Lee Gardens Arlington Ltd. Partnership v. Arlington County Board

Present: Carrico, C.J., Compton, Stephenson, Lacy, Hassell and
Koontz, JJ., and Poff, Senior Justice

LEE GARDENS ARLINGTON LIMITED PARTNERSHIP

OPINION BY
v. Record No. 950305 SENIOR JUSTICE RICHARD H. POFF
November 3, 1995

ARLINGTON COUNTY BOARD, ET AL.

FROM THE CIRCUIT COURT OF ARLINGTON COUNTY
Benjamin N.A. Kendrick, Judge

This is a taxpayer's appeal from a judgment upholding a tax

assessment of Sheffield Court Apartments, a large garden

apartment complex owned by Lee Gardens Arlington Limited

Partnership (Lee Gardens, or the taxpayer).
On January 16, 1992, the property was valued at $33,719,278.

The County Board of Arlington County (the County) approved a

partial exemption for rehabilitation which reduced the assessed

value to $24,539,900. In October, based upon a review of a

three-year history of Sheffield Court's report of operating

income and expense and a redetermination of its net operating

income, the County raised the January assessment to $26,896,600.

In December 1993, Lee Gardens filed an application under

Code §§ 58.1-3984 and -3987 to correct the revised assessment and

to require a refund of overpayment. Lee Gardens alleged that the

1992 assessment "does not reflect the fair market value of the

property [and] . . . is not uniform in its application." The

County filed a counterclaim asking the court to increase the

assessment to $28,139,800 "based on actual net operating income

. . . data . . . not received . . . until after the 1992

assessment was made."

During discovery, Lee Gardens requested disclosure of tax
assessment worksheets used by the County, and the County filed a

request for disclosure of certain taxpayer records. The trial

court denied the taxpayer's request and, in part, the County's

request.

As its final witness at trial, Lee Gardens introduced George

Byrne, a private tax consultant, and asked the court to qualify

him as an expert in valuation of commercial real estate and

review of assessments. Byrne was not licensed as an appraiser,

and the court ruled that he was ineligible to testify as an

expert witness.
Lee Gardens moved for a continuance. The court denied the

motion. The taxpayer moved for nonsuit, and the County moved to

strike the taxpayer's evidence. The court denied Lee Gardens'

motion and granted the County's motion to strike the evidence.

Thereupon, the County nonsuited its counterclaim.

We awarded Lee Gardens an appeal, and we will consider the

three questions raised by its assignments of error.

I

First, we address the question whether the trial court erred

in denying the taxpayer's discovery request.

The assessment formula employed here is called

"capitalization of net operating income". Under that formula,

operating expenses are subtracted from operating income, and a

capitalization rate is applied to the difference to determine the

assessment. As operating income remains constant, the quantum of

the assessment will vary according to changes in the operating-

expense factor.

In its application of the assessment formula, the County
created a set of "guidelines" of income and expenses. The set

includes different guidelines for different types of taxable

properties. Thomas Rice, director of the County's department of

assessments, testified that the guidelines were used as "the

first indication on the value"; that the appraisal staff

"examines each of the indications of value produced by those

guidelines . . . the experience of the property, its history as

reported"; that the staff "has the latitude of adjusting those

guideline numbers . . . to reflect the operation of the

particular property"; and that, absent such "historical . . .

information, the last resort for the county is to rely on the

guidelines".
Rice said that the guidelines were not applied to Sheffield

Court because its history of operation showed "higher rent" and

"lower expenses" than those "indicated by the guidelines", and

that no apartment complex with a history of income and expenses

like those of Sheffield Court had been assessed by applying the

guidelines. As appears from the County's response to a request

for admissions, approximately 40 percent of 1992 appraisals of

large garden apartment complexes did not apply the guidelines.

Rice testified further that the guidelines were not applied when

actual expenses were historically higher than the guidelines.

