EUGENE E. AND TAPIAN REEVES,	)
	)
Complainants,	)
	)
v.	)		Appeals Number 99-76506
	)		through 99-76530
DONNA SNIDER, ASSESSOR,	)
PEMISCOT COUNTY, MISSOURI,	)
	)
Respondent.	)

Holding: Complainants' legal challenges to the 1999 assessments of the subject properties are denied.

SUMMARY

Complainants appeal the increased assessments on 25 residential properties in Pemiscot County on the grounds that Respondent's actions did not constitute the necessary physical inspection required pursuant to Section 137.115, RSMo Supp. 1998, and additional alleged procedural violations. Complainants propose that the inspection violation be remedied by capping the assessment increase at 17%, the amount of increase allowed without the necessity of a physical inspection. Their proposed remedies under their alleged procedural violations are to eliminate the assessment increase. Complainants appealed to the Board of Equalization which affirmed the original valuations. Respondent presented appraisal evidence in support of her original valuations.

Complainants renew their objections to various rulings made in the procedural history of these appeals. The objections predominantly relate to the acceptance of Respondent's direct testimony and exhibits. The full commission reviewed the procedural history of the case, analyzed the filed objections and determined that the rulings would stand in its Order of August 10, 2000. In light of the determination of the full commission affirming the procedural rulings in place, this Hearing Officer has no authority to revisit those issues.

ISSUES

The material issue in this appeal is: What constitutes a "physical inspection" pursuant to Section 137.115.10, RSMO Supp. 1998? Secondarily, Complainants challenge (1) the constitutionality of the statute authorizing the assessor's membership on the local board of equalization; and (2) the fairness of the burden of proof resting with the taxpayer-movant.

FINDINGS OF FACT

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

2. There was no evidence offered to establish that either Mark Hensley or Billy Keefer were acting without proper official authority for the contract services they provided the assessor for the 1999 reassessment.

3. Inspection of all parcels under appeal was done by means of a visual analysis of the outside, from the street, between January and April of 1999 by either Mark Hensley or Billy Keefer. Complainants' Exhibits AA - YY. They physically stopped and inspected each individual piece of property. Respondent's Exhibit 1 at 15.

4. Inspections serve a number of functions -- to confirm the condition and quality of the improvements, to compare a particular piece of property with other similar properties, and to note property adjustments and major improvements. Respondent's Exhibit 1 at 12, & 14.

5. Complainants' purchase of the vacant lot which is the subject property in Appeal No. 99-76529 was not sufficient to establish the purchase price as representative of market value in light of the fact that there was no evidence that the subject parcel had been exposed to the open market or that the agreed upon price was representative of what one would expect to pay for the subject property given the current market conditions.

CONCLUSIONS OF LAW

1. Complainants, as the moving parties in the appeal, have the burden to come forward with substantial and persuasive evidence in support of the assessment they propose. Industrial Development Authority of Kansas City v. State Tax Commission, 804 S.W.2d 387, 392 (Mo. App. WD 1991). Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 701-02 (Mo. 1959).

2. "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).

3. "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).

4. There is a presumption in favor of the board of equalization and the State Tax Commission. May Department Stores Co. v. State Tax Commission, 308 S.W.2d 748, 759 (Mo. 1958) (citations omitted); State ex rel. Thompson v. Bethards, 9 S.W.2d 603, 604 (Mo. 1928).

5. A physical inspection requires an examination of the physical condition of the item under review with an eye toward noting flaws and defects.

6. The actions of these agents of the assessor were sufficient to constitute a physical inspection of the subject properties.

7. The Missouri Constitution provides the Commission with jurisdiction "...to hear appeals from local boards in individual cases and, upon such appeal, to correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious." Mo. Const. Art. X, Section 14 (1945). Supplementary to the constitutional grant of jurisdiction, statutory law provides:

Every owner of real property or tangible personal property shall have the right to appeal from the local boards of equalization to the state tax commission. . .concerning all questions and disputes involving the assessment against such property, the correct valuation to be placed on such property, the method or formula used in determining the valuation of such property, or the assignment of a discriminatory assessment to such property.

