Garrett LLC v. Noble County Assessor

ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
PATRICK L. JESSUP CURTIS T. HILL, JR.
MICHAEL M. YODER ATTORNEY GENERAL OF INDIANA
YODER & KRAUS P.C. MATTHEW R. ELLIOTT
Kendallville, IN REBECCA MCCLAIN
WINSTON LIN
DEPUTY ATTORNEYS GENERAL
Indianapolis, IN
______________________________________________________________________
FILED
IN THE Sep 24 2018, 3:24 pm
INDIANA TAX COURT CLERK
Indiana Supreme Court
Court of Appeals
______________________________________________________________________ and Tax Court
GARRETT LLC, )
)
Petitioner, )
)
v. ) Cause No. 49T10-1712-TA-00022
)
)
NOBLE COUNTY ASSESSOR, )
)
Respondent. )
ON APPEAL FROM A FINAL DETERMINATION
OF THE INDIANA BOARD OF TAX REVIEW
FOR PUBLICATION
September 24, 2018
WENTWORTH, Judge
Garrett LLC challenges the final determination of the Indiana Board of Tax Review
that established the assessed value of its real property for the 2016 tax year. Upon
review, the Court affirms the Indiana Board’s final determination.
FACTS AND PROCEDURAL HISTORY
Garrett is in the business of acquiring, remediating, and reselling contaminated
properties. (Cert. Admin. R. at 162.) In June 2014, Garrett purchased for $1.00 the
former Dalton Foundry, a property located in Kendallville, Indiana that was owned by the
Dalton Corporation and had been vacant since 2009. (Cert. Admin. R. at 55, 59-60.)
After purchasing the property, Garrett hired contractors to do both a Phase I and
Phase II evaluation of the property’s environmental contamination, which disclosed that
its soil and ground water contained chlorinated solvents and metal contamination. (See
Cert. Admin. R. at 164-65, 182.) In addition, the evaluations revealed that the property
was covered with foundry sand, requiring two feet of clay surface and a foot of topsoil in
order to build on it. (Cert. Admin. R. at 183-84.)
Garrett entered a Voluntary Remediation Program with the State of Indiana that
exchanged a covenant not to sue for the remediation of the property. (See Cert. Admin.
R. at 185-86.) Garrett sold a ten-acre portion of the property, referred to as The Mound,
at a discount to East Noble School Corporation for building a new middle school. (Cert.
Admin. R. at 165-67, 177-78.) The sale proceeds helped Garrett fund both the demolition
of the old Dalton factory and the environmental cleanup costs. (Cert. Admin. R. at 178.)
For the assessment date of March 1, 2015, the Noble County Assessor valued
the property at $200,000: $72,600 for 25.03 acres of land and $127,400 for the
improvements. (Cert. Admin. R. at 87-88, 154-55.) Garrett protested the assessment to
the Noble County Property Tax Assessment Board of Appeals (PTABOA). After an
informal meeting, the Assessor did not lower the $200,000 assessed value, but did agree
to reallocate the property’s assessed value by reducing the land value to $68,900 and
2
increasing the value of the improvements to $131,100. (See Cert. Admin. R. at 56-58,
87.) The parties signed a Form 134 - Joint Report by Taxpayer / Assessor to the County
Board of Appeals of a Preliminary Informal Meeting (Form 134) to that effect on March
16, 2015. (Cert. Admin. R. at 56-58.)
On May 20, 2015, Garrett transferred 4.75 acres of the property to Garrett Well,
LLC. (Cert. Admin. R. at 67-68, 168.) Thereafter, Garrett demolished all the buildings on
the portion of the property it retained. (See Cert. Admin. R. at 169-71, 177-78.)
For the assessment date of January 1, 2016, the Assessor valued the property at
$131,700: $121,700 for 20.28 acres of land and $10,000 for improvements. (Cert. Admin.