Lee Gardens argues on brief that use of actual expenses

lower than guidelines "results in a . . . higher assessment" and

that "this method . . . is not uniform in application." Lee

Gardens also contends that the County's use of actual expenses
higher than the guidelines "is directly relevant to the non-

uniformity basis of the taxpayer's claim." Consequently, Lee
Gardens reasons, the trial court committed reversible error when

it denied its discovery motion. That motion requested disclosure

of County "tax worksheets for all commercial properties whose

expenses exceeded those for the guidelines, and whose actual, or

stabilized, expenses were used to compute net operating income."

Under Code § 58.1-3, income and expense information

taxpayers provide tax officials is confidential, and any

disclosure made without a court order is a Class 2 misdemeanor.

Rule 4:1(b)(1) authorizes a trial court to order discovery

"regarding any matter, not privileged, which is relevant to the

subject matter involved", including any information "reasonably

calculated to lead to the discovery of admissible evidence."

With respect to the recipient of a discovery order, Rule 4:1(c)

empowers the court to "make any order which justice requires to

protect a party or person from . . . undue burden or expense,

including one . . . that . . . confidential . . . commercial

information not be disclosed".
The record shows that the County assesses "approximately

1000 parcels of real estate which are classified as apartment

properties", including "some 500 plus . . . apartment complexes"

with a total of "some 40,000 apartment units in Arlington

County". Lee Gardens' discovery request embraced not only

apartment properties, but "tax worksheets for all commercial

properties" in Arlington County.

"All taxes . . . shall be uniform upon the same class of

subjects". Va. Const. art. X, § 1. The constitutional mandate

requires uniformity in the assessment of "properties having like

characteristics and qualities, located in the same area." Smith
v. City of Covington, 205 Va. 104, 108, 135 S.E.2d 220, 223

(1964). Obviously, Lee Gardens' discovery request extends to a

"class of subjects" with "characteristics and qualities" unlike

apartment complexes and whose histories of income and expense are

unlike that experienced by Sheffield Court.

The trial court's order denying Lee Garden's request was

based upon the court's finding that the request was "overbroad,

burdensome and not reasonably calculated to lead to the discovery

of admissible evidence". Citing Rakes v. Fulcher, 210 Va. 542,
546, 172 S.E.2d 751, 755 (1970), Lee Gardens acknowledges on

brief that "[t]he granting or denying of a request for discovery

is a matter within the trial court's discretion and will be

reversed only if the action taken was improvident, and affected

substantial rights."

We are of opinion that the trial court's finding is

supported by the record and complies with the provisions of Rule

4:1. Consequently, we cannot say that the order denying Lee

Gardens' disclosure request was an abuse of the court's

discretion, and we will affirm the order denying that request.

II

Next, we consider whether a person unqualified to obtain an

appraiser's license can testify as an expert witness on real

estate valuation.

On voir dire, Byrne acknowledged that he was a tax

consultant under contract with Lee Gardens' attorney; that he was

being compensated for his testimony; that he would testify as to

the value of Sheffield Court; and that he did not have a Virginia

real estate appraiser's license. Asked if he was "qualified to
get a license", Byrne replied, "I don't have the course work."

Sustaining the County's objection, the trial court ruled that

Byrne "can't be qualified [as an expert witness] without a

license."

The question in issue is a matter of first impression in

this Court. However, the Attorney General of Virginia has issued

an opinion relevant to that issue. Op. Att'y Gen. 211 (1993).

Construing the applicable statutes in Chapter 20.1 of Title 54.1

of the Code, the Attorney General concluded that
it is unlawful [under Code § 54.1-2011(A)] for anyone,
including a licensed real estate broker, who does not
have a real estate appraiser's license to testify for
compensation about the value of real estate in any
court proceeding, unless permitted under applicable
statutory exceptions.

Id. at 212.