Section 138.430, RSMo. A dispute concerning the constitutionality of an assessment statute is clearly beyond the scope of the Commission's authority.

8. As residents of a third class county, Complainants carry the burden of proof in these appeals.

9. Due process in the form of notice and opportunity for a full and fair hearing is required before citizens can be deprived of property.

10. This Hearing Officer is not persuaded as a matter of law that "due process of law" requires a rejection of the long-standing case law placing the burden of proof with the taxpayer-movant. Rather, the existence of the appeal process which includes the right to an evidentiary hearing provides Complainants with a full and fair opportunity to be heard long before any risk of extinguishment of property rights through a tax foreclosure sale.

11. "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:

1. buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what they consider their best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

5. 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.

Jurisdiction

Every owner of real and tangible personal property has the right to appeal from the decision of their local board of equalization to the State Tax Commission within the time prescribed by statute or thirty days following the final action of the board, whichever is later. Section 138.430, RSMo; 12 C.S.R. 30-3.010. Such appeals before the Commission are contested cases and are heard on a de novo basis. Koplar v. State Tax Commission, 321 S.W.2d 686, 693 (Mo. 1959).

Burden of Proof

The subject properties are located in Pemiscot County which was a third class county on the January 1, 1999, tax date. Complainants, as the moving parties in the appeal, have the burden to come forward with substantial and persuasive evidence in support of the assessment they propose. Industrial Development Authority of Kansas City v. State Tax Commission, 804 S.W.2d 387, 392 (Mo. App. WD 1991). Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 701-02 (Mo. 1959). See also, Conclusions of Law # 2 and 3, supra.

In case law, the courts have long-established a presumption "of validity and of good faith in the actions of tax officials, and of the correctness of assessments....[S]uch presumptions attach to the actions of the county and state boards of equalization, as well as to the valuations of the assessors." May Department Stores Co. v. State Tax Commission, 308 S.W.2d 748, 759 (Mo. 1958) (citations omitted); State ex rel. Thompson v. Bethards, 9 S.W.2d 603, 604 (Mo. 1928) ("The presumption that such valuation is the true value attaches just as well to the action of the state board of equalization and county board of equalization as it does to the valuation of the assessor."). This common law presumption derived its roots from the more general presumption in favor of public officials. See, Wymore v. Markway, 89 S.W.2d 9, 14 (Mo. 1935).

The presumption in favor of the correctness of the assessor's valuation was eliminated in 1992 when the legislature adopted statutory language which stated "[t]here shall be no presumption that the assessor's valuation is correct." See, Sections 138.060, 138.090, 138.180, and 138.431, RSMo. As a result, the presumption in favor of the correctness of the assessment currently only extends to the board of equalization and the State Tax Commission.

Alleged Statutory and Constitutional Violations

Complainants' grounds of appeal may be set forth as follows:

I. The assessor's increase in the assessed value of Complainants' real estate in excess of seventeen percent was in violation of Section 137.115.10, RSMo Supp. 1998, because only a "drive by" review was performed and not a "physical inspection" as directed in the statute.

II. Missouri state action through Sections 138.010 and 138.135, RSMo, has denied equal protection to Complainants, as persons outside of St. Louis County. The inequity lies in the fact that protection against bias has been provided to persons in St. Louis County by prohibiting the assessor from sitting on the Board of Equalization but has not provided such protection to citizens in the rest of the state.

III. Section 138.010, RSMo Supp. 1998 also violates due process by placing the assessor on the Board of Equalization with the duty to review and pass judgment on her own official acts. Accordingly, Complainants did not receive a full and fair opportunity for hearing since bias existed in the official reviewing body.

IV. As a matter of due process, Respondent should be held to a proof requirement similar to that required in venues mentioned in Section 137.115, RSMo Supp. 1998 because she employed nothing more than guesswork and then made a computer entry.

Complainants" proposed remedy under Point I is that the increase be limited to 17% over the prior assessment. The remaining three constitutional issues are noted as "Raised, but Reached only if Statutory Limitation is Rejected" and the proposed remedy for Points II and III are to set aside the increase in assessed valuation as based upon a constitutionally defective procedure. The proposed remedy for Point IV is to require the assessor to go forward with evidence of value which meets generally accepted appraisal standards.

