State Tax Commission of Missouri
v.) Appeal Number 07-10457
PHILIP MUEHLHEAUSLER, ASSESSOR,)
ST. LOUIS COUNTY,MISSOURI,)
DECISION AND ORDER
Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE.Assessment by the St. Louis County Assessor is AFFIRMED. Hearing Officer finds presumption of correct assessment by the Board was rebutted. True value in money for the subject property for tax years 2007 and 2008 is set at $547,200, residential assessed value of $103,970.
Complainant appeared pro se.
Respondent appeared by Counsel, Paula J. Lemerman, Associate County Counselor.
Case heard and decided by Senior Hearing Officer W. B. Tichenor.
The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2007.
Complainant appeals, on the ground of overvaluation, the decision of the St. Louis County Board of Equalization, which reduced the valuation of the subject property.The Assessor determined an appraised value of $547,200, assessed value of $103,970, as residential property.The Board reduced the value to $524,700, assessed value of $99,690.Complainant proposed a value of $383,200, assessed value of $72,810.A hearing was conducted on June 17, 2008, at theSt. LouisCountyGovernmentCenter,Clayton,Missouri.
The Hearing Officer, having considered all of the competent evidence upon the whole record, enters the following Decision and Order.
Mr. Muskin testified that his opinion of the fair market value of his property as of January 1, 2007, was $383,200.The opinion of value was based upon an appraisal report of Ernest A. Demba, Missouri State Certified General Real Estate Appraiser.Mr. Demba testified in support of his appraisal.
In arriving at his conclusion of value, Mr. Demba developed the sales comparison approach based upon sales of three properties deemed comparable to the subject.After concluding a value of $515,000 for the Muskin property, the appraiser applied a “Discount Rate” adjustment of .75.1315 which resulted in a rounded value of $383,170, rounded to $383,200.This adjustment was based upon “effects of location. Detrimental neighborhood influences – construction on Clayton and condition of the subdivision streets.”
The exhibits offered into evidence on behalf of the Complainant are as set out below.Objection on the grounds of hearsay and relevance were made by Counsel for Respondent to Exhibits B and C.Objection was sustained.
Appraisal Report – Ernest A. Demba
National Home Sales Data
Respondent placed into evidence the testimony of Ms. Sharon Kehoe, Residential Real Estate Appraiser for St. LouisCounty.The appraiser testified as to her appraisal of the subject property.The Appraisal Report (Exhibit 1) of Ms. Kehoe was received into evidence.Ms. Kehoe arrived at an opinion of value for the subject property of $562,000 based upon a sales comparison approach to value.In performing her sales comparison analysis, the appraiser relied upon the sales of four properties deemed comparable to the subject property.
Respondent also offered Exhibit 2 into evidence.Exhibit 2 consisted of the sales data sheet on the property at 110 Meadowbrook County Club which sold in June, 2006 for$665,000, a plat showing lot location for this property and the Certificate of Value on the sale.Exhibit 2 was received into evidence.
FINDINGS OF FACT
1.Jurisdiction over this appeal is proper.Complainant timely appealed to the State Tax Commission from the decision of the St. Louis County Board of Equalization.
2.The subject property is located at 64 Meadowbrook Country Club Estate, Ballwin, Missouri.The property is identified by parcel number 21S140208.The property consists of a 53,838 square foot lot improved by a one and a half-story brick and frame single-family structure of good quality construction.The house was built in 1977 and appears to be in average condition.The residence has a total of nine rooms, which includes three bedrooms, three full and two half baths, and contains 3,884 square feet of living area.There is a full basement with 1,550 square feet of finish and an attached oversized three-car garage.
3.There was no evidence of new construction and improvement from January 1, 2007, to January 1, 2008.
4.The discount rate of .751315 applied by Mr. Demba is not supported by any market data.The conclusion of value of $510,000, before applying the discount rate, is not supported from the entirety of the adjusted sales data.Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the true value in money as of January 1, 2007, to be $383,200, as proposed.
