State Tax Commission of Missouri

GEORGE & SAUNDRA BRENNER, )

)

Complainants, )

)

v. ) Appeal Number 05-10212

)

PHILIP MUEHLHEAUSLER, ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

The decision of the St. Louis County Board of Equalization reducing the assessment made by the Assessor, is AFFIRMED. Market value for the subject property for tax years 2005 and 2006 is set at $253,300 (assessed value $48,127).

Complainant, George Brenner, appeared pro se.

Respondent appeared by Counsel, Paula J. Lemerman, Associate County Counselor.

Case heard and decided by Hearing Officer Karin A.C. Spradlin.

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2005, which shall also apply to the tax date of January 1, 2006.

SUMMARY

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 to $253,300. The Assessor originally determined a market value of $303,900 (assessed value of $57,741, as residential property). The Assessor proposed an appraised value of $315,000 at the hearing (assessed value $59,850). Complainant proposed a value of $125,000 (assessed value of $23,750). A hearing was conducted on May 16, 2006, at the St. Louis County Government Center, Clayton, Missouri.

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

Complainant’s Evidence

Complainant, George Brenner, testified on his own behalf. He offered his opinion of value for the subject property as of January 1, 2005, to be $125,000. This was based on the offer to purchase in “as is” condition from Home Vestors dated July 18, 2005, that is included in Exhibit B. Tr. p. 4, lines 5-6. However, Mr. Brenner testified that he “would like not to believe” that $125,000 is the value of the subject property, and that he “would be very upset to sell the house for that price.” Tr. p. 4, lines 13-15.

Mr. Brenner testified that the photographs which comprise Exhibit A accurately represent the condition of the subject property as of January 1, 2005. Tr. p. 16, lines 22-25. Specifically, Exhibit A contains photographs depicting various items of deferred maintenance, and a sketch drawn by Mr. Brenner dated July 27, 2005, indicating seven major foundation cracks. The photographs include, but are not limited to, those containing the following descriptions: (1) first floor laundry ceiling and east wall misalignment due to plumbing west dining room wall; (2) north wall breakout - ‘I beam’ ; (3) north wall buckled due to foundation failure, concrete foundation wall cracked and wall moved inward--buckling brick on front, south wall of master bedroom also cracked and moved inward; and (4) buckled north wall - view east, wall 3 inches out of plumb, note I beam breakout.

Regarding the sketch showing the foundation cracks, Mr. Brenner testified: “This shows the major cracks, not the minor cracks in the foundation. There are numerous window fissures and small cracks which I have not addressed…[t]hese four cracks allow this basement wall to move inward, and that inward motion caused the bricks on the exterior to buckle and separate from the structure.” Tr. p. 27, lines 12-17. Mr. Brenner offered a document that is part of Exhibit B into evidence titled “Detractions Present on 1 January 2005.” That document alleges the following structural and foundation problems:

Interior First Floor - Structural Problems

· Guest bedroom door: Swings open, frame not plumb. Indicates NE corner of house has settled. Door strikes frame (door top planed to allow door to close).

· Crack in arch between living room and entry hall.

· Crack above window in guest bedroom.

· The above are directly related to failed north basement wall and the cracked and buckled brick north wall between living room and guest bedroom.

· Crack in arch between family room and kitchen.

Basement – Structural Problems

North (front) wall east of porch: Two major vertical cracks from floor to top of basement wall (previously repaired) leak water. Additionally there is a diagonal crack running from the east corner of this wall. This wall has moved inward at top (south) approx. 2 in. wall is out of plumb approx. 1.0 “in 48”. East “I” beam caused wall to break around it. Bandboard is approx. 20 degrees out of plumb. This is the cause of failure (buckling and cracking) of the brick of the north wall between living room and guest bedroom.

South wall under master bedroom: Two major diagonal cracks (at each end) and vertical crack on south end of east wall. South wall has moved south (outward at top) and is out of plumb approx. 1.0” in 48’. Bandboard is not bolted to wall.

Foundation (basement walls) contains not less than 18 cracks, many have and do leak water in severe ground water conditions.

Basement – Water Problems

Foundation (basement walls) contains not less than 18 cracks, many have and do leak water in severe ground water conditions.

Hydrostatic leakage has occurred at the base of columns and several sites in the floor slab.

