In re 109 Kinsale Land Tr.

• Court: Court of Appeals of North Carolina
• Decided: February 4, 2014
• Docket: 13-623
• Status: Unpublished

Opinion

An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

NO. COA13-623 NORTH CAROLINA COURT OF APPEALS

Filed: 4 February 2014

IN THE MATTER OF THE APPEAL OF:

109 KINSALE LAND TRUST North Carolina Property Tax Commission No. 11 PTC 944 From the decision of the Durham County Board of Equalization and Review regarding the valuation of certain real property for tax year 2011.

Appeal by taxpayer from final decision entered 10 December

2012 by the North Carolina Property Tax Commission. Heard in

the Court of Appeals 23 October 2013.

Manning Fulton & Skinner P.A., by William S. Cherry, III, and Michael T. Medford, for taxpayer-appellant.

Office of the Durham County Attorney, by Assistant County Attorney Marie Inserra, for respondent-appellee Durham County.

CALABRIA, Judge.

This appeal by 109 Kinsale Land Trust (“taxpayer”) is an

appeal from a Final Decision (“Final Decision”) of the North

Carolina Property Tax Commission (“the Commission”) upholding

the Durham County Board of Equalization and Review’s (“Review -2- Board”) property tax valuation of residential property and

granting Durham County’s motion to dismiss. We vacate and

remand.

I. Background

Taxpayer owns an improved residential property located in

The Oaks subdivision at 109 Kinsale Drive, Chapel Hill, North

Carolina 27517 (“the property”). The property is a 6,583 square

foot single family residence situated on .80 acres of land

located in a subdivision in the southwest portion of Durham

County that borders Chapel Hill, North Carolina. Since the

subdivision is situated on the line between Durham and Orange

counties, some of the homes in the subdivision are located in

Durham County and others are located in Orange County.

The property originally sold in 1999 for $522,500.

Although there were no improvements or additions from 1999 to

2001, the property was valued for tax purposes in 2001 at

$561,000. Taxpayer purchased the property on 13 January 2011

for $525,000.

On 1 January 2008, Durham County (“the County”) reappraised

the property and valued it at $1,086,842. In tax year 2011,

taxpayer appealed the County’s assessment to the Review Board.

On 6 October 2011, the Review Board reassigned the property a -3- total value of $914,684. Taxpayer appealed the Review Board’s

decision to the Commission, alleging an arbitrary method of

valuation was used to determine the property’s value that

resulted in an assessment that substantially exceeded the true

value of money for the property. According to taxpayer, the

true value of the property as of 1 January 2008 was $610,000.

On 16 August 2012, the Commission heard taxpayer’s appeal.

Taxpayer appeared pro se through trustee Lee Lawrence, and the

County was represented by counsel. Taxpayer presented evidence

from Brett Leyburn (“Leyburn”), a certified North Carolina

residential real estate appraiser who testified regarding the

property’s “inferior quality of construction,” including

structural issues such as bowing in the rear wall, different

colors in the brick mortar, cracks in the bricks from settling,

and standing water in the basement. Leyburn also testified that

he valued the property using the sales comparison approach, and

his responsibility was “to find the most comparable properties.

County lines do not determine value.” In selecting comparable

properties, Leyburn sought “the most similar type properties

with regard to location, quality, condition and site value.”

Leyburn valued the property at $610,000 as indicated by the

sales comparison approach to value. -4- Taxpayer also presented evidence from the County’s

appraiser, Sheila Thompson (“Thompson”), an adverse witness.

Taxpayer questioned her regarding the subjectivity of the

County’s choice of comparable sales in the Hope Valley

subdivision, a completely different subdivision from The Oaks

located approximately five miles from the property:

Q: So, in your professional opinion, you selected – you chose to not use homes in the subdivision that were outside the county?

A: Yes.

Q: And while that’s – would you say that’s subjective?

The primary evidence offered by the County consisted of

Thompson’s cross-examination. On cross-examination, Thompson

testified regarding her use of the Durham County Schedule of

Values, and that in her professional opinion the property’s

value was $914,684. Specifically, Thompson indicated that her

exclusive use of Durham County properties in the comparative

sales approach was related to the County’s Schedule of Values:

Q: Please just tell the Commission briefly, for the record, about [the County’s] Schedule of Values.

A: Our Schedule of Values are based on Durham County market analysis, January 1, 2008, and they are only comprised of Durham -5- County sales.

