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BUHL FOUNDATION v. BD. OF PROP. ASSESS
Buhl Foundation v. Board of Property Assessment, Appeals and Review, Supreme Court of Pennsylvania, May 21, 1962
Factual and Procedural Background
The appeal arises from an order of the Court of Common Pleas of Allegheny County sustaining a triennial real estate tax assessment on property known as Chatham Village, a private housing development in the nineteenth ward of the city of Pittsburgh. The Buhl Foundation developed and owned the property until November 1, 1960, when it sold its interest to intervenor Chatham Village Homes, Inc. The contested assessment concerned only the buildings (the land assessment was not contested). The assessment of the entire property was increased for the triennial years 1957–1959 from $911,450 to $1,282,360, with the increase entirely on the buildings (from $674,610 to $1,043,720, a 55% increase). At the court below the tax assessment records were offered in evidence and an order sustaining the assessment was entered dismissing the appeal. The Foundation appealed to the Supreme Court of Pennsylvania.
Legal Issues Presented
- Whether the assessment of the buildings exceeded the property's fair market (actual) value.
- Whether the assessment was uniform with other assessments (the uniformity requirement under the constitution and applicable statutes).
- Whether the use of (depreciated) reproduction cost by the assessing official is a proper and probative method for fixing the fair market value of improved real estate for tax purposes.
- What evidentiary burden and presumptions apply at a hearing on an appeal from a real estate tax assessment (i.e., effect of offering tax assessment records and the burden on the property owner to overcome the presumed validity of the assessment).
Arguments of the Parties
Appellant's Arguments
- The assessment as made by the board exceeds the fair market value ("actual value") of the property.
- The assessment is not uniform with other assessments (i.e., lacks required uniformity across real estate as a class).
The opinion does not contain a detailed account of the appellee's (Board's) specific arguments beyond the presentation of the board's tax assessment records and the board's appraiser testimony explaining factors considered in making the assessment.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Lehigh and Wilkes Barre Coal Company's Assessment, 225 Pa. 272, 74 A. 65 (1909) | Establishes that offering tax assessment records makes out a prima facie case showing the validity of the assessment. | Cited to support that the tax assessment records introduced at the hearing created a prima facie showing of validity of the assessment. |
| Westbury Apartments, Inc. Appeal, 314 Pa. 130, 170 A. 267 (1934) | Same principle: tax assessment records create a prima facie case. | Used with other cases to show the presumption of validity when assessment records are offered. |
| Chatfield v. Board of Rev. of Taxes, 346 Pa. 159, 29 A.2d 685 (1943) | Same principle: tax assessment records create a prima facie case. | Included among authorities establishing the prima facie validity of an assessment when records are offered. |
| Washington County v. Marquis, 233 Pa. 552, 82 A. 756 (1912) | Allocates the burden: once the prima facie case is made, the property owner must show by the weight of the evidence that he was aggrieved. | Cited to explain the landowner's burden after the assessment records were admitted. |
| Hammermill Paper Co. v. Erie, 372 Pa. 85, 92 A.2d 422 (1952) | Affirms the property owner's burden to overcome the presumed validity of the assessment. | Used to support the proposition that the complaining property owner must prove aggrievement by the weight of the evidence. |
| Park Tax Assessment Case, 350 Pa. 421, 39 A.2d 601 (1944) | Interprets the statutory requirement in Allegheny County that real estate be assessed according to "actual value." | Cited to show statutory foundation for assessing according to actual value in Allegheny County. |
| Delaware, L. W. R. R. Co.'s Tax Assessment (No. 1), 224 Pa. 240, 73 A. 429 (1909) | States the constitutional requirement of uniformity in taxation. | Quoted to emphasize that statutory assessment standards are subordinate to the constitutional uniformity requirement. |
| Brooks Building Tax Assessment Case, 391 Pa. 94, 137 A.2d 273 (1958) | Defines "actual value" as "market value" and provides the market-value definition quoted by the court. | Quoted for the definition that "actual value" means market value and the definition of market value used by the court. |
| Algon Realty Co. Tax Assessment Appeal, 329 Pa. 321, 198 A. 49 (1938) | States that fair market value is fixed by opinions of competent witnesses and that the trial court's finding must be supported by competent evidence. | Relied upon to require that the court's finding of value be supported by competent evidence and that expert opinions consider many factors. |
| Traylor v. Allentown, 378 Pa. 489, 106 A.2d 577 (1954) | Explains that many factors should be taken into account by expert witnesses when estimating market value. | Cited to indicate the range of factors an expert should consider in valuing property; referenced to disallow reliance on reproduction cost. |
| Metropolitan Edison Co.'s Appeal, 307 Pa. 401, 161 A. 303 (1932) | Holds that reproduction cost has no probative value in fixing fair market value of improved real estate for tax purposes. | Relied upon to conclude that the board's appraiser's use of reproduction cost was an improper factor. |
| McSorley v. Avalon Boro. School Dist., 291 Pa. 252, 139 A. 848 (1927) | Agreement (accord) that reproduction cost is not probative of market value for tax purposes. | Listed with other cases to support the rule that reproduction cost lacks probative value. |
| Harleigh Realty Co. Case, 299 Pa. 385, 149 A. 653 (1930) | Addresses the principle of uniformity in taxation of real estate as a class. | Cited in the court's discussion of what constitutes comparability for uniformity purposes. |
Court's Reasoning and Analysis
The court's analysis proceeded in the following sequence, relying on the record and established authorities cited in the opinion:
- Prima Facie Validity from Records: The court first observed that the board had offered the tax assessment records in evidence at the hearing below. Under established precedent, that offering created a prima facie showing of the validity of the assessment, shifting the evidentiary burden to the complaining property owner to prove by the weight of the evidence that it was aggrieved by the assessment.