Discussion

Complainants' first point addresses the adequacy of the assessor's physical inspection as required, under Section 137.115.10, RSMo Supp. 1998, before a residential assessment can be increased more than 17%. The section states:

If the assessor increases the assessed valuation of any parcel of subclass (1) real property by more than seventeen percent since that last assessment, excluding increases due to new construction or improvements, then the assessor shall conduct a physical inspection of such property.

Section 137.115.10, RSMo Supp. 1998. On this point, Ms. Snider testified that generally reassessment involves application of the relevant index to the mass appraisal cost approach, a review of the new calculations on the property record card, and then an inspection of the property to make sure that the new appraisal done by the mass appraisal system is accurate for the property. This inspection typically involves driving by the property, stopping and looking at it. Respondent's Exhibit 1 at 5, and 9. The assessing official reviewing the property does not go inside the property. In addition to looking at the property, the assessing official compares the property with other properties of like kind in the same area. Id., at 10.

All parcels under appeal were inspected outside from the street between January and April of 1999 by either Mark Hensley or Billy Keefer. Complainants' Exhibits AA - YY. Mark Hensley testified concerning the reassessment process. He indicated that the inspections serve a number of functions -- to confirm the condition and quality of the improvements, to compare a particular piece of property with other similar properties, and to note property adjustments and major improvements. Respondent's Exhibit 1 at 12, & 14. Where there is new construction or improvements, the field reviewer will take exterior measurements of the new additions. Id., at 14 - 15. When questioned more pointedly on the scope of these inspections, Mr. Hensley explained:

Q: Now, in the Complaint, these inspections have been referred to as drive-bys. Does that accurately characterize the way that that inspection is made?

A: I don't like referring to them as drive-bys, I think for the fact that the term drive by depicts that you are just going down the highway and you're just doing 20 mile an hour and you just drive by the property. That is not the case here. We physically stop, inspect each individual piece of property. We do not go in the property; we do not have that privilege of doing that in the mass appraisal system. If you had to go in and inspect every piece of property, you could not get it done in a two-year cycle. But we do physically look at, inspect, and if there are any additions or anything major done to the property, then we do get out and make those adjustments.

Q: So the term "drive-by" is really to distinguish it from an interior inspection of the property; is that correct?

A: That's correct.

Id., at 15.

The term "physical inspection" is not defined by statute but the plain meaning as set forth in dictionaries is straightforward. "Inspection" can be defined as "1 critical examination, 2 official examination or review, as of troops." Webster's New World Dictionary, Third College Edition (1988) at 699. A physical inspection requires an examination of the physical condition of the item under review with an eye toward noting flaws and defects. This Hearing Officer agrees with Respondent that the clear purpose of this inspection requirement is to correlate the value created to the observable physical condition of the subject property. A requirement to insure that assessing officials do not calculate valuations for assessment purposes from a desk at the courthouse with no consideration given to the observable physical condition of the property under review. The testimony of one of the field reviewers establishes that it is the standard practice to examine or inspect the relevant property to confirm the condition and quality of the improvements, to examine the property in order to compare it with other similar properties, and to note property adjustments and major improvements. Where there is observable new construction or improvements, the field reviewer enters the property to take exterior measurements and notes. This Hearing Officer is persuaded that the actions of these agents of the assessor were sufficient to constitute a physical inspection of the subject properties.

Complainants' second point challenges on equal protection grounds the constitutionality of Section 138.010, RSMo. Complainants allege a denial of equal protection in that protection against bias has been provided to persons in St. Louis County by prohibiting the assessor from sitting on the Board of Equalization pursuant to Section 138.135.1, RSMo, but has not been provided to citizens in the rest of the state in that Section 138.010, RSMo, includes assessors as members of local boards of equalization. The law is very clear concerning the scope of the State Tax Commission's jurisdiction in appeals from local boards of equalization. The Missouri Constitution provides the Commission with jurisdiction "...to hear appeals from local boards in individual cases and, upon such appeal, to correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious." Mo. Const. Art. X, Section 14 (1945). Supplementary to the constitutional grant of jurisdiction, statutory law provides:

Every owner of real property or tangible personal property shall have the right to appeal from the local boards of equalization to the state tax commission. . .concerning all questions and disputes involving the assessment against such property, the correct valuation to be placed on such property, the method or formula used in determining the valuation of such property, or the assignment of a discriminatory assessment to such property.

