Cain v. Custer Cty. Bd. of Equal. , 298 Neb. 834 ( 2018 )


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    Nebraska Supreme Court A dvance Sheets
    298 Nebraska R eports
    CAIN v. CUSTER CTY. BD. OF EQUAL.
    Cite as 
    298 Neb. 834
    Donald V. Cain, Jr., appellant, v. Custer County
    Board of Equalization, appellee.
    ___ N.W.2d ___
    Filed February 2, 2018.   No. S-17-370.
    1.	 Taxation: Judgments: Appeal and Error. An appellate court reviews
    Nebraska Tax Equalization and Review Commission decisions for errors
    appearing on the record.
    2.	 ____: ____: ____. When reviewing a Nebraska Tax Equalization and
    Review Commission judgment for errors appearing on the record, the
    inquiry is whether the decision conforms to the law, is supported by com-
    petent evidence, and is neither arbitrary, capricious, nor unreasonable.
    3.	 Administrative Law. An administrative agency’s decision is arbitrary
    when it is made in disregard of the facts or circumstances without some
    basis which would lead a reasonable person to the same conclusion.
    4.	 ____. Administrative agency action taken in disregard of the agency’s
    own substantive rules is arbitrary and capricious.
    5.	 Taxation: Appeal and Error. Questions of law arising during appel-
    late review of Tax Equalization and Review Commission decisions are
    reviewed de novo.
    6.	 Constitutional Law: Due Process. The determination of whether
    the procedures afforded to an individual comport with constitutional
    requirements for procedural due process presents a question of law.
    7.	 Administrative Law: Statutes. The meaning and interpretation of stat-
    utes and regulations are questions of law.
    8.	 Due Process. Due process principles protect individuals from arbitrary
    deprivation of life, liberty, or property without due process of law.
    9.	 Administrative Law: Due Process. A party appearing in an adjudica-
    tion hearing before an agency or tribunal is entitled to due process pro-
    tections similar to those given to litigants in a judicial proceeding.
    10.	 Due Process: Notice. Due process does not guarantee an individual
    any particular form of state procedure. Instead, the requirements of due
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    process are satisfied if a person has reasonable notice and an oppor-
    tunity to be heard appropriate to the nature of the proceeding and the
    character of the rights which might be affected by it.
    11.	   Taxation. An owner is not deprived of his property without due proc­
    ess of law by means of taxation if he has an opportunity to question
    its validity or amount of such tax or assessment in some stage of the
    proceedings, either before that amount is finally determined or in a sub-
    sequent proceeding for its collection.
    12.	   Judges: Evidence. Generally, a successor judge may not make a deci-
    sion based on conflicting evidence that a predecessor judge heard.
    13.	   Trial: Judges: Due Process: Witnesses. Due process entitles a liti-
    gant to have all the evidence submitted to a single judge who can see
    the witnesses testify and, thus, weigh their testimony and judge their
    credibility.
    14.	   Due Process. Oral argument is not an essential element of due process.
    15.	   Trial: Judges: Due Process: Waiver. A party has a due process right
    that a successor or substitute judge may not render a judgment for a
    predecessor judge who conducted the trial, but the party may waive this
    right and agree to have a successor judge decide the case.
    16.	   Taxation: Valuation: Presumptions: Evidence. A presumption exists
    that a county board of equalization has faithfully performed its official
    duties in making a property tax assessment and has acted upon suffi-
    cient competent evidence to justify its action. The presumption disap-
    pears when competent evidence to the contrary is presented. Once the
    presumption is rebutted, whether the valuation assessed is reasonable
    becomes a question of fact based on all of the evidence.
    17.	   Taxation: Valuation: Proof. The burden of showing a property tax
    valuation to be unreasonable rests upon the taxpayer.
    18.	   ____: ____: ____. The taxpayer’s burden to show a property tax valu-
    ation to be unreasonable is not met by showing a mere difference of
    opinion. Rather, the taxpayer must establish the valuation placed upon
    the property when compared with valuations placed on other similar
    property is grossly excessive and is a result of arbitrary or unreasonable
    action and not just a mere error in judgment.
    19.	   Taxation: Notice: Proof. When the Tax Equalization and Review
    Commission hears a property tax protest under Neb. Rev. Stat.
    § 77-1507.01 (Reissue 2009) and performs the factfinding functions
    that a county board of equalization would have if the county had timely
    provided notice to the taxpayer, the taxpayer’s burden of persuasion is
    by a preponderance of the evidence.
    20.	   Evidence: Words and Phrases. Competent evidence is evidence that is
    admissible and tends to establish a fact in issue.
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    21.	 Property: Valuation: Witnesses. A resident owner who is familiar with
    his or her property and knows its worth is permitted to testify as to its
    value without further foundation.
    22.	 Taxation: Valuation: Evidence. When an independent appraiser
    using professionally approved methods of mass appraisal certifies that
    an appraisal was performed according to professional standards, the
    appraisal is considered competent evidence under Nebraska law.
    23.	 Taxation: Valuation. In tax valuation cases, actual value is largely a