R. at 89-90.) Garrett protested the 2016 assessment to the PTABOA and the PTABOA
reduced the total assessed value to $105,400: $95,400 for the land and $10,000 for the
improvements. (See Cert. Admin. R. at 5-9, 89.) Still dissatisfied, Garrett pursued an
appeal with the Indiana Board. (Cert. Admin. R. at 1-2.)
On August 3, 2017, the Indiana Board conducted a hearing on Garrett’s appeal.
During the hearing, Garrett claimed that its land had zero value, but indicated it would be
willing to accept the previously agreed upon land value of $68,900 because the property
had not been changed since then. (Cert. Admin. R. at 160-61, 193.) In support, Garrett
presented: (1) evidence that it purchased the contaminated property for $1.00 from Dalton
Corporation in 2014, (2) a list of properties it considered “comparable” with their property
tax records, and (3) the Form 134 from its 2015 PTABOA appeal. (See Cert. Admin. R.
at 55-66, 84, 181-89.)
On November 1, 2017, the Indiana Board issued its final determination, concluding
that Garrett had provided undisputed probative evidence for reducing the 2016
3
assessment of improvements by demonstrating that no buildings remained on the
property on the January 1, 2016, assessment date.1 (Cert. Admin. R. at 111-12 ¶¶ 17(n),
(o), (p), 18.) The Indiana Board further concluded, however, that Garrett’s evidence was
not probative of the property’s 2016 market value-in-use. (Cert. Admin. R. at 111 ¶
17(m).) Accordingly, the Indiana Board left the land valuation of $95,400 unchanged.
(See Cert. Admin. R. at 112 ¶ 18.)
On December 13, 2017, Garrett initiated this original tax appeal. Additional facts
will be supplied as necessary.
STANDARD OF REVIEW
The party seeking to overturn an Indiana Board final determination bears the
burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane
Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Thus, to prevail Garrett must
demonstrate to the Court that the Indiana Board’s final determination is arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law; contrary to
constitutional right, power, privilege or immunity; in excess of or short of statutory
jurisdiction, authority, or limitations; without observance of the procedure required by law;
or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-6(e)(1)-(5)
(2018).
ANALYSIS
On appeal, Garrett claims the Indiana Board’s final determination is an abuse of
discretion, arbitrary and capricious, and unsupported by substantial evidence because it
1
The Indiana Board’s final determination reduced the 2016 assessment of improvements to
reflect that no buildings were present on the assessment date. (See Cert. Admin. R. at 111-12
¶¶ 17-(n), (o), (p), 18.) Asphalt paving listed on the 2016 property record card was also assessed
as improvements. (See Cert. Admin. R. at 89-90, 111-12 ¶ 17(p) n. 3.)
4
failed to find Garrett’s evidence of 1) the property’s 2014 sales price, 2) the comparable
properties, and 3) the agreed land value for the 2015 assessment date probative of the
subject property’s 2016 market value-in-use. (See Pet’r Br. at 3, 6-10.)
1. 2014 Sales price
To support a reduction in its property’s assessed value, Garrett had the burden
to provide market-based evidence (e.g., sales data, appraisals, construction costs, etc.)
showing that the assessment did not accurately reflect the property’s market value-in-
use. See 2011 REAL PROPERTY ASSESSMENT MANUAL (“Manual”) (incorporated by
reference at 50 IND. ADMIN. CODE 2.4-1-2 (2011)) at 3. The Indiana Board determined,
however, that the property’s June 2014 sales price was not probative evidence of the
property’s 2016 market value-in-use because Garrett did not present evidence a) that the
price was the result of a market value sale, b) that it was valueless because it was
contaminated land, and c) how the June 2014 sales price related to the January 1, 2016
assessment date. (Cert. Admin. R. at 109-10 ¶¶ 17(d)-(h).)
a) Market Value Sale
During the period at issue, Indiana defined “market value” as
The most probable price, as of a specified date . . . for which the
specified property rights should sell after reasonable exposure in a
competitive market under all conditions requisite to a fair sale, with the
buyer and seller each acting prudently, knowledgably, and for self-
interest, and assuming neither is under undue duress.