Over 350 feet of drain have been installed to direct water away from the house. This helps, however, the basement still leaks causing damage to contents, severely limiting use of the basement, and promotes mold.

Exterior – Structural Problems

North brick wall cracked and buckled. Wall between living room and guest bedroom has failed from failure of north basement wall.

Mr. Brenner testified that he obtained a written bid from Central States Basement and Foundation Repair, which is included in Exhibit C. However, Mr. Brenner testified that this would only address the foundation repair required, and not the incidental and consequential damage caused by the repair itself. Tr. p. 30, lines 6-10, 16-25; p. 31 lines 1-5, 23-25; p. 32 lines 3-6, 13-24; p. 33 lines 19-25; p. 34 lines 1-3. Mr. Brenner did not offer written bids for the incidental and consequential damage into evidence.

Mr. Brenner offered the following exhibits into evidence:

Exhibit A – Photographs of the interior and exterior of subject property, driveway and pool area.

Exhibit B – Documents from the Board of Equalization Appeal

Exhibit C – Costs to Repair the Subject Property

Exhibit D – Complainant’s Opinion of the Board of Equalization Decision

Exhibit E – Board of Equalization Decision

Evidentiary Rulings

Exhibit A — received into evidence (no objection by Counsel for Respondent).

Exhibit B — Counsel for Respondent objected to Exhibit B on the grounds of relevance (on the basis that prior assessments on the subject property are not relevant for purposes of determining value as of January 1, 2005), hearsay and lack of foundation. Exhibit B was received into evidence at the hearing subject to Counsel’s objection. Counsel’s objection is hereby overruled and Exhibit B is received into evidence.

Exhibit C — Counsel for Respondent objected to Exhibit C on the grounds of hearsay, lack of foundation (with regard to the estimates that are not supported with a bid). Exhibit C was received into evidence at the hearing subject to Counsel’s objection. Counsel’s objection is hereby sustained on the basis that the quotes for repair work that were obtained verbally by Complainant are hearsay and lack sufficient foundation except the written bid contained in Exhibit C from Central States Basement and Foundation Repair is hereby received into evidence.

Exhibit D — excluded at hearing based on Counsel for Respondent’s objections of hearsay and lack of foundation.

Exhibit E — Counsel for Respondent objected to Exhibit E on the grounds of relevance (for the purposes of Commission de novo hearing as the documents are from the Board of Equalization hearing). Exhibit E was received into evidence at the hearing for the limited purpose of representing the decision of the Board of Equalization.

Respondent’s Evidence

Respondent placed into evidence the testimony of Mr. Bo Frumson, appraiser for St. Louis County. The appraiser testified as to his appraisal of the subject property. The Appraisal Report, Exhibit 1, of Mr. Frumson was received into evidence. Mr. Frumson arrived at a final opinion of value for the subject property of $315,000 based upon a sales comparison approach and a cost approach to value. In performing his sales comparison analysis, the appraiser relied upon the sales of properties which he deemed to be comparable to the subject property. The properties relied upon by Respondent’s appraiser in performing his appraisal were alleged to be comparable to the subject property for the purpose of making a determination of value of the subject property.

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 508 Redondo Drive, Chesterfield, Missouri. The property is identified by Parcel ID 21S520022. The property consists of 0.874 of an acre lot (38,071 square feet) improved by a 1.5 story frame and brick veneer, Cape Cod style, detached single-family dwelling of average quality construction. The house was built in 1967. The residence has a total of nine (9) rooms, which includes five (5) bedrooms, three (3) full bathrooms, and contains a total of 2,579 square feet of gross living area. There is a full, unfinished basement, partially finished attic, and an attached two-car (2) garage.

3. The property was purchased by Complainants in February, 1985.

4. There has been no appraisal of the property within three (3) years prior to the tax date of January 1, 2005.

5. There was no listing or sale of the property noted within three years prior to the tax date of January 1, 2005.

6. There was evidence of some repairs to the basement foundation made after January 1, 2005, and prior to March 31, 2006, the date of the Respondent’s appraisal.

7. There was no evidence that the valuation on Complainant’s property was not made by a computer, computer-assisted method or a computer program.

8. As of the tax date, the subject property was in poor condition.

9. Respondent’s appraiser made various adjustments to the comparable properties for differences which existed between the subject and each comparable. The adjustments for condition do not appear to be adequate to bring the comparables in line with the subject for purposes of the appraisal problem.