    matter of opinion and without a precise yardstick for determination with
    complete accuracy.
    24.	 Evidence: Presumptions. A presumption may take the place of evi-
    dence unless and until evidence appears to overcome or rebut it, and
    when evidence sufficient in quality appears to rebut it, the presumption
    disappears and thereafter the determination of the issues depends upon
    the evidence.
    25.	 ____: ____. A presumption is not evidence and should never be placed
    in the scale to be weighed as evidence.
    26.	 Administrative Law. If an agency rule is but an aid to help the agency
    in its decision, then the rule is not binding upon the agency unless the
    rule confers a procedural benefit upon a party.
    Appeal from the Tax Equalization and Review Commission.
    Reversed and remanded with directions.
    David A. Domina, of Domina Law Group, P.C., L.L.O.,
    for appellant.
    Steven R. Bowers, Custer County Attorney, and Glenn A.
    Clark for appellee.
    Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy,
    K elch, and Funke, JJ.
    Funke, J.
    Donald V. Cain, Jr., appeals an order of the Tax Equalization
    and Review Commission (TERC) affirming the decision of the
    Custer County assessor (Assessor) regarding the 2012 taxable
    value of his agricultural property. Because we find error on
    the record, we reverse the TERC’s order and remand the cause
    with directions to sustain Cain’s property valuation protests
    for the 2012 tax year.
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    CAIN v. CUSTER CTY. BD. OF EQUAL.
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    298 Neb. 834
    I. BACKGROUND
    Cain owns property in Custer County southwest of Broken
    Bow, Nebraska. The subject property encompasses 10 con-
    tiguous parcels totaling 1,093.93 acres of agricultural land
    exclusively used for cattle production and grazing. The land
    consists of rolling hills with Valentine sand and native grass.
    About 756 acres of the property is irrigated native grass upon
    which Cain grazes cattle. In 2006, Cain improved this portion
    of his land with center pivot irrigation systems to enhance
    livestock grazing. Cain does not cultivate row crops on the
    subject property.
    In 2012, the Assessor increased the total assessed value of
    Cain’s property from $734,968 to $1,834,925. This represented
    nearly a 250-percent property tax increase from the prior year,
    without improvements being made to the property during that
    time. This sharp increase was largely due to the Assessor’s
    decision to change the classification of irrigated grassland for
    purposes of valuation. From 2006 to 2012, the Assessor had
    used a Nebraska Department of Revenue formula to adjust
    the value of irrigated native grassland. In 2012, the Assessor
    reclassified irrigated grassland by uniformly classifying all irri-
    gated land as irrigated cropland, whether the land is used for
    “cultivated row crops, small grains, seeded hay, forage crops,
    or grasses.”1
    Cain protested. Because Cain had not been provided timely
    notice of the increased assessments, he was not afforded an
    evidentiary hearing for his protests before the Custer County
    Board of Equalization. Pursuant to Neb. Rev. Stat. § 77-1507.01
    (Reissue 2009), Cain directly petitioned the TERC to deter-
    mine the actual value of each parcel. The TERC consolidated
    Cain’s protests and afforded him a hearing on his petitions. A
    divided panel of two TERC commissioners, Nancy J. Salmon
    and Thomas D. Freimuth, affirmed the Assessor’s increased
    valuations of Cain’s property for 2012.
    1
    See 350 Neb. Admin. Code, ch. 14, § 002.21B (2009).
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    Following an appeal, in Cain v. Custer Cty. Bd. of Equal.
    (Cain I),2 we found plain error and reversed, and remanded.
    We found the TERC’s role according to the procedure pro-
    vided under § 77-1507.01 was to “‘determine the actual value
    or special value of real property for that year.’”3 We found
    the TERC’s decision to determine Cain’s protests using the
    clear and convincing evidence standard provided under Neb.
    Rev. Stat. § 77-5016(9) (Cum. Supp. 2016) was erroneous,
    because such standard applied in “‘all appeals’” before the
    TERC.4 However, the TERC’s role was not to conduct an
    appellate review but to perform an initial review of Cain’s
    challenges to the increased assessments. We held the TERC’s
    decision erroneously increased the taxpayer’s burden of proof
    in a proceeding under § 77-1507.01. We remanded the cause
    with instructions for the TERC to reconsider the matter on
    the record using the preponderance of the evidence stan-
    dard applicable to initial protests before a county board of
    equalization.
    Freimuth resigned as a TERC commissioner in September
    2015, so upon remand, the matter was assigned to another
    commissioner, Robert W. Hotz. Cain moved for a new hearing
    on the merits and an opportunity to present supplemental evi-
    dence and argue the case under the preponderance of the evi-
    dence standard. He also filed a notice of constitutional issues
    in which he requested the TERC to vacate the Assessor’s valu-
    ations of his property and determine that the statutes he chal-
    lenged were unconstitutional. The TERC denied both requests,
    determining that it had no authority to do anything other than
    follow this court’s instructions on remand.
    Both Hotz and Salmon reviewed the full record and, without
    an additional hearing, considered Cain’s protests. The TERC
    issued a new order which reversed in part the Assessor’s
    2
    Cain v. Custer Cty. Bd. of Equal., 
    291 Neb. 730
    , 
    868 N.W.2d 334
    (2015).
    3
    
