Opinion
No. 107,472.
2012-08-10
In the Matter of the Equalization Appeal of WAGNER, Kristin Lea for the Year 2011 in Johnson County, Kansas.
Appeal from Court of Tax Appeals. Kristin Lea Wagner, appellant pro se. Kathryn D. Myers, assistant county counselor, for appellee Board of Johnson County Commissioners.
Appeal from Court of Tax Appeals.
Kristin Lea Wagner, appellant pro se. Kathryn D. Myers, assistant county counselor, for appellee Board of Johnson County Commissioners.
Before MALONE, P.J., MARQUARDT, J., and KNUDSON, S.J.
MEMORANDUM OPINION
PER CURIAM.
Kristin Wagner appeals the decision of the Court of Tax Appeals (COTA) allowing the quality rating used to determine the appraised value of her property for tax year 2011 to stand. Specifically, Wagner argues that (1) the COTA improperly shifted the burden of proof and (2) the COTA's underlying factual findings concerning the quality rating were not based on evidence that was substantial when viewed in light of the record as a whole. We agree with Wagner's claims, and we reverse COTA's decision and remand with directions.
In October 2003, Wagner purchased her residence, located at 5115 Lewis Drive in Shawnee, Kansas, for $510,000. Soon after, she finished the basement, completed installation for a preplumbed central vacuum system, widened the driveway, replaced part of the sprinkler irrigation system, and added a swimming pool. After the improvements were completed, a representative from the Johnson County Appraiser's Office (the County) inspected the property and, in February 2005, the County appraised the property at $521,000 for tax purposes. The property record card, which contains information about the property, showed a quality rating of “4.00–Good” for tax year 2005.
In October 2005, Wagner listed the property for sale with an asking price of $725,000, and the County February 2006 Notice of Value showed an appraised value of $721,700. The 2006 appraisal also showed a quality rating of B. Wagner appealed from this appraised value and, after a hearing before the Board of Tax Appeals (BOTA), the County recommended and the BOTA affirmed an adjusted appraised value of $561,000. In addition, the quality rating was adjusted to B.
The 2007 Notice of Value showed an appraised value of $721,700; the appraised value was based in part on the sale values of five comparable properties and utilized a quality rating of B, equivalent to Good or 4.00. The 2008 Notice of Value showed an appraised value of $614,800, again using comparable properties. In 2008, however, the County used a quality rating of 4.33.
In 2009, the Notice of Value showed an appraised value of $614,800, again utilizing comparison properties and a quality rating of 4.33. On an appeal of that appraisal, however, the County recommended and the COTA affirmed a reduction; the final 2009 appraised value was $596,400. The 2010 Notice of Value showed an appraised value of $569,000, also using comparison properties and a quality rating of 4.33. The 2010 comparable sales report showed the “construction quality” as “Good.” Wagner once again appealed, but the COTA sustained the appraised value.
In 2011, the Notice of Value showed an appraised value of $569,000, using comparable properties for analysis. The quality rating in 2011 was listed at “4.33–Good.” Wagner appealed, complaining that the appraised value was higher than the 2006 appraised value, despite her having made no improvements to the property since 2006 and the fact that the real estate market had taken a “substantial downturn.” After an informal equalization appeal, the County did not change the appraised value and, in June 2011, Wagner filed a protest form with the COTA.
On July 7, 2011, the Small Claims and Expedited Hearings Division of the COTA held a hearing, after which the hearing officer issued the following decision:
“The County valued the subject property for tax year 2011 at its 2010 value of $569,000. As support for its assigned valuation, the County presented three sales from 2009 and 2010. The Taxpayer recommended the subject be valued at $531,500, a trended value using the 2006 value as a base year. She noted the subject's subdivision is very unique, and asserted Comparable # 1 is the best indicator of value for the subject. She stated she has made no improvements to the subject property since 2006, while her neighbors have continued to update their homes. The hearing officer finds the best estimate of the fair market value of the subject property is the County's currently-assigned valuation. The value assigned by the County is supported by three sales similar to the subject in style, age and size. Comparable # 1 is the same age and style as the subject and has close to the same above-grade square footage. It is in better condition, and sold for $600,000, which would seem to support the valuation assigned to the subject property. Based on all the evidence presented at the hearing, the hearing officer concludes the subject property should be valued at $569,000 for tax year 2011.”
On August 8, 2011, Wagner appealed the decision to the COTA. In October 2011, Wagner mailed the County an Exchange of Evidence, which contained a chronology of the property's history since 2005. In the packet, Wagner also identified two approaches by which she wished the County to recalculate the appraised value of the property using a quality rating of 4.00.
The COTA conducted a hearing on October 26, 2011. At the hearing, Darla Frank appeared for the County and Wagner appeared pro se. Frank testified that the County relied heavily on the sales comparison approach in determining appraisal values for residential property. According to Frank, Wagner's property was “a one-and-a-half story conventionaI[-]style home built in 1999” with five bedrooms, five full baths, one half bath, three fireplaces, a walk-out basement, and a basement with 2,000 square feet of living area. Frank also noted that the attached garage was 2,123 square feet. Frank discussed the comparison properties utilized in the 2011 appraisal, noting that they were located in the same neighborhood, although not the same subdivision as Wagner's property. The report contained the location of the comparables and a statement showing the figures the County used in determining its appraised value. Frank recommended that the appraised value remain at $569,000.
Wagner questioned Frank about the square footage of the garage. Wagner submitted Taxpayer Exhibit 2, the comparable sales report for 2010, which showed the area of the garage at 1,094 square feet. Wagner stated that the garage was the same size it had been in 2010 and asked Frank to explain the increase in square footage for valuation purposes. In response, Frank stated that the County would be happy to send someone out to measure the garage. Frank also stated that the area of the garage was irrelevant to the overall valuation, as evidenced by the fact that the 2010 valuation, which considered the garage at 1,094 square feet, and the 2011 valuation, which considered the garage at 2,123 square feet, were both $569,000.
Next, Wagner turned to the quality rating and asked Frank to explain its history. Frank replied, “I don't have the history of the quality rating. Obviously, this is the 2011 hearing, and I don't carry all the records from the last five years or anything on the record.” Frank explained the process of determining a property's quality rating, emphasizing the subjectivity of the determination and testifying that the quality rating was based on such considerations as construction quality, property upgrades, quality of appliances and building materials, and interior features. Asserting that she had made no upgrades to her home, Wagner stated, “I'd like to specifically ask what changed the condition desirability [quality rating] of my home between 2005 and 2006 from good to very good.” Wagner reasserted her request that the quality rating be returned to “Good”—which corresponds with a 4.00 value, rather than using the 4.33 value of “Good”—and that her appraisal value be recalculated based on that quality rating. Frank stated that the County would consider a change if Wagner would allow them to inspect the property, which might require photographing the inside of her home. At the end of the hearing, the COTA held the record open for 4 weeks in order to allow time for the inspection, to measure the garage, for the County to submit any changes to the COTA, and for Wagner to respond to any such changes.
Following the hearing, a series of letters between Wagner and Frank ensued. In the letters, Wagner refused to allow an inspection unless the County first provided a “list of those items which ... justified ... changing the construction quality of my property from Good to Good between 2007 and 2008.” Frank replied that an inspection was required for any review of the quality rating and did not provide specific justifications for the change in quality rating of Wagner's property. The inspection did not occur. Regarding the disputed area of the garage, Frank admitted that the larger measurement was an error, stated that the County had generated a new analysis which resulted in a reduced market value, and further stated that the County would recommend the adjustment to the COTA.
On December 9, 2011, the COTA issued its order, noting the recommended reduction in value due to the garage adjustment. The order also stated:
“As for the construction quality, the evidence shows that it is based on the multiple listing services data sheets and on interior features that are often not evident on the exterior. No evidence is presented on behalf of the Taxpayer to show that the interior of the subject property should be reduced. While the Taxpayer may feel that the grade is overstated here[,] it could have just as easily been understated in 2006. Without evidence of the interior condition to the contrary, the Court finds that the County's construction grade [quality rating] of the subject property shall stand.”
Based on the adjustment due to garage size, the COTA ordered that the appraised value of Wagner's property for the tax year 2011 be reduced to $553,600. Wagner filed a subsequent letter asking for reconsideration, arguing that the order was not supported by sufficient evidence and that the COTA had improperly shifted the burden of proof onto her. The COTA denied her request, and Wagner filed a petition for judicial review.
We begin by emphasizing that the issue raised in this appeal is very narrow. Wagner's only complaint concerns the quality rating used by the County to determine the appraised value of her property for tax year 2011. Wagner raises two related issues. First, Wagner argues that the COTA improperly shifted the burden of proof to her and allowed the 4.33 quality rating to stand because Wagner failed to provide evidence that the quality rating should be reduced. Second, Wagner claims that the COTA's underlying factual findings concerning the quality rating were not based on evidence that was substantial when viewed in light of the record as a whole.