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. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. 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. Section 138.431.4, RSMo.

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 her inquiry and any evidence presented by the parties, or based solely upon evidence presented by the parties. Section 138.430.2, RSMo.

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. 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).

Experts

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. St. Louis County v. Boatmen’s Trust Co., 857 S.W.2d 453, 457 (Mo. App. E.D. 1993); Vincent by Vincent v. Johnson, 833 S.W.2d 859, 865 (Mo. 1992); Beardsley v. Beardsley, 819 S.W.2d 400, 403 (Mo. App. 1991); Curnow v. Sloan, 625 S.W.2d 605, 607 (Mo. banc 1981). An expert’s opinion must be founded upon substantial information, not mere conjecture or speculation, and there must be a rational basis for the opinion. Missouri Pipeline Co. v. Wilmes, 898 S.W.2d 682, 687 (Mo. App. E.D. 1995). The state tax commission cannot ignore a lack of support in the evidence for adjustments made by the expert witnesses in the application of a particular valuation approach. Drey v. State Tax Commission, 345 S.W.2d 228, 234-236 (Mo. 1961); Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348 (Mo. 2005).

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. St. Joe Minerals Corp. v. State Tax Commission, 854 S.W.2d 526, 529 (Mo. App. E.D. 1993); Missouri Baptist Children’s Home v. State Tax Commission, 867 S.W.2d 510, 512 (Mo. banc 1993). It is the fair market value of the subject property on the valuation date. Hermel, Inc. v. STC, 564 S.W.2d 888 (Mo. banc 1978).

Market Value

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 is 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 each 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.

6. 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.

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, at 615 (Mo. App. W.D. 2000); Hermel, supra; 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 (replacement or construction) 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 (Mo. App. E.D. 1993); Aspenhof Corp. v. STC, 789 S.W.2d 867, 869 (Mo. App. E.D. 1990); Quincy Soybean Company, Inc., v. Lowe, 773 S.W.2d 503, 504 (Mo. App. E.D. 1989), citing Del-Mar Redevelopment Corp v. Associated Garages, Inc., 726 S.W.2d 866, 869 (Mo. 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).

Board of Equalization Presumption

There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 308 S.W.2d 748, 759 (Mo. 1958).

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, even if simply to sustain the value made by the Assessor, is accepted as true only until there is substantial and persuasive evidence to the contrary. The presumption of correct assessment is rebutted when the taxpayer presents substantial and persuasive evidence to establish that the assessor’s or Board’s valuation is erroneous and what the fair market value should have been placed on the property. Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341, 348 (Mo. 2005); Hermel, Inc., supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696 (Mo. 1959).

Complainant -Taxpayer has Burden of Proof

In Westwood Partnership v. Gogarty, 103 S.W.3d 152 (Mo. App. E.D. 2003), the court of appeals stated:

There is no longer an automatic presumption regarding the correctness of an assessor's valuation. Section 138.431.3. This statutory change from the previous situation in which the assessor's valuation was presumed to be correct does not mean that there is now a presumption in favor of taxpayer. The taxpayer in a Commission tax appeal still bears the burden of proof and must show by a preponderance of the evidence that the property was improperly classified or valued. Industrial Development Authority of Kansas City v. State Tax Commission of Missouri, 804 S.W.2d 387, 392 (Mo. App. 1991).

In Reeves v. Snider, 115 S.W.3d 375 (Mo. App. S.D. 2003), the court of appeals described the taxpayer's burden as follows:

Taxpayers were the moving parties seeking affirmative relief, and as such, they bore the burden of proving the vital elements of their case, i.e., the assessments were "unlawful, unfair, improper, arbitrary or capricious.” Cupples Hesse Corp. v. State Tax Comm'n, 329 S.W.2d 696, 702 (Mo.1959); Westwood P'ship v. Gogarty, 103 S.W.3d 152, 161[8] (Mo. App. 2003); 84 C.J.S. Taxation §§710, 726. This is true regardless of the existence or non-existence of the challenged presumption. As the Supreme Court of Missouri explained, "even were we to hold that it [the presumption] has been overcome, the burden of proof on the facts and inferences would still remain on petitioner, for it is the moving party seeking affirmative relief.” Cupples, 329 S.W.2d at 702[16]. See also 84 C.J.S. Taxation §710, which states: "Even where there is no presumption in favor of the assessor's ruling, if no evidence is offered in support of the complaint, the reviewing board is justified in fixing the valuation complained of in the amount assessed by the assessor.”