Q: And that is why, as a guideline, all Durham County appraisers look to comparables within Durham County?

Q: And when we talk about what Durham County is going to assess an unfinished basement space, that’s going to be guided by the Durham County Schedule of Values, which was passed by the Durham County Board of Commissioners, which has no relevance in Chapel Hill, which is Orange County?

A: Correct.

Thompson also testified regarding certain conditions on the

property that influenced her valuation:

Q: And you have taken into – in fact, you were critical in your appraisal – critical, I mean, significance – in reducing the value of 109 Kinsale for all of the conditions that Mr. Lawrence mentioned today, with the exception of structural integrity, correct?

Q: And you made some dramatic changes – reductions in value?

Q: From $1,000,089 to 914. And you even indicated that you would – if it warranted and provided a proof of cost to cure, you would make any other changes that there was evidence to support?

A: Yes. -6- At the conclusion of the evidence, the Commission granted

the County’s oral motion to dismiss for taxpayer’s failure “to

meet the burden of production to show by material and competent

evidence that the County’s appraisal was arbitrary or capricious

or illegal and exceeded true value.” In the Commission’s Final

Decision on 10 December 2012, the Commission affirmed the

County’s assigned value of $914,684 and stated that “Durham

County met its burden of going forward with the evidence and of

persuasion that its valuation method did in fact produce true

value of the property[.]” Taxpayer appeals.

II. Jurisdiction

A party has an appeal as of right from any final order of

the Property Tax Commission. N.C. Gen. Stat. § 7A-29 (2011).

See N.C. Gen. Stat. § 105-345(d) (2011) (stating an appeal of

the Commission’s final order shall lie with this Court).

III. Standard of Review

When reviewing decisions of the Commission, this Court may

affirm or reverse the Commission’s decision, remand the case for

further proceedings, or reverse or modify the decision if “the

substantial rights of the appellants have been prejudiced

because the Commission’s findings are . . . [u]nsupported by

competent, material and substantial evidence in view of the -7- entire record as submitted” or arbitrary or capricious. N.C.

Gen. Stat. § 105-345.2 (b) (2011). “[W]hether a decision is

arbitrary and capricious is reviewed de novo.” In re Parkdale

America, 212 N.C. App. 192, 193, 710 S.E.2d 449, 450 (2011)

(“Parkdale I”) (citation omitted). “In making the foregoing

determinations, the court shall review the whole record or such

portions thereof as may be cited by either party[.]” N.C. Gen.

Stat. § 105-345.2 (c) (2011).

“The whole record test only allows [this Court] to

determine whether the decision of the Commission was based on

substantial evidence. The weight and credibility of the

evidence remains for the Commission." In re Lane Co. – Hickory

Chair Div., 153 N.C. App. 119, 128, 571 S.E.2d 224, 229 (2002).

“If the Commission’s decision, considered in the light of the

foregoing rules, is supported by substantial evidence, it cannot

be overturned.” In re Philip Morris U.S.A., 130 N.C. App. 529,

533, 503 S.E.2d 679, 682 (1998) (citation omitted).

IV. Discussion

As an initial matter, taxpayer argues that the Commission’s

decision was arbitrary and capricious, “lack[ing] a rational

basis in fact[.]” However, because there are no findings in the

Final Decision addressing the weight of taxpayer’s evidence or -8- the County’s valuation methods, we cannot properly address this

argument under the applicable standard of review.

Taxpayer also argues that the written Final Decision is

inconsistent with the proceedings at the hearing, and the

Commission’s conclusion that the County carried its burden of

persuasion that its valuation methods produced true value is

arbitrary and capricious. We agree.

A county’s ad valorem tax assessment is presumptively

correct. In re AMP, Inc., 287 N.C. 547, 562, 215 S.E.2d 752,

761 (1975). “This presumption may be rebutted by material,

substantial, and competent evidence that an arbitrary or illegal

method of valuation was used and the assessment substantially

exceeded the true value in money of the property.” Philip

Morris U.S.A., 130 N.C. App. at 533, 503 S.E.2d at 682

(citations omitted). “[I]t is not enough for the taxpayer to

show that the means adopted by the tax supervisor were wrong, he

must also show that the result arrived at is substantially

greater than the true value in money of the property assessed,

i.e., that the valuation was unreasonably high.” In re Appeal

of Parkdale Mills, ___ N.C. App. ___, ___, 741 S.E.2d 416, 419-

20 (2013) (quoting In re AMP, 287 N.C. at 563, 215 S.E.2d at

762) (“Parkdale II”). If the taxpayer rebuts the initial -9- presumption, the burden shifts to the County, which must then

demonstrate that its methods produce true values. In re IBM

Credit Corp., 201 N.C. App. 343, 345, 689 S.E.2d 487, 489 (2009)

(citation omitted).

