Monroe County Assessor v. SCP 2007-C-26-002, LLC a/k/a CVS 3195-02 , 62 N.E.3d 478 ( 2016 )

ATTORNEYS FOR PETITIONER: ATTORNEY FOR RESPONDENT:
MARILYN S. MEIGHEN PAUL M. JONES, JR.
ATTORNEY AT LAW PAUL JONES LAW, LLC
Carmel, IN Indianapolis, IN
BRIAN A. CUSIMANO FILED
ATTORNEY AT LAW
Nov 04 2016, 3:59 pm
Indianapolis, IN
CLERK
_____________________________________________________________________
Indiana Supreme Court
Court of Appeals
and Tax Court
IN THE
INDIANA TAX COURT
_____________________________________________________________________
MONROE COUNTY ASSESSOR, )
)
Petitioner, )
)
v. ) Cause No. 49T10-1509-TA-00029
)
SCP 2007-C-26-002, LLC a/k/a )
CVS 3195-02, )
)
Respondent. )
______________________________________________________________________
ON APPEAL FROM A FINAL DETERMINATION OF
THE INDIANA BOARD OF TAX REVIEW
FOR PUBLICATION
November 4, 2016
WENTWORTH, J.
On August 19, 2015, the Indiana Board of Tax Review issued a final
determination valuing a CVS store in Bloomington, Indiana for purposes of the 2009
through 2013 assessments. The Monroe County Assessor has challenged that final
determination, but the Court affirms.
FACTS AND PROCEDURAL HISTORY
The property at issue in this case is the CVS store located at 1000 North College
Avenue in Bloomington, Indiana. (Cert. Admin. R. at 1895-96.) The store is
approximately 13,000 square feet and sits on 1.44 acres of land. (Cert. Admin. R. at
1895-96.)
For the 2009 through 2013 assessments, the Assessor valued the subject
property as follows: $3,907,800; $3,856,500; $3,817,100; $3,907,000; and $3,933,900.
Believing those values to be too high, CVS filed appeals with the Monroe County
Property Tax Assessment Board of Appeals (PTABOA). The PTABOA affirmed the
assessments and CVS subsequently filed appeals with the Indiana Board. After
consolidating the appeals, the Indiana Board conducted an administrative hearing on
the matter in August of 2014.
During the hearing, both CVS and the Assessor presented Appraisal Reports,
completed by certified appraisers in conformance with the Uniform Standards of
Professional Appraisal Practice (USPAP), valuing the subject property for each of the
assessment years at issue. (See Cert. Admin. R. at 247-420, 1897-2143.) Both
Appraisal Reports employed the sales comparison, income, and cost approaches to
value; nonetheless, they arrived at substantially different values for the subject property.
(Compare Cert. Admin. R. at 407-10 with 1903.) In addition to her Appraisal Report, the
Assessor also presented a review, completed by a third certified appraiser, critiquing
CVS’s Appraisal. (See Cert. Admin. R. at 2144-82.)
On August 19, 2015, the Indiana Board issued its final determination in the matter.
In the final determination, the Indiana Board first addressed the Assessor’s review. The
Indiana Board explained that in critiquing CVS’s Appraisal Report, the Assessor’s
review had one primary complaint: it used data from properties that were being used for
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a general retail purpose both pre- and post-sale rather than data from properties that
were specifically used “for a successful ongoing CVS operation.” (See, e.g., Cert.
Admin. R. at 166-68 ¶¶ 39, 43, 46, 178 ¶ 77.) (See also, e.g., Cert. Admin. R. at 2148.)
The Assessor’s review therefore claimed that the CVS Appraisal Report “failed to
capture all of the [subject property’s] utility received by [CVS]” and therefore merely
measured the subject property’s market value, not its market value-in-use. (See Cert.
Admin. R. at 176 ¶ 73, 178 ¶ 77.) (See also, e.g., Cert. Admin. R. at 2153.)