To prevail, Complainants must "present an opinion of market value and then ... present substantial and persuasive evidence that the proposed value is indicative of the market value of the subject property on tax day." Hermel, Inc. v. STC, 564 S.W.2d 888, at 897; Daly v. P.D. George Co., 77 S.W.3d 645, 651 (Mo. App. 2002). Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975). 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).

Complainant’s Opinion of Value

The owner of property is generally held competent to testify to its reasonable market value. Boten v. Brecklein, 452 S.W.2d 86, 95 (Sup. 1970). The owner’s opinion is without probative value however, where it is shown to have been based upon improper elements or an improper foundation. Shelby County R-4 School District v. Hermann, 392 S.W.2d 609, 613 (Sup. 1965). The owner may not support an opinion of value by reference to comparable sales unless the owner qualifies as an expert. State ex rel. Missouri Hwy. and Tr. Comm’n v. McDonald’s Corp., 872 S.W.2d 108, 113 (Mo. App. E.D. 1994); State ex rel. Missouri Hwy. and Tr. Comm’n v. Pracht, 801 S.W.2d 90, 94 (Mo. App. E.D. 1990).

The Complainant’s evidence was not substantial and persuasive to rebut the presumption of correct assessment by the Board of Equalization of St. Louis County and establish the true value in money as of January 1, 2005, to be $125,000, as proposed. At hearing, the Complainant testified that he based his opinion of value upon an offer he received from Home Vestors. This “offer” is contained within a letter from Home Vestors to Complainant which states in part:

Please consider this a letter of intent to purchase your property at 508 Redondo, St. Louis, MO 63017. If you submit an accepted contract by August 1, 2005, we would like to offer you a price of $125,000. We would like to purchase this property in “As-Is” condition and we will not require you to remove any of your unwanted belongings. In addition, we will not be asking you to make any repairs or offer any inspections. We will pay your normal closing costs and will not charge any real estate fees or commissions.

This “offer” is atypical in that it does not require the owner to remove all belongings, nor is it presented in the form of a real estate contract. These characteristics raise suspicion as to its legitimacy as “a fair sale where the buyer and seller are each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.” Further, Complainant testified at hearing that the subject property had not been exposed in the open market at all. Tr. p. 3 lines 24-25; p. 4 lines 1-3. Thus, the Complainant’s proposed value of $125,000 fails to meet the definition of “market value.” Doubt regarding the validity of this opinion of value was further cast by the fact that prior to Complainant receiving the letter from Home Vestors, he had asserted an opinion of value of $197,400 in his appeal form to the St. Louis County Board of Equalization. Exhibit B, Page 3. The Complainant also attempted to establish a total amount of the costs to repair certain deficiencies in the property at approximately $163,000, many of which were cited by Home Vestors as necessary in order to sell the subject property at retail. Tr. p. 30 lines 2-6 and lines 9-15. It appears more than coincidental that when these costs are added to the Home Vestors’ offer of $125,000, the Complainant’s total proposed value is closer, although still $15,900 less than the Respondent’s original proposed value. Id. The fact that Home Vestors was the impetus to obtaining the verbal quotes - which in themselves are unreliable as hearsay - makes these quotes suspect, and ultimately unpersuasive. Nevertheless, the Complainant has established that significant deficiencies in the physical condition of the subject property existed on January 1, 2005, and as such has established that the Assessor’s original assessment was “unlawful, unfair, improper, arbitrary and capricious.” Yet, the Complainant has not established substantial and persuasive evidence of the market value to be applied to the subject property, so in this regard he has failed to carry his evidentiary burden and his position fails.

Respondent’s Burden of Proof

In any case in St. Louis County where, as in this case, 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. Section 138.060, RSMo; 12 CSR 30-3.075.

In this appeal, the Respondent has imposed upon him by the provisions of Section 137.115.1, RSMo, the requirement that he carry the burden of proof, supported by clear, convincing and cogent evidence to sustain the valuation on Complainant’s property which is presumed to have been made by a computer, computer-assisted method or a computer program, since the Respondent did not prove otherwise at the hearing. Therefore, 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: