Atlantic Venture, Inc. v. Supervisor of Assessments

FISCHER, Judge. Atlantic Venture, Inc. and Chesapeake Venture, Inc. appeal a December 12, 1991 order of the Circuit Court for Baltimore City that affirmed in part and reversed in part three decisions of the Maryland Tax Court (Tax Court). For the limited purpose of conducting a hearing, the Tax Court consolidated three appeals from decisions of the Property Tax Assessment Appeals Board (Board). The Tax Court affirmed in part and reversed in part decisions of the Board affirming the appellee’s, Supervisor of Assessments’ (Supervisor), property tax assessments for three properties.

By an April 24, 1992 order, we consolidated the three cases for appeal. The three properties involved are located in Baltimore City and were assessed by the Supervisor, under direction of the Maryland Tax-Prop.Code Ann. (1986) (Property Tax Code), for the tax year beginning July 1, 1988. The first property, 2901 Childs Street, consists of 42.124 acres of “deep water channel” land with a bulkhead. Atlantic Venture, Inc. is the owner and taxpayer of this parcel.

The Supervisor assessed the property for $8,804,120, divided as ⁷⁶ $5,476,120 for land ($130,000 per acre) and $3,328,000 for improvements. The second property, 2000 Chesapeake Avenue, consists of 25.361 acres of “non-deep water channel” land with a bulkhead. Chesapeake Venture, Inc. is the owner and taxpayer of this parcel. The Supervisor assessed this property for $4,715,680, divided as $8,296,930 for land ($130,000 per acre) and $1,418,750 for improvements.

The third property, 2001 Chesapeake Avenue, consists of 6.21 acres (the leased portion of a 17.295 acre parcel lot) of “deep water channel” land with a bulkhead. Chesapeake Venture is the taxpayer of this parcel, which it leases from the owner, Chevron Oil Company. The Supervisor assessed the property for $1,334,300, divided as $807,300 for land ($130,000 per acre) and $527,000 for improvements. 1 Under the Property Tax Code § 14-502, the Taxpayers appealed these property tax assessments to the Board on March 31, 1989 and April 3, 1989. On July 28, 1989, the Board affirmed the Supervisor’s assessment of each property.

On August 25, 1989, the Taxpayers appealed the Board’s decisions to the Tax Court. The Taxpayers argued to the Tax Court that the “land” value (as opposed to the “improvements” value or “total” value) of the assessments was overstated. During this consolidated hearing, issues arose as to: 1) the propriety of appealing only the “land” value and, 2) whether the bulkheads should be valued as improvements or whether they are exempt under Property Tax Code § 8-238. 2 The Tax Court’s opinion stated that the Tax-Property Article allowed the Taxpayers to appeal only the land values of the assessments and that the bulkhead exemption did ⁷⁷ not apply to the Taxpayers’ properties. In a “Supplemental Memorandum of Grounds for Decision” the Tax Court found: 1) that the Taxpayers’ income and market approaches failed to convince the court that the assessment of the land values for the three properties warranted a reduction in the land values; 2) that 2000 Chesapeake Avenue was improperly valued for a pier with deep water access, and therefore, the land value was over assessed by $30,000 per acre and, 3) that the bulkheads are not exempt from assessment and the value of the bulkheads must be added as improvements.

The Tax Court went on to state, “[Supervisor] did not allocate the bulkhead value to the improvement but, rather to the land. Only the land value was under appeal. Therefore, we shall remand the appeals to the Supervisor and order him to reduce the value of the land on all three appeals by that amount attributable to the costs of the bulkhead. Since neither [Supervisor nor Taxpayers] appealed the value of the improvements, the value as determined by the Property Tax Assessment Appeals Board is not within our jurisdiction and shall remain unchanged.” The Taxpayers and the Supervisor appealed the Tax Court’s orders to the Circuit Court for Baltimore City.

The circuit court opinion states that property tax assessment appeals are appeals of the total property assessment, land and improvements. The circuit court affirmed the Tax Court’s finding that the bulkheads are not exempt from assessment, reversed the assessment of the land values, and remanded to the Tax Court for the Tax Court to remand to the Board to remand to the Supervisor and for the Supervisor to assess the properties again. The circuit court ordered the Supervisor to revalue the total property, including the bulkheads in the value of the improvements. On this appeal, the Taxpayers present the following questions: 1.

