IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2013 Term
FILED
October 21, 2013
No. 12-0638 released at 3:00 p.m.
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
LEE TRACE LLC,
Petitioner
V.
GEARL RAYNES, ASSESSOR FOR BERKELEY COUNTY, WEST VIRGINIA,
BERKELEY COUNTY COUNCIL SITTING AS BOARD OF REVIEW AND
EQUALIZATION, AND BERKELEY COUNTY COUNCIL,
Respondents
No. 12-0992
LEE TRACE LLC,
Petitioner
V.
GEARL RAYNES, ASSESSOR FOR BERKELEY COUNTY, WEST VIRGINIA,
BERKELEY COUNTY COUNCIL SITTING AS BOARD OF REVIEW AND
EQUALIZATION, AND BERKELEY COUNTY COUNCIL,
Respondents
_____________________________________________________
Appeal from the Circuit Court of Berkeley County
Honorable Christopher C. Wilkes, Judge
Case No.: 11-AA-2
REVERSED AND REMANDED
_____________________________________________________
Submitted: September 4, 2013
Filed: October 21, 2013
Thomas Moore Lawson, Esq. Michael D. Thompson, Esq.
Lawson and Silek, P.L.C. Thompson & Pardo, PLLC
Winchester, Virginia Charles Town, West Virginia
Attorney for Petitioner Attorney for Respondent Assessor
Gearl Raynes
Norwood Bentley, Esq.
Martinsburg, West Virginia
Attorney for Respondent Council and
Board of Review and Equalization
The Opinion of the Court was delivered PER CURIAM.
JUSTICE KETCHUM concurs and dissents and reserves the right to file a separate
opinion.
SYLLABUS BY THE COURT
1. “ ‘This Court reviews the circuit court’s final order and ultimate
disposition under an abuse of discretion standard. We review challenges to findings of fact
under a clearly erroneous standard; conclusions of law are reviewed de novo.’ Syllabus
Point 4, Burgess v. Porterfield, 196 W.Va. 178, 469 S.E.2d 114 (1996).” Syllabus Point 1,
In re: Tax Assessment of Foster Foundation’s Woodlands Retirement Community, 223
W.Va. 14, 672 S.E.2d 150 (2008).
2. “ ‘An assessment made by a board of review and equalization and
approved by the circuit court will not be reversed when supported by substantial evidence
unless plainly wrong.’ Syllabus Point 1, West Penn Power Co. v. Board of Review and
Equalization, 112 W.Va. 442, 164 S.E. 862 (1932) (other internal citations omitted).’
Syllabus Point 3, In re: Tax Assessment of Foster Foundation’s Woodlands Retirement
Community, 223 W.Va. 14, 672 S.E.2d 150 (2008).” Syllabus Point 2, Mountain America,
LLC v. Huffman, 224 W. Va. 669, 687 S.E.2d 768 (2009).
3. “Title 110, Series 1P of the West Virginia Code of State Rules confers
upon the State Tax Commissioner discretion in choosing and applying the most accurate
method of appraising commercial and industrial properties. The exercise of such discretion
will not be disturbed upon judicial review absent a showing of abuse of discretion.”
i
Syllabus Point 5, In re Tax Assessment Against American Bituminous Power Partners,
L.P., 208 W. Va. 250, 539 S.E.2d 757 (2000).
ii
PER CURIAM:
These consolidated cases are before the Court upon two separate appeals of
Lee Trace LLC, Petitioner, from a March 23, 2012, order of the Circuit Court of Berkeley
County affirming the Board of Review and Equalization’s determination that Lee Trace’s
challenge to the 2010 tax assessment for apartment property located at Hood Circle,
Martinsburg, West Virginia, was not timely filed, and a July 24, 2012, order of the Circuit
Court of Berkeley County granting, in part, and denying, in part, Lee Trace’s petition for
appeal of the Board of Review and Equalization’s ruling setting the 2011 assessment
value for the same property at $6,551,735.
In the first appeal, Lee Trace contends that the January 5, 2010, assessment
letter did not inform it of its right to appeal the 2010 assessment as expressly required by
W. Va. Code §11-3-2a. In the second appeal, which pertains to the 2011 assessment, Lee
Trace contends that the circuit court erred in averaging the Assessor’s “hybrid” income
approach assessment with the 2010 cost approach assessment; 2) the circuit court erred in
according a presumption of correctness to the Assessor when the Assessor admitted that
she had not performed an assessment compliant with legislative rules; 3) the circuit court
erred in finding that the Assessor was not required to consider an income approach to
value; 4) the circuit court ignored evidence of the property’s value submitted by Lee Trace
and improperly relied on evidence that was not relevant to the property’s value; and 5) the
circuit court set an assessment that violated its equal protection rights. Upon reviewing
1
the petitions, the responses, the submitted appendices, and the arguments of counsel, this
Court concludes that the circuit court’s orders pertaining to both the 2010 and 2011
assessments should be reversed for the reasons set forth more fully below, and the cases
remanded for further proceedings consistent with this Opinion.
I.
FACTUAL AND PROCEDURAL BACKGROUND
A. No. 12-0638
Lee Trace owns real property located at 15000 Hood Circle, Martinsburg,
West Virginia 25403, consisting of approximately 17.02 acres. The instant appeal
involves the 2010 real estate tax assessment of the property. In 2008, an apartment
complex was constructed on the property. The property was appraised and assessed by
the Berkeley County Assessor’s Office as land only for the tax year 2009, as construction
on the apartment complex was not yet complete as of the July 1, 2008, statutory assessment
date. However, by July 1, 2009, the statutory assessment date for tax year 2010,
construction of the apartment buildings and other structures was complete, and the
assessed value of the property for tax year 2010 reflected a completed project. Lee Trace
listed the face amount of fire insurance carried on the “Application for Review of Property
Assessment” dated February 10, 2011, as $17,000,000.00. On the same document, Lee
Trace declared the cost of construction of the apartment complex on the property to be
$12,927,378.00. On January 5, 2010, the Assessor issued a Notice of Increase in
2
Assessment informing Lee Trace that the property had increased in value to $7,895,530.00
for the 2010 tax year. The notice provided, in pertinent part, the following:
Dear Taxpayer:
In accordance with Chapter 11, Article 3, Section 2A of the
West Virginia Code, I am herewith notifying you that your
current property assessment for the forthcoming year is
$7,895,530
Your property assessment previously was
$677,050
The difference between current and previous is
$7,218,480
This represents an increase in the assessed value.
...
If you believe an adjustment in the assessed value is necessary,
you should contact the County Commission sitting as a Board
of Review and Equalization.
Lee Trace completed an “Application for Relief Based on Improper Notice
Pursuant to West Virginia Code § 11-3-2a and for Relief from Clerical Errors Pursuant to
West Virginia Code § 11-3-27” dated December 21, 2010. It asserted that the notice it
received was insufficient because it failed to advise Lee Trace, LLC of its right to appear
and seek an adjustment, and that the Assessor committed clerical errors by using different
standards for appraising similar area properties and by failing to use income information in
the appraisal.
3
Counsel for Lee Trace appeared at the Berkeley County Council Meeting on
February 3, 2011. The council subsequently advised Lee Trace’s counsel, by letter dated
February 24, 2011, that it found that the owner of Lee Trace, Robert Cocker, was given
adequate notice for the filing of the review and equalization application, but Mr. Cocker
failed to timely file his request. The letter stated that the council was without jurisdiction
to consider the application, having adjourned sine die in February of 2010.
Lee Trace filed a petition for appeal with the Circuit Court of Berkeley
County on March 18, 2011. On March 23, 2012, the circuit court entered its Order
Substituting Party, Denying Part of the Petition, and Setting a Hearing. The circuit court
opined that the notice was sufficient because W.Va. Code § 11-3-2a does not require that a
particular date be given as a deadline, and because the notice referenced the appropriate
code section, therein directing Lee Trace to the explanation of process. The circuit court
reasoned that “[a]ll persons are presumed to know the law.” State v. McCoy, 107 W.Va.
163, 172, 148 S.E. 127, 130 (1929). The circuit court also found that the time for
challenging the assessment was not extended because of clerical mistake, because Lee
Trace challenged the assessment based on the method used, not “an unintentional or
inadvertent act” as described in W.Va. Code § 11-3-27. The circuit court found that Lee
Trace did not challenge the assessment at the proper time, and had waived its right to seek
correction. The circuit court affirmed the Board of Review and Equalization’s ruling with
respect to the 2010 assessment. Because Lee Trace had also challenged its 2011
4
assessment in the appeal to the circuit court, the court set a hearing to address the
remaining issues. The circuit court entered an order on April 16, 2012, clarifying that its
previous order regarding the 2010 assessment was a final order for purposes of appeal.1
B. No. 12-0992
For the 2011 tax year, the Assessor assessed the property at a value of
$7,593,430.00 using a cost approach analysis to determine the value. Lee Trace filed an
application for review of the 2011 assessment, which was received by the council on
February 17, 2011, and attended a hearing with the Board of Review and Equalization on
February 22, 2011. Lee Trace sought to adjust the 2011 assessment by using the income
approach, thus reducing the tax assessed value of the property. Deputy Assessor Tamera
Edgar (hereinafter referred to as “Ms. Edgar” or “the Assessor”) confirmed at that hearing
before the Board of Review and Equalization that some other apartment complexes in the
area had assessments reduced by the Board upon consideration of income when taxpayers
specifically requested it, but that the income approach was not used to assess Lee Trace’s
property because the data was not available to develop a “cap rate” used in the calculation
due to the lack of any comparable sales in Berkeley County for the period in question.
Thus, it was not possible for her to meet the specific requirements pertinent to performance
of an income approach provided for in Legislative Rule § 110-1P-2.
1 Tothe extent that Lee Trace appeals from the April 16, 2012 order as final and
appealable, this is the order date that we will reference in the remainder of the Opinion.
5
At the hearing, the Board of Review and Equalization asked the Assessor to
provide it with a value that took into account the income of the property. Lee Trace
provided additional income information for 2010 to the Assessor on the day following the
hearing, and the Assessor then completed a revised assessment which utilized realty rates
to determine a capitalization rate in lieu of unavailable market data, and also utilized actual
rent of the property in lieu of economic rent. This “hybrid” income approach provided a
value of $5,207,940.00 based upon her income approach. By letter dated February 24,
2011, the Berkeley County Council, sitting as the Board of Review and Equalization,
ordered:
After due consideration of the presentation of the applicant and
the documents offered and of the presentation of the [a]ssessor,
the [c]ouncil finds that the [a]ssessor’s original assessment of
the value of the property was $7,593,430, based upon a cost of
construction approach, for this new property; that, the owner
has requested an income approach compared to the cost
comparison of the property, yielding an assessment of
$5,207,940; that the [c]ouncil further finds that, a fair value is
reached by averaging the value by income approach and the
value by cost approach; that the fair total assessed value is
$6,400,690.
Accordingly, the [c]ouncil [o]rders that the assessed value of
the property should be reduced to $6,400,690, all as based on
the evidence presented and upon the recommendation of the
[a]ssessor.
Lee Trace appealed this order to the Circuit Court of Berkeley County
alleging that the Board of Review and Equalization’s consideration of a “hybrid” income
6
approach subsequently offered by the Assessor was improper, and that the Board’s
averaging of the cost approach and “hybrid” income approach was improper. There was
an insufficient record from the Board of Review and Equalization’s deliberations and the
hearing held with regard to Lee Trace’s request for an adjustment to the assessment.
There was no explanation on the record of how the Assessor arrived at the value derived
from the cost approach or the value derived from the “hybrid” income approach. The
circuit court permitted discovery to supplement the record.
In the course of discovery, Ms. Edgar testified that she utilized the income
approach for properties only when taxpayers asked her to do so. Regarding Lee Trace,
specifically, she said, “Well, I did the cost approach. The market data was considered but
not done, because there were no sales. And I did the income approach. . . . We did an
income—when we received the information for Lee Trace, it was after the fact. But it was
done.” Lee Trace did not provide the Assessor’s office with income information until late
in January, 2011, and then, only two of the three years required by the Legislative Rule.
Ms. Edgar testified that she had rental information—but not occupancy rate
information—about Lee Trace at the time she performed her appraisal but, “I just felt that
being new construction, that I wanted to put more weight on that.”2
2 Counsel had appeared on behalf of Lee Trace at an earlier council meeting on February 3,
2011. At that hearing, Ms. Edgar told the council that she had met with Lee Trace’s
counsel in March of 2010, and told him at that time that she would be happy to do an
income assessment on the property if he would come to see her in January of 2011. She
7
Ms. Edgar testified that when she performed the income approach appraisals,
the appraisals were lowered. However, she acknowledged that she did not recall an open
market sale of an apartment complex in the area in recent years, and when developing the
capitalization rate for the income approach, she used “Realty Rates” for the D.C.
metropolitan area in place of the current selling price of comparable properties.
Specifically, she testified,
Q (by counsel for Lee Trace): All right. When you did the
income based appraisals only after people asked for them, is
this the way you used that information where it says by
dividing annual net income by the current selling price of
comparable properties? Is that the method that you have used
historically when you did an income based appraisal?
A: That’s not how I derived the cap rate.
Q: All right. How did you develop a cap rate?
A: We mentioned this before. I used Realty Rates.
Q: All right. Do you understand the difference between what
you did using Realty Rates out of a book for different market
areas as opposed to what’s set forth here in the statute?
informed council that, as of the February 3, 2011, meeting, she had not received all of the
necessary documentation from Lee Trace. By letter dated February 24, 2011, the county
council advised Lee Trace, LLC that the council had no jurisdiction to consider an
application, dated December 21, 2010, related to the 2010 assessment, because the Board
of Review and Equalization had adjourned sine die in February of 2010. Ms. Edgar also
testified that this was the first year that the Board of Review and Equalization had averaged
two different approaches to achieve the final assessment. She testified that it was done for
“at least two” taxpayers.
8
A: I understand that. But if you do not have a sale of an
apartment complex during that year, you’re not going to be
able to develop a cap rate using this method. You can’t do it if
you don’t have the information.
Q: All right. So – and each time when you did the income
based appraisal after people had asked you to do it, you did
look to see if there was a sale and then determined that there
was not. Therefore, you could not follow the instruction of
the statute.
A: To my knowledge, I have not had an open market sale of
apartment complexes recently in this county.
Also in the course of discovery, the Assessor filed on January 6, 2012, a
“Supplement to Record” in the form of a report of appraisal performed by Rolston &
Company. This report attached a market value of $10,950,000 to the property, after taking
an average of Rolston’s own cost approach and income approach figures. That appraiser
wrote that “[t]he [s]ales [c]omparison [a]pproach could not be developed since there were
no sales in the area which were comparable to the subject.” He went on, “The [i]ncome
[a]pproach was based on the actual income and actual and projected expenses and is felt to
be the best indicator of value. However, the [c]ost [a]pproach needs to be considered and
was given equal weight to the determination of value.”
Lee Trace then filed on April 17, 2012, a motion to supplement the
administrative record with a report of appraisal prepared by L. Steven Noble. Mr. Noble
proposed values of $8,040,000 (cost approach); $6,700,000 (income capitalization
9
approach) and $8,200,000 (sales comparison approach). He wrote:
The value conclusion is $6,630,500, heavily weighted by the
[i]ncome [a]pproach, which for the Martinsburg, Berkeley
County markets is appropriate. For apartment properties, the
[s]ales [c]omparison [a]pproach is usually given more weight.
However, the property has not reached stabilization and a large
adjustment was warranted for that characteristic. Furthermore,
there are no recent comparable sales of land or apartments in
the local market. And, although the [c]ost [a]pproach suffers
from various forms of depreciation, they are market-derived
deductions. For this non-stabilized apartment property, the
[i]ncome [a]pproach is weighted heavily in the analysis.
On July 24, 2012, the circuit court entered a final order granting, in part, and
denying, in part, the petition for appeal. The court found that the Assessor’s use of the cost
approach was within her discretion, that the Board of Review and Equalization had
discretion to request an income estimate and average the two values, and that the Board has
the authority to equalize assessments by increasing or decreasing the value. The court
found, however, that the Board acted arbitrarily because the final value at which the Board
arrived—$6,400,690—is not an accurate average of the income-derived and cost-derived
values. The court wrote:
Under this unique situation, the Court finds [it] best, legally
and equitably, to set the value at the actual average.
The [c]ourt notes a couple of the major factors in the record
that support this value. Lee Trace is a complex either
significantly newer (or more recently built) or significantly
larger than any of the comparable complexes. So, this value,
slightly higher, than possibly others, would be proper. Also,
the value for the purposes of fire insurance is set at
$17,000,000, which would yield an assessment of 10,200,000
10
(60%)—significantly above the value determined by the
Assessor and the Board.
On the other hand, Petitioner’s appraisal is completed by
someone not licensed to appraise property in West Virginia.
This fact, along with the other evidence in the record, renders
Petitioner’s appraisal unpersuasive.
Most notably, the appraisal submitted by the [c]ounty, done by
a licensed appraiser and done in a manner which considers a
large number of factors and approaches, finds in the market
value to be $10,950,000. This amount clearly supports the
Board’s attempt to average the two numbers, as 60% of the
market value yields $6,570,000 (which is similar to what the
mathematical average is).
So the [c]ourt finds that the Board’s affixing of the number was
arbitrary, and Petitioner has met the burden, to wit: “average”
was not mathematically correct. Further the [c]ourt finds that
substantial evidence, as well as equitable factors, support a
mathematical average of the income approach and cost
approach assessments.
Therefore, the most accurate way to fix this arbitrary number is
to fix the math. A mathematical average appropriately
considers all the factors and gives the due deference to the
Board’s statutory authority to equalize assessments.
Accordingly, the [c]ourt finds that the value supported by the
evidence is the mathematical average of the cost and income
approaches to the assessment, which is $6,551,735.
Following entry of the circuit court’s orders pertaining to the 2010 and 2011
tax assessments, Lee Trace filed its Petitions for Appeal with this Court.
II.
11
STANDARD OF REVIEW
“ ‘This Court reviews the circuit court’s final order and ultimate disposition
under an abuse of discretion standard. We review challenges to findings of fact under a
clearly erroneous standard; conclusions of law are reviewed de novo.’ Syllabus Point 4,
Burgess v. Porterfield, 196 W.Va. 178, 469 S.E.2d 114 (1996).” Syllabus Point 1, Foster
Found., 223 W.Va. 14, 672 S.E.2d 150 (2008). This Court has repeatedly recognized that
“ ‘[a]n assessment made by a board of review and equalization
and approved by the circuit court will not be reversed when
supported by substantial evidence unless plainly wrong.’
Syllabus Point 1, West Penn Power Co. v. Board of Review and
Equalization, 112 W.Va. 442, 164 S.E. 862 (1932) (other
internal citations omitted).” Syllabus Point 3, In re: Tax
Assessment of Foster Foundation’s Woodlands Retirement
Community, 223 W.Va. 14, 672 S.E.2d 150 (2008).”
Syllabus Point 2, Mountain America LLC v. Huffman, 224 W. Va. 669, 687 S.E.2d 768.
The interpretation of a statute, or the constitutionality of a statute, as written or as applied,
as in this case, presents a purely legal question subject to de novo review. Foster Found.,
223 W. Va. at 18-19, 672 S.E.2d at 154-55 (citing Appalachian Power Co. v. State Tax
Dept. of West Virginia, 195 W. Va. 573, 466 S.E.2d 424 (1995)); Chrystal R.M. v. Charlie
A.L., 194 W. Va. 138, 459 S.E.2d 415 (1995).
III.