- Burden on Owner to Prove Aggrievement: The opinion reiterated that after the records were admitted the landowner bore the "laboring oar" to overcome the presumption of validity and show the assessment was erroneous.
- Evaluation of the Board Appraiser's Testimony: The court examined the testimony of the chief building appraiser — the individual who made the assessment for the board — and concluded that, although he claimed to have considered several factors, the major and basic factor used in arriving at the valuation was depreciated reproduction cost.
- Rejection of Reproduction Cost as Probative: Relying on prior Pennsylvania decisions, the court held that reproduction cost has no probative value in fixing fair market value for tax purposes. Because an improper factor (depreciated reproduction cost) was admittedly used, the court concluded that the presumed validity of the assessment was overcome.
- Insufficiency of Supporting Evidence: The court found that the only evidence offered in support of the increased assessment was the estimate based on improper considerations. Consequently, the trial court's finding of value sustaining the assessment lacked competent evidentiary support and could not stand.
- Guidance on Uniformity: Anticipating remand, the court briefly discussed uniformity. It recognized Chatham Village as a unique development (in size, make-up and planning), making direct comparisons with identical properties difficult. It noted the trial court had rejected offered comparables as not comparable. The Supreme Court emphasized that the legal requirement is uniformity in taxation of real estate as a class — properties need not be identical nor necessarily in the same immediate neighborhood to be comparable for uniformity analysis.
- Disposition: Because the assessment was supported only by evidence relying on an improper factor and the presumption of validity was thereby overcome, the Supreme Court reversed the order sustaining the assessment and remanded the record for further proceedings the lower court deemed proper.
Holding and Implications
ORDER REVERSED.
Implications and direct effects from the opinion as stated by the court:
- The trial court's order sustaining the triennial assessment on the buildings at Chatham Village is reversed because the assessment rested on an improperly used factor (depreciated reproduction cost), which has no probative value in fixing fair market value for tax purposes.
- The record is remanded to the lower court for any further proceedings it deems proper to effectuate a just and equitable result.
- Each side is to bear its own costs.
- The court provided guidance on the uniformity principle: uniformity is required in taxation of real estate as a class, and comparability for uniformity purposes does not demand identical properties or necessarily properties in the immediate neighborhood.
The opinion did not announce a new test altering prior law; it applied established principles (including the rejection of reproduction cost as probative of market value and the evidentiary rules regarding prima facie validity and the landowner's burden) and remanded for proceedings consistent with those principles.
Taxation — Real estate — Assessment — Words and Phrases — Actual value — Market value — Reproduction costs — Uniformity of assessment — Act of May 22, 1933, P.L. 853.
1. Under the Act of May 22, 1933, P.L. 853, § 402, as amended by the Act of May 16, 1939, P.L. 143, § 1, in Allegheny County, real estate is required to be assessed according to the actual value thereof. [570]
2. The term "actual value" means "market value". [570]
3. "Market value" is the price which a purchaser, willing but not obliged to buy, would pay an owner, willing but not obliged to sell, taking into consideration all uses to which the property is adapted and might in reason be applied. [570]
4. Reproduction cost has no probative value for any purpose in fixing the fair market value of improved real estate for tax purposes. [571]
5. What the law requires is uniformity in the taxation of real estate as a class. [571] Practice — Appeal from real estate tax assessment — Validity of assessment — Evidence — Prima facie case — Burden of proof.
6. At a hearing on an appeal from a real estate tax assessment, when the tax assessment records are offered in evidence this makes out a prima facie case showing the validity of the assessment; and the complaining property owner is then required to show by the weight of the evidence that he has been aggrieved by the valuation so fixed. [569-70]
7. The presumed validity of an assessment is overcome by evidence that an improper factor was admittedly used in computing the assessment. [571]
8. The finding of value by the trial court must be supported by competent evidence. [571]
OPINION BY MR. JUSTICE EAGEN, May 21, 1962:
This appeal is from an order of the court below sustaining a triennial real estate tax assessment. The property involved is a private housing development in the nineteenth ward of the city of Pittsburgh, known as Chatham Village.