Did the circuit court err in remanding for reassessment of land and improvements when the taxpayers challenged land values only? ⁷⁸ 2. Did the circuit court err in failing to remand to the Tax Court with instructions to value the land in accordance with the evidence? 3. Did the circuit court err in directing that bulkheads on the subject properties be assessed as improvements? 3 I. The Taxpayers argue that they “only challenged the value of the land, and the Circuit Court erred in reaching the valuation of improvements.” The Taxpayers contend that, since they did not appeal the Supervisor’s valuation of the improvements, the “assessments as to improvements were therefore not before either the Tax Court or the Circuit Court.” The Taxpayers believe that the Property Tax Code permits an appeal of only the land valuation. The Taxpayers refer to § 8-104(a) which governs the Supervisor’s valuation of real property and which states, “[R]eal property shall be valued separately for: (1) the land; and (2) the improvements on the land.” The Taxpayers also refer to §§ 14-502 and 14-509 which allow a taxpayer to appeal a “value or classification in a notice of assessment.” In refuting the Taxpayers’ argument, the Supervisor contends that § 8-401(c), which governs the notification to the taxpayer of a change in valuation, allows an appeal of the total value only.

The Supervisor points to § 8-401(c)(3), which requires the Supervisor to provide notification of “the amount of the proposed value including a statement that the total amount of the proposed value is the value for purposes of appeal.” We agree that the total value of the assessment is the value from which an appeal must be taken. ⁷⁹ Section 8-401(c)(3) makes it mandatory upon the Supervisor to notify the taxpayer that the total amount of the proposed value is the value to be used for appeal. The sections that the Taxpayers rely upon, §§ 8-404,14-502 and 14-509, state that a person receiving notice of a change under § 8-401, may “appeal the value or classification____” The Taxpayers posit that the “value” referred to in these sections is the value of the land or improvements, and therefore, the Taxpayers may appeal any one of those values or both of the values. We do not agree. The “value” referred to in these sections is the “total amount of the proposed value” of which the Taxpayer is notified under § 8-401(c)(3) to be the value for appeal.

Although the land value and improvements value are contestable issues, the total property value, as provided for in § 8-401(c)(3), is the value from which the taxpayer may appeal. In addition to the statutory construction, the Taxpayers argue that the common law allows them to appeal only the “land” value. The Taxpayers state, “[I]t did not appeal the value of the improvements, and the assessments as to improvements were therefore not before either the Tax Court or the Circuit Court.” The Taxpayers cite Susquehanna Power Co. v. State Tax Commission, 159 Md. 334 , 151 A. 29 (1930), as upholding the Tax Court’s decision in these cases to limit its address to the “land” values. In Susquehanna, the Court of Appeals allowed the power company to appeal one of twelve separate values included in the State Tax Commission’s $18,735,265 assessment of the company’s property.

In Susquehanna, 159 Md. at 341 , 151 A. 29 , the County Commissioners of Harford County placed the following assessment upon the company property: Electrical transmission system.......................$109,293. Land submerged and rights......................... 6,622,816. Buildings (dam and power house).................. 12,003,156. Total................................$18,735,265.

The company appealed this assessment to the State Tax Commission of Maryland. The commission reversed the ⁸⁰ action of the county commissioners and lowered the assessment of the property to $12,023,633. The commission’s assessment was broken down into sixteen categories such as water towers, dwelling houses and acres of land. One portion of the commission’s assessment was 2,110 acres of submerged land valued at $2,349,300.

The power company appealed the assessment to the Court of Appeals arguing that the submerged land was exempt from assessment. The Susquehanna Court found that the Tax Commission had correctly determined that the submerged land was assessable and that the commission properly valued that area. The Court noted the uniqueness and difficult nature of valuing the power company’s property. The Court also found that the commission was “compelled to separate the project into its component parts and to value such parts separately.

