St. Leonard Shores Joint Venture v. Supervisor of Assessments

COLE, Judge. The question presented in this case is whether the Supervisor of Assessments of Calvert County erred in determining the full cash value, for property tax purposes, of 105 unsold lots in a subdivision without taking into account the projected “sell-out period” of the lots. We distill the facts giving rise to this issue as follows. In 1978, appellant, St. Leonard Shores Joint Venture, purchased a large tract of waterfront land in Calvert County, Maryland.

In July and August of 1979, appellant recorded ⁴⁴⁴ subdivision plats, which subdivided the property into 117 lots. From the time of subdivision to January 1, 1982, only 12 of the lots were sold. Appellee, the Supervisor of Assessments of Calvert County (“Supervisor”), determined the full cash value of the remaining 105 lots to be $2,635,-000 as of January 1, 1982, the date of finality. 1 The Supervisor reached this figure by determining the full cash value of each individual subdivision lot and by combining these values. The Supervisor used this method of assessment based on a directive issued by the State Department of Assessments and Taxation (SDAT).

The SDAT directive, issued November 13, 1980, provides, The valuation of subdivided lots should consider each lot as a single legal entity. Each lot should be valued at its full cash value as of the date of finality regardless of ownership. This valuation should consider the highest and best use of each individual lot. Bulk ownership should not be considered.

Appellant appealed the valuation of the lots to the Property Tax Assessment Appeal Board for Calvert County and argued that the Supervisor had assessed the lots at more than full cash value. The Board rejected appellant’s argument and affirmed the Supervisor’s assessment. Appellant then appealed to the Maryland Tax Court and that court, after a hearing held before one of its examiners, also affirmed the assessment. Still seeking redress, appellant next appealed to the Circuit Court for Calvert County.

By opinion and order filed February 2, 1984, the circuit court reversed the Tax Court’s decision. In so doing, the circuit court declared that the “sell-out period”—the estimated period of time required to sell all of the lots—must be considered in determining the full cash value of the lots and that the SDAT directive should be disregarded because it removes the “sell-out period” from the assessor’s considera ⁴⁴⁵ tion. Because the Supervisor failed to consider the “sell-out period” in assessing the property in question, the circuit court concluded that his assessment of the lots was erroneous. The Supervisor appealed the circuit court’s decision to the Court of Special Appeals.

In Supervisor v. St. Leonard Shores Joint Ven., 61 Md.App. 204 , 486 A.2d 206 (1985), the intermediate appellate court reversed the circuit court and held that the circuit court had erroneously reversed the Tax Court. We granted appellant’s petition for certiorari in order to address the important question presented. I Appellant contends that the Supervisor assessed the 105 unsold subdivision lots at more than their full cash value because the Supervisor failed to consider the length of time necessary to sell all of the lots. Because this case focuses upon the Supervisor’s determination of the full cash value of the subdivision lots, we begin our analysis by examining the statutory requirement of “full cash value.” Article 81, § 14(b)(l)(i) provides that “[a]ll real property required by this article to be assessed shall be valued at its full cash value on the date of finality.” In Rogan v. Commrs. of Calvert County, 194 Md. 299 , 71 A.2d 47 (1950), this Court addressed the determination of full cash value.

Judge Delaplaine, writing for the Court, declared: Ordinarily the cash value of property is the market value. Schley v. Montgomery County Com’rs, 106 Md. 407, 410 , 67 A. 250 . But, as Justice White said in San Francisco National Bank v. Dodge, 197 U.S. 70 , 25 S.Ct. 384, 386 , 49 L.Ed. 669 , the market value of property is the value a willing purchaser will pay for it to a willing seller in open market, eliminating exceptional and extraordinary conditions giving the property temporarily an abnormal value. Id. [194 Md.] at 311, 71 A.2d at 54 .

Since Rogan , we have repeatedly recognized the willing purchaser—willing seller standard as the ordinary mode ⁴⁴⁶ of measuring full cash value. See, e.g., Supervisor v. Ort Children Tr., 294 Md. 195, 201 , 448 A.2d 947, 950 (1982), Samet v. Supervisor of Assess., 290 Md. 357, 359-60 , 430 A.2d 73, 74 (1981); Shell Oil Co. v. Supervisor, 278 Md. 659, 666 , 366 A.2d 369, 373-74 (1976); State Dept. of A & T v. Greyhound Comp., 271 Md. 575, 586 , 320 A.2d 40, 45-46 (1974); Tax Comm. v. Brandt Cabinet Works, 202 Md. 533, 545 , 97 A.2d 290, 295 (1953). Thus, for purposes of measuring full cash value, the assessor should assume that a willing buyer and a willing seller wish to engage in a hypothetical sale of the property to be assessed. In disputing the Supervisor’s assessment of the 105 unsold lots, appellant emphasizes that “[t]he problem ... is that you didn’t have 105 buyers, you had twelve—seven the first year and five the next year.” Appellant’s argument misses the point.

Regardless of whether a buyer for each lot actually exists, the assessor is required to assess each lot as if a willing buyer exists. This is not to say that a glut on the market should not be considered. We think, however, that the condition of the real estate market is adequately reflected in the price that the hypothetical