5.The properties relied upon by Respondent’s are comparable to the subject property. The four properties are located within less than a mile of the subject.Each sale property sold at a time relevant to the tax date of January 1, 2007, in a range from March, 2005 to August, 2006.The sale properties are similar to the subject in style, quality of construction, age, condition, room, bedroom and bathroom count, living area, location, site size and other amenities of comparability.Two of the sale properties are located in Meadowbrook Country Club Estates, as is the subject.
6.The appraiser made various adjustments to the comparable properties for differences which existed between the subject and each comparable.All adjustments were appropriate to bring the comparables in line with the subject for purposes of the appraisal problem.The net adjustments range from 5.2% to 14.2% of the sales price.
7.The adjusted sales prices for the comparables calculated to $561,300, $559,500, $580,486 and $546,900, respectively.The appraiser concluded on a $562,000 value which calculated to a value per square foot of $144.70 compared with the sales prices per square foot of living area for the comparables of $144.60, $220.52, $145.73 and $156.44. The comparison of the value per square foot provides a validation check for the appraisal, to demonstrate that the indicated value is consistent with the market for properties such as the subject.
8.Respondent’s evidence met the standard of substantial and persuasive to establish the value of the subject, as of January 1, 2007, to be $562,000.However, Respondent’s appraisal was accepted only to sustain the original assessment made by the Assessor and not for the purpose of raising the assessment above that value.Respondent meet the standard of clear, convincing and cogent evidence in this appeal to sustain the original valuation of $547,200.
CONCLUSIONS OF LAW AND DECISION
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.
Presumption In Appeals
There is a presumption of validity, good faith and correctness of assessment by the CountyBoardof Equalization.The presumption in favor of the Board is not evidence.A presumption simply accepts something as true without any substantial proof to the contrary.In an evidentiary hearing before the Commission, the valuation determined by the Board is accepted as true only until and so long as there is no substantial evidence to the contrary.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 should have been placed on the property.Complainant’s evidence, as is addressed in detail below, did not meet the standard of substantial and persuasive evidence to rebut the presumption of correct assessment by the Board.Respondent’s evidence met the required standard to rebut the presumption of correct assessment by the Board and to establish the value of the property under appeal to be $562,000, as of January 1, 2007, but for the mandate of 12 CSR 30-3.075.
Standard for Valuation
Section 137.115, RSMo, 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.It is the fair market value of the subject property on the valuation date.Market value is the most probable price in terms of money which a property should bring in competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeable and assuming the price is not affected by undue stimulus.
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.
2.Both parties are well informed and well advised, and both acting in what they consider their own best interests.
3.A reasonable time is allowed for exposure in the open market.
4.Payment is made in cash or its equivalent.
5.Financing, if any, is on terms generally available in the Community at the specified date and typical for the property type in its locale.
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.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.Both appraisers developed their opinions of value from use of the sales comparison approach.Complainant’s appraisal, for reasons addressed below, was not substantial and persuasive evidence to establish the value concluded by Mr. Demba.Respondent’s sales comparison approach carried the required burden to sustain the Assessor’s original valuation of the Muskin property.
Complainant Fails To Meet 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, 2007.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, i.e., the assessment was “unlawful, unfair, improper, arbitrary or capricious.”
Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.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.
Owner’s Opinion of Value
The owner of property is generally held competent to testify to its reasonable market value.The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation.Mr. Muskin’s opinion of value was founded upon the appraisal report presented and testified to by Mr. Demba.An appraisal report generally will provide the proper foundation for the owner’s opinion.However, when there are serious issues related to the conclusion of value offered by the appraiser, the foundation may prove to be worthless.For the reasons discussed below, the owner’s opinion of value of $383,200 is found to be based upon improper elements and an improper foundation.It therefore can be given no probative value in this appeal.