Manual at 5-6 (emphasis added). The Indiana Board stated that Garrett “failed to
establish the property was exposed to the market for a reasonable time.” (See Cert.
Admin. R. at 110 ¶ 17(g), 163-64 (stating Garrett learned about the property through a
personal meeting with the mayor and not from a sale listing).) The Indiana Board further
5
stated that the 2014 sale appeared to be the result of undue duress because the property
was vacant and up for tax sale.2 (See Cert. Admin. R. at 110 ¶ 17(g) (stating that the
Indiana Board assumed the Dalton Corporation abandoned the property).)
Even though the transaction was not a market value sale, the Indiana Board noted
that it was possible that this transaction could still qualify as a reliable indicator of the
property’s 2016 market value-in-use. Garrett failed, however, to rebut “the
preponderance of the evidence [ ] that the sale was not reliable “by providing some
evidence the sale is reliable.” (Cert. Admin. R. at 110 ¶ 17(h).) Accordingly, after
weighing the evidence, the Indiana Board concluded that the 2014 sales price, by itself,
was not probative of the property’s 2016 market value-in-use. (See Cert. Admin. R. at
110 ¶ 17(h).)
The administrative record contains no evidence that the property was exposed to
the market. (See generally Cert. Admin. R.; see also Pet’r Br. at 8-9 n.1.) Garrett argues,
nonetheless, that in this case “[s]tandard exposure to the market would have been a
useless act” because the property’s contamination and need for environmental
remediation made the property “effectively unmarketable.” (See Pet’r Br. at 5, 8
(reasoning that “common sense explains [the property] is not marketable”).) In addition,
Garrett claims that the Dalton Corporation, a publicly held corporation, did not sell the
property under undue duress, but fulfilled its fiduciary duty to its shareholders by selling
the property, ostensibly a net liability, for a $1.00 net gain. (See Pet’r Br. at 8 (postulating
that because “the property was a net liability does not [] mean that the seller was under
2
In its brief, Garrett corrected the Indiana Board’s conclusion by noting that the property had not
been up for tax sale, but it had been vacant since 2009. (See Pet’r Br. at 8-9 n.1; Cert. Admin.
R. at 55.)
6
undue duress[, i]t merely means that the property had no value in its current condition”).)
Garrett’s arguments are unpersuasive, however, because they are conclusory statements
masking the absence of evidence in the record that the 2014 sales price was reliable and
thus probative of the 2016 market value-in-use.
b) Value of Contaminated Property
Next, Garrett claimed that the June 2014 sales price reflected the property’s
market-value-in-use on the 2016 assessment date because contaminated property is
valueless. (See Pet’r Br. at 8-9.) Indeed, the Indiana Board acknowledged that
contamination can have an impact on a property’s value. (See Cert. Admin. R. at 109 ¶
(d) (explaining that “the existence of contamination could greatly lower a property’s
value”).)
Evidence that a property suffers from contamination, however does not by itself
necessitate a finding that a property is valueless. See e.g., Lake Cty. Assessor v. U.S.
Steel Corp., 901 N.E.2d 85, 93-95 (Ind. Tax Ct. 2009) (explaining that evidence must be
presented to quantify the impact of the contamination on the land’s value), review denied.
Accordingly, Garrett was required to provide evidence quantifying its conclusion that its
contaminated property was valueless. See Fisher v. Carroll Cty. Assessor, 74 N.E.3d
582, 590 (Ind. Tax Ct. 2017) (explaining that although a property’s condition actually may
render it valueless, “an objective, factual basis is necessary to sustain such a finding”).