The Indiana Board determined that the appraisal review carried no weight
because its criticism of CVS’s Appraisal Report was founded upon a misunderstanding
of Indiana’s market value-in-use standard. (See generally Cert. Admin. R. at 176-83 ¶¶
73-89.) More specifically, the Indiana Board explained that pursuant to well-established
Tax Court case law:
a property’s market value-in-use should be measured against
properties with a comparable use (e.g., general retail or light
manufacturing) as opposed to properties with identical users;
it is not improper to consider vacant properties as comparable to
occupied properties because market value-in-use measures the
value of a property for its use and not of its use; and
a property’s market value and market-value-in use often coincide
and thus, when determining a property’s market value-in-use, it is
improper to reject out-of-hand an appraisal that estimates that
property’s market value.
(See Cert. Admin. R. at 178-80 ¶¶ 79-82 (citing Shelby Cnty. Assessor v. CVS
Pharmacy, Inc. # 6637-02, 994 N.E.2d 350, 354 (Ind. Tax Ct. 2013); Millennium Real
Estate Inv., LLC v. Assessor, Benton Cnty., 979 N.E.2d 192 (Ind. Tax Ct. 2012), review
denied; Meijer Stores Ltd. P’ship v. Smith, 926 N.E.2d 1134 (Ind. Tax Ct. 2010); Stinson
v. Trimas Fasteners, Inc., 923 N.E.2d 496 (Ind. Tax Ct. 2010)).) Thus, continued the
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Indiana Board, the appraisal review’s ultimate conclusion – that the CVS Appraisal
Report was not probative – was incorrect. (See Cert. Admin. R. at 181 ¶ 85, 182 ¶ 88
(rejecting the Assessor’s argument that CVS’s use of general retail properties was
irrelevant to valuing the property or that, in using those properties, CVS was
determining something other than the property’s market value-in-use).)
The Indiana Board also evaluated the competing Appraisal Reports. The Indiana
Board meticulously examined how each party conducted their sales comparison,
income, and cost approaches to value. (See Cert. Admin. R. at 160-66 ¶¶ 22-37, 170-
75 ¶¶ 54-67.) Then, in a lengthy discussion, the Indiana Board addressed the strengths
and weaknesses of each of those approaches within each Appraisal Report. (See Cert.
Admin. R. at 183-90 ¶¶ 91-111.) Ultimately, the Indiana Board determined that the
values as determined under the CVS Appraisal Report’s income approach were the
most credible indication of the subject property’s market value-in-use. (Cert. Admin. R.
at 154-55 ¶ 1, 190 ¶ 112.) Accordingly, the Indiana Board reduced the subject
property’s value to be consistent with those values. (See Cert. Admin. R. at 165 ¶ 36,
190-91 ¶¶ 113-14 (reducing the subject property’s 2009 assessment to $2,456,542; its
2010 assessment to $2,110,000; its 2011 assessment to $2,290,000; its 2012
assessment to $2,380,000; and its 2013 assessment to $2,620,000).)
The Assessor initiated this original tax appeal on September 4, 2015. The Court
heard the parties’ oral arguments on May 19, 2016. Additional facts will be supplied as
necessary.
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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). Accordingly, the Assessor must
demonstrate to the Court that the Indiana Board’s final determination in this matter 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 procedure required
by law; or unsupported by substantial or reliable evidence. See IND. CODE § 33-26-6-
6(e)(1)-(5) (2016).
ANALYSIS
On appeal, the Assessor argues that the Indiana Board’s final determination
must be reversed because it is contrary to law. (See Pet’r V. Pet. Judicial Review Final
Determination of Ind. Bd. Tax Review (“Pet.”) at 5-6 ¶¶ 15-16, 19-22.) The Assessor
also argues that the Indiana Board’s final determination must be reversed because it
arbitrary and capricious. (Pet. at 7 ¶ 23.)
I.
The Assessor contends that the Indiana Board’s final determination is contrary to
law and must be reversed because it does not value the subject property in accordance
with Indiana’s market value-in-use standard. (See, e.g., Pet. at 5-6 ¶¶ 15-16, 19-22;
Oral Arg. Tr. at 14.) More specifically, the Assessor argues that the Meijer, Trimas
Fasteners, and Millennium cases were wrongly decided by the Tax Court and thus, the
Indiana Board’s “attachment” to them for purposes of determining a property’s market
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value-in-use is “unreasonable.” (See, e.g., Pet’r Br. at 2-3, 8-11.) The Assessor
reasons that the Legislature enacted Indiana Code §§ 6-1.1-4-43 and -44 in 2015 to put
the Indiana Board on notice that the Tax Court’s holdings in Meijer, Trimas Fasteners,
and Millennium were “defective” and did not comport with the intended meaning of
market value-in-use.1 (See Pet’r Br. at 2, 9-11.)