DISCUSSION
A. No. 12-0638
12
As it pertains to the 2010 property tax assessment, Lee Trace alleges that the
Assessor failed to provide it with adequate notice as required under W.Va. Code § 11-3-2a
and constitutional due process. West Virginia Code § 11-3-2a (2008)3 requires that the
Assessor provide notice to property owners whose assessment has increased by more than
ten percent from the prior year. That statute provides, in pertinent part,
(a) If the assessor determines the assessed valuation of any
item of real property is more than ten percent greater than
the valuation assessed for that item in the last tax year, the
increase is one thousand dollars or more and the increase is
entered in the property books as provided in section
nineteen of this article, the assessor shall give notice of the
increase to the person assessed or the person controlling
the property as provided in section two of this article. The
notice shall be given at least fifteen days prior to the first
meeting in February at which the county commission
meets as the board of equalization and review for that tax
year and advise the person assessed or the person
controlling the property of his or her right to appear and
seek an adjustment in the assessment. The notice shall be
made by first-class United States postage mailed to the
address of the person assessed or the person controlling the
property for payment of tax on the item in the previous
year, unless there was a general increase of the entire
valuation in any one or more districts in which case the
notice shall be by publication of the notice by a Class II-0
legal advertisement in compliance with the provisions of
article three, chapter fifty-nine of this code. The area for
the publication is the county.
W. Va. Code § 11-3-2a.
3 Although W. Va. Code § 11-3-2a was amended in June 2010, the 2008 version of W. Va.
Code § 11-3-2a is applicable in this case insofar as the notice at issue was dated January 5,
2010.
13
The concluding paragraph of the January 5, 2010, notice provided to Lee
Trace stated, “If you believe an adjustment in the assessed value is necessary, you should
contact the county commission sitting as a Board of Review and Equalization.” Lee Trace
asserts that the notice did not advise it of its right to appear or of the February 25, 2010,
deadline, and because it was unaware of a deadline, it did not contact the Assessor or the
Board until March of 2010. Lee Trace alleges that, “Even if there were no specific
statutory requirement of notice, this principle [that administrative agencies observe basic
rules of fairness] would seem to require that adequate notice and opportunity to be heard be
afforded. . . .” Mizell v. Rutledge, 174 W.Va. 639, 641, 328 S.E.2d 514, 516 (1985). Also,
“constitutional due process includes being informed of the possible consequences of
government action.” Id. Lee Trace contends that a plain reading of the notice reveals that
it did not conform to the statute. See W. Va. Code § 11-3-2a.
Conversely, the Respondents contend that a review of W.Va. Code § 11-3-2a
shows that the notice dated January 15, 2010, conveyed the exact wording required by
statute. Respondents argue that “[a]ll persons are presumed to know the law.” State v.
McCoy, 107 W.Va. at 172, 148 S.E. at 130. They argue that W.Va. Code § 11-3-24 clearly
indicates that the county council will meet annually, not later than February 1st of the tax
year and adjourn sine die no later than the last day of February of the tax year. That code
section also explains that anyone who fails to seek relief at that meeting has waived his
right to ask for a correction of his assessment in that particular tax year. Additionally, the
14
Berkeley County Council asserts that it is not always possible for the Assessor to know the
sessim dates for the Board of Review and Equalization, but a person can contact the
Assessor and/or the council office, as provided in the notice, for details. “The law in
prescribing the time when such complaints will be heard, gives all the notice required . . . .”
Hagar v. Reclamation Dist. No. 108, 111 U.S. 701, 710, 4 S. Ct. 663, 668 (1884).
Furthermore, the Respondents maintain that statutes establishing administrative
procedures for the collection and assessment of taxes are to be construed in favor of the
government. Mountain America LLC v. Huffman, 224 W.Va. at 683, 687 S.E.2d at 782
(finding W.Va. Code § 11-3-24 facially constitutional and constitutional as to that case)
(citing Syl. Pt. 1, Calhoun County Assessor v. Consolidated Gas Supply Corp., 178 W.Va.
230, 358 S.E.2d 791 (1987)).
Upon review of the notice at issue in this case, we find that it does not
comport with the requirements established in W. Va. Code §11-3-2a, as it fails to
adequately inform the person assessed or the person controlling the property of his or her
“right to appear” and seek an adjustment in the assessment. Because W. Va. Code
§11-3-2a does not expressly specify what information constitutes proper notice of the
“right to appear,” this Court must necessarily decide this issue.
Here, the parties dispute whether the Assessor is required to provide dates of
sessions for the Board of Review and Equalization in order to put the taxpayer on notice of
15
the time frame for appeal. We believe that in order for Lee Trace to properly be advised of
its right to appear under §11-3-2a, the notice at issue should have specified the place and
time by which Lee Trace could object to the proposed increase in the valuation of the
property.4
The notice at issue here simply advised Lee Trace that “[i]f you believe an
adjustment in the assessed value is necessary, you should contact the county commission
sitting as a Board of Review and Equalization.” No mention was made of the taxpayer’s
right to appear by a specified time or at a specific place, and no explanation was provided
regarding the role the county commission served in the tax assessment appeals process.
As a matter of due process, the taxpayer should be sufficiently alerted of his or her appeal
rights, and we find that the notice at issue in this case is insufficient on these grounds.
Indeed, the requirement for the government to properly advise persons of their appeal
rights is founded in principles of statutory and constitutional due process. Mizell, 174 W.
Va. at 643, 328 S.E.2d at 518; see also Chavis v. Heckler, 577 F.Supp. 201, 205 (D.C.D.C.
4 It is helpful to our analysis that the currently enacted version of W. Va. Code §11-3-24,
effective June 11, 2010, expressly anticipates that the taxpayer is given notice of the time
and place that the Board of Review and Equalization is in session in order to object to the
proposed increase in the valuation of the taxpayer’s property. West Virginia Code
§11-3-24(f) provides, in pertinent part, “[a]ny person who receives notice as provided in
subsection (e) of this section may appear before the board at the time and place specified in
the notice to object to the proposed increase in the valuation of the taxpayer’s property. . .”
(emphasis added). Although the notice at issue before us was dated January 5, 2010, six
months prior to this version of the code being enacted, it is useful for purposes of
determining what information constitutes proper notice of the right to appear.
16
1983) (finding that failure to advise of right to appeal in social security case violates
procedural due process). In addition to these constitutional principles, this Court has
recognized that statutory notice provisions, such as in the instant case, require that a
taxpayer be informed of the specific consequences of an assessor’s determination in order
to make an informed decision concerning appeal. Mizell, 174 W. Va. at 643, 328 S.E.2d at
518 (citing In re Tax Assessments Against Pocahontas Land Corp., 158 W. Va. 229, 210
S.E.2d 641 (1974)). Accordingly, we reverse the circuit court’s April 16, 2012, order
finding that Lee Trace’s appeal of the 2010 tax assessment was untimely.5
B. No. 12-0992
In the second appeal, Lee Trace alleges that the circuit court ruling was
clearly erroneous for the following reasons: 1) the circuit court erred in averaging the
Assessor’s “hybrid” income approach assessment with the 2010 cost approach
assessment; 2) the circuit court erred in according a presumption of correctness to the
Assessor when the Assessor admitted that she had not performed an assessment compliant
with legislative rules; 3) the circuit court erred in finding that the Assessor was not
required to consider an income approach to value; 4) the circuit court ignored evidence of
the property’s value submitted by Lee Trace and improperly relied on evidence that was
5 To the extent that we reverse the circuit court’s ruling on these grounds, it is not
necessary for this Court to address Lee Trace’s remaining argument pertaining to the 2010
tax assessment -- whether there was an inadvertent mistake or clerical error under W. Va.
Code §11-3-27.
17
not relevant to the property’s value; and 5) the circuit court set an assessment violating its
equal protection rights.
When valuing property for ad valorem taxation purposes, the property is
required to be valued at its true and actual value. As this Court has stated,
[t]ax assessments of property are required to be proportionate
to the property’s value: “[A]ll property, both real and personal,
shall be taxed in proportion to its value to be ascertained as
directed by law.” W. Va. Const. art. X, § 1. W. Va. Code § 11–
3–1 (1977) (Repl. Vol. 2008) further instructs that “[a]ll
property shall be assessed annually ... at its true and actual
value.” We have interpreted the term “value” with respect to
tax assessments as meaning “ ‘worth in money’ of a piece of
property-its market value.” Syl. pt. 3, in part, Killen v. Logan
County Comm’n, 170 W.Va. 602, 295 S.E.2d 689 [ (1982) ][,
overruled on other grounds by In re Tax Assessment of Foster
Found.’s Woodlands Ret. Cmty., 223 W.Va. 14, 672 S.E.2d
150 (2008) ]. Furthermore, we have held that “[t]he price paid
for property in an arm’s length transaction, while not
conclusive, is relevant evidence of its true and actual value.”
Syl. pt. 2, in part, Kline v. McCloud, 174 W.Va. 369, 326
S.E.2d 715 (1984).
Foster Found., 223 W.Va. at 33, 672 S.E.2d at 169.
The West Virginia Code of State Rules § 110-1P-2.2.1 (1991) recognizes
three different appraisal methods for determining the fair market value of “commercial and
industrial real and personal property for ad valorem tax purposes.” This subsection
provides: “. . . the Tax Commissioner will consider and use, where applicable, three
18
generally accepted approaches to value: (A) cost,6 (B) income,7 and (C) market data.8” W.
Va. C.S.R. § 110-1P-2.2.1. Additionally, appraisals must consider a variety of other
factors. See W. Va. C.S.R. § 110-1P-2.1.1 (1991) and W. Va. C.S.R. § 110-1P-2.1.3
(1991). This series of regulations provides that each of the enumerated factors should be
considered, but “some . . . may be given more weight than others.” W. Va. C.S.R. §
110-1P-2.1.4 (1991).
