #7.  These soils are generally unsuited for cultivation and may have other

severe limitations for grazing and forestry that cannot be corrected. Limitations—

  1. Very steep slopes (over fifteen percent (15%));
  2. Severe erosion potential;
  3. Grades #5 and #6 bottomland subject to frequent damaging flooding (more than

once in two (2) years);

  1. Intensive management required to achieve grass or timber productions; and
  2. Very shallow topsoil. Use value: seventy-three dollars ($73) . . . .

 

Claim of Overvaluation

To obtain a reduction in assessed valuation based upon an alleged overvaluation, the Complainants must prove the TVM of the subject property on the subject tax day.  Hermel, Inc., v. State Tax Commission, 564 S.W.2d 888, 897 (Mo. banc 1978).  TVM is defined as the price that the subject property would bring when offered for sale by one willing but not obligated to sell it and bought by one willing or desirous to purchase but not compelled to do so.  Rinehart v. Bateman, 363 S.W.3d 357, 365 (Mo. App. W.D. 2012); Cohen v. Bushmeyer, 251 S.W.3d 345, 348 (Mo. App. E.D. 2008); Greene County v. Hermel, Inc., 511 S.W.2d 762, 771 (Mo. 1974).  TVM is defined in terms of value in exchange and not in terms of value in use.  Stephen & Stephen Properties, Inc. v. State Tax Commission, 499 S.W.2d 798, 801-803 (Mo. 1973).  In sum, TVM is the fair market value of the subject property on the valuation date.  Hermel, Inc., 564 S.W.2d at 897.  A presumption exists that the assessed value fixed by the BOE is correct.  Rinehart, 363 S.W.3d at 367; Cohen, 251 S.W.3d at 348; Hermel, Inc., 564 S.W.2d at 895.

Generally, a property owner, while not an expert, is competent to testify to the reasonable market value of his own land.  Cohen, 251 S.W.3d at 348-49; Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992).  “However, when an owner’s opinion is based on improper elements or foundation, his opinion loses its probative value.”  Carmel Energy, Inc., 827 S.W.2d at 783.  A taxpayer does not meet his burden if evidence on any essential element of his case leaves the Commission “in the nebulous twilight of speculation, conjecture and surmise.”  See Rossman v. G.G.C. Corp. of Missouri, 596 S.W.2d 469 (Mo. App. E.D. 1980).

Highest and Best Use

                TVM is the fair market value of the property on the valuation date and is a function of its highest and best use, which is the use of the property which will produce the greatest return in the reasonably near future.  Aspenhof Corp. v. State Tax Commission, 789 S.W. 2d 867, 869 (Mo. App. 1990).  It is true that property can only be valued according to a use to which the property is readily available.  But this does not mean that in order for a specific use to be the highest and best use for calculating the property’s TVM that particular use must be available to anyone deciding to purchase the property.  A determination of the TVM cannot reject the property’s highest and best use and value the property at a lesser economic use of the property.  Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W. 3d 341, 348-349 (Mo. banc 2005).

Weight to be Given Evidence

The Hearing Officer is not bound by any single formula, rule, or method in determining TVM and 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.  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 Hearing Officer, as the trier of fact, may consider the testimony of an expert witness and give it as much weight and credit as deemed necessary when viewed in connection with all other circumstances.  Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. W.D. 1991).  The Hearing Officer, as the trier of fact, is not bound by the opinions of experts but may believe all or none of the expert’s testimony or accept it in part or reject it in part.  Exchange Bank of Missouri v. Gerlt, 367 S.W.3d 132, 135-36 (Mo. App. W.D. 2012).

In this case, neither party presented expert testimony and evidence.

Official and Judicial Notice

Agencies shall take official notice of all matters of which the courts take judicial notice.  Section 536.070(6).  Courts will take judicial notice of their own records in the same cases.  State ex rel. Horton v. Bourke, 129 S.W.2d 866, 869 (1939); Barth v. Kansas City Elevated Railway Company, 44 S.W. 788, 781 (1898).  In addition, courts may take judicial notice of records in earlier cases when justice requires or when it is necessary for a full understanding of the instant appeal.  Burton v. Moulder, 245 S.W.2d 844, 846 (Mo. 1952); Knorp v. Thompson, 175 S.W.2d 889, 894 (1943); Bushman v. Barlow, 15 S.W.2d 329, 332 (Mo. banc 1929); State ex rel St. Louis Public Service Company v. Public Service Commission, 291 S.W.2d 95, 97 (Mo. banc 1956). 

In the present appeal, the Hearing Officer takes official notice of 12 CSR 30-4.010.

Methods of Valuation

Proper methods of valuation and assessment of property are delegated to the Commission.  It is within the purview of the Hearing Officer to determine the method of valuation to be adopted in a given case.  See, Nance v. STC, 18 S.W.3d 611, 615 (Mo. App. W.D. 2000); Hermel, Inc., 564 S.W.2d at 897; Xerox Corp. v. STC, 529 S.W.2d 413 (Mo. banc 1975).  Missouri courts have approved the comparable sales or market approach, the cost approach, and the income approach as recognized methods of arriving at fair market value.  St. Joe Minerals Corp. v. STC, 854 S.W.2d 526, 529 (App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (App. E.D. 1987); and State ex rel. State Highway Comm’n v. Southern Dev. Co., 509 S.W.2d 18, 27 (Mo. 1974).

