Wigwam Holdings LLC v. Madison County Assessor , 115 N.E.3d 531 ( 2018 )

ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
MATTHEW S. CARR CURTIS T. HILL, JR.
JACOB V. BRADLEY ATTORNEY GENERAL OF INDIANA
COURTNEY S. FIGG ZACHARY D. PRICE
QUARLES & BRADY LLP KELLY S. THOMPSON
Indianapolis, IN DEPUTY ATTORNEYS GENERAL
Indianapolis, IN
FILED
IN THE Dec 14 2018, 10:50 am
INDIANA TAX COURT CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
WIGWAM HOLDINGS LLC, )
)
Petitioner, )
)
v. ) Cause No. 18T-TA-00015
)
MADISON COUNTY ASSESSOR, )
)
Respondent. )
ORDER ON PETITIONER’S PETITION TO
ENJOIN THE COLLECTION OF TAX
FOR PUBLICATION
December 14, 2018
WENTWORTH, J.
Wigwam Holdings LLC has appealed the Indiana Board of Tax Review’s final
determination that upheld the assessment of its real property for the 2015 tax year.
Pending its appeal, Holdings seeks to enjoin the collection of property taxes. The Court
finds that Holdings is not entitled to an injunction.
FACTS AND PROCEDURAL HISTORY
During the 2015 tax year, Holdings owned four parcels consisting of approximately
18 acres of land in Anderson, Indiana. (See Cert. Admin. R. at 189, 273-301.) On
September 2, 2014, Holdings acquired these parcels by Quitclaim Deed from the City of
Anderson Department of Redevelopment, which had contemporaneously acquired them
that day by Quitclaim Deed from the Anderson Community School Corporation (referred
to together as the “Quitclaim Deeds”). (See Cert. Admin. R. at 278-92.) The only parcel
at issue in this matter contained a 220,000 square foot building with, among other things,
a natatorium, maintenance shops, an auditorium, band and choral rooms, offices, a
cafeteria/kitchen, a two-story classroom, and an 8,996 seat basketball facility situated on
the 8.56 acre parcel (the “Wigwam”). (See Cert. Admin. R. at 189, 218-20, 473-76.) The
property was unoccupied on the March 1, 2015, assessment date. (See Cert. Admin. R.
at 462, 484, 551.)
For the year at issue, the Madison County Assessor assigned the property an
assessed value of $11,415,000 ($428,000 for land and $10,987,000 for improvements).
On December 12, 2015, Holdings appealed the assessment to the Madison County
Property Tax Assessment Board of Appeals (PTABOA). On September 19, 2016, after
a hearing, the PTABOA reduced the assessment to $2,115,200 ($423,700 for land and
$1,691,500 for improvements).1 Believing the assessment was still too high, Holdings
sought review with the Indiana Board on November 3, 2016.
On April 18, 2017, the Indiana Board conducted a hearing on the matter, during
which Holdings claimed its assessment should be reduced to $68,500 ($68,500 for land
and $0 for improvements). (See Cert. Admin. R. at 460.) To support its claim, Holdings
1
The PTABOA apparently reclassified the property’s use type as utility/storage and reassessed
the entire building based on that use type under Indiana’s assessment guidelines. (See Cert.
Admin. R. at 298-301, 682-84.) (See also Cert. Admin. R. at 729 (indicating that applying the
utility/storage use type to an unoccupied commercial property typically results in the lowest
possible assessment).)
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presented, among other things, an appraisal completed in conformance with the Uniform
Standards of Professional Appraisal Practice (USPAP); the testimony of one of the
appraisal’s preparers, Mr. Jay Allardt (an Indiana certified general appraiser and SRA
designated member of the Appraisal Institute); and the documentation associated with its
acquisition of the property. (See, e.g., Cert. Admin. R. at 187-267, 273-92, 471-72.)
Allardt’s appraisal had been prepared prior to the 2015 assessment date at the
request of the Anderson Department of Redevelopment for use “in considering a possible
acquisition of the [] property.” (Cert. Admin. R. at 188.) In substance, the appraisal
provided that the Wigwam’s highest and best use was as vacant land because its building
contained asbestos, was not ADA compliant, lacked air conditioning and a sprinkler
system, and was generally in poor condition. (See Cert. Admin. R. at 243-47, 477-80.)
Allardt subtracted his estimated land value of $68,500 from his estimate of the building’s
demolition and remediation costs of $559,000 to conclude that the Wigwam’s market
value was negative $490,500 as of May 30, 2014. (See Cert. Admin. R. at 193, 248-50,
494-98.)
Holdings also maintained the “building wasn’t worth anything” because it was
acquired for $0 on September 2, 2014. (See Cert. Admin. R. at 505, 623-24.) The
Quitclaim Deeds required the gymnasium to “be repaired, restored, and maintained in a
first class manner” by December 31, 2018, and simultaneously, Holdings and the
Anderson Community School Corporation entered into an Escrow Agreement that
required the School Corporation to deposit $630,000 in an escrow account for Holdings
to use to restore the property. (See Cert. Admin. R. at 273-92, 396-97, 400, 533-35, 605-
16.) The Quitclaim Deeds further provided that upon completion of the restoration, the
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Anderson Community School Corporation would receive the “irrevocable right” to use the
Wigwam gymnasium for up to 12 days each year for a period of 10 years with an option
to extend another 5 years. (See Cert. Admin. R. at 278-79.) If Holdings did not fulfill its
obligations by December 31, 2018, however, the escrow funds were to be returned to the
Anderson Community School Corporation. (See Cert. Admin. R. at 274.)
Finally, Allardt testified that the Assessor incorrectly determined the assessed
value. Allardt claimed it was incorrect because it classified the property under the wrong
use type (i.e., utility/storage) and failed to account for abnormal obsolescence in its cost
approach, an omission that negatively impacted the value of the property. 2 (See Cert.
Admin. R. at 508-10, 761-66, 777-78.)
In response, the Assessor asserted that Holdings’ evidence lacked probative value
because it did not establish the property’s actual market value-in-use. (See Cert. Admin.
R. at 377.) As support, the Assessor offered a variety of property tax assessment
materials, Indiana case law, and the testimony of an expert witness, Mr. Anthony
Garrison, an Indiana certified Level III Assessor-Appraiser. (See, e.g., 376-85, 680.)
Garrison testified that there were “issues” with Allardt’s appraisal because it estimated
the Wigwam’s market value, not its market value-in-use, even though the two standards
are not necessarily equivalent. (See Cert. Admin. R. at 701-04, 710-18.) Indeed,
Garrison explained that Allardt’s appraisal was inconsistent with the market value-in-use
standard because it was based on a hypothetical use of the property as vacant land rather
2
Abnormal obsolescence is a “loss in value from obsolescence beyond normal depreciation[.]”
REAL PROPERTY ASSESSMENT GUIDELINES FOR 2011 (incorporated by reference at 50 IND. ADMIN.
CODE 2.4-1-2(c) (2011)), Bk. 2, App. F at 4. In turn, obsolescence is “[a] diminishing of a
property’s desirability and usefulness brought about by either functional inadequacies or super-
adequacies inherent in the property itself, or adverse economic factors external to the property.”
Id., Bk. 2, Glossary at 16.
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than its current use as improved land. (See Cert. Admin. R. at 704-06, 709-18, 731.)
Moreover, Garrison testified that Allardt’s appraisal failed to account for the requirement
in the Quitclaim Deeds and associated Escrow Agreement that Holdings restore the
Wigwam’s gymnasium. (See Cert. Admin. R. at 709, 717-18, 723-25.) Finally, Garrison
stated that the September 2014 sale was not a market transaction because the seller was
atypically motivated by its desire to restore the iconic Wigwam for the community’s future
use, as implied by the restrictions in the Quitclaim Deeds and the Escrow Agreement.
(Cert. Admin. R. at 706-09.) (See also Cert. Admin. R. at 273-92.)
On March 29, 2018, the Indiana Board issued its final determination upholding the
assessment. (Cert. Admin. R. at 407-22.) In so doing, the Indiana Board explained that
it had weighed the evidence and determined that Holdings did not make a prima facie
case for reducing its assessment because Allardt’s appraisal did not credibly value the
Wigwam and the September 2014 sale was not a probative, market transaction. (See
Cert. Admin. R. at 418-21 ¶¶ 43-52.) The Indiana Board also determined that Holdings’
use type and abnormal obsolescence claims were unpersuasive because they were not
evidence of value, but merely attacked the assessment methodology. (See Cert. Admin.
R. at 421 ¶ 50.)
On May 11, 2018, Holdings initiated an original tax appeal and filed a Petition to
Enjoin the Collection of Tax pursuant to Indiana Code § 33-26-6-2. On October 5, 2018,
Holdings filed an emergency motion to remove the property at issue from a tax sale, which
the Court granted on October 10, 2018. Then, on November 27, 2018, after the Certified
Administrative Record was filed and the parties submitted their briefs, the Court
conducted a hearing on Holdings’ Petition to Enjoin. Additional facts will be supplied
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when necessary.
LAW AND ANALYSIS
When, as here, a taxpayer appeals the assessment of its real property to the Tax
Court, it must “pay taxes on the tangible property when the property tax installments come
due, unless the collection of the taxes is enjoined under [Indiana Code § 33-26-6-2]
pending” the resolution of the appeal. IND. CODE § 6-1.1-15-10(a) (2018). To enjoin the
collection of the tax, Holdings must show the Court that (1) it has a reasonable opportunity
to prevail in the appeal; (2) the issues raised by its appeal are substantial; and (3) the
equitable considerations favoring the enjoining of the collection of the tax outweigh the
state’s interest in collecting the tax pending the appeal. See IND. CODE 33-26-6-2(c)
(2018). All three factors must exist for the Court to enjoin the collection of tax. I.C. § 33-
26-6-2(c).
Reasonable Opportunity to Prevail
A reasonable opportunity to prevail is a tolerable, moderate, rational, honest, or
equitable chance of success on the merits of the appeal. See Video Tape Exch. Coop of
Am., Inc. v. Indiana Dep’t of State Revenue, 512 N.E.2d 476, 477 (Ind. Tax Ct. 1986).
Thus, when a party seeks to enjoin the collection of property taxes, it must demonstrate
that it has a reasonable opportunity to prevail by showing that the Indiana Board’s final
determination may be reversed by the Tax Court because it is arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law; in excess of or short of
statutory jurisdiction, authority, or limitations; without observance of the procedure
required by law; or unsupported by substantial evidence. See IND. CODE § 33-26-6-
6(e)(1)-(5) (2018). To that end, Holdings claims that it has a “reasonable likelihood of
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success on the merits” because the Indiana Board’s final determination regarding the
credibility of Allardt’s appraisal, the probative value of the September 2014 sale, and its
abnormal obsolescence claim are arbitrary, capricious, an abuse of discretion, in excess
of the Indiana Board’s statutory authority, in violation of the procedure required by law,
and unsupported by substantial evidence. (See Pet’r Br. Supp. Pet. Enjoin Collection Tax
(“Pet’r Br.”) at 5, 7-18; Pet’r Pet. Original Tax Appeal Final Determination Ind. Bd. Tax
Review (“Pet’r Pet.”) ¶¶ 42-72.)
A. Allardt’s Appraisal
Holdings claims it is likely to prevail on the merits because it made a prima facie
case for reducing its assessment by introducing into evidence a USPAP-compliant
appraisal and the testimony of its expert witness, Allardt, who both prepared and
explained the appraisal in detail. (See Pet’r Br. at 10-11; Hr’g Tr. at 8-10.) Holdings
states that because it established a prima facie case, the evidentiary burden shifted,
triggering the Assessor’s duty to introduce his own market-based evidence in rebuttal.
(See Pet’r Br. at 11.) Holdings claims that the Assessor, however, did not meet this
evidentiary burden because he simply “relied upon [his] cross-examination of [Holdings’]
witnesses, which [cross-examination] was largely conclusory and focused on irrelevant
hypotheticals.” (Pet’r Br. at 14.) Consequently, Holdings contends that it is likely to
prevail because the Indiana Board ignored its uncontroverted evidence, “attacked”
Allardt’s appraisal itself, and made the Assessor’s case for him. (See Pet’r Br. at 10-16;
Hr’g Tr. at 25-26.)
Holdings cites several cases as authority for the proposition that a taxpayer makes
a prima facie case for reducing an assessment by presenting an appraisal completed in
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conformance with USPAP. (See Pet’r Br. at 10-11 (citing Marion Cty. Assessor v.
Washington Square Mall, LLC, 46 N.E.3d 1, 7-8 (Ind. Tax Ct. 2015); French Lick Twp. Tr.
Assessor v. Kimball Int’l, Inc., 865 N.E.2d 732, 739 (Ind. Tax Ct. 2007); Hometowne
Assocs., L.P. v. Maley, 839 N.E.2d 269, 277 (Ind. Tax Ct. 2005); Meridian Towers E. &
W. v. Washington Twp. Assessor, 805 N.E.2d 475, 479 (Ind. Tax Ct. 2003); Canal Square
Ltd. P’ship v. State Bd. of Tax Comm’rs, 694 N.E.2d 801, 807 (Ind. Tax Ct. 1998)).)