The record is devoid of any objective factual basis that would support Garrett’s
claim that its property has no value simply because it is contaminated. There is evidence
in the record, however, that is contrary to Garrett’s claim. (See, e.g., Cert. Admin. R. at
171-75 (indicating that a buyer initiated the purchase of another foundry that Garrett
7
owned while it was still in a contaminated state), 165-68, 177-78 (indicating that Garrett
sold a portion of the subject property to East Noble School Corporation and used the
proceeds of that sale to help fund the demolition and cleanup costs for the subject
property).) Thus, Garrett’s arguments again are unpersuasive, lacking evidence relating
the contamination to the property’s claimed market-value-in-use.
c) Relating the Sales Price to the Relevant Valuation Date
Finally, the Indiana Board reasoned that the June 2014 sales price was not
probative because Garrett failed to relate the sales price to the valuation date that was
approximately 18 months later - January 1, 2016. (Cert. Admin. R. at 110 ¶ 17(e).) See
also IND. CODE § 6-1.1-2-1.5 (2016) (“the annual assessment date for tangible property is
. . . January 1 in a year beginning after December 31, 2015”); Manual at 3 (“any evidence
relevant to the true tax value of the property as of the assessment date may be presented
to rebut the presumption of correctness of the assessment”) (emphasis added).
The Court has recognized that in assessment challenges, taxpayers can present
property values from a period different from the assessment date “as long as they attempt
to relate that evidence to the appropriate valuation and assessment dates.” See Marion
Cty. Assessor v. Simon DeBartolo Group, LP, 52 N.E.3d 65, 70 (Ind. Tax Ct. 2016). Here,
the record reveals that Garrett made no such attempt. (See generally Cert. Admin. R.)
Instead of pointing to evidence in the record that related the 2014 sale price to the
appropriate valuation date, Garrett implies that showing the relationship is unnecessary
because “[e]ighteen months is not a significant period for a property that sat vacant and
unusable for a half a decade.” (Pet’r Br. at 7.) Without citing an authority or any
evidentiary basis for its assertion, however, Garret’s bald assertion will not carry the day.
8
See U.S. Steel, 901 N.E.2d at 94 (“a mere opinion or conclusion does not constitute
probative evidence”) (citation omitted).
2. Comparable Properties
Next, Garrett challenges the Indiana Board’s determination that its evidence of
comparable properties was not probative of its property’s 2016 market-value-in-use. (See
Pet’r Br. at 7-9.) At the administrative hearing, Garrett presented a one-page summary
of three properties as follows:
COMPARABLES
1. 703 GOODWIN STREET– Abandoned Foundry transferred to
Garrett, LLC by Commissioner’s Tax Deed. Prior to this it failed
to sell at tax sale. Garrett, LLC paid no money to the County
for the Deed. [Kendallville Foundry]
2. 420 LISBON ROAD– An eyesore for years that was
transferred by Commissioners Tax Deed. [Kendallville Iron &
Metal]
3. 205 WEST WAYNE STREET– Commonly known as the
McCray building. It is an abandoned Commercial building that
has been an eyesore for years. It has been offered at tax sale
for years and never sold. Current delinquent taxes are
$476,719.03. [McCray Building]
(See Cert. Admin. R. at 84.) In addition, Garrett submitted the property tax records for
two of the properties: Kendallville Iron & Metal and the McCray Building properties. (See
Cert. Admin. R. at 72-74, 78-83.) Moreover, there was testimony in the record, although
scanty, regarding the Kendallville Foundry and the McCray Building. (See Cert. Admin.
R. at 55, ¶¶ 4-5 (within the Kendallville Mayor’s affidavit), 171-76 (regarding the
Kendallville Foundry), 176 (regarding the McCray Building).) This evidence reveals that
9
all three industrial/commercial properties were transferred either by Commissioner’s Tax
Deed, sold at a tax sale, or as yet unsold at tax sales. (See Cert. Admin. R. at 84.)
The Indiana Board, assuming Garrett intended the evidence regarding these
properties to apply a sales-comparison approach,3 found this evidence was not probative
because Garrett did not provide evidence, explanation, or analysis comparing these
properties to the subject property and did not explain how any differences may affect
determining the subject property’s market value-in-use. (See Cert. Admin. R. at 110-11
¶¶ 17(i)-(j).) See also Manual at 9-10 (stating that under the sales comparison approach,
an “appraiser considers and compares all possible differences between the comparable
properties and the subject property that could affect value”).