Section 138.430 RSMo. Complainants' point challenges the constitutionality of Section 138.010, RSMo (authorizing the assessor's membership on the local board of equalization) in light of the existence of Section 138.135, RSMo (prohibiting the assessor's membership on the Board of Equalization in a first class county of at least 900,000 inhabitants). A dispute concerning the constitutionality of an assessment statute is clearly beyond the scope of the Commission's authority. Complainants' point is preserved for the record.

Complainants' third point, related to the second point, challenges on due process grounds the constitutionality of Section 138.010, RSMo. Complainants allege that placing the assessor on the board of equalization with the duty to review and pass judgment on his or her official acts inherently denies Complainants a full and fair opportunity for hearing since bias existed in the official reviewing body. As discussed in the second point, a dispute concerning the constitutionality of an assessment statute is clearly beyond the scope of the Commission's authority. Complainants' point is preserved for the record.

Complainants' final point alleges that as a matter of due process, Respondent should be held to a proof requirement similar to that required in venues mentioned in Section 137.115, RSMo Supp. 1998, because she employed nothing more than guesswork and then made a computer entry.

In all appeals other than appeals of residential assessments from first class charter counties, the Complainant carries the burden of proof. See, Burden of Proof discussion, supra at 6. [The exception was carved out for residential valuations in first class charter counties because such counties frequently use a computer program to calculate a valuation for assessment purposes. An assessment made by "a computer, computer-assisted method, or a computer program" does not include valuation conclusions made by an individual and then entered into a computer assessment record.] As residents of a third class county, Complainants carry the burden of proof in these appeals.

Due process in the form of notice and opportunity for a full and fair hearing is required before citizens can be deprived of property. The U.S. and Missouri Constitutions provide that citizens shall not "...be deprived of life, liberty, or property without due process of law...." U.S. Const. amend. V; Mo. Const. Art. I, Section 10. Due process of law contemplates notice and an opportunity to be heard. Blydenburg v. David, 413 S.W.2d 284, 289 (Mo. banc 1967).

This Hearing Officer is not persuaded that due process of law requires a rejection of the long-standing caselaw placing the burden of proof with the taxpayer-movant. Rather, the existence of the appeal process which includes the right to an evidentiary hearing provides Complainants with a full and fair opportunity to be heard long before any risk of extinguishment of property rights through a tax foreclosure sale.

Valuation

Complainants offered valuation evidence on Appeal No. 99-76529. Mrs. Reeves testified that they were approached by the previous owner who indicated that he would like to sell the subject lot which is located between two rental houses owned by Complainants. He indicated he wanted $700.00 for the vacant lot. Complainants indicated they would pay $500.00 for the lot and purchased it for that amount on June 2, 1998.

"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:

1. buyer and seller are typically motivated;

2. both parties are well informed or well advised, and acting in what they consider their best interests;

3. a reasonable time is allowed for exposure in the open market;

4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

5. 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. Accordingly, the best evidence would be open market sales activity of the subject parcel or comparable parcels.

This Hearing Officer finds and concludes that there was insufficient evidence on the record to indicate the most likely selling price of the subject lot if exposed to the market for sale.

ORDER

The assessed valuations for the subject properties for the 1999 tax year are affirmed.

A party may file with the Commission an application for review of a hearing officer decision within thirty (30) days of the mailing of such decision. The application shall contain specific detailed grounds upon which it is claimed the decision is erroneous.

If an application for review of a hearing officer decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal 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 of Pemiscot 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. If any 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 April 4, 2001.

STATE TAX COMMISSION OF MISSOURI

Aimee Smashey, Hearing Officer

OF HEARING OFFICER DECISION

On April 4, 2001, Hearing Officer Aimee L. Smashey entered her Decision and Order (Decision) affirming the assessments made by the Assessor and which had been sustained by the Pemiscot County Board of Equalization.

