State Tax Commission of Missouri

HARLEY M. SMITH, )

)

Complainant, )

)

v. ) Appeal Number 07-10033

)

PHILIP MUEHLHEAUSLER, ASSESSOR, )

ST. LOUIS COUNTY, MISSOURI, )

)

Respondent. )

ORDER

AFFIRMING HEARING OFFICER DECISION

UPON APPLICATION FOR REVIEW

On June 9, 2008, Senior Hearing Officer W. B. Tichenor entered his Decision and Order (Decision) setting aside the assessment by the St. Louis County Board of Equalization and increasing true value in money to $425,000 for the property under appeal, assessed value as residential property of $90,750.

Complainant timely filed his Application for Review of the Decision.

CONCLUSIONS OF LAW

Standard Upon Review

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).

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 he 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).

The Commission will not lightly interfere with the Hearing Officer’s Decision and substitute its judgment on the credibility of witnesses and weight to be given the evidence for that of the Hearing Officer as the trier of fact. Black v. Lombardi, 970 S.W.2d 378 (Mo. App. E.D. 1998); Lowe v. Lombardi, 957 S.W.2d 808 (Mo. App. W.D. 1997); Forms World, Inc. v. Labor and Industrial Relations Com’n, 935 S.W.2d 680 (Mo. App. W.D. 1996); Evangelical Retirement Homes v. STC, 669 S.W.2d 548 (Mo. 1984); Pulitzer Pub. Co. v. Labor and Indus. Relations Commission, 596 S.W.2d 413 (Mo. 1980); St. Louis County v. STC, 562 S.W.2d 334 (Mo. 1978); St. Louis County v. STC, 406 S.W.2d 644 (Mo. 1966).

DECISION

A review of the record in the present appeal provides support for the determinations made by the Hearing Officer. There is competent and substantial evidence to establish a sufficient foundation for the Decision of the Hearing Officer. A reasonable mind could have conscientiously reached the same result based on a review of the entire record. The Commission finds no basis to support a determination that the Hearing Officer acted in an arbitrary or capricious manner or abused his 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); Phelps v. Metropolitan St. Louis Sewer Dist., 598 S.W.2d 163 (Mo. App. E.D. 1980).

Complainant’s sole point raised for review involves the assertion that a set of doors on the three car garage (converted carriage house) was not operable. Complainant argues that Respondent’s appraiser testified at hearing that it would lower his appraised value by $2,500 - $5,000. A review of the testimony by Mr. Koch (appraiser for St. Louis County) establishes that he testified that the fact that the garage doors to one of the spaces were non-working would have a “minor effect” on his appraisal and would probable call for an adjustment of only $2,500. There is no testimony that the appraiser then testified to a revised conclusion of fair market value.

By Complainant’s own admission, the doors' hinges are rusted and do not work. However, the Hearing Officer could have been, and apparently was, persuaded that the cost to correct the non-opening doors would be far less than $2,500. The fact that the doors do not work, does not eliminate the fact that there exists additional space that with a minimum of cost could be utilized and does in fact contribute to the value of the property.

The Hearing Officer did not err in his determinations as challenged by Complainant.

ORDER

The Commission upon review of the record and Decision in this appeal, 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 138.432 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.

The Collector of St. Louis County shall continue to hold the disputed taxes pending an Order from the Commission as to whether a Petition for Judicial Review of the Order has been filed.

SO ORDERED August 12, 2008.

STATE TAX COMMISSION OF MISSOURI

Bruce E. Davis, Chairman

Jennifer Tidwell, Commissioner

Charles Nordwald, Commissioner

DECISION AND ORDER

HOLDING

Decision of the St. Louis County Board of Equalization sustaining the assessment made by the Assessor is SET ASIDE. Hearing Officer finds presumption of correct assessment rebutted by Respondent’s evidence. True value in money for the subject property for tax years 2007 and 2008 is set at $425,000, residential assessed value of $80,750.

Complainant appeared pro se.

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

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

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 $408,000, assessed value of $77,520, as residential property. Complainant proposed a value of $350,000, assessed value of $66,500. A hearing was conducted on May 20, 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.

Complainant’s Evidence

Complainant testified in his own behalf and gave his opinion of value to be $350,000. This value was arrived at by deducting a factor of 4% from the value of $340,000 which had been stipulated to for the 2005 assessment and then adding $20,000 for enclosing a 16 by 16 open porch prior to 2007 and converting it to a heated living space. $340,000 x .04 = $13,600; $340,000 - $13,600 = $326,400; $326,400 + $20,000 = $346,400, round by Complainant to $350,000.

Complainant offered into evidence a group of Internet articles on the housing market in St. Louis and the nation (Exhibit A). Counsel for Respondent objected on the grounds hearsay, relevance and lack of foundation. Objection was sustained. Exhibit A was excluded from evidence. It is included in the Appeal file only for the purpose of preserving the record of the tendered exhibit. It was not relied upon to arrive at a conclusion of value in the appeal.