COTA orders are subject to appellate review under the Kansas Judicial Review Act (KJRA), K.S.A. 77–601 et seq. The KJRA specifically sets forth the scope of review and allows this court to grant relief if “the agency has erroneously interpreted or applied the law.” K.S.A.2011 Supp. 77–621(c)(4). “This court's review of statutory interpretation in tax appeal matters is unlimited, and an appellate court applies the same general rules that are applied in other contexts.” In re Tax Appeals of Genesis Health Clubs, 42 Kan.App.2d 239, 242, 210 P.3d 663 (2009), rev. denied 290 Kan. 1094 (2010).
Wagner first contends that the COTA misapplied the law regarding burden of proof. K.S.A.2011 Supp. 79–1609 states:
“With regard to any matter properly submitted to the court relating to the determination of valuation of residential property ... for taxation purposes, it shall be the duty of the county appraiser to initiate the production of evidence to demonstrate, by a preponderance of the evidence, the validity and correctness of such determination.... No presumption shall exist in favor of the county appraiser with respect to the validity and correctness of such determination.” (Emphasis added.)
Thus, the burden was on the County to show the correctness of its appraisal valuation for tax year 2011. Moreover, “[t]he law requires the county appraiser to appraise all taxable real property each year at its fair market value....” (Emphasis added.) In re Equalization Proceeding of Amoco Production Co., 33 Kan.App.2d 329, 332–33, 102 P.3d 1176 (2004), rev. denied 279 Kan. 1006 (2005); see K.S.A. 79–1455. As Wagner notes, the COTA explicitly recognized that the County was required to support the validity and correctness of its appraisal by a preponderance of the evidence.
Wagner asserts that the COTA shifted the burden to her when it required that she decide at the hearing whether she would allow the County to inspect the garage to determine the proper square footage. Toward the end of the hearing, Wagner specifically referred to the square-footage measurement of the garage and asked that it be returned to its previous measurement and the appraisal be recalculated. The COTA responded, “And the County is saying that the only way they can do that is by coming out and doing an inspection. Are you going to allow for an inspection and re-measurement of the garage?”
In responding this way, the COTA improperly shifted the burden of proof to Wagner. Pursuant to the applicable statutory language, the County had the burden to show the validity and correctness of the measurement at the hearing; they did not have the option to require Wagner to allow further measurements. But due to the fact that the County ultimately conceded its error in measuring the garage and the COTA appropriately reduced the appraised value based on the corrected measurements, this was harmless error and does not require further action by this court. See K.S.A.2011 Supp. 77–621(e) (stating that in determining whether to grant relief upon review of an agency action, “due account shall be taken by the court of the rule of harmless error”).
Wagner also asserts that the COTA improperly shifted the burden of proof regarding her challenge to the quality rating. When asked to justify the upgrade in the quality rating, Frank requested that Wagner allow further inspection of her property so that the County could make any necessary adjustments and “try to stay current with what we should have listed on the property.” As with the garage space, Wagner asserted that the County needed to justify the change; Wagner asked the COTA to return the quality rating to its previous grade of 4.00/Good instead of the current 4.33/Good. The COTA responded that the County needed to perform an inspection before that could happen.
The County had the burden to prove the validity and correctness of the quality rating at the hearing. It was insufficient to instead require Wagner to submit to further inspection or accept the quality rating in the 2011 appraisal. The COTA's order stated: “While the Taxpayer may feel that the grade is overstated here[,] it could have just as easily been understated in 2006. Without evidence of the interior condition to the contrary, the Court finds that the County's construction grade [quality rating] of the subject property shall stand.” (Emphasis added.) We agree with Wagner that the COTA improperly shifted the burden of proof on the quality rating issue.
Next, Wagner claims that the COTA's underlying factual findings concerning the quality rating were not based on evidence that was substantial when viewed in light of the record as a whole. In its order, the COTA stated: “As for the construction quality, the evidence shows that it was based on the multiple listing services data sheets and on interior features that are often not evident on the exterior.” Wagner asserts there is no substantial evidence in the record to support this finding. In response, the County asks this court to presume that the COTA reviewed the record of Wagner's prior appeal to the COTA from the 2006 appraisal valuation. The County attaches to its brief an appendix of materials from that appeal.
Kansas Supreme Court Rule 6.03(e) (2011 Kan. Ct. R. Annot. 44.), however, governs the acceptable contents of an appellee's brief and allows “an appendix containing extracts of critical portions of the record,” subject to the limitations contained in Rule 6.02. Rule 6 .02(f) (2011 Kan. Ct. R. Annot. 39) states that such an appendix is not to be considered a substitute for the record itself. See also Edwards v. Anderson Engineering, Inc., 284 Kan. 892, 895, 166 P.3d 1047 (2007) (stating that information in an appendix to an appellee's brief but not included in the record on appeal will not be considered). The information in the County's appendix is not included in the record on appeal, nor did the COTA state that it considered the 2006 proceedings when deciding the instant appeal. Thus, the information in the County's appendix shall not be considered in this appeal.
