Bateman v. Rinehart

RICHARD B. TEITELMAN, Chief Justice.

The principal opinion holds that the State Tax Commission (the Commission) determined correctly that the “immediate most suitable use” of Taxpayers’ property is for commercial use even though the property is zoned for single family residential use and all commercial use is prohibited. The only way for Taxpayers to utilize the properties for commercial use is to convince the city to rezone the property with variances from setback and buffer requirements and to negotiate access easements across buffer strips owned by other private parties. I respectfully dissent because these contingencies are beyond the Taxpayers’ control and preclude “immediate” commercial use.

*450I. Immediate most suitable economic use

Section 137.016.51 provides that vacant properties can be classified for tax purposes according to the “immediate most suitable economic use.” The immediate most suitable economic use is determined according to a list of eight factors that require consideration of the physical characteristics of the property as well as zoning and other legal restrictions on use of the property. The word “immediate” qualifies the phrase “most suitable economic use” and each of the statutory factors that determines the immediate most suitable economic use. Any tax classification pursuant to section 137.016.5 requires a finding that the taxing authority’s proposed most suitable economic use is an “immediate” use. Analysis of a tax classification pursuant to section 137.016.5, therefore, requires a definition of the word “immediate.”

The word “immediate” as used in section 137.016.5 is not defined by statute. When a word is not defined by statute, it is defined according to its plain and ordinary meaning as derived from the dictionary. See State v. Oliver, 293 S.W.3d 437, 446 (Mo.2009). The word “immediate” means “acting or being without the intervention of another object, cause, or agency” or “occurring, acting, or accomplished without loss of time.” Webster’s Third New International Dictionary (1966). Similarly, the definition of “immediacy” is the “state of being immediate,” with the word “immediate” defined as “freedom or absence of an intervening medium.” Id. Consequently, an “immediate most suitable economic use” cannot be a use that absolutely is prohibited by existing zoning regulations.

II. Section 137.016.5(3)

The principal opinion asserts that the zoning restrictions in this case are not conclusive because section 137.016.5(3) provides that the present “zoning classification shall not be considered conclusive, if, upon consideration of all factors, it is determined that such zoning classification does not reflect the immediate most suitable economic use of the property....” Section 137.016.5(3) does establish that, in some cases, vacant and unused property can be taxed in a manner inconsistent with its present zoning. However, the fact that, in some cases, property can be taxed as commercial when zoned residential does not mean that residential zoning never can be conclusive. To the contrary, the logic of section 137.016.5(3) demonstrates that present zoning restrictions can be conclusive.

The proposition that zoning is not conclusive if it does not reflect the immediate most suitable economic use is nothing more than a cautionary reminder, as it is simply a tautological restatement of what must be proven to reclassify the property in the first place; i.e., the immediate most suitable economic use. The necessary corollary to this is that zoning is conclusive when that zoning establishes and strictly defines the present, suitable economic use of the property.2 When, as in this case, *451present zoning absolutely prohibits commercial use and there is no imminent change to the present zoning classification, then the commercial use cannot be an immediate use and the present, prohibitory zoning must be considered conclusive in the same manner as a present and absolute physical limitation on commercial use that cannot immediately be removed by the landowner.

III. There is no substantial evidence that commercial use is an immediate use

The facts of this case demonstrate that Taxpayers cannot utilize their property immediately for commercial purposes. There is no dispute that both lots presently are zoned solely for single family residential use and all commercial use strictly is prohibited. Both lots are located at the end of a residential cul-de-sac in a residential subdivision. Any commercial use would require Taxpayers to negotiate access easements across private property. In short, there are multiple contingencies out of Taxpayers’ control that stand in the way of any commercial use, let alone “immediate” commercial use. Given these facts, the assessor admits in her brief filed with this Court that any commercial use of the property is “improbable in the 13 months that remained in the assessment cycle.” Commercial use cannot be considered “immediate” when the taxing authority admits that such use is “improbable” for more than a year.

The testimony from the city’s expert witness, a commercial appraiser, does not alter this conclusion. He testified that the city would be “amenable” to some commercial use of the properties in the future. The appraiser’s testimony was speculative and cannot constitute substantial evidence to support the Commission’s decision.

First, even if the city is “amenable” to some type of rezoning at some future time, any commercial use is still speculative and contingent and, therefore, by definition is not “immediate.”