The Buhl Foundation was the original developer and continued in ownership until November 1, 1960, when it sold its interest to the intervening appellant, Chatham Village Homes, Inc. The assessment appealed from involves only that levied against the buildings; the land assessment is not in litigation.
The property comprises approximately forty-five acres of land, sixteen acres of which are used for structures, four acres for recreational facilities and there are twenty-five acres of woodland. It includes one hundred and ninety-seven dwelling units, one hundred and twenty-nine of which were constructed in the year 1931, sixty-eight units in 1934.
The assessment of the entire property was increased for the triennial years of 1957-1958-1959, from $911,450 to $1,282,360. All of this increase was on the buildings which were raised in valuation from $674,610 to $1,043,720, or fifty-five per cent.
Appellant argues that the assessment exceeds the fair market value of the property and is not uniform with other assessments.
At the hearing in the court below, the tax assessment records were offered in evidence. This made out a prima facie case showing the validity of the assessment: Lehigh and Wilkes Barre Coal Company's Assessment, 225 Pa. 272, 74 A. 65 (1909); Westbury Apartments, Inc. Appeal, 314 Pa. 130, 170 A. 267 (1934); Chatfield v. Board of Rev. of Taxes, 346 Pa. 159, 29 A.2d 685 (1943). The complaining real estate owner then had the laboring oar to show by the weight of the evidence that it had been aggrieved by the valuation so fixed: Washington County v. Marquis, 233 Pa. 552, 82 A. 756 (1912); Hammermill Paper Co. v. Erie, 372 Pa. 85, 92 A.2d 422 (1952).
The landowner called as its witness the chief building appraiser of the Board of Property Assessment of Allegheny County, the individual who made the assessment for the board. He testified that he considered several factors in arriving at his conclusion as to the value of the buildings involved, but an analysis of his testimony makes it clear that the major and basic factor used was depreciated reproduction costs. This was error.
In Allegheny County, real estate is required to be assessed according to the actual value thereof: Act of May 22, 1933, P.L. 853, § 402, as amended by the Act of May 16, 1939, P.L. 143, § 1, 72 P. S. § 5020-402. See also, Park Tax Assessment Case, 350 Pa. 421, 39 A.2d 601 (1944). This, of course, is subordinate to the constitutional requirement of uniformity: Delaware, L. W. R. R. Co.'s Tax Assessment (No. 1), 224 Pa. 240, 73 A. 429 (1909); Brooks Building Tax Assessment Case, 391 Pa. 94, 137 A.2d 273 (1958). " `The term "actual value" means "market value" (citing cases). And market value has been defined as the price which a purchaser, willing but not obliged to buy, would pay an owner, willing but not obliged to sell, taking into consideration all uses to which the property is adapted and might in reason be applied' ": Brooks Building Tax Assessment Case, supra, at 97.
The actual or fair market value, while not easily ascertained, is fixed by the opinions of competent witnesses as to what the property is worth on the market at a fair sale: Algon Realty Co. Tax Assessment Appeal, 329 Pa. 321, 198 A. 49 (1938). Many factors should be taken into acount by the expert witness in arriving at his estimate of value. See, Traylor v. Allentown, 378 Pa. 489, 494, 106 A.2d 577 (1954). However, as pointed out in that decision, reproduction cost is not one of them. In fact, reproduction cost has no probative value for any purpose in fixing the fair market value of improved real estate for tax purposes: Metropolitan Edison Co's Appeal, 307 Pa. 401, 161 A.2d 303 (1932). Accord, McSorley v. Avalon Boro. School Dist., 291 Pa. 252, 139 A. 848 (1927); Algon Realty Co. Tax Assessment Appeal, supra.
Since an improper factor was admittedly used in computing the assessment, the presumed validity thereof was overcome. Further, since the only evidence offered in support of the assessment as made was this estimate based upon improper considerations, the finding of value of the court below, sustaining the assessment, cannot stand. The finding of value by the trial court must be supported by competent evidence. See, Algon Realty Co. Tax Assessment Appeal, supra.
Since we will remand this case for further action that the lower court deems proper, brief discussion of the application of the rule of uniformity is indicated.
It is clear from the present record that the development involved is unique as to size, make-up and planning. Under such circumstances, comparison with identical properties for the purpose of ascertaining the ratio of assessed value to market value is difficult, if not impossible. The landowner herein offered evidence as to the market value of other housing developments and the ratio of the assessments thereon. The lower court found that these properties were not comparable and considered the evidence valueless. We just wish to note for the guidance of the trial court in the further consideration of this case that what the law requires is uniformity in the taxation of real estate as a class: Delaware, L. W. R. R. Co's Tax Assessment (No. 1), supra; Harleigh Realty Co. Case, 299 Pa. 385, 149 A. 653 (1930). To be comparable, for this purpose, the properties need not be identical; nor need they necessarily be located in the same immediate neighborhood.
Order reversed. The record is remanded to the lower court for any further proceedings it deems proper to effectuate a just and equitable result. Each side to bear own costs.
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