Complainants timely filed their Application for Review of the Decision. Respondent timely filed her Reply to Application for Review. The grounds stated in the Application for Review may be summarized as:

The Hearing Officer erred in:

(A) finding "a presumption in favor of the board of equalization," and implicitly relying on this presumption to affirm the values stated in the decision of the board of equalization denying taxpayers' appeal;

(B) relying on a presumption to find that the persons who looked at the properties were authorized by law to act for the assessor in satisfying the inspection requirements mandated by the legislature in section 137.115.10, RSMo and in failing to apply the seventeen percent limitation of said statute;

(C) relying on Exhibit 1, because Exhibit 1 is not a part of the record in this case, in that the Chief Hearing Officer and the Commission erroneously overruled Complainants' objection to Exhibit 1;

(D) finding that looking at the outside of the property from the street constitutes a "physical inspection."

(E) finding that the recent purchase price of the vacant lot in Appeal 99-76529, is not substantial evidence of market value.

DECISION

The Hearing Officer's Decision and Order sufficiently and competently addresses each of the points raised by Complainants in their Application for Review. Therefore, the Commission will only briefly and summarily respond to Complainants' points.

It is well-established law that there is a presumption in favor of the board of equalization as found by the Hearing Officer. When, as in these appeals, Complainants fail to present evidence which is deemed substantial and persuasive by the Hearing Officer to establish the true value in money of the properties in question, the presumption prevails. Complainants elected to offer no evidence of value, with the exception of one parcel (Appeal 99-76529). Complainants' contention relating to whether the matter before the board was a contested or uncontested case misses the point.

Complainants' argument relating to the physical inspection by agents of the Assessor is not well taken. The Hearing Officer appropriately found that the requirement of a physical inspection by persons working on behalf of the Assessor would fulfill the requirement of section 137.115.10, RSMo. If the reasoning put forth by Complainants that the Assessor may not employ agents to conduct physical inspections were carried to its logical extension, then the Assessor would have to personally and individually make the assessment list and assess all real and personal property under the language of section 137.115.1, RSMo. Common sense permits the work of the Assessor to be conducted through and with the assistance of deputies, agents, appraisers, and other employees.

Complainants' contention that the Hearing Officer erred in not imposing a limitation of seventeen percent increase in value of the subject properties is in error. The relevant statute sets no such limitation or cap, it only requires a physical inspection of the increase is over seventeen percent.

Exhibit 1 is a part of the record. It was received into evidence over the objection of Complainants. Tr. 16, Lines 2-5. Since the Exhibit was part of the record, it could not be error for the Hearing Officer to have relied upon it in rendering her decision.

The Hearing Officer's determination that viewing the outside of the subject properties from the street constitutes a "physical inspection," is an appropriate application of the term "physical inspection," as it is used in section 137.115.10, RSMo. The discussion on this point at pages 9-10 of the Decision provide an adequate and complete response. No benefit would be obtained by restating the Hearing Officer's review on this point.

Finally, Complainants take issue with the Hearing Officer's determination of value relative to the vacant lot in Appeal 99-76529. It is clear from the record, the Hearing Officer was not persuaded that Complainants had presented substantial and persuasive evidence to establish value. Decision, pp. 12-13. The property by the testimony of Complainant, Tapian Reeves, was not exposed to the open market for sale. Therefore, the Hearing Officer was justified in her conclusion that the June, 1998 purchase of the subject property was not sufficient to establish the purchase price as the true value in money (fair market value) of the property on January 1, 1999.

There is competent and substantial evidence to establish a sufficient foundation for the Findings, Conclusions and Decision reached 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.2d 403 (Mo. App. E.D. 1995). The determinations made by the Hearing Officer are supported by substantial evidence upon the whole record. A reasonable mind could have conscientiously reached the same result based on a review of the entire record. Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

The Hearing Officer did not err in her findings, conclusions and rulings as challenged by Complainants. The Complainants' points are not well taken.

ORDER

The Commission upon review of the record and Decision in these appeals, 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 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

SO ORDERED July 10, 2001.

STATE TAX COMMISSION OF MISSOURI

Sam D. Leake, Chairman

Bruce E. Davis, Commissioner

Jennifer Tidwell, Commissioner