In the case before us, Lee Trace is not arguing that the Assessor failed to
consider all of the factors under the cost approach analysis, but rather that the Assessor
violated the law in this assessment by failing to consider the income approach. Lee Trace
also claims that the Board’s reduction, based upon an estimate of what an income approach
6
To determine fair market value under the cost approach, “replacement cost of the
improvements is reduced by the amount of accrued depreciation and added to an estimated
land value. In applying the cost approach, the Tax Commissioner will consider three types
of depreciation: physical deterioration, functional obsolescence, and economic
obsolescence.” W. Va. C.S.R. § 110-1P-2.2.1.1 (1991).
7
In determining the income approach, “[a] property’s present worth is directly related to its
ability to produce an income over the life of the property. The selection of an overall
capitalization rate will be derived from current available market data by dividing annual
net income by the current selling price of comparable properties. The present fair market
value of the property shall then be determined by dividing the annual economic rent by the
capitalization rate.” W. Va. C.S.R. § 110-1P-2.2.1.2 (1991). Under this type of valuation,
economic rent means “the rental amount which a space or property would attain in the open
market at the time of appraisal, whether it is lower, higher or the same as the actual contract
rent.” W. Va. C.S.R. § 110-1P-2.3.6 (1991).
8
The market data approach will be applied by “considering the comparable selling price of
comparable properties.” W. Va. Code § 110-1P-2.2.1.3 (1991).
19
would result in, contravened the regulations.
Conversely, the Respondents assert that the Assessor did not have a database
from apartment complex owners for income approach comparison, and she did not have
sales of apartment complex owners to develop a capitalization rate for an income approach
appraisal as required by W.Va. C.S.R. § 110-1P-2.2.1.2. Lee Trace had not provided any
income or operating statement for its property for 2010 at the time she performed the initial
assessment of the property. The Assessor had to give the Board of Review and
Equalization a completed property book by February 2011, and Lee Trace did not give the
Assessor timely information. The income approach appraisal was not completed in the
normal course of the Assessor’s duties, but at the Board’s request.
Respondents further allege that having invited the Board to consider an
income approach appraisal of its property as had been performed in a similar fashion for
other apartment complex properties in past years, Lee Trace should not now be
complaining that the Board and circuit court erred in using the assessed value derived by
this income approach method. See Syl. Pt. 6, Page v. Columbia Natural Resources, Inc.,
198 W.Va. 378, 480 S.E.2d 817 (1996) (stating “[a] litigant may not silently acquiesce to
an alleged error, or actively contribute to such error, and then raise that error as a reason for
reversal on appeal.”). They aver that if Lee Trace disagreed with the methodology, it
should have informed the Board of its disagreement or produced its own income approach
20
appraisal to the Board during the February 2011 session.
Title 110, Series 1P of the West Virginia Code of State Rules is clearly
intended by its language to give the Assessor discretion in choosing the method for
valuation. In syllabus point 5 of In re Tax Assessment Against American Bituminous Power
Partners, L.P., 208 W. Va. 250, 539 S.E.2d 757 (2000), this Court held that “Title 110,
Series 1P of the West Virginia Code of State Rules confers upon the State Tax
Commissioner discretion in choosing and applying the most accurate method of appraising
commercial and industrial properties. The exercise of such discretion will not be disturbed
upon judicial review absent a showing of abuse of discretion.”; see also Syl. Pt. 4, Stone
Brooke Ltd. Partnership v. Sisinni, 224 W. Va. 691, 688 S.E.2d 300 (2009). West
Virginia C.S.R. § 110-1P.-2.2.2 embodies this intent found throughout the statutes and
rules, and states in pertinent part,
[w]hen possible, the most accurate form of appraisal should be
used, but because of the difficulty in obtaining necessary data
from the taxpayer, or due to the lack of comparable
commercial and/or industrial properties, choice between the
alternative appraisal methods may be limited.
This Court has recognized that “the Tax Commissioner has permitted an
Assessor to select any one of these three methods by which to value commercial real
property for ad valorem taxation purposes, with a preference not for any one particular
method but only for ‘the most accurate form of appraisal.’ W. Va. C.S.R. § 110–1P–2.2.2.”
21
Sisinni, 224 W. Va. at 700, 688 S.E.2d at 309.
Here, the circuit court properly concluded that an assessor need not perform
a useless act of considering an appraisal method where the assessor does not have
sufficient data to perform that appraisal method. Lee Trace did not deliver all of its 2010
expense and income information to the Board until mid-February of 2011. Additionally,
the data was not available for the Assessor to develop a “cap rate” used in the calculation
due to the lack of any comparable sales in Berkeley County for the period in question.
Thus, the Assessor’s choice was limited. See also Bayer MaterialScience, LLC v. State Tax
Comm’r, 223 W.Va. 38, 54, 672 S.E.2d 174, 190 (2008) (rejecting taxpayers’ request to
apply particular appraisal method where taxpayers had not provided data necessary to
apply that appraisal method because taxpayers’ corporate financial structure did not
produce that type of data). Accordingly, we find that the circuit court did not commit
error in ruling that the Assessor’s choice of the cost approach was within her discretion
under the plain language of the legislative rules and the authority of this Court.