Demba Conclusion of Value
Mr. Demba arrived at a conclusion of value of $510,000 for the Muskin property without making an adjustment for what he believed to be the negative influence of construction involved in the widening ofClayton Road.Clayton Roadprovides the main entrance into Meadowbrook Country Club Estates.The $510,000 value was based upon three sales ranging from November, 2004 to August 2006.None of the sales were in Meadowbrook.
A review of Mr. Demba’s Comments on Comparable Sales reveals that essentially the appraiser picked the unadjusted sales price of the middle comparable as his conclusion of value, comments indicating placing more weight on comparable number 1 notwithstanding.Given that two sales of properties within the subject subdivision occurred in March 2005 and May 2006, there is no sound basis for the appraiser to have selected a sale of a property from November 2004 as a comparable.
Mr. Demba apparently places no reliance on Sale No. 2 because it is below the mean of the adjusted sale values.The fact is that the mean of the adjusted values of the three sales was $537,853.Sale2 as adjusted was at 98.2% of the mean.Sale1 as adjusted was at only 94.4% of the mean.Sale3 as adjusted was at 107.6% of the mean.In other words, the sale closest to the mean was notSale1 or 3, butSale2.
The record shows the use of the late 2004 sale was not warranted, other more recent sales should have been used.The indicated values concluded by Mr. Demba for both Sales 2 and 3 rebut the value determined by the Board of $524,700 and establish a value in excess of that amount, a value in a range from $527,750 to $578,270.Furthermore, when Sales 2 and 3 are added to the mix of the sales utilized by Ms. Kehoe in her appraisal, they give further support to the Assessor’s original value.
The Hearing Officer is not persuaded the Demba Sale 1 was appropriate for the present appraisal problem.Therefore, the value indicated by the remaining two sales will not support an opinion of value of $510,000, as concluded by the appraiser.
Discount Rate Adjustment
The Demba opinion of value is based upon his making an adjustment to account for highway construction at the entrance of the subject subdivision and condition of the subdivision streets.“Where the basis for a test as to the reliability of the testimony is not supported by a statement of facts on which it is based, or the basis of fact does not appear to be sufficient, the testimony should be rejected.”On both the matter of highway construction and subdivision streets, the testimony offered was not persuasive.The record shows three sales in the Meadowbrook.All three sales would be impacted by the subdivision streets.However, there is no indication of any negative influence from such a factor.
As to the matter of the highway construction onClayton Road, the record is devoid of any supporting data of a negative impact of the magnitude proposed by Mr. Demba’s negative adjustment.In point of fact, given that the widening of Clayton Road was a matter within the public domain as early as 2004 and clearly during 2005 and 2006, the sale prices of the three Meadowbrook properties, that sold in 2005 and 2006, are not shown to have been discounted by approximately 25% from sales of other properties not impacted by the Clayton Road highway construction.The sales data rebuts any basis for the Demba discount adjustment in his appraisal.
When the calculations are performed applying Mr. Demba’s .751315 “discount rate” to each of his comparables it amounts to negative adjustments of $126,216, $131,242 and $143,806 respectively to his three sales.There is no data in the record to support these adjustments.The adjustments rest entirely on Mr. Demba’s misplaced reliance on the decision in the case of St. Charles County v. Olendorff.Mr. Demba testified at the evidentiary hearing that this was the basis for his adjustment, not any market data.
The court’s holding in Olendorff was simply that in a condemnation proceeding the trial court’s error in not giving a proposed instruction stating that, in determining the value of the landowner’s remaining property, the jury must not consider any general benefit which is conferred upon, or any general detriments suffered by, all property within usable range of the road improvements project was harmless.There is discussion in the case relative to the development of an opinion by an appraiser who developed and utilized a “discount” factor of 75% as Mr. Demba used in his appraisal.However, in Olendorff, the appraiser was working from an actual taking due to a temporary construction area.No such factor exists in the present appeal.The facts of Olendorff are completely distinguishable to the facts of this case.