    Id. at 745,
    868 N.W.2d at 346.
    4
    
    Id. at 748,
    868 N.W.2d at 347.
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    determination with respect to three parcels of Cain’s land,
    because, due to clerical errors, these parcels had been incor-
    rectly assessed as including water wells. For the remaining
    seven parcels, the TERC accepted the Assessor’s reasoning and
    affirmed the Assessor’s 2012 valuations of Cain’s property.
    The TERC’s order stated, “[TERC] finds that the presumptions
    in favor of the initial valuations by the . . . Assessor have not
    been rebutted by a preponderance of the evidence . . . .”
    Cain timely appeals.
    II. ASSIGNMENTS OF ERROR
    Cain assigns, restated, that the TERC erred by (1) failing to
    conduct a hearing following remand which permitted him argu-
    ment under the correct standard of review, (2) failing to hear
    constitutional claims and decide those issues, (3) rendering a
    decision not supported by sufficient evidence, (4) failing to
    follow remand instructions, (5) making errors of law; and (6)
    violating Cain’s constitutional rights by failing to classify his
    property in a uniform and proportionate manner.
    III. STANDARD OF REVIEW
    [1-5] We review decisions of the TERC for error appearing
    on the record of the commission.5 When reviewing a TERC
    judgment for errors appearing on the record, the inquiry is
    whether the decision conforms to the law, is supported by
    competent evidence, and is neither arbitrary, capricious, nor
    unreasonable.6 An administrative agency’s decision is arbi-
    trary when it is made in disregard of the facts or circum-
    stances without some basis which would lead a reasonable
    person to the same conclusion.7 Administrative agency action
    5
    Neb. Rev. Stat. § 77-5019(5) (Cum. Supp. 2016); Burdess v. Washington
    Cty. Bd. of Equal., ante p. 166, 
    903 N.W.2d 35
    (2017).
    6
    See County of Douglas v. Nebraska Tax Equal. & Rev. Comm., 
    296 Neb. 501
    , 
    894 N.W.2d 308
    (2017).
    7
    Brenner v. Banner Cty. Bd. of Equal., 
    276 Neb. 275
    , 
    753 N.W.2d 802
          (2008).
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    taken in disregard of the agency’s own substantive rules is
    also arbitrary and capricious.8 Questions of law arising dur-
    ing appellate review of the TERC’s decisions are reviewed
    de novo.9
    [6,7] The determination of whether the procedures afforded
    to an individual comport with constitutional requirements for
    procedural due process presents a question of law.10 The mean-
    ing and interpretation of statutes and regulations are questions
    of law.11
    IV. ANALYSIS
    We first address whether Cain’s due process rights were
    violated. We then address whether the TERC erred in affirm-
    ing the Assessor’s valuation of Cain’s property for the 2012
    tax year.
    1. No Due Process R ight
    to Oral A rgument
    Cain assigns that the TERC violated his due process rights
    by not permitting him to argue how the preponderance of the
    evidence standard of proof applied to the adduced evidence.
    [8-11] Due process principles protect individuals from arbi-
    trary deprivation of life, liberty, or property without due process
    of law.12 A party appearing in an adjudication hearing before
    an agency or tribunal is entitled to due process protections
    similar to those given to litigants in a judicial proceeding.13
    8
    Blakely v. Lancaster County, 
    284 Neb. 659
    , 
    825 N.W.2d 149
    (2012).
    9
    Brenner, supra note 7.
    10
    In re Interest of Carmelo G., 
    296 Neb. 805
    , 
    896 N.W.2d 902
    (2017); State
    v. McCurry, 
    296 Neb. 40
    , 
    891 N.W.2d 663
    (2017).
    11
    State v. Jasa, 
    297 Neb. 822
    , 
    901 N.W.2d 315
    (2017).
    12
    Bryan M. v. Anne B., 
    292 Neb. 725
    , 
    874 N.W.2d 824
    (2016).
    13
    See, Crown Products Co. v. City of Ralston, 
    253 Neb. 1
    , 
    567 N.W.2d 294
    (1997); Geringer v. City of Omaha, 
    237 Neb. 928
    , 
    468 N.W.2d 372
          (1991); Krusemark v. Thurston County Bd. of Equal., 
    10 Neb. Ct. App. 35
    ,
    
    624 N.W.2d 328
    (2001).
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    Due proc­ ess does not guarantee an individual any particu-
    lar form of state procedure. Instead, the requirements of due
    process are satisfied if a person has reasonable notice and an
    opportunity to be heard appropriate to the nature of the pro-
    ceeding and the character of the rights which might be affected
    by it.14 This court has stated that an owner is not deprived of
    his property without due process of law by means of taxation if
    he has an opportunity to question its validity or the amount of
    such tax or assessment at some stage of the proceedings, either
    before that amount is finally determined or in a subsequent
    proceeding for its collection.15
    In Cain’s petition for review, he argued that because, after
    remand, only one of the commissioners assigned to decide
    Cain’s protests was present at the evidentiary hearing, the
    TERC failed to decide the matter by a quorum, as required
    under Neb. Rev. Stat. § 77-5005(2) (Cum. Supp. 2016). Cain
    argued this procedure violated his due process rights under
    Neb. Rev. Stat. §§ 77-5003(1) and 77-5015 (Cum. Supp.
    2016).
    [12,13] In Liljestrand v. Dell Enters.,16 we found a work-
    ers’ compensation claimant’s due process rights were violated
    where the original trial judge retired during an appeal and, on
    remand, the case was assigned to a new judge who reviewed
    the record and issued an order without an evidentiary hearing.
    In reversing, and remanding for a new trial, we agreed with
    the general rule that a successor judge may not make a deci-
    sion based on conflicting evidence that a predecessor judge
    heard.17 We stated that “‘due process entitles a litigant to have
    all the evidence submitted to a single judge who can see the
    14
    In re Interest of S.J., 
    283 Neb. 507
    , 
    810 N.W.2d 720
    (2012); Slansky v.
    Nebraska State Patrol, 
    268 Neb. 360
    , 
    685 N.W.2d 335
    (2004).
    15
    Farmers Co-op Assn. v. Boone County, 
    213 Neb. 763
    , 
    332 N.W.2d 32
          (1983).
    16
    Liljestrand v. Dell Enters., 
    287 Neb. 242
    , 
    842 N.W.2d 575
    (2014).
    17
    