We do, however, take issue with the circuit court’s affirmation of the Board’s
reduction in value based upon an estimate averaging the cost approach value initially used
by the Assessor with a “hybrid” income approach analysis subsequently performed by the
Assessor at the request of the Board. Specifically, we find that it was an abuse of
discretion for the Board to utilize a “hybrid” income approach value that did not comport
22
with the requirements of W. Va. Code of State Rules § 110-1P-2.2.1.2 and § 110-1P-2.3.6.9
The record reveals that the Assessor testified in her deposition that she could
not develop a capitalization rate to do an income approach as required by W. Va. Code of
State Rules § 110-1P-2.2.1.2 “. . . by dividing annual net income by the current selling
price of comparable properties . . .” because “. . .if you do not have a sale of an apartment
complex during that year, you’re not going to be able to develop a cap rate using this
method. You can’t do it if you don’t have the information.” The Assessor pointed out “ .
. . to my knowledge, I have not had an open market sale of apartment complexes recently in
this county.” She also testified that in attempting to perform an income analysis, annual
actual rent for the property was used instead of annual economic rent. West Virginia
Code of State Rules § 110-1P-2.2.1.2 requires that “the present fair market value of the
property shall then be determined by dividing the annual economic rent by the
capitalization rate.” Therefore, we find that the Board of Review and Equalization’s use
of the $6,400,690.00 assessed value utilizing this “hybrid” income approach in its
methodology was plainly wrong as a matter of law, and the circuit court erred in affirming
the Board’s use of the “hybrid” income approach. “An assessment made by a Board of
Review and Equalization and approved by the circuit court will not be reversed when
supported by substantial evidence unless plainly wrong.” Syl. Pt. 2, Mountain America,
9
The requirements of W. Va. C.S.R. § 110-1P-2.2.1.2 and § 110-1P-2.3.6 are set forth
more fully above. See footnote 7, supra.
23
LLC v. Huffman, 224 W. Va. 669, 687 S.E.2d 768 (2009) (citing Syl. Pt. 1, West Penn
Power Co. v. Board of Review and Equalization, 112 W. Va. 442, 164 S.E. 862 (1932)).
Although we determine that the Board of Review and Equalization’s
methodology was plainly wrong, the fact remains that Lee Trace has presented no evidence
that the methodology used by the Assessor in her initial cost approach assessment of
$7,593,430.00 was erroneous. Rather, it has appealed the 2011 assessment alleging that a
proper income approach should have been used by the Assessor instead. As we stated
above, we believe the Assessor was within her discretion to utilize the cost approach
method to appraise and assess the property. Once an Assessor has selected an appraisal
method and applied it to appraise and assess a parcel of commercial real property,
the valuation placed upon the property by the assessor is
accorded great deference and is presumed to be correct. “As a
general rule, there is a presumption that valuations for taxation
purposes fixed by an assessor are correct.... The burden is on
the taxpayer challenging the assessment to demonstrate by
clear and convincing evidence that the tax assessment is
erroneous.” Syl. pt. 2, in part, Western Pocahontas Props., Ltd.
v. County Comm’n of Wetzel County, 189 W.Va. 322, 431
S.E.2d 661. Accord Syl. pt. 7, In re Tax Assessments Against
Pocahontas Land Co., 172 W.Va. 53, 303 S.E.2d 691 (“It is a
general rule that valuations for taxation purposes fixed by an
assessing officer are presumed to be correct. The burden of
showing an assessment to be erroneous is, of course, upon the
taxpayer, and proof of such fact must be clear.”). Cf. Syl. pt. 2,
In re Tax Assessments Against the S. Land Co., 143 W.Va.
152, 100 S.E.2d 555 (1957) (“In a case involving the
assessment of property for taxation purposes, which does not
involve the violation of a statute governing the assessment of
property, or a violation of a constitutional provision, or in
24
which a question of the constitutionality of a statute is not
involved, this Court will not set aside or disturb an assessment
made by an assessor or the county court, acting as a board of
equalization and review, where the assessment is supported by
substantial evidence.”), overruled on other grounds by In re the
Assessment of Shares of Stock of the Kanawha Valley Bank,
144 W.Va. 346, 109 S.E.2d 649 (1959).
Foster Found., 223 W. Va. at 33–34, 672 S.E.2d at 169–70. We find that the cost
approach assessment performed by the Assessor is supported by substantial evidence in the
record. Lee Trace has not raised any error with respect to the methodology used by the
Assessor in performing the cost approach analysis. Thus, we find that Lee Trace has not
met the requisite burden of establishing by clear and convincing evidence that the
Assessor’s cost approach assessment was erroneous. Therefore, we accord the 2011
assessment made by the Assessor due deference and find that the 2011 tax assessment for
the property at issue should be adjusted to reflect the Assessor’s initial cost approach
assessment value of $7,593,430.00.10
IV.
CONCLUSION
For the above stated reasons, we reverse the April 16, 2012, order and the
July 24, 2012, order of the Circuit Court of Berkeley County and remand these matters to
the circuit court for further proceedings consistent with this Opinion.
10 Because we reverse the circuit court’s order on the grounds stated above, it is not
necessary to address Lee Trace’s remaining assignments of error.
25
Reversed and Remanded.
26