Notably, Garrett did not compare the type or extent of any contamination on its
property with any contamination, or lack thereof, on the three properties it presented as
comparable even though it argues that contamination is the basis for reducing its
assessment. (See generally Cert. Admin. R.) Indeed, Garrett provided so little
information about these three properties that the Indiana Board had to infer the reason it
was presented. (See Cert. Admin. R. at 110 ¶ 17(i) (“[w]hile [Garrett] did not discuss
them, a list of purportedly comparable properties was introduced as evidence[; the
Indiana] Board infers that [Garrett] intended to use the sales-comparison approach to
prove the property’s value”).)
3
The sales comparison approach, one of the three generally accepted appraisal methods
expressly authorized under Indiana’s property tax assessment system, is “based on the
assumption that potential buyers will pay no more for the subject property than it would cost them
to purchase an equally desirable substitute improved property already existing in the market
place.” See 2011 REAL PROPERTY ASSESSMENT MANUAL (“Manual”) (incorporated by reference
at 50 IND. ADMIN. CODE 2.4-1-2 (2011)) at 9.
10
Whether Garrett offered this evidence as a sales comparison approach or as other
evidence to rebut the presumption of the assessment’s correctness, it failed to make it
clear to the Indiana Board how the evidence substantiates its claims of a lower value.
(See Cert. Admin. R. at 110-11 ¶¶ 17(i)-(j).) The Court has repeatedly reminded parties
that they must walk the Indiana Board, and this Court, through every element of their
analyses. See, e.g., Clark v. Dep’t of Local Gov’t Fin., 779 N.E.2d 1277, 1282-83 n. 4
(Ind. Tax Ct. 2002); Long v. Wayne Twp. Assessor, 821 N.E.2d 466, 471 (Ind. Tax Ct.
2005) review denied. This did not happen here. As a result, the Court will not reverse
the Indiana Board’s finding that the evidence of comparable properties carried no
probative value.
3. 2015 Assessed Value
Finally, the Indiana Board determined that the subject property’s value for 2015
was not probative of its 2016 market value-in-use. (Cert. Admin. R. at 111 ¶¶ 17(k)-(l).)
The Indiana Board explained that the 2015 value resulted from an agreement between
Garrett and the Assessor, not from “evidence of the correct valuation of the property.”
(Cert. Admin. R. at 111 ¶ 17(k).) Moreover, the Indiana Board noted that the subject
property was a different property on the 2016 assessment date than it was on the 2015
assessment date because Garrett had transferred acreage, demolished improvements,
and started the remediation process in the interim. (Cert. Admin. R. at 111 ¶ 17(l).)
Garrett argues, however, that its land could not logically be worth more in 2016
than its 2015 assessed value of $68,900 for two reasons: the land was contaminated on
the 2016 assessment date just like it was on the 2016 assessment date and it had 4.75
fewer acres to assess on the 2016 assessment date than it had in 2015. (See Pet’r Br.
11
at 9-10.) Furthermore, Garrett claims that the Legislature intended prior year
assessments to be probative evidence of its subsequent year’s value by making both
valuations central to shifting the burden of proof under Indiana Code § 6-1.1-15-17.2.4
(See Pet’r Br. at 9-10.) See also IND. CODE § 6-1.1-15-17.2 (2018).
While Garrett’s claims appear logical at first glance, they ultimately fail to persuade.
Garrett advocates that the assessed value should be the same for 2016 as it was for 2015
because the land was contaminated on both assessment dates. (See Pet’r Br. at 6, 9-
10.) Cherry-picking one fact as the sole indicator of value, however, ignores the broader
factual considerations required to determine a property’s market value-in-use. (See
generally Manual.) Moreover, the Court will not follow Garrett down the rabbit hole and
hold that just because fewer acres were assessed in 2016 than 2015, the 2016 assessed
value can be no greater than that in 2015. Instead, the Court will follow its long-held
precedent that each tax year stands alone for property tax assessment administrative and
judicial appeals. See Barth, Inc. v. State Bd. of Tax Comm’rs, 699 N.E.2d 800, 805 n. 14
(Ind. Tax Ct. 1998) (“[w]here a taxpayer challenges an assessment, the resolution of that
challenge does not depend on how the property was previously assessed”).