Nonetheless, neither specific language in, nor trends from, those cited cases indicate that
there is a per se rule that a USPAP-compliant appraisal automatically establishes a prima
facie case for reducing an assessment. This is consistent with the Indiana Board’s
statutory duty, as the finder of fact, to “review the probative value of an appraisal report.”
See IND. CODE § 6-1.1-15-4(p) (2018). See also Stinson v. Trimas Fasteners, Inc., 923
N.E.2d 496, 498-99 (Ind. Tax Ct. 2010) (stating the Indiana Board is responsible for
weighing the evidence and judging the credibility of the witnesses who testify at the
administrative hearing). Consequently, the resolution of this appeal depends on whether
the Assessor presented the Indiana Board with evidence that placed the credibility of
Allardt’s appraisal, and therefore its probative value, at issue.
The Assessor presented evidence in the form of testimony by Garrison, a certified
expert on real property assessment in Indiana. (See Cert. Admin. R. at 680.) Garrison
identified wide-ranging disparities between Allardt’s appraisal and his testimony when
compared to the valuation standards and assumptions underlying Indiana’s assessment
guidelines. (See Cert. Admin. R. at 680-756.) For example, Garrison testified that he
considered the property at issue, “a 9,000 seat arena attached to a school[,]” to be a
special purpose property. (See Cert. Admin. R. at 705-06, 710-13.) (See also Hr’g Tr. at
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45 (indicating that Holdings also agrees that the Wigwam is a special purpose property).)
He explained that Indiana’s assessment guidelines define a special purpose property as
a type of limited market property that has a “unique physical design, special construction
materials, or a layout that restricts its utility to the use for which it was built.” (Cert. Admin.
R. at 710-11.) Garrison further explained that the guidelines require that a special
purpose property’s market value-in-use to be determined using the cost approach. (See
Cert. Admin. R. at 712.) Moreover, he asserted that the market value-in-use of a special
purpose property would not be determined by examining its highest and best use, which
is a market value measure. (See Cert. Admin. R. at 700-06.) (See, also e.g., Cert. Admin.
R. at 379 (citing Millennium Real Estate Inv., LLC v. Assessor, Benton Cty., 979 N.E.2d
192, 196 (Ind. Tax Ct. 2012) (explaining that when a property’s current use is inconsistent
with its highest and best use, the property’s market value-in-use will not equal its market
value because the sales price will not reflect the property’s utility), review denied).)
Here, the certified administrative record reveals that the parties presented
conflicting evidence during the Indiana Board hearing calling into question the credibility
of Holdings’ evidence. The Indiana Board exercised its discretion and weighed the
evidence. Absent an abuse of discretion, the Court cannot reweigh that evidence. See
Trimas Fasteners, 923 N.E.2d at 498. Accordingly, the Court finds that Holdings does
not have a reasonable opportunity to prevail on this issue in its appeal.
B. September 2014 Sale
Next, Holdings claims that it has a better than negligible chance of succeeding on
the merits because it presented probative evidence establishing that in September 2014,
the Wigwam sold in a market transaction for a negative $630,000. (See Hr’g Tr. at 30-
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31.) Holdings claims this evidence is sufficient to establish the market value of the
property thus making its prima facie case for reducing the assessment. (See Hr’g Tr. at
30-34.)
During the 2015 tax year, Indiana defined “market value” for purposes of its
property tax system as:
The most probable price, as of a specified date, in cash, or in terms
equivalent to cash, or in other precisely revealed terms, 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, knowledgeably, and for
self-interest, and assuming that neither is under undue duress.
2011 REAL PROPERTY ASSESSMENT MANUAL (incorporated by reference at 50 IND. ADMIN.
CODE 2.4-1-2 (2011)) at 5-6. This definition specifies that conditions required for a fair
sale, include the buyer and seller being typically motivated, without duress, compulsion,
or pressure to act. See id. Accord 2002 REAL PROPERTY ASSESSMENT MANUAL (2004
Reprint) (incorporated by reference at 50 IND. ADMIN. CODE 2.3-1-2 (2002 Supp.)
(repealed 2010)) at 10 (defining “market value”); Marion Cty. Assessor v. Simon
DeBartolo Group, LP, 52 N.E.3d 65, 70-71 (Ind. Tax Ct. 2016) (construing Indiana’s
definition of market value).