This very same argument has already been advanced in – and rejected by – the
Tax Court. See Howard Cnty. Assessor v. Kohl’s Indiana LP, 57 N.E.3d 913, 916-19
(Ind. Tax Ct. 2016), notice of intent to petition for review filed Oct. 4, 2016. See also
Marion Cnty. Assessor v. Simon DeBartolo Group, LP, 52 N.E.3d 65, 68-69 (Ind. Tax
Ct. 2016); Marion Cnty. Assessor v. Washington Square Mall, LLC, 46 N.E.3d 1, 9-10
(Ind. Tax Ct. 2015); CVS Pharmacy, Inc. # 6637-02, 994 N.E.2d at 354 n.5 (rejecting
the assessor’s argument that the holdings in Meijer and Trimas Fasteners were wrong
and, that in holding as it did, the Court was “impermissibly attempting to convert
Indiana’s market value-in-use system into a fair market value system”).) Because the
Court believes its previous cases correctly explain the market value-in-use standard and
that the Court is not the proper arena to change a law, it continues to stand by its
analyses in those cases and need not repetitively address the argument in this opinion.
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The plain language of these statutes limited the use of certain comparable properties in
valuing big box stores and nonincome producing commercial properties without implying any
change to the market value-in-use standard. See IND. CODE §§ 6-1.1-4-43, -44 (2015). The fact
that the Legislature repealed the statutes less than a year after it enacted them, see 2016 Ind.
Acts 2987-89, belies the Assessor’s claim that the Legislature intended to override the Meijer,
Trimas Fasteners, and Millennium decisions.
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II.
The Assessor also argues that the Indiana Board’s final determination must be
reversed because it is “muddled, inconsistent . . . [and] doesn’t make sense.” (Oral Arg.
Tr. at 9, 11, 14 (asserting that the final determination’s inconsistencies make it arbitrary
and capricious).) For instance, she asserts that in its final determination, the Indiana
Board stated that the use of “general retail” comparables was proper when estimating a
value for the subject property under the sales comparison approach, but then later
stated that data from “drugstore/pharmacy” properties might be more appropriate under
the cost and income approaches to value. (See Pet’r Reply Br. at 1-3 (comparing
paragraphs 79 and 85 of the final determination); Oral Arg. Tr. at 4.) She also contends
that the Indiana Board indicated that for purposes of the sales comparison approach
“general retail” did not include small neighborhood shopping centers but then allowed
CVS to use aggregate data – which included information relating to small neighborhood
shopping centers – to support its selection of market rents and cap rates under the
income approach. (See Pet’r Reply Br. at 4 (comparing paragraphs 97 and 108 of the
final determination); Oral Arg. Tr. at 4-5, 24, 30.) The Assessor insists that given these
inconsistencies, “the assessment community doesn’t know what it should be doing”
because it “doesn’t know what market value-in-use means to the Indiana Board.” (See
Oral Arg. Tr. at 18, 27.)
Through this argument, the Assessor invites the Court to both revisit her first
claim that the Tax Court has interpreted market value-in-use incorrectly, (see, e.g., Oral
Arg. Tr. at 30-32 (challenging the Court to “tell me how . . . th[ese] different jumbled
thoughts value the utility to this CVS” and asserting that “I don’t think value has anything
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to do in property tax cases anymore”)), and establish bright-line rules for the application
of comparable properties under the various approaches to value. The Court need not
do either. See, e.g., Kohl’s, 57 N.E.3d at 916-19 (providing in no uncertain terms why
the Court’s construction of market value-in-use is proper); Trimas Fasteners, 923
N.E.2d at 502 (explaining that because the valuation of property is an opinion and not
an exact science, it is up to each party to convince the Indiana Board why its opinion –
which includes the use of comparable properties – is more probative).
CONCLUSION
The Assessor has not demonstrated that the Indiana Board’s final determination
is either contrary to law or arbitrary and capricious. Accordingly, the Indiana Board’s
final determination in this matter is AFFIRMED.
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