That conclusion was based, the Attorney General explained,

upon the "clear language" of § 54.1-2011(A) which provides that

"it shall be unlawful to engage in the appraisal of real estate

. . . for compensation" and upon the "plain language" of § 54.1-

2009 under which, the Attorney General said, "an 'appraisal'

includes any opinion or conclusion about the value of interest in

real property. An appraisal report may be either oral or

written. A broker's testimony in a . . . court proceeding,

therefore, clearly falls within this definition of an

'appraisal'."

Lee Gardens contends that the statutory exception defined in

Code § 54.1-2010(3) "clearly applies to Mr. Byrne." That

subsection of the statute creates an exception for "[a]ny person

who, in the ordinary course of business, provides consulting

services . . . for a fee". Construing that language, the
Attorney General decided:
In ordinary usage, "consulting" is defined as
"providing professional or expert advice." Webster's
Ninth New Collegiate Dictionary 282 (1990). It is not
clear that this definition is broad enough to include
paid testimony in court, which goes beyond mere advice
to the property owner paying for the testimony. In
view of the rule of strict construction that applies to
exemptions from licensing statutes, therefore, it is my
opinion that § 54.1-2010(3) does not except a real
estate broker's testimony from the general prohibition
in § 54.1-2011(A).

Id. at 213.
In City of Winchester v. American Woodmark Corporation, 250

Va. ___, ___, ___ S.E.2d ___, ___ (1995), we said:
[W]e have repeatedly held that the General Assembly is
presumed to have knowledge of the Attorney General's
interpretation of statutes and the General Assembly's
failure to make corrective amendments evinces
legislative acquiescence in the Attorney General's
interpretation. Browning-Ferris, Inc. v. Commonwealth,
225 Va. 157, 161-62, 300 S.E.2d 603, 605-06 (1983);
Richard L. Deal and Assoc. v. Commonwealth, 224 Va.
618, 622, 299 S.E.2d 346, 348 (1983); Albemarle County
v. Marshall, 215 Va. 756, 762, 214 S.E.2d 146, 150
(1975).

The Attorney General's statutory analysis of the Code

Chapter entitled "Real Estate Appraisers" was published August

18, 1993. In 1994, the General Assembly amended Code § 8.01-

401.1 entitled "Opinion testimony by experts." Acts 1994, c.

328. Had the legislature intended to make "corrective

amendments" to Chapter 20.1 of Title 54.1 enacted in 1990, it

could have done so. It did not.

We share the Attorney General's analysis of the applicable

statutes, and we will affirm the trial court's ruling that Byrne

was ineligible to testify as an expert witness.

III

Finally, we must decide whether the trial court erred in
denying Lee Garden's motion for nonsuit.

"A party shall not be allowed to nonsuit a cause of action,

without the consent of the adverse party who has filed a

counterclaim, . . . unless the counterclaim . . . can remain

pending for independent adjudication by the court." Code § 8.01-

380(C). Absent the County's consent, the dispositive question is

whether the County's counterclaim seeking an increase in the

assessment could have remained pending on the docket for

independent adjudication after Lee Gardens' claim seeking a

decrease in assessment had been nonsuited.
Subsection B of Code § 58.1-3984 affords the commissioner of

revenue of a county or city the same right to initiate litigation

of a tax assessment as that afforded a taxpayer by subsection A

of that statute. Lee Gardens concedes on brief that, to increase

an under assessment, "the county's only recourse . . . is to

petition the Circuit Court for an increase in the assessment,

pursuant to sec. 58.1-3984(B)". The County did not pursue that

course. Instead, it chose to assert an under-assessment claim in

litigation initiated by the taxpayer's over-assessment claim.

Fair market value was the ultimate issue common to both

claims. The County's counterclaim could not remain pending on

the docket for an adjudication independent of an adjudication of
the taxpayer's nonsuited claim; an adjudication of one claim

would be an adjudication of both. Accordingly, we will uphold

the trial court's ruling that Lee Gardens was not entitled to

nonsuit its claim without the County's consent.

IV

Finding no merit in Lee Gardens' assignments of error, we
need not address the County's assignment of cross-error, and we

will affirm the judgment of the trial court.

Affirmed.