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    witnesses testify and, thus, weigh their testimony and judge
    their credibility.’”18 We noted the issue for determination was
    the nature and extent of the claimant’s permanent disability,
    which we found involved evaluating the credibility of the
    witnesses, and that the successor judge had no opportunity to
    assess credibility before deciding the case.
    At oral argument in this appeal, Cain conceded he had not
    assigned as error the TERC’s refusal to hear additional evi-
    dence. Cain did not request a new evidentiary hearing before
    Hotz, the successor commissioner. Cain noted our instructions
    on remand were limited to reconsideration on the record using
    the preponderance of the evidence standard (though we could
    not have predicted one of the two commissioners who heard the
    evidence would resign). Instead, Cain argued he was entitled to
    argue how the standard of proof applied to the evidence. Here,
    Cain asserts only the right to make a legal argument pertaining
    to an already existing record.
    [14,15] We have not recognized oral argument as a free-
    standing procedural due process right.19 Oral argument may
    be desirable but it is not indispensable, nor is it an essential
    element of due process.20 The due process right protected in
    Liljestrand, that a successor or substitute judge may not render
    a judgment for a predecessor judge who conducted the trial,
    is primarily based on the need for the ruling judge to consider
    credibility where the evidence is in conflict.21 A party may
    18
    
    Id. at 248,
    842 N.W.2d at 580 (quoting Smith v. Freeman, 
    232 Ill. 2d 218
    ,
    
    902 N.E.2d 1069
    , 
    327 Ill. Dec. 683
    (2009)).
    19
    Ready Mix, Inc. v. Nebraska Railroads, 
    181 Neb. 697
    , 
    150 N.W.2d 275
        (1967).
    20
    See State v. Smith, 
    199 Neb. 368
    , 
    259 N.W.2d 16
    (1977).
    21
    Liljestrand, supra note 16. See, also, State ex rel. Bonner v. McSwine, 
    14 Neb. Ct. App. 486
    , 
    709 N.W.2d 691
    (2006); Newman v. Rehr, 
    10 Neb. Ct. App. 35
    6, 
    630 N.W.2d 19
    (2001), affirmed on other grounds 
    263 Neb. 111
    ,
    
