State Tax Commission of Missouri

 

PAUL & KAY ASHWOOD                           )

d/b/a ASHWOOD PROPERTIES, LLC,         )

)

Complainants,               )

)

v.                                                         )           Appeal Number 05-10382

)         

PHILIP MUEHLHEAUSLER, ASSESSOR,   )

ST. LOUIS COUNTY, MISSOURI,               )

)

 Respondent.                )

 

 

DECISION AND ORDER

 

HOLDING

 

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor is AFFIRMED.  Hearing Officer finds presumptions of correct assessment not rebutted. True value in money for the subject property for tax year 2006 is set at $1,347,200, assessed value as residential property of $255,970.

Complainant appeared by Counsel, Donald Kenneth Anderson, Jr., St. Louis, Missouri.

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

Case heard and decided by Senior Hearing Officer W. B. Tichenor.

ISSUE

The Commission takes this appeal to determine the true value in money for the subject property on January 1, 2005.

SUMMARY

Complainant appeals, on the ground of overvaluation, the decision of the St. Louis County Board of Equalization, which sustained the valuation of the subject property.  The Assessor determined an appraised value of $1,347,200, assessed value of $255,970, as residential property.  Complainant proposed no value in the Complaint for Review of Assessment.

Evidentiary hearing was conducted on January 23, 2007, at the St. Louis County Government Center, Clayton, Missouri.  Transcript of hearing filed with the Commission on February 21, 2007.

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

Complainants’ Evidence

The following exhibits were received into evidence on behalf of the Complainants.

Exhibit A – Annual Property Operating Data, dated October 31, 2002

            Exhibit B – Supplemental Income and Loss statements for 2003 and 2004 tax returns

            Exhibit C – Certificate of Organization for Ashwood Properties, LLC

            Exhibit D – Operating Agreement for Ashwood Properties, LLC

            Exhibit E – Proforma Annual Statement for 2003

            Exhibit F – Real Estate Management Agreement dated February 1, 2003

            Exhibit G – Analysis Assumptions Report dated February 1, 2003

            Exhibit H – Loan Documents dated January 16, 2004

            Exhibit I – Advertising Expense Reports for Suburban Journals, St. Louis Post Dispatch and The Journal for dates November, 2003 through September, 2005

            Exhibit J – Advertising sample dated August 29, 2004

            Exhibit K – Property Management Agreement dated April 5, 2005

            Exhibit L – Property Status Report

            Exhibit M – Project Operating Reports for years 2004 and 2005

            Exhibit N – Actual Operations Report for years 2004 and 2005

            Exhibit O – Rent Roll Data for December 2005

            Exhibit P – Quarterly Income/Expense Reports for years 2003, 2004, 2005 and 2006

            Exhibit Q – General Ledgers for years 2004, 2005 and 2006

            Exhibit R – Pro Forma Income Statement

            Exhibit S – Income and Expenses – Stabilized Cash Flow Statement

            Exhibit T – Written Direct Testimony of Herbert Bauman, Property Manager

            Exhibit U – Written Direct Testimony of Paul Ashwood, Partner in Ashwood Properties, LLC

Respondent’s Evidence

The following exhibits were received into evidence on behalf of Respondent.

Exhibit 1 – Sales Contract from Complainants’ January 2003 purchase of the Subject Property

            Exhibit 2 – Appraisal of Subject Property dated January 15, 2003

            Exhibit 3 – Certified Copy of General Warranty Deed, dated January 30, 2003

            Exhibit 4 – Certified Copy of Deed of Trust for $2,040,000, dated January 30, 2003

            Exhibit 5 – Certified Copy of Real Property Certificate of Value indicating full consideration of $2,400,000

            Exhibit 6 – Annual Property Operating Data: Pro Forma Analysis Supporting Complainants’ Purchase Price

            Exhibit 7 – Written Direct Testimony of Stephen Robertson, Commercial Real Estate Supervisor for St. Louis County Assessor’s Office.

 

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 763-782 Chamberlain Place, Webster Groves, Missouri.  The property is identified by locator number 22J111286.  Complaint for Review of Assessment.   The property consists of a 1.29 acre tract, according to a Boundary Survey, dated May 29, 2002.  The tract is improved by a 38-unit apartment complex, known as the Chamberlain Manor Apartments.  Exhibit 2.