Respondent’s Evidence

Respondent placed into evidence the testimony of Mr. Robert S. Koch, Missouri State Certified Residential Appraiser. 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 $425,000 based upon a sales comparison approach to value. In performing his sales comparison analysis, the appraiser relied upon the sales of seven properties which he deemed to be 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 7025 Washington Avenue, University City Missouri. The property is identified by parcel number 18J610133. The property consists of .5219 of an acre lot improved by a two and a half-story brick, single-family structure of good quality construction. The house was built in 1910 and appears to be in average condition, with its chronological age being considered greater than its effective age. The residence has a total of nine rooms, which includes five bedrooms, three full and one half baths, and contains 2,482 square feet of living area. There is a full unfinished basement, an unfinished attic on the upper floor and an detached three-car garage, with one garage door that does not open. There was no listing or sale of the property noted within three years prior to the tax date of January 1, 2007.

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 $350,000.

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 seven properties were all located within less than six-tenths of 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 May, 2007. Three properties sold in 2005, at unadjusted per square foot of living area sale prices of $172.74, $179.04 and $165.02. Three properties sold in 2006, at unadjusted per square foot of living area sale prices of $164.96, $175.21 and $174.43. One property sold in May 2005 at an unadjusted per square foot of living area sale price of $186.45. 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. The comparables were all within 192 or less square feet in living area of the subject’s living area.

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 gross adjustments ranged from 5.9% to 19.2% of the sales prices, with a median of 14% and an average of 13.75%. This level of gross adjustments is acceptable for this valuation problem. The net adjustments ranged from a -3.1% to only 6.3%, with a median of 0.4% and an average of only 1.12%. The indicated values (adjusted sales prices) ranged from $404,200 to $436,100, with a median of $426,100, and an average of $423,330. The concluded value of $425,000 equates to a per square foot of living area value of $171.24, which falls in the range of the sales properties per square foot sale prices of $164.96 to $179.04, with a variance of only $6.28 to $7.80.

7. 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 $425,000.

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.

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 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 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. Snider, Hermel & Cupples Hesse, supra. Complainant failed to present substantial and persuasive evidence to rebut the presumption of correct assessment. However, Respondent’s evidence established that the basis for the Assessor’s original valuation, which was sustained by the Board, was based upon the subject property having an open frame porch, when in fact prior to January, 2007, that open frame porch had been converted to an enclosed heated living space.

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 valuation calculation employed by Mr. Smith was not a recognized approach to determining fair market value in an ad valorem tax appeal. The approach utilized by Mr. Koch was a recognized and well-established methodology for the appraisal of real estate in appeals before the Commission.

Respondent’s Burden of Proof

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. The Koch appraisal meets the required evidentiary standard in this appeal to establish fair market value for the subject at $425,000.

Ordinarily, in any case in St. Louis County where the Respondent presents evidence indicating a value 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. However, this rule does not prevent the introduction of evidence of valuation which shows that the Assessor’s original value and, in this instance, the Board’s value did not account for new construction and improvement of the subject home which had been made prior to 2007. The Commission may consider evidence of an increase in value under such circumstances where a material change in the physical structure of the home has been omitted in the assessment, as was the case in this instance.

Therefore, the appraisal report presented by Mr. Koch correctly valued the property as it existed on January 1, 2007, and accounted for the enclosed heated living area. The Assessor’s valuation had failed to pick up this change in the subject home, which clearly added value to the property. Since the change had been made prior to January of 2007, it is proper to account for that change and to value the property under appeal as it did actually exist on the valuation date.

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. 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).

Complainant presented no evidence relevant to a determination of fair market value. Therefore, there is no substantial and persuasive evidence in the record from Complainant upon which a finding can be made that the presumption of correct assessment by Board was rebutted

Owner’s Opinion of Value

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, --- S.W.3d ----, 2008 WL 820938 (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 basis for Mr. Smith’s opinion of value is a calculation based initially upon a four percent (4%) decrease in a value stipulated to for the 2005 assessment. First, there is no competent and relevant evidence to establish a 4% decrease in property values in the subject neighborhood from 2005 to 2007. Beyond that error in the Complainant’s method for determining value, there is no evidence upon which it can be concluded that the value stipulated to between the taxpayer and the assessor for the 2005 valuation actually represented fair market value of the property under appeal as of January 1, 2005. Therefore, the owner’s opinion of value is founded upon faulty elements and a faulty foundation. No probative weight can be given to it in this appeal.

Internet Articles

Exhibit A was excluded from evidence, upon objection on the grounds of hearsay, relevancy and lack of foundation. Articles obtained from the Internet, magazines, newspapers, etc., are classic hearsay. They simply are not admissible into evidence on this ground alone.

Such articles, in this instance addressing the general housing situation in the nation or in the St. Louis area lack relevance, because no foundation is established connecting what is purported in any given article to the valuation situation with regard to the property under appeal. Generalizations on either a decrease or an increase in home values does not establish that values for any given set of homes has either increased or decreased. More importantly any such area or regional trends do not address the specific question always presented in an overvaluation case before the Commission – the fair market value of a given property on a given valuation date.

Taxpayers are often enamored with what the print or Internet media has to say about home values. As interesting as such information might be on the general topic, it does not provide any substantive information on the specific appraisal problem in any given appeal. This type of tendered exhibit has no probative value, it can be given no weight in reaching a conclusion of value. Accordingly, such proffered exhibits are to be excluded from evidence.

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 SET ASIDE.

The assessed value for the subject property for tax years 2007 and 2008 is set at $80,750.

A party 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.

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 and an order to the Collector to release and disburse the impounded taxes, unless said taxes have been disbursed pursuant an order of the circuit court under the provisions of Section 139.031.8, RSMo. §139.031.3, RSMo.

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. If any or all 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.