    638 N.W.2d 863
    (2002); In re Marriage of Seyler, 
    559 N.W.2d 7
    (Iowa
    1997).
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    waive this right and agree to have a successor judge decide
    the case.22
    We find, by asserting only the right to make a legal argu-
    ment to the decisionmaker regarding the controlling standard
    of evidence and by failing to request relief in the form of a new
    evidentiary hearing before the TERC, that Cain waived the due
    process rights applicable in Liljestrand. Cain’s argument that
    he was entitled to argue the case following remand is without
    merit. Cain’s due process rights were not violated.
    2. TERC Erred in A ffirming
    Assessor’s Valuations
    Cain argues the TERC erred in affirming the Assessor’s
    valuations of his property for the 2012 tax year.
    Under Neb. Rev. Stat. § 77-201(1) (Reissue 2009), all real
    property, unless expressly exempt, is subject to taxation and
    is to be valued at its actual value. As we noted in Burdess
    v. Washington Cty. Bd. of Equal.,23 the Legislature has made
    agricultural and horticultural land a separate and distinct class
    of property for purposes of property taxation. While most real
    property is valued for taxation purposes at 100 percent of its
    actual value, which is “the market value of real property in the
    ordinary course of trade,”24 the Legislature has determined that
    agricultural and horticultural land shall be valued at 75 percent
    of its value.25
    In Bartlett v. Dawes Cty. Bd. of Equal.,26 we reviewed the
    statutory scheme used to value agricultural land:
    22
    Smith, supra note 18; In re Marriage of Seyler, supra note 21. See Louis
    v. Nebraska Dept. of Corr. Servs., 
    12 Neb. Ct. App. 944
    , 
    687 N.W.2d 438
          (2004).
    23
    Burdess, supra note 5.
    24
    Neb. Rev. Stat. § 77-112 (Reissue 2009).
    25
    See § 77-201(2).
    26
    Bartlett v. Dawes Cty. Bd. of Equal., 
    259 Neb. 954
    , 962, 
    613 N.W.2d 810
    ,
    817 (2000).
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    Agricultural land constitutes a separate and distinct
    class of property for purposes of property taxation.[27]
    Neb. Const. art. VIII requires uniform and proportion-
    ate assessment within the class of agricultural land.
    Agricultural land is then divided into “categories” such as
    irrigated cropland, dry cropland, and grassland.[28] These
    categories are further divided into subclasses based on
    soil classification.[29]
    This court, in Bartlett, rejected the assessor’s use of market
    areas employed in the case as violative of the statutory scheme
    set out by the Legislature. The evidence indicated that the
    market areas established by the assessor were not based on
    soil classification, but, instead, were based on assessment-to-
    sales ratios. Because the subclasses of agricultural land had to
    be based on soil classification, not upon where the land was
    located, we determined that the market areas did not constitute
    subclasses of agricultural land as defined by our statutes.
    After our decision in Bartlett, the Legislature enacted Neb.
    Rev. Stat. § 77-103.01 (Reissue 2009),30 which set forth that
    a class or subclass based on market characteristics shall be
    based on characteristics that affect the actual value in a dif-
    ferent manner than it affects the actual value of properties
    not within the market characteristic class or subclass. The
    factors to consider now include parcel use, parcel type, loca-
    tion, geographic characteristics, zoning, city size, parcel size,
    and market characteristics appropriate for the valuation of
    such land.
    The Nebraska Court of Appeals, in Vanderheiden v. Cedar
    Cty. Bd. of Equal.,31 found market areas based upon an
    27
    See Neb. Rev. Stat. § 77-1359 (Cum. Supp. 2016).
    28
    See Neb. Rev. Stat. § 77-1363 (Cum. Supp. 2016).
    29
    See 
    id. 30 See
    Vanderheiden v. Cedar Cty. Bd. of Equal., 
    16 Neb. Ct. App. 578
    , 
    746 N.W.2d 717
    (2008).
    31
    Vanderheiden, supra note 30.
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    e­ xamination of the land for soil types, productivity, availability
    of water, relation to market distribution points, land use, geog-
    raphy, and sales history were in accordance with § 77-103.01.
    Under § 77-112, actual value of real property for purposes
    of taxation may be determined using professionally accepted
    mass appraisal methods, including, but not limited to, (1)
    the sales comparison approach, taking into account factors
    such as location, zoning, and current functional use; (2) the
    income approach; and (3) the cost approach. This statute does
    not require use of all the specified factors, but requires use of
    applicable statutory factors, individually or in combination, to
    determine actual value of real estate for tax purposes.32
    As set forth in Neb. Rev. Stat. § 77-1507.01 (Reissue 2009),
    “[a]ny person otherwise having a right to appeal may petition
    the [TERC] to determine the actual value or special value of
    real property for that year . . . .”
    [16-19] In initial protests before the TERC, the valuation
    by the assessor is presumed to be correct, and the burden of
    proof rests upon the taxpayer to rebut this presumption and to
    prove that an assessment is excessive.33 A presumption exists
    that a county board of equalization has faithfully performed
    its official duties in making an assessment and has acted
    upon sufficient competent evidence to justify its actions.34
    The presumption disappears when competent evidence to
    the contrary is presented.35 Once the presumption is rebut-
    ted, whether the valuation assessed is reasonable becomes a
    question of fact based on all of the evidence, with the burden
    32
    US Ecology v. Boyd Cty. Bd. of Equal., 
    256 Neb. 7
    , 
    588 N.W.2d 575
          (1999).
    33
    Cain I, supra note 2.
    34
    See, § 77-5016(9); JQH La Vista Conf. Ctr. v. Sarpy Cty. Bd. of Equal.,
    