Garrett is correct that a prior year’s assessed value must be considered when
determining who bears the burden of proof in assessment appeals. (See Pet’r Br. at 10
(discussing I.C. § 6-1.1-15-17.2).) Nonetheless, a prior year’s assessed value is not
necessarily probative evidence of a subsequent year’s assessed value in other contexts.
“Probative evidence is evidence sufficient to establish a given fact that, if not contradicted,
4
Indiana Code § 6-1.1-15-17.2, commonly referred to as “the burden-shifting rule,” provides that
if the assessment of the same property increases by more than 5% from one year to the next, the
assessor bears the burden of proving that the assessment is correct. See IND. CODE § 6-1.1-15-
17.2 (2018); Orange Cty. Assessor v. Stout, 996 N.E.2d 871, 873 (Ind. Tax Ct. 2013).
12
will remain sufficient.” Meadowbrook N. Apartments v. Conner, 854 N.E.2d 950, 953 (Ind.
Tax Ct. 2005). For example, a prior year’s assessed value is merely one factor to be
considered in determining the assessed value in a subsequent year under the trending
rules. Cf. 50 IND. ADMIN. CODE 27-5-1 (2016) (discussing the annual adjustment process).
Here, Garrett provided no analysis to relate the earlier value to the later assessment date.
In addition, the Indiana Board noted that the property’s 2015 value was the product
of an agreement between the Assessor and Garrett, memorialized on the Form 134, in
which they stipulated to a land value of $68,900 for the March 1, 2015 assessment date.
(See Cert. Admin. R. at 56-58, 111 ¶ 17(k).) “[T]he parties’ intent [with respect to the
stipulation] is to be determined from the ‘four corners’ of the stipulation itself.” U.S. Steel,
901 N.E.2d at 91 (stating that “[b]ecause a stipulation is akin to a contract, the intent of
the parties in drafting the stipulation controls”) (citation omitted). The Form 134 did not
indicate that the agreed 2015 value was intended to extend to the 2016 assessment.
(See Cert. Admin. R. at 56-58.) To the contrary, the Form 134 indicates that the Assessor
intended the stipulated value to apply exclusively to the 2015 assessment. (See Cert.
Admin. R. at 56-58.)
CONCLUSION
Garrett’s appeal relies generally on legal conclusions that are unsupported by the
record evidence. Although Garrett claims reversible error because the Indiana Board’s
final determination was an abuse of discretion and arbitrary and capricious, the basis of
Garrett’s appeal is actually a thinly veiled request that the Court reweigh the evidence
presented to the Indiana Board.
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The final determination reveals that the Indiana Board considered the complete
evidentiary presentations and provided clear, reasonable, and logical rationale as to why
some of the evidence had no probative value. While some of Garrett’s naked assertions
may raise an eyebrow, Garrett failed to back them up by taking the necessary steps to
prove its case to the Indiana Board. The Court cannot and will not reweigh the evidence
- to do so, would improperly give Garrett a second bite at the apple. See Stinson v. Trimas
Fasteners, Inc., 923 N.E.2d 496, 498-99 (Ind. Tax Ct. 2010) (explaining that the Court
cannot reweigh evidence on appeal absent a showing that the Indiana Board abused its
discretion). The right place to get such nourishment is before the Indiana Board. The
Indiana Board’s final determination is AFFIRMED.5
5
The Court must mention that the Certified Administrative Record in this case contained a
disturbing amount of missing testimony labeled as “(inaudible)” during the administrative hearing.
(See, e.g., Cert. Admin. R. at 147-203.) Missing testimony is problematic and impedes review of
the administrative proceedings. The Court cautions the Indiana Board to ensure that its
administrative records are properly developed and preserved by taking the necessary steps to
improve the transcription of its hearings.
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