State Tax Commission of Missouri

ALLAN & ELIZABETH M. KALB, )

)

Complainant, )

)

v. ) Appeal No. 07-12780

)

PHILIP MUEHLHEAUSLER, ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

DECISION AND ORDER

HOLDING

Decision of the St. Louis County Board of Equalization reducing the assessment made by the Assessor is SET ASIDE. Hearing Officer finds Complainants did not rebut the presumption of correct assessment by the Board. Respondent did rebut the presumption of correct assessment by the Board. True value in money for the subject property for tax years 2007 and 2008 is set at $2,420,000, residential assessed value of $459,800.

Complainant, Allan J. Kalb, appeared pro se.

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, 2007.

SUMMARY

Complainants appeal, 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 $2,611,600, assessed value of $496,200, as residential property. The Board reduced the value to $2,276,300, assessed value of $432,500. Complainants proposed a value of $1,863,658, assessed value of $354,100. A hearing was conducted on July 9, 2008, 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.

Complainants’ Evidence

Mr. Kalb testified on behalf of the Complainants. He stated the owners’ opinion of fair market value as of January 1, 2007 to be $1,863,658. The taxpayer arrived at his opinion of value by calculating the average per square foot appraised value by the Assessor for the 2007 assessment cycle on the properties located at numbers 1, 2, 3 and 4 Forest Ridge Place. He then took this average per square foot appraised value ($216.40) times the subject’s square foot living area (8,612) to arrive at the opinion of value.

Complainant offered Exhibit A into evidence. Exhibit A was a document prepared by Mr. Kalb that listed the six properties on Forest Ridge, the 2005-06 appraised values, the 2007-08 appraised values, the square feet of living area and the per square foot appraised value for each property. Counsel for Respondent objected to Exhibit A on the ground it was not an accepted appraisal methodology. The objection was overruled and Exhibit A was received. The objection goes to the question of how much, if any, probative weight can be given to the Exhibit and the opinion of value derived therefrom. Irrespective of the evidentiary weight that might be given the Exhibit, it is admissibility to demonstrate the elements and foundation for Mr. Kalb’s opinion of value.

Respondent’s Evidence

Respondent placed into evidence the testimony of Mr. Robert Steven Koch, Missouri State Certified Residential Real Estate Appraiser for St. Louis County. The appraiser testified as to his appraisal of the subject property. The Appraisal Report (Exhibit 1) of Mr. Koch was received into evidence. Mr. Koch arrived at an opinion of value for the subject property of $2,420,000 based upon a sales comparison approach to value. In performing his sales comparison analysis, the appraiser relied upon the sales of three properties deemed comparable to 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 5 Forest Ridge Place, Clayton, Missouri. The property is identified by parcel number 19J240335. The property consists of 2.64 acres improved by a two and a half-story brick, single-family structure of excellent quality construction. The house was built in 1912 and appears to be in average condition. The residence has a total of fifteen rooms, which includes six bedrooms, four full and one half baths, and contains 8,612 square feet of living area. There is a full unfinished basement and a detached four-car oversize garage. Exhibit 1.

3. There was no evidence of new construction and improvement from January 1, 2007, to January 1, 2008.

4. 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 $1,863,658, as proposed.

5. The properties relied upon by Respondent’s appraiser were comparable to the subject property for the purpose of making a determination of value of the subject property. The three properties were located within less than a half mile of the subject. Each sale property sold at a time relevant to the tax date of January 1, 2007 (12/05 – 3/07). The sale properties were 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. Exhibit 1.

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 ranged from -8% to 10.6%. Significant adjustments were required for various items including condition, living area and individual amenities. These were appropriate for this particular valuation. Exhibit 1.

7. The adjusted sales prices for the comparables calculated to $2,377,147, $2,415,700 and $2,489,600, respectively. The appraiser concluded on a $2,420,000 value which calculated to a value per square foot of $281.01 compared with the sales prices per square foot of living area for the comparables of $343.79, $280.39 and $343.25. 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. Exhibit 1.

8. Respondent’s evidence met the standard of substantial and persuasive to rebut the presumption of correct assessment by the Board and establish the value of the subject, as of January 1, 2007, to be $2,420,000. Exhibit 1.

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.

Presumption 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 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. Hermel, supra; Cupples-Hesse Corporation v. State Tax Commission, 329 S.W.2d 696, 702 (Mo. 1959). The opinion of value and the methodology utilized to arrive at the opinion of value tendered by Mr. Kalb did not constitute substantial and persuasive evidence to establish that the Board’s valuation was in error or to establish the fair market value of the subject on January 1, 2007. Respondent’s evidence of value, being grounded in an accepted appraisal method rebutted the presumption of correct assessment and establish true value in money for the Kalb property as of January 1, 2007.

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 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.

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; Exhibit 1.

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 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). The method of valuation employed by Complainant is not accepted appraisal practice. The basis for the valuation does not rest in a comparison of the subject to actual sales. Averaging of the assessor’s appraised values on any given number of properties has never been recognized as a proper method for ad valorem tax valuations. Respondent’s appraiser developed an opinion of value relying upon an established and recognized approach for the valuation of real property, the sales comparison or market approach. The sales comparison approach is generally recognized to be the most reliable methodology to be utilized in the valuation of single-family residences.

Complainants Fail To Meet 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, 2007. Hermel, Inc. v. State Tax Commission, 564 S.W.2d 888, at 897. 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.” 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).

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).

The owner of property is generally held competent to testify to its reasonable market value. Rigali v. Kensington Place Homeowners’ Ass’n, 103 S.W.3d 839, 846 (Mo. App. E.D. 2003); 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. 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). The owner’s opinion does not rest on any market data to establish the true value in money for their property as of January 1, 2007. Averaging of appraised values does not provide an opinion of value based upon proper elements and a proper foundation. Accordingly, the opinion of value given by Mr. Kalb can be given no probative weight. Complainants failed to meet their burden of proof.

Respondent Proves Value

Respondent, when advocating a value different from that determined by the original valuation or a valuation made by the Board of Equalization, must meet the same burden of proof to present substantial and persuasive evidence of the value advocated as required of the Complainant under the principles established by case law. Hermel, Cupples-Hesse, Brooks, supra. Respondent presented substantial and persuasive evidence to establish a fair market value as of January 1, 2007, of $2,420,000 for the property under appeal. Exhibit 1. The sale properties were appropriate to use as comparables for valuing the Kalb property. The adjustments made were consistent with generally accepted guidelines for the appraisal of property of the subject’s type. The adjustments properly accounted for the differences between the subject and each comparable.

ORDER

The assessed valuation for the subject property as determined by the Board of Equalization for St. Louis County for the subject tax day is SET ASIDE.

The assessed value for the subject property for tax years 2007 and 2008 is set at $459,800.

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. Said application must be in writing addressed to the State Tax Commission of Missouri, P.O. Box 146, Jefferson City, MO 65102-0146, and a copy of said application must be sent to each person at the address listed below in the certificate of service.

Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 2000.

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 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 August 4, 2008.

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 4^th day of August, 2008, to: Allan Kalb, 5 Forest Ridge Place, Clayton, MO 63105, Complainant; Paula Lemerman, Associate County Counselor, Attorney for Respondent; Philip A. Muehlheausler, Assessor; John Friganza, Collector, County Government Center, 41 South Central Avenue, Clayton, MO 63105.

________________________________

W. B. Tichenor, Senior Hearing Officer