    285 Neb. 120
    , 
    825 N.W.2d 447
    (2013); Brenner, supra note 7 (citing Ideal
    Basic Indus. v. Nuckolls Cty. Bd. of Equal., 
    231 Neb. 653
    , 
    437 N.W.2d 501
          (1989)).
    35
    JQH La Vista Conf. Ctr., supra note 34.
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    of proof resting on the taxpayer.36 The taxpayer’s burden to
    show the valuation to be unreasonable is not met by show-
    ing a mere difference of opinion.37 Rather, the taxpayer
    must establish the valuation placed upon the property when
    compared with valuations placed on other similar property
    is grossly excessive and is a result of arbitrary or unreason-
    able action and not just a mere error in judgment.38 When
    the TERC hears a property tax protest under § 77-1507.01
    and performs the factfinding functions that a county board
    of equalization would have if the county had timely provided
    notice to the taxpayer, the taxpayer’s burden of persuasion is
    by a preponderance of the evidence.39
    Thus, the ultimate issue of fact in this case is the actual
    value of Cain’s subject property in 2012.
    (a) Evidence
    For the purpose of property tax assessments, the Assessor
    developed five market areas based on her record of property
    sales, soil type, availability of water, and topography, but not
    based on land use. Cain’s property is located in market area
    1, the highest valued land in the county, and has been valued
    as part of that market area for some time. Within each market
    area, the Assessor categorized agricultural property into sub-
    classes of irrigated cropland, grassland, and dryland, which
    were designated as “A,” “G,” and “D,” respectively. Property
    in each category was further classified by soil capability. A
    rating from “1” to “4” was given to each parcel, with “1”
    representing soil with the highest productivity rating and “4”
    representing the lowest quality soil. Under this framework, for
    example, category “4A” was irrigated cropland with poor soil
    36
    See 
    id. 37 See
    id. (citing Bumgarner 
    v. County of Valley, 
    208 Neb. 361
    , 
    303 N.W.2d 307
    (1981)).
    38
    See 
    id. 39 See
    Cain I, supra note 2.
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    and category “4G” was grassland with poor soil. But property
    classified as “4A” or “4G” was valued differently depending
    upon the market area in which it was located.
    Market areas 1, 2, and 3 are most relevant. Market area
    1 primarily comprised the lower southeastern portion of the
    county, which contained soil suitable for crop production.
    Market area 1 contains most of the farm activity in the county
    and contains land with silt loam and flat row crop production.
    Market area 2, characterized as the Sandhills region, primarily
    comprised the northwestern and northern parts of the county.
    Market area 3 was a transitional area between market areas 1
    and 2.
    In 2012, the Assessor designated the nonirrigated portions
    of Cain’s property as grassland and valued such land between
    $495 and $505 per acre, depending on soil capability. The
    Assessor classified the irrigated portions of Cain’s property
    as irrigated cropland, or “A.” This meant Cain’s irrigated land
    was valued between a range of “1A” and “4A,” or between
    $2,100 and $2,930 per acre in market area 1. The Assessor
    placed almost 600 acres of Cain’s land into the “4A” category,
    poor quality irrigated cropland valued at $2,100 per acre. The
    same category was valued per acre at $450 in market area 2
    and $870 in market area 3. The remaining 100-plus irrigated
    acres were valued between $2,105 and $2,930.
    At the evidentiary hearing, Cain adduced evidence that the
    Assessor inequitably classified the irrigated portions of his
    land, because the valuations did not take into consideration
    that his property was not comparable to irrigated cropland in
    terms of soil type, topography, and land use. Cain irrigated
    only native grasses. In 2006, he drilled two wells for pivot
    irrigation to combat dust from a feedlot south of his property.
    In all, his property had three wells and seven irrigation pivots.
    He testified he used irrigation conservatively to avoid erosion.
    Cain submitted affidavits stating his opinion that the taxable
    value of his property for the 2012 year was $778,625, or an
    average of $711.77 per acre.
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    Cain and his expert witness, Cyril Thoene, both testified the
    best and most productive use of Cain’s property was for cattle
    grazing and not for row crop production, because the soil was
    mostly Valentine sand. Thoene presented a county soil map
    which showed that a band of Valentine sand ran southeast from
    the Sandhills region to an area just south of Broken Bow, where
    Cain’s property was located. The land containing Valentine
    sand is fragile with little fertility. The land has slopes, is highly
    erodible, and overall is not suitable for farming.
    In 2010, Thoene, a certified general appraiser, appraised
    Cain’s property and determined that approximately 95 per-
    cent of the soil was rolling Valentine sand with steep slopes.
    He testified that Valentine soils are some of the poorer land
    that one could farm. He opined that Cain’s property was most
    comparable to property in market area 2, the lowest valued
    agricultural land in the county. He stated that but for the pres-
    ence of irrigation systems, Cain’s property would be identical
    to the Sandhills grassland found in market area 2. Because of
    its proximity to Broken Bow, however, Thoene believed the
    property should be valued between the 2012 values for “4A”
    property in market area 2 ($450 per acre) and market area 3
    ($870 per acre).
    In completing his appraisal report, Thoene considered
    each of the three appraisal methods—the sales comparison
    approach, the income approach, and the cost approach—and
    determined a value estimate based upon the Uniform Standards
    of Professional Appraisal Practice. Thoene said that the unique-
    ness of Cain’s irrigated grassland made it difficult to find com-
    parable sales. He kept records of every sale in the county and
    had not seen any recent sales of irrigated grassland in Custer
    County. But he found comparable sales in 2010 outside the
    county where the property owner had installed pivot irrigation
    but used the land for livestock grazing. Thoene determined
    that those properties sold for about one-quarter to one-third
    of the selling price for average- to high-quality irrigated
    cropland. Thoene stated these market findings supported his
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    opinion that Cain’s property should be valued between $450
    and $870 per acre.
    The Assessor explained how she classified Cain’s prop-
    erty. She testified that even though Cain’s property contained
    Valentine sand, the property was not equivalent to property
    in market area 2, because Cain’s soil had “a little loam in it.”
    She determined this by using a Department of Revenue soil
    chart not offered into evidence. She explained her valuations
    accounted for soil types through market sales and the soil capa-
    bility subclassifications.
    The Assessor admitted that Cain’s property was valuated the
    same as other irrigated cropland in market area 1, regardless
    of its topography and whether it was suitable for crop produc-
    tion. She conceded that Cain’s property had poor quality soil