Second, even if one accepts the proposition that present zoning is not conclusive, the appraiser’s testimony that the city was “amenable” to rezoning was largely speculative. The appraiser was not a member of the city council and was not in a position to offer a credible opinion as to how or when the city would rezone the property so as to permit commercial use. Much of the appraiser’s knowledge of the city’s supposed intentions were obtained from reading the city council’s minutes from 2000, nearly a decade prior to the hearing in this case, when the prior property owner unsuccessfully tried to rezone the properties for commercial use. No “expert” is needed to read those same, dated minutes and speculate as to what the city may or may not do in the future. Further, while some council members thought the rezoning application simply presented “too intense” of a commercial use, others objected to any commercial use of the properties at all because it would place commercial use “right in the back yards” of neighboring residences. The appraiser also testified that the city was trying to rezone the property a less restrictive C-0, C-l or C-2. This testimony I still fundamentally speculative as it simply states that the city is undertaking some sort of effort to rezone the property to perhaps allow some unknown level of commercial use at some unidentified time in the future. This testi*452mony is also fundamentally speculative. The appraiser’s speculative testimony does not constitute substantial evidence to support the Commission’s decision. See, e.g., Tuf Flight Industries v. Harris, 129 S.W.3d 486, 491 (Mo.App.2004)(testimony that a company’s use of an alley constituted “roughly,” “maybe,” “probably,” and “probably maybe” one-fifth of all use of the alley was not substantial and competent evidence to support the allocation of 20 percent of the alley’s maintenance costs to the company).

In contrast to the appraiser’s speculative testimony, his non-speculative testimony favors Taxpayers’ position that commercial use is not an immediate use for their property. The appraiser testified that due to the current zoning restrictions, the properties would not be used as commercial during the assessment period that Taxpayers are challenging. He also testified that rezoning the property for commercial use would require passage of a commercial development plan by the city of Gladstone and that no such plan was under consideration. The non-speculative aspects of the appraiser’s testimony demonstrate that the commercial use is not an immediate use for Taxpayers’ property.

The principal opinion finds further support for the Commission’s decision by referencing section 137.016.5(8), which permits the consideration of other relevant factors. One of the identified factors is the fact that Taxpayers listed the property for sale as commercial property. A landowner’s subjective desire to maximize their profit has little to do with the objective factors pertaining to the physical characteristics and legal restrictions that are listed in section 137.016.5. The more relevant fact is that, over the course of nearly four years immediately preceding the hearing in this case, Taxpayers’ marketing efforts were completely unsuccessful. The failure to sell the property for commercial use does not support a finding that the immediate most suitable use is commercial. To the contrary, when considered in conjunction with the single family residential zoning restriction and the appraiser’s testimony, the fact that Taxpayers could not sell the property for commercial use makes it even clearer that there is no substantial evidence to support the Commission’s decision that commercial use is the immediate most suitable economic use for Taxpayers’ property.

IV. Algonquin

Finally, the principal opinion asserts that the Commission’s decision is supported by Algonquin Golf Club v. State Tax Commission, 220 S.W.3d 415 (Mo.App.2007). In Algonquin, the court of appeals found that the specific zoning obstacles and indentures made it impossible for private golf courses to be used immediately commercially as public golf courses. Id. at 421-22. Accordingly, the court reversed the Commission’s decision allowing the private clubs to be taxed as commercial public courses.

Although there are no restrictive indentures at play in this case, the fact remains that, as in Algonquin, the present zoning restrictions in this case make it absolutely illegal for Taxpayers to utilize their property for commercial purposes. Like the private golf club in Algonquin, the individual taxpayers in this case presently cannot use their property commercially, and any such use is contingent on obtaining a change in the law. While Algonquin is factually distinguishable from this case, primarily due to the restrictive indentures not present in this case, these factual distinctions do not materially alter the analysis, for in both cases, the property owner legally is prohibited from using the property in the manner asserted by the taxing *453authority. In both Algonquin and in this case, the legal restrictions precluded a finding that commercial use was the immediate most suitable economic use. The only material, practical difference between individual taxpayers in this case and the private golf clubs in Algonquin is that the individual taxpayers here are required to pay exponentially higher taxes for a use they cannot pursue, while the private golf clubs in Algonquin rightly were shielded from that result. This case is sufficiently similar to Algonquin to warrant the same result.

V. Conclusion

The Commission’s decision rests on the assumption that someday Taxpayers’ property might be rezoned to permit commercial use. Right now, the only possible use of the properties is as residential lots. Any commercial use is purely speculative. The Taxpayers’ obligation to pay a commercial tax rate must wait until such time as there is a certain possibility that they actually can utilize their property for commercial purpose. Otherwise, Taxpayers are being required, in effect, to subsidize the county and other taxpayers on the objectively incorrect assumption that Taxpayers can use their property for commercial purposes. I would reverse the Commission’s decision.

. All statutory references are to RSMo 2000 unless otherwise indicated.

. Subdivision 3 of section 137.016.5 accounts for the fact that not all residential zoning or commercial zoning classifications absolutely prohibit all other uses. For instance, many municipalities employ different residential zoning classifications ranging from the strict, single family zoning at issue in this case to mixed-use residential classifications that permit substantial commercial activity within the residential area. In the latter case, as is common in many urban neighborhoods, residential zoning would be relevant but not conclusive because, unlike this case, some commercial use would be immediately legally permissible. The remaining statutory factors, *451such as location of the property and adjacent uses, then would be applied to determine if the commercial use is the immediate most suitable use. However, as in this case, when the present zoning absolutely prohibits a particular use, subdivision 3 provides that zoning is conclusive.