Olendorff was a condemnation action.There was a taking of the landowner’s property and a temporary construction easement.The adjustment made by the appraiser accounted for the value of the temporary construction easement and the diminished rental value of the remaining property during the construction period.The Muskin property is not subject to any taking or any temporary construction easement with regard to theClayton Road construction.
The Olendorff court followed the holding of the Missouri Supreme Court in State ex rel State Hwy. Comm’n v. Koberna concerning an expert’s opinion.The Court in Koberna, at 663, held it is not necessary for an expert’s opinion to be based on market data, such as comparable sales, so long as there is other factual basis for the expert’s opinion.Therein is the problem with Mr. Demba’s application of his discount rate.He provided no other factual basis for the discount adjustment.
In Olendorff, the appraiser (Mr. Schlueter) explained that he employed a functional obsolescence principle to calculate the temporary damages resulting from the temporary construction easement.Furthermore, the Court found that Schlueter’s opinions were supported by substantial data and that his failure to provide specific, quantitative values for each factor he considered does not warrant reversal.Mr. Demba in making his discount adjustment made no such showing as did Mr. Schlueter.
There is no data, substantial or otherwise, on what if any impact the highway construction might have on sale prices in Meadowbrook.Mr. Demba essentially did nothing more than borrow the 75% factor that had been developed by Schlueter.The totality of Mr. Demba’s “data” in support of his discount is his statement at page 56 – “This is in the form of a discount for 3 years at a rate of 10 percent.That discount factor is .751315.”The 10 percent factor, according to Mr. Demba’s statement at page 57 is “a common market-indicate discount.”There is no evidence from which the Hearing Officer can reasonably ascertain that a 10 percent discount factor is indicated from the market.In other words, the Hearing Officer is left with nothing but speculation, conjecture and surmise, with regard to the development and application of Mr. Demba’s discount factor. 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.”
There is however a further defect with regard to Mr. Demba’s application of the discount factor for the highway construction.That is his application of the discount based upon a 3-year delay in marketing.The valuation for ad valorem tax purposes hypothecates a sale of the property on January 1, 2007.Mr. Demba erroneously hypothecates that because of the highway construction the sale date must be delayed three years.Mr. Demba in applying his discount factor is not valuing the property on the appropriate valuation date, irrespective of what his appraisal purports.
Furthermore, the three year time period is contradicted by Mr. Demba’s own statements at page 59 of Exhibit A.Demba admits that the Clayton Roadconstruction will continue to the end of 2008.That is effectively only two years after the valuation date.However, he arbitrarily extends his discount period out until the end of 2009.The Hearing Officer can only conclude this is because Mr. Schlueter in Olendorff used a three year time period.However, in that instance, the temporary easement affecting the Oldendorff’s property was for a three year period.Here, Mr. Demba simply ignores the fact that from January 2007 the highway construction will only continue for another 24 months.He tacks on an additional 12 months for no apparent and certainly no justifiable reason.
For all of the foregoing reasons, the opinion of value stated by Mr. Muskin of $383,200 has no probative value, because it is based on the Demba appraisal.The opinion developed by Mr. Demba has its foundation in errors and speculation, rendering the document insubstantial and non-persuasive to establish fair market value in this appeal.
Respondent Met Burden of Proof
Respondent presented substantial and persuasive evidence to establish a fair market value as of January 1, 2007, to be $562,000 for the Muskin property.However in any case in St. Louis County where the assessor presents evidence which indicates a valuation higher than the value finally determined by the assessor or the value determined by the board of equalization, whichever is higher, for that assessment period, such evidence will only be received for the purpose of sustaining the assessor’s or board’s valuation, and not for increasing the valuation of the property under appeal.Therefore, in this instance the Kehoe appraisal was received to sustain the value of $547,200 and not for the purpose of increased the value to $562,000.