    and that if irrigation systems were not present on the land, his
    property would be classified as grassland and valued between
    $495 to $510 per acre.
    The Assessor explained her property valuations were based
    upon state statutes and Department of Revenue rules and
    regulations and that she lacked authority to make adjust-
    ments for irrigated grassland. She relied upon the Department
    of Revenue’s regulation, 350 Neb. Admin. Code, ch. 14,
    § 002.21B, which defines irrigated cropland as all land where
    irrigation is used, whether for “cultivated row crops, small
    grains, seeded hay, forage crops, or grasses.” She admitted,
    however, that from 2006 to 2012, she used a formula to adjust
    the value of irrigated grassland. She said both the county and
    the Department of Revenue were aware of her practice to
    adjust valuations for irrigated grassland. She conceded that the
    Department of Revenue did not require her to discontinue mak-
    ing adjustments for irrigated grassland.
    In response to a question posed by Freimuth, the Assessor
    admitted the actual value of Cain’s property could be some-
    where between the value of property in market areas 2 and 3:
    Q Do you agree with . . . Thoene’s position that it’s
    somewhere between Market Area 2 and Market Area 3,
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    somewhere between 450 and 870? If you were to say,
    from a (indiscernible) standpoint or similarity standpoint,
    would you agree with . . . Thoene that it’s somewhere
    between 450 and 870, Market Area 2, Market Area 3
    valuation?
    A It could possibly be. I would more soon use a for-
    mula because there’s going to be other irrigated grass. It’s
    just not one person that this would envelop.
    (b) Resolution
    [20-22] Competent evidence is evidence that is admissible
    and tends to establish a fact in issue.40 A resident owner who
    is familiar with his or her property and knows its worth is
    permitted to testify as to its value without further founda-
    tion; this principle rests upon the owner’s familiarity with the
    property’s characteristics, its actual and potential uses, and
    the owner’s experience in dealing with it.41 When an indepen-
    dent appraiser using professionally approved methods of mass
    appraisal certifies that an appraisal was performed according to
    professional standards, the appraisal is considered competent
    evidence under Nebraska law.42
    The burden of persuasion imposed on Cain is not met by
    showing a mere difference of opinion unless it is established
    by a preponderance or greater weight of the evidence that the
    valuation placed upon the property when compared with valua-
    tions placed on other similar property is grossly excessive and
    is the result of a systematic exercise of intentional will or fail-
    ure of plain duty, and not mere errors of judgment.43 Beginning
    with a presumption that the Assessor faithfully performed her
    40
    TJ 2010 Corp. v. Dawson Cty. Bd. of Equal., 
    22 Neb. Ct. App. 989
    , 
    866 N.W.2d 93
    (2015).
    41
    Darnall Ranch v. Banner Cty. Bd. of Equal., 
    276 Neb. 296
    , 
    753 N.W.2d 819
    (2008); Brenner, supra note 7.
    42
    JQH La Vista Conf. Ctr., supra note 34.
    43
    See, Cain I, supra note 2; JQH La Vista Conf. Ctr., supra note 34.
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    official duties in making an assessment and acted upon suf-
    ficient competent evidence, we must determine in the instant
    case if there is competent evidence to the contrary such that the
    presumption disappeared.
    We determine that the TERC erred in disregarding Cain’s
    testimony that, in his opinion, the subject property had an
    actual value of approximately $711.77 per acre. This testimony
    constituted competent evidence under the rule that an owner
    who is familiar with his property and knows its worth is per-
    mitted to testify as to its value.
    We also determine that the TERC erred in disregarding the
    testimony of Thoene, whose expertise as a real estate appraiser
    was demonstrated by the evidence. Thoene testified that he
    used the sales comparison approach to determine his estimated
    value of between $450 and $870 per acre. His appraisal report,
    which was received into evidence, indicated that Thoene uti-
    lized all three mass appraisal methods and that those methods
    support his estimated value. His appraisal was therefore com-
    petent evidence which was entitled to weight in determining
    the actual value of the subject property.
    [23] We have recognized that in tax valuation cases, actual
    value is largely a matter of opinion and without a precise yard-
    stick for determination with complete accuracy.44
    [24,25] The record shows the TERC used an erroneous evi-
    dentiary standard in determining Cain’s protests. The TERC
    found that “the presumptions in favor of the initial valuations
    by the County Assessor have not been rebutted by a prepon-
    derance of the evidence.” However, as we have previously
    held, the presumption of validity afforded to the Assessor’s
    valuation disappears once competent evidence to the contrary
    is presented.45 A presumption may take the place of evidence
    44
    Brenner, supra note 7.
    45
    See, JQH La Vista Conf. Ctr., supra note 34; Brenner, supra note 7; TJ
    2010 Corp., supra note 39; Zabawa v. Douglas Cty. Bd. of Equal., 17 Neb.
    App. 221, 
    757 N.W.2d 522
    (2008).
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    unless and until evidence appears to overcome or rebut it, and
    when evidence sufficient in quality appears to rebut it, the
    presumption disappears and thereafter the determination of the
    issues depends upon the evidence.46 A presumption is not evi-
    dence and should never be placed in the scale to be weighed as
    evidence.47 And, once the presumption of validity disappears,
    the taxpayer bears the burden of showing the county’s valua-
    tion is unreasonable.48
    The opinions of Cain and Thoene that the actual value of
    the subject property was approximately 60 percent lower than
    the 2012 valuation determined by the Assessor constituted
    competent evidence which caused the presumption of validity
    afforded to the Assessor’s valuation to disappear. Therefore,
    the reasonableness of the Assessor’s valuation was a question
    of fact based upon all the evidence presented, and Cain had the
    burden of showing such valuation to be unreasonable.
    Most of Cain’s and Thoene’s testimony about the unique
    qualities and value of Cain’s land was unrefuted, except for the
    Assessor’s competing position that all irrigated property must
    be valued as irrigated cropland.
    The regulation the Assessor relied on states: “Irrigated
    Cropland includes all land where irrigation is used, whether for
    cultivated row crops, small grains, seeded hay, forage crops,
    or grasses.”49 This definition of “[i]rrigated [c]ropland” is a
    subdefinition of “[c]ropland.”50 The purpose of this definition
    “is to establish guidelines for the assessment of agricultural
    land.”51 This type of agency rule is merely an aid, and not a
    46
    See, First Nat. Bank in Kearney v. Bunn, 
    195 Neb. 829
    , 
    241 N.W.2d 127
          (1976); In re Estate of Drake, 
    150 Neb. 568
    , 
    35 N.W.2d 417
    (1948).
    47
    Bohmont v. Moore, 
    138 Neb. 784
    , 
    295 N.W. 419
    (1940).
    48
    See 
    id. 49 350
    Neb. Admin. Code, ch. 14, § 002.21B.
    50
    