3.         The property was conveyed by Chamberlain Manor Associated to Chamberlain Manor, LLC in August, 2002 for $1,250,000.  Chamberlain Manor LLC renovated 20 units.  Exhibit 2.  Paul and Kay Ashwood purchased the property on January 30, 2003 for $2,400,000.  Exhibits 1, 2, 3 & 5.  The property is subject to a Deed of Trust, dated January 30, 2003 in the amount of $2,040,000.  Exhibit 4.  Title to the property was conveyed to Ashwood Properties, LLC, Paul and Kay Ashwood sole Members on May 16, 2005.  Exhibit U.

4.         There was no evidence of new construction and improvement from January 1, 2005, to January 1, 2006.

5.         Complainants’ 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, 2005, to be $500,000.       

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.

Presumptions In Appeals

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 Supreme Court of Missouri has held, “A tax assessor’s valuation is presumed correct.”  Snider v. Casino Aztar/Aztar Missouri Gaming Corp., 156 S.W.3d 341 (Mo. 2005).  Citing to Hermel, supra; and Cupples Hesse Corp. v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959).

            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, Hermel & Cupples Hesse, supra.

            Complainants’ evidence did not rise to the level of substantial and persuasive on the issue of fair market value.  The presumptions were not rebutted.  The evidence failed to establish an erroneous assessment.  Complainants’ evidence was insufficient to prove the fair market value of the subject property as of January 1, 2005 was $500,000.

 

 

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, supra.

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 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.

Complainants’ Burden of Proof

In order to prevail, Complainants 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, 2005.  Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897.  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).

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 testimony of Mr. Ashwood proffered the opinion of fair market value for the subject property as of January 1, 2005 to be $500,000.  Exhibit U, Q & A 65.  However, no explanation was provided which established the foundation upon which this opinion was based.  There was no development of any recognized method for appraisal of real property.  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. Div. 2 1974).  Mr. Ashwood’s opinion of value was not demonstrated to be based upon any of these recognized methods for valuation property for ad valorem tax purposes.

Documents providing financial information on a property under appeal in and of themselves are not sufficient to establish fair market value.  Absent the development of the financial data into the income approach for the appraisal of real property there is little if any probative weight which can be given to the data.  The testimony of Mr. Ashwood as to his opinion of fair market value, without demonstrating the manner in which the opinion of value was concluded is not sufficient to provide a proper foundation to constitute substantial and persuasive evidence.  

The taxpayer appears to want the Hearing Officer to take the financial data as to the 2004 and 2005 years of operation and treat that as an income approach to value for the subject.  However that information was not developed into an income approach.  It is not the responsibility of the Hearing Officer to act as appraiser for either the taxpayer or the assessor in an appeal before the Commission.

The additional factor that Complainant purchased the subject property in an open market transaction in January, 2003 for $2,400,000 cannot be ignored.  Evidence of the actual sales price of property is admissible to establish value at the time of an assessment, provided that such evidence involves a voluntary purchase not too remote in time.  The actual sale price is a method that may be considered for estimating true value.  St. Joe Minerals Corp. v. STC, 854 S.W.2d 526 (App. E.D. 1993).  The property is subject to a mortgage in excess of $2,000,000, supported by an appraisal done at the time of the 2003 sale and financing opining a value of $2,450,000.

The assessor’s value of only $1,347,200 is well supported by the actual purchase by Complainants of the property just two years prior to the assessment date of January 1, 2005.  Mr. Ashwood’s opinion of a fair market value of only $500,000 was not supported by substantial and persuasive evidence and therefore the presumptions of correct assessment were not rebutted.


ORDER

The assessed valuation for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Louis County for the subject tax day is AFFIRMED.

The assessed value for the subject property for tax years 2005 and 2006 is set at $255,970.

Complainants may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision.  The application shall contain specific grounds upon which it is claimed the decision is erroneous.  Failure to state specific facts or law upon which the appeal is based will result in summary denial.  Section 138.432, RSMo 2000.

If an application for review of this 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 St. Louis 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. 


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 February 28, 2007.

STATE TAX COMMISSION OF MISSOURI

 

 

_____________________________________

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 28th  day of February, 2007, to:     Donald Kenneth Anderson, 8011 Clayton Road, St. Louis, MO 63117, Attorney for Complainants; Paula Lemerman, Associate County Counselor, Attorney for Respondent; Philip A. Muehlheausler, Assessor, County Government Center, 41 S. Central Ave., Clayton, MO 63105; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.

 

 

 

___________________________

Barbara Heller

Legal Coordinator