As stated above, COTA orders are subject to appellate review under the KJRA. The KJRA allows this court to grant relief if it determines that
“the agency action is based on a determination of fact, made or implied by the agency, that is not supported to the appropriate standard of proof by evidence that is substantial when viewed in light of the record as a whole, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this act.” K.S.A.2011 Supp. 77–621(c)(7).
K.S.A.2011 Supp. 77–621(d) further provides:
“For purposes of this section, ‘in light of the record as a whole’ means that the adequacy of the evidence in the record before the court to support a particular finding of fact shall be judged in light of all the relevant evidence in the record cited by any party that detracts from such finding as well as all of the relevant evidence in the record, compiled pursuant to K.S.A. 77–620, and amendments thereto, cited by any party that supports such finding, including any determinations of veracity by the presiding officer who personally observed the demeanor of the witness and the agency's explanation of why the relevant evidence in the record supports its material findings of fact. In reviewing the evidence in light of the record as a whole, the court shall not reweigh the evidence or engage in de novo review.
At the hearing, Wagner specifically questioned Frank as to the reason behind the increase in the quality rating assigned to her property. Frank responded:
“Well that's like four years ago information [ sic ]. So the only thing—I did read her evidence, and the only thing that I was trying to ascertain—and I didn't put it in there—is any time a property is listed on the Multiple—Heartland Multiple Listing Service, we utilize that data.
“Now, I went back, and her property—and I've got the history here—was listed, she purchased the property, it looks like in January of 2004, according to MLS is what they have, for 510 and then turned around and put the property on the market for $725,000 in October of '05, and basically had it on—it expired in April of '06; and then it was re-listed in '07 for 750; and then it remained active until July.
“Now, I could not—because it's so long ago, I could not get the actual MLS listing to read what was on the property at that time and what it said about the interior of the property at that time and what had been done to the property. And just because we didn't have any building permits doesn't necessarily mean that someone doesn't cosmetically fix up their home or something such as that.
“ So I don't know if the appraiser was reading something off of that and got information, but the property didn't ever sell. It was on the market on and off for about two years. And I don't know if they contacted the listing agent at that point in time or not, but basically, that was—that could have been part of the information that they ascertained for the interior of your home.” (Emphasis added.)
Although Frank's point that the change occurred years ago is well taken, Frank also did not offer any testimony or evidence to support the quality rating as it stood in tax year 2011. As previously stated, the law requires the county appraiser to appraise all taxable real property each year at its fair market value. See K.S.A. 79–1455; In re Equalization Proceeding of Amoco Production Co., 33 Kan.App.2d at 332–33. It is the duty of the county appraiser to produce evidence to demonstrate, by a preponderance of the evidence, the validity and correctness of such determination. K.S.A.2011 Supp.79–1609. Because the law requires yearly appraisal, Frank should have been prepared to justify the use of the quality rating for the year 2011 even if she did not know why it had been originally changed. As K.S.A.2011 Supp. 79–1609 mandates, there is no presumption in favor of the County with respect to the validity and correctness of a valuation determination.
Here, the County presented no evidence to support the quality rating of Good/ 4.3. Although COTA found that “the evidence shows that [the quality rating] was based on the multiple listing services [MLS] data sheets,” the County did not present any evidence showing that the quality rating was, in fact, based on the MLS, nor were any MLS data sheets admitted into evidence. Instead, Frank's testimony consisted of speculation. Frank testified, I could not get the actual MLS listing to read what was on the property at that time and what it said about the interior of the property at that time and what had been done to the property.” (Emphasis added.) Frank also testified, “ I can't tell you exactly why someone actually changed that particular thing [the quality rating], but it was a subjective call. I don't know if they were on the property, they contacted the listing agent.” (Emphasis added.)
The question for this court is simply whether the COTA's finding that the quality rating was based on MLS data sheets was based on evidence that, viewed in light of the record as a whole, was substantial. We recognize that this court is not allowed to reweigh the evidence or engage in de novo review. But here, there simply was no evidence presented at the hearing that the quality rating was actually based on MLS data sheets, nor was there any evidence presented at the hearing of interior features that justified such a quality rating. The COTA's underlying factual findings concerning the quality rating were not based on evidence that was substantial when viewed in light of the record as a whole. Accordingly, we reverse and remand with directions that the COTA establish the appraised value of the subject property for tax year 2011 based on a 4.00 quality rating.
Reversed and remanded with directions.