    Id., § 002.21.
    51
    
    Id., § 001.01
    (emphasis supplied). See Neb. Rev. Stat. § 77-1330(1) (Cum.
    Supp. 2016).
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    command. If an agency rule is but an aid to help the agency in
    its decision, then the rule is not binding upon the agency unless
    the rule confers a procedural benefit upon a party.52 The defi-
    nitional guideline of “[i]rrigated [c]ropland”53 here provides no
    procedural benefit and therefore is not mandatory.
    The Assessor admitted she was not instructed to utilize this
    regulation and that she had not adhered to it from 2006 to
    2012. Thus, the Assessor’s premise about a legal requirement
    for uniform classification of irrigated land is not persuasive.54
    In truth, under §§ 77-103.01, 77-112, and 77-1363, asses-
    sors are not limited to a single method of determining the
    actual value of property for tax purposes. Rather, assessors are
    charged with a duty to consider a wide range of relevant fac-
    tors in order to arrive at a proper assessment which does not
    exceed actual value.
    Based on our review of the record, we find Cain proved by
    the greater weight of the evidence that his irrigated grassland
    property was not comparable to the vast majority of the high
    quality farming land within market area 1 and was more com-
    parable to valuations placed on other similar property in mar-
    ket areas 2 and 3, as well as Cain’s own nonirrigated property.
    As a result, we find the TERC erred by failing to find Cain
    carried his burden to prove by a preponderance of the evidence
    that the Assessor’s value of his irrigated grassland property
    for the 2012 tax year was grossly excessive and the result of
    arbitrary or unreasonable action.
    3. R emaining Assignments
    of Error
    Because we have determined that the TERC’s order should
    be reversed, we do not address Cain’s remaining assignments
    52
    See Schmidt v. State, 
    255 Neb. 551
    , 
    586 N.W.2d 148
    (1998).
    53
    See 350 Neb. Admin. Code, ch. 14, § 002.21B.
    54
    See Beynon Farm Products v. Bd. of Equalization, 
    213 Neb. 815
    , 
    331 N.W.2d 531
    (1983).
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    of error. An appellate court is not obligated to engage in an
    analysis that is not necessary to adjudicate the case and con­
    troversy before it.55
    V. CONCLUSION
    We conclude that Cain has shown by a preponderance of
    the evidence that the valuation of the property at issue for the
    tax year 2012 is $870 per acre, for a total of $951,719.10. We
    remand the matter to the TERC with directions that it direct
    the Assessor to set the valuation of the property at such amount
    for the tax year 2012, upon which amount taxes for such year
    shall be determined and paid.
    R eversed and remanded with directions.
    Wright, J., not participating in the decision.
    55
    Estermann v. Bose, 
    296 Neb. 228
    , 
    892 N.W.2d 857
    (2017).
    

Document Info

Docket Number: S-17-370

Citation Numbers: 298 Neb. 834

Filed Date: 2/2/2018

Precedential Status: Precedential

Modified Date: 10/4/2019

Authorities (28)

Smith v. Freeman , 232 Ill. 2d 218 ( 2009 )

In Re the Marriage of Seyler , 559 N.W.2d 7 ( 1997 )

State v. Smith , 199 Neb. 368 ( 1977 )

State v. McCurry , 296 Neb. 40 ( 2017 )

Beynon Farm Products Corp. v. Board of Equalization , 213 Neb. 815 ( 1983 )

Crown Products Co. v. City of Ralston , 253 Neb. 1 ( 1997 )

Newman v. Rehr , 263 Neb. 111 ( 2002 )

Ideal Basic Industries, Inc. v. Nuckolls County Board of ... , 231 Neb. 653 ( 1989 )

Schmidt Ex Rel. Schmidt v. State , 255 Neb. 551 ( 1998 )

FIRST NAT. BANK IN KEARNEY v. Bunn , 195 Neb. 829 ( 1976 )

Bartlett v. DAWES COUNTY BD. OF EQUAL. , 259 Neb. 954 ( 2000 )

Estermann v. Bose , 296 Neb. 228 ( 2017 )

State v. Jasa , 297 Neb. 822 ( 2017 )

Cain v. Custer Cty. Bd. of Equal. , 298 Neb. 834 ( 2018 )

Bumgarner v. County of Valley , 208 Neb. 361 ( 1981 )

Brenner v. BANNER COUNTY BD. OF EQUAL. , 276 Neb. 275 ( 2008 )

Darnall Ranch, Inc. v. Banner Cty. Bd. of Equal. , 276 Neb. 296 ( 2008 )

US Ecology, Inc. v. Boyd County Board of Equalization , 256 Neb. 7 ( 1999 )

Bryan M. v. Anne B. , 292 Neb. 725 ( 2016 )

In re Interest of Carmelo G. , 296 Neb. 805 ( 2017 )

View All Authorities »