And while that method was more difficult and more inconvenient than valuing the project as a whole, it involved no injustice or unfairness to the taxpayer, because after all the value of the whole was but the sum of the values of its parts, considered as parts of the whole.” Susquehanna, 159 Md. at 352 , 151 A. 29 . The Court affirmed the commission’s order and found that the testimony was largely that of “warring experts” and that there was no evidence for the Court to determine that the commission’s judgment was not fairly exercised nor that its conclusion was not correct. The Taxpayers cite the following statement in Susquehanna, 159 Md. at 341 , 151 A. 29 , as allowing appeals limited to only the “land” assessment value, “[T]he appeal to the Circuit Court for Harford County did not challenge the propriety of the entire assessment made by the county commissioners, but involved only the item of 2,110 acres of land submerged by the water impounded by the dam, and this court on this appeal is limited to a consideration of that item alone.” Contrary to the Taxpayers’ argument, Susquehanna does not hold that taxpayers may appeal only a portion of the assessment. In Susquehanna , the Court stated that it would not overturn the commission’s valuation ⁸¹ of the submerged land since it could not be determined from the evidence that the valuation was incorrect.

As the Court of Appeals stated in Susquehanna , the taxpayer was not prejudiced by the commission’s assessment since the submerged land portion of the assessment was correct, and therefore the sum of the parts still equalled the whole. In Macht v. Dep’t of Assessments, 266 Md. 602, 610 , 296 A.2d 162 (1972), where the taxpayers derived revenue from leasing the airspace of a building, the court stated, “[Ujnder the teaching of Susquehanna Power, we see no reason why land, improvements and airspace could not be separately valued for assessment purposes, so long as the sum of the elements did not exceed the value of the whole.” So, as the Court of Appeals has stated previously and as the Supervisor argues, the property assessment may be divided into different portions for ease of valuation, although the sum of these portions must still equal the total assessment. The Taxpayers contend that the Susquehanna decision is conclusive that a taxpayer may appeal only the “land” value of a property assessment. The present case is an example of why the taxpayers’ proposition is incorrect; here, the Tax Court erred in requiring the land to be revalued for the subtraction of the bulkheads and in failing to require the improvements to be revalued for the addition of the bulkheads.

This revaluation violates Susquehanna’s holding that the sum of the parts must equal the value of the whole. In addition, Susquehanna was decided by the Court of Appeals in 1930, but the statutory language of Property Tax Code § 8-401(c)(3) was added by Chapter 314 of the Acts of 1979. Since the statute is controlling, the total value of the assessment is the “value” for purposes of appeal. An assessment must be partitioned into land and improvement values.

Md.Tax-Prop.Code Ann. § 8-104(a). A taxpayer may offer proof as to only a portion of the total assessment; however, this does not preclude the appellate court from addressing any other portion and/or total value of the assessment. Therefore, since the total value of both the land and improvements is the total value for purposes ⁸² of appeal, the circuit court did not err by remanding for revaluation of both the land and improvements.

II

Second, the Taxpayers argue that Circuit Court “erred in failing to remand to the Tax Court with instructions to value the land in accordance with the evidence in the record.” Judicial review of Tax Court proceedings is governed by Md.State Gov’t Code Ann. § 10-215(g) which states: In a proceeding under this section, the court may: (1) remand the case for further proceedings; (2) affirm the decision of the agency; or (3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision of the agency: (i) is unconstitutional; (ii) exceeds the statutory authority or jurisdiction of the agency; (iii) results from an unlawful procedure; (iv) is affected by any other error of law; (v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or (vi) is arbitrary or capricious. In this case, the Tax Court found that there were problems with both the Taxpayers’ and Supervisor’s valuations of the land. In its “Supplemental Memorandum of Grounds for Decision” the Tax Court made the following findings: 2001 Chesapeake Avenue — the Taxpayer’s market and income approaches were not sufficient to warrant a reduction in the value. 2901 Childs Street — the Taxpayer’s evidence failed to convince the court that the Supervisor’s value was incorrect. 2000 Chesapeake Avenue — the Taxpayer’s evidence did not warrant a reduction in the valuation. The court did ⁸³ reduce the land value, however, since the Supervisor had mistakenly considered this parcel to have deep water access.

The court reduced the value of the land by $30,000 an acre to $100,000 an acre. The Supervisor’s expert testified that $100,000 was the amount applied to waterfront property. The circuit court reversed the Tax Court’s affirmance of the land valuations as being contrary to the evidence. The three cases were “remanded to the Tax Court, for further remand to the Property Tax Assessment Appeal Board, for further remand to the Supervisor of Assessments to assess the property in each case by separately valuing the land and separately valuing the improvements including the bulkheads.” The Taxpayers believe that “the valuations adopted by the Tax Court were thus properly rejected by the Circuit Court,” but the