The Respondent has imposed upon him by the provisions of Section 137.115.1, RSMo, the burden of proof to present clear, convincing and cogent evidence to sustain a valuation on residential property which is made by a computer, computer-assisted method or a computer program.There is a presumption in this appeal that the original valuation, which was sustained by the Board of Equalization, was made by a computer, computer-assisted method or a computer program.There was no evidence to rebut the presumption, therefore, in order to sustain the valuation of the subject property at $547,200, appraised value, Respondent’s evidence must come within the guidelines established by the legislature and must clearly and convincingly persuade the Hearing Officer as to the value sought to be sustained.
The statutory guidelines for evidence to meet the standard of clear, convincing and cogent include the following:
(1)The findings of the assessor based on an appraisal of the property by generally accepted appraisal techniques; and
(2) The purchase prices from sales of at least three comparable properties and the address or location thereof.As used in this paragraph, the word comparable means that:
(a)Such sale was closed at a date relevant to the property valuation; and
(b) Such properties are not more than one mile from the site of the disputed property, except where no similar properties exist within one mile of the disputed property, the nearest comparable property shall be used.Such property shall be within five hundred square feet in size of the disputed property, and resemble the disputed property in age, floor plan, number of rooms, and other relevant characteristics.
Clear, cogent and convincing evidence is that evidence which clearly convinces the trier of fact of the affirmative proposition to be proved.It does not mean that there may not be contrary evidence.The quality of proof, to be clear and convincing must be more than a mere preponderance but does not require beyond a reasonable doubt.“For evidence to be clear and convincing, it must instantly tilt the scales in the affirmative when weighed against the evidence in opposition and the fact finder’s mind is left with an abiding conviction that the evidence is true.”
The sale properties selected by Ms. Kehoe were appropriate for the appraisal problem.The Hearing Officer recognizes that Ms. Kehoe’s Sale No. 2 was significantly smaller in living area than the subject.It was appropriate to use this sale due to its location in the subject subdivision.The three remaining sales provide clear, cogent and convincing evidence of value.The use of two properties within the subject subdivision gave particular strength to the appraisal.The adjustments made by Ms. Kehoe were consistent with generally accepted guidelines for the appraisal of property of the subject’s type.The adjustments properly accounted for the various differences between the subject and each comparable.Respondent’s evidence met the standard of clear, cogent and convincing to sustain the Assessor’s original value of $547,200.
The assessed valuation for the subject property as determined by the Board of Equalization forSt. LouisCountyfor the subject tax day is SET ASIDE.The assessed valuation for the subject property as determined Assessor forSt. LouisCountyfor the subject tax day is AFFIRMED.
The assessed value for the subject property for tax years 2007 and 2008 is set at $103,970.
A party may file with the Commission an application for review of this decision within thirty days of the mailing of such decision.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, MO65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.
The Collector of St. Louis 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 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 September 12, 2008.
STATE TAX COMMISSION OFMISSOURI
W. B. Tichenor
Senior Hearing Officer
Certificate of Service
I hereby certify that a copy of the foregoing has been mailed postage prepaid on this 12thday of September, 2008, to:Arthur Muskin, 64 Meadowbrook Country Club, Ballwin, MO 63011, Complainant; Paula Lemerman, Associate County Counselor, Attorney for Respondent; Philip A. Muehlheausler, Assessor; John Friganza, Collector,CountyGovernmentCenter,41 South Central Avenue,Clayton,MO63105.
 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).
 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.
 St. Joe Minerals Corp., supra; 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. Div. 2 1974).
 See, 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).Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).
 Cohen v. Bushmeyer, 251 S.W.3d 345, (Mo. App. E.D., March 25, 2008); Carmel Energy, Inc. v. Fritter, 827 S.W.2d 780, 783 (Mo. App. W.D. 1992); State, ex rel. Missouri Hwy & Transp. Com’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990); Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965).