In Parkdale I, 212 N.C. App. 192, 710 S.E.2d 449, the

taxpayer appealed the Commission’s final decision (“the order”)

upholding Davidson County’s ad valorem property tax valuation of

two textile mills because the county’s valuation exceeded the

properties’ true value. 212 N.C. App. at 192, 710 S.E.2d at

450. Although the order stated that Davidson County had met its

burden, no language in the order indicated Parkdale had

presented sufficient evidence to rebut the presumption of

correctness. Id. at 197, 710 S.E.2d at 452-53. In addition,

the order lacked findings of fact and conclusions of law

explaining why Davidson County’s methods were arbitrary or

illegal. Id., 710 S.E.2d at 453. “More importantly, the order

[did] not explain why the Commission concluded the County’s

ultimate assessment was correct.” Id. at 197-98, 710 S.E.2d at

453. This Court remanded the case to the Commission because the

findings in the Commission’s final decision failed to explain

the respective burdens of the parties. “Because the Commission

failed to explain why the County’s appraisal methods ascertained -10- true value despite being arbitrary or illegal,” this Court

vacated the order and remanded for specific findings explaining

how the Commission weighed the evidence to reach its

conclusions. Id. at 198, 710 S.E.2d at 453.

In the instant case, the Commission’s Final Decision

includes language reciting the presumption of correctness,

refers to the burden shifting framework, and grants the County’s

motion to dismiss. According to the Commission, “Durham County

met its burden of going forward with the evidence and of

persuasion that its valuation method did in fact produce true

value of the property[.]” However, the Commission here, just as

in Parkdale I, failed to make findings explaining how taxpayer

rebutted the presumption, or how the County met its burden

afterward. Instead, the findings are simply a recitation of

some of the hearing testimony and do not explain how the

Commission weighed the evidence to reach its conclusions.

Leyburn, as taxpayer’s independent appraiser, testified

that the County did not properly consider a number of issues

with the property. However, the written findings attribute

Leyburn’s testimony to Thompson. Thompson testified that the

County did in fact consider those issues in valuing the

property. In addition, the Commission found that Thompson -11- testified that the County’s Schedule of Values was considered in

the valuation, and that “she reviewed comparable sales in Durham

County and not Orange County because those sales were comparable

to the property and provide supporting evidence that Durham

County properly assessed” the property.

While these findings effectively summarize the testimony

presented at the hearing, there is no indication in the findings

themselves that the Commission properly applied the burden

shifting analysis in reaching its conclusion. Instead, the only

indication that the Commission applied the burden shifting

analysis comes in the unsupported final conclusion indicating

that the County had met its burden. Because the County enjoys a

presumption of correctness, the County had no burden to meet

unless taxpayer first showed the valuation to be arbitrary or

illegal. Philip Morris U.S.A., 130 N.C. App. at 533, 503 S.E.2d

at 682. However, the Commission made no findings that taxpayer

had shown the valuation to be arbitrary or illegal, and made no

findings regarding how the County showed its valuations

established the property’s true value. “The lack of findings

undermines our confidence in the Commission’s conclusion that

the County has met its ultimate burden of establishing a true

value.” Parkdale I, 212 N.C. App. at 198, 710 S.E.2d at 453 -12- (citation omitted). We therefore vacate and remand to the

Commission.

V. Conclusion

While the Commission’s findings summarize the testimony of

the appraisers at the hearing, there are no findings addressing

whether or how taxpayer rebutted the County’s presumption of

correctness. Additionally, there are no findings addressing how

the County met its burden of showing that its appraisal methods

produced true value, despite a conclusion indicating that the

County bore and met a burden of proof. The lack of specific

findings is the result of a lack of competent, material, and

substantial evidence regarding how taxpayer’s evidence was

evaluated and how the Commission properly applied the burden

shifting analysis. We therefore vacate and remand to the

Commission for further proceedings with specific findings of

fact supported by competent, material, and substantial evidence.

Vacated and remanded.

Judges HUNTER, Robert C. and HUNTER, JR., Robert N. concur.

Report per Rule 30(e).