Evidence in the certified administrative record called into question whether the
September 2014 sale actually reflected the property’s market value. Allardt testified that
the seller was typically motivated, even though the buyer paid zero dollars and received
access to $630,000 in return for the property transfer. (See Cert. Admin. R. at 534-35.)
Garrison, on the other hand, testified that those same facts, together with the restrictions
in the Quitclaim Deeds and Escrow Agreement and the seller’s status as an exempt
governmental entity, actually indicate that the seller was not typically motivated. (See
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Cert. Admin. R. at 707-09.) Once again, the Indiana Board weighed the evidence to
determine its probative value. (See Cert. Admin. R. at 420-21 ¶¶ 47-49.) Holdings has
not identified anything in the certified administrative record that indicates the Indiana
Board abused its discretion by weighing the credibility of the competing evidence and
concluding that the sale price was not probative of the Wigwam’s market value.
Therefore, the Court finds that Holdings does not have a reasonable opportunity to prevail
in its appeal based on this issue. See Trimas Fasteners, 923 N.E.2d at 498 (providing
that the Court may not reweigh the evidence absent an abuse of discretion).
C. Abnormal Obsolescence
Finally, Holdings claims it has a reasonable likelihood of success on the merits
because the Indiana Board erred by rejecting its abnormal obsolescence claim. (See
Pet’r Br. at 16-18.) Holdings explains that it “presented uncontroverted evidence of the
Wigwam’s significant functional and economic obsolescence[,]” which the Assessor failed
to take into account. (See Pet’r Br. at 17-18.) Accordingly, Holdings contends that the
Indiana Board’s failure to reduce the assessment based on its abnormal obsolescence
claim constitutes an abuse of discretion because it is against the logic and effect of the
facts and circumstances before it. (See Pet’r Br. at 17.)
It is well established that when a taxpayer claims its property assessment is too
high, it has the burden to prove its claim with market-based evidence. See, e.g.,
McKeeman v. Steuben Cty. Assessor, 10 N.E.3d 612, 614 (Ind. Tax Ct. 2014). Merely
challenging the Assessor’s methodology will not suffice. See, e.g., Gillette v. Brown Cty.
Assessor, 54 N.E.3d 454, 456 (Ind. Tax Ct. 2016). Moreover, a taxpayer must support
its claim that abnormal obsolescence has diminished the value of its property with
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probative evidence that 1) identifies the causes of the alleged obsolescence and 2)
quantifies the amount of obsolescence to be applied to its improvements. See, e.g., Idris
v. Marion Cty. Assessor, 12 N.E.3d 331, 334 (Ind. Tax Ct. 2014); Hometowne Assocs.,
839 N.E.2d at 273-74; Canal Square, 694 N.E.2d at 806-07. Although Allardt’s testimony
identified several causes of alleged obsolescence that may have diminished the value of
the Wigwam, Holdings did not provide evidence to quantify their negative effect on the
value of its property. (See, e.g., Cert. Admin. R. at 760-69.) Accordingly, the Court finds
that Holdings does not have a reasonable opportunity to prevail in its appeal on this issue
as well.
Holdings has failed to establish any grounds that persuade the Court that it has a
reasonable opportunity to prevail in its appeal. Consequently, the Court need not address
the remaining two factors.3
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Although insufficient by themselves to support equitable relief, the other two factors tend to
favor injunction. The appeal raises a substantial issue of statewide importance, i.e., under what
circumstances, if any, a USPAP-compliant appraisal automatically constitutes a prima facie case
for assessment reduction. Moreover, the equitable considerations favor enjoining the collection
of tax because the fiscal impact to Holdings, which would have to pay a significant tax bill or lose
its interest in the property, far outweighs the negligible fiscal impact on the County, which has
never collected taxes on the property because of its prior tax exempt status.
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CONCLUSION
For the foregoing reasons, Holdings has not demonstrated that the collection of
property taxes should be enjoined pending the resolution of its appeal. Consequently,
the Court DENIES Holdings’ Petition to Enjoin the Collection of Tax. The Court will issue
orders regarding the briefing of the merits and the stay of the tax sale under separate
cover.
SO ORDERED this 14th day of December 2018.
Martha Blood Wentworth, Judge
Indiana Tax Court
Distribution:
Matthew S. Carr, Jacob V. Bradley, Courtney S. Figg, Kelly S. Thompson, Zachary D.
Price
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