In re 109 Kinsale Land Tr. ( 2014 )

An unpublished opinion of the North Carolina Court of Appeals does not constitute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?
A: Yes.
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?
A: Yes.
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?
A: Yes.
Q: And you made some dramatic changes –
reductions in value?
A: Yes.
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).