“For purposes of levying property taxes, the value of real property is typically determined using one or more of three generally accepted approaches.”  Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 346 (Mo. banc 2005), citing St. Louis County v. Security Bonhomme, Inc., 558 S.W.2d 655, 659 (Mo. banc 1977).  “Each valuation approach is applied with reference to a specific use of the property—its highest and best use.”  Snider, 156 S.W.3d at 346-47, citing Aspenhof  Corp., 789 S.W.2d at 869.  “The method used depends on several variables inherent in the highest and best use of the property in question.”  Snider, 156 S.W.3d at 347.  “Each method uses its own unique factors to calculate the property’s TVM.”  Id.  “The ‘comparable sales approach’ uses prices paid for similar properties in arms-length transactions and adjusts those prices to account for differences between the properties.  Id. at 348.  “Comparable sales consist of evidence of sales reasonably related in time and distance and involve land comparable in character.”  Id. (quotation omitted).  “This approach is most appropriate when there is an active market for the type of property at issue such that sufficient data [is] available to make a comparative analysis.”  Id.

Implicit in this definition are the consummation of a sale as of a specific date and the passing of title from seller to buyer under conditions whereby:

  1. Buyer and seller are typically motivated.

 

  1. Both parties are well informed and well advised, and both acting in what they consider their own best interests.

 

  1. A reasonable time is allowed for exposure in the open market.

 

  1. Payment is made in cash or its equivalent.

 

  1. Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.

 

  1. The price represents a normal consideration for the property sold unaffected by special financing amounts and/or terms, services, fees, costs, or credits incurred in the transaction.

 

Real Estate Appraisal Terminology, Society of Real Estate Appraisers, Revised Edition, 1984; see also, Real Estate Valuation in Litigation, J. D. Eaton, M.A.I., American Institute of Real Estate Appraisers, 1982, pp. 4-5; Property Appraisal and Assessment Administration, International Association of Assessing Officers, 1990, pp. 79-80; Uniform Standards of Professional Appraisal Practice, Glossary.

Discussion

Complainants’ evidence was both substantial and persuasive to support an opinion that the classification of the subject property was agricultural as of January 1, 2018.  However, Complainants’ evidence was neither substantial nor persuasive to support an opinion that the TVM of the subject property was $2,100 as of January 1, 2017.  Substantial evidence is that which is relevant, adequate, and reasonably supports a conclusion.  Cupples Hesse Corp., 329 S.W.2d at 702.  Persuasive evidence is that which causes the trier of fact to believe, more likely than not, the conclusion advocated is the correct conclusion.  Id.

The undisputed evidence established that the 1.4-acre subject property was vacant land as of January 1, 2017.  No structure intended for human habitation was located on the subject property as of January 1, 2017. The classification of the subject property cannot be determined under the definitions of Section 137.115.1; therefore, the provisions of Section 137.016.5 must be considered:

(1)  Immediate prior use, if any, of such property;

(2)  Location of such property;

(3)  Zoning classification of such property; except that, such zoning classification shall not be considered conclusive if, upon consideration of all factors, it is determined that such zoning classification does not reflect the immediate most suitable economic use of the property;

(4)  Other legal restrictions on the use of such property;

(5)  Availability of water, electricity, gas, sewers, street lighting, and other public services for such property;

(6)  Size of such property;

(7)  Access of such property to public thoroughfares; and

(8)  Any other factors relevant to a determination of the immediate most suitable economic use of such property.

 

The subject property has been classified as residential, at least since 2003;  however, Respondent testified she desired the property to be agricultural.  Complainants testified they believe the subject property was previously part of the adjacent property improved with the Rock Lodge.   It is unclear whether the Rock Lodge is still in use.  The location of the subject property is not conducive as development as residential property.  A utility easement crosses through the subject property.  It has no water, septic or sewer service.  The subject property currently has no road access as Complainants testified the Corps of Engineers has barred Complainants use of its road.  The subject property is located in a wooded area, has a 16% slope, and is rocky.  When asked, Respondent could not say that the subject property constitutes a buildable lot.  Given this substantial evidence, the Hearing Officer is persuaded that the subject property should have been classified as agricultural as of January 1, 2017.

With regard to the claim of overvaluation, Complainants argued that the subject property should be valued based upon Grade 7 productivity value.  However, Complainants testified the subject property is not put to any agricultural use.  Productivity value is provided for property that is used for raising crops or livestock.  Thus, assigning a soil grade is not the proper method of valuing the subject property when the property is vacant and unused.

Complainants’ letter from a Century 21 agent is not substantial and persuasive evidence.  Although Respondent did not object to the letter being admitted into evidence, the comparables utilized by the agent were not identified.  The agent was not present for cross-examination by Respondent or the Hearing Officer.  Complainants did not use any other method, specifically one of the three court-approved methods of valuation, to arrive at an opinion of TMV.  Consequently, the Hearing Officer would be required to engage in speculation to conclude that Complainants’ opinion of the TVM of the subject property is correct.

ORDER

The classification of the subject property as determined by the BOE is SET ASIDE.  The TVM for the subject property as determined by the BOE is AFFIRMED.  The assessed value for the subject property is $2,196 agricultural ($18,300 TVM), as of January 1, 2017, for tax year 2018.

Application for Review

A party may file with the Commission an application for review of this decision within thirty days of the mailing date set forth in the Certificate of Service for this Decision.  The application shall contain specific facts or law as 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 application for review is based will result in summary denial. Section 138.432, RSMo

Disputed Taxes

The Collector of Ozark County, as well as the collectors of all affected political subdivisions therein, shall continue to hold the disputed taxes pending the possible filing of an Application for Review, unless said taxes have been disbursed pursuant to a court order under the provisions of Section 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 November 13, 2018.

STATE TAX COMMISSION OF MISSOURI

John Treu

Senior Hearing Officer

 

Certificate of Service

I hereby certify that a copy of the foregoing has been sent electronically or mailed postage prepaid this 13 day of November, 2018, to: Complainants(s) counsel and/or Complainant, the County Assessor and/or Counsel for Respondent and County Collector.

 

Jacklyn Wood

Legal Coordinator