APPEAL FROM THE SUPERIOR COURT, WENDELL P. GARDNER, JR., J. [345 ASSOCLTDPARTNERSHIP vDC, 721 A2d Page 964]
Before Steadman, Schwelb and Farrell, Associate Judges.
The opinion of the court was delivered by: Steadman, Associate Judge:
This is an appeal from a review by the Tax Division of the Superior Court of a commercial real property tax assessment pursuant to D.C.Code §§ 47-825.1(j), -3303 (1997). The taxpayer, Square 345 Associates Limited Partnership, challenges the trial court's valuation of its property for tax year 1989 at $36,070,735. The property, a parcel of land located at 1001 G Street, Northwest, at the time vacant except for a shell structure known as the McLachlen Building, *fn1 had been assessed by the District to have a value of $38,760,980. *fn1
When lodging a challenge before the Superior Court, the burden is on the taxpayer to demonstrate error in the assessment. See Super. Ct. Tax R. 12(b). The trial court here concluded that, despite various assignments of error, the taxpayer had only succeeded in discrediting one aspect of the assessment, namely, that the assessor, Troy Davis, failed to consider the taxpayer's obligation to preserve the interior of the McLachlen Building by virtue of the building's designation as an historic landmark. *fn2 To reflect that financial burden, the court adjusted the $38,760,980 figure downward by $2,690,245, an amount it had determined using [345 ASSOCLTDPARTNERSHIP vDC, 721 A2d Page 965]
figures supplied by the taxpayer's expert appraiser.
The taxpayer in the present case asserts that our decision in District of Columbia v. Burlington Apartment House Co., 375 A.2d 1052 (D.C. 1977) (en banc), precludes the approach followed by the trial court. It argues that once error has been demonstrated in an assessment, the assessment must be disregarded for all purposes. We hold that it is within the trial court's broad discretion to accept whatever elements of an assessment the court deems valid and to make any necessary adjustments required by the evidence adduced at trial. In light of this conclusion, and because we find no grounds for reversal in the taxpayer's litany of claims relating to the trial court's factual findings, we affirm. *fn3
Real property taxes in the District are based upon an assessment of the "estimated market value" as of January 1st of the year preceding the tax year in question. See D.C.Code § 47-820(a) (1997). The term "estimated market value" is defined in D.C.Code § 47-802(4) as
100% of the most probable price at which a particular piece of real property, if exposed for sale in the open market with a reasonable time for the seller to find a purchaser, would be expected to transfer under prevailing market conditions between parties who have knowledge of the uses to which the property may be put, both seeking to maximize their gains and neither being in a position to take advantage of the exigencies of the other.
The taxpayer is entitled to an administrative review of the assessment, which, prior to 1993, was undertaken by the Board of Equalization and Review. See supra note 2. Once this remedy has been exhausted, the aggrieved taxpayer may enlist the Superior Court, Tax Division to review the assessment. See D.C.Code § 47-825.1(j); District of Columbia v. Keyes, 362 A.2d 729, 732-33 (D.C. 1976). "The [Superior] Court shall hear and determine all questions arising on appeal and shall make separate findings of fact and conclusions of law, and shall render its decision in writing. The Court may affirm, cancel, reduce, or increase the assessment." D.C.Code § 47-3303.
Before the Superior Court, the case is subject to de novo evaluation on the basis of evidence presented at trial. See District of Columbia v. New York Life Ins. Co., 650 A.2d 671, 672 (D.C. 1994); Washington Post Co. v. District of Columbia, 596 A.2d 517, 521 n. 2 (D.C. 1991); Rock Creek Plaza — Woodner Ltd. Partnership v. District of Columbia, 466 A.2d 857, 859 n. 1 (D.C. 1983). However, the taxpayer bears the burden to show that the assessment it challenges is incorrect. See Super. Ct. Tax R. 12(b); Wyner v. District of Columbia, 411 A.2d 59, 60 (D.C. 1980). On appeal, we apply in tax assessment cases the same standard of review applicable to civil cases generally: "The trial court's factual findings are binding upon this court unless they are clearly erroneous; if the findings are acceptable, we will not disturb the court's judgment unless it is plainly wrong or without evidence to support it." Wolf v. District of Columbia, 597 A.2d 1303, 1307 (D.C. 1991) ("Wolf I") (internal quotation marks omitted); see also D.C.Code § 47-3304(a) (1997); D.C.Code § 17-305(a) (1997).
Apart from questioning the court's method in calculating the reduction of the District's assessment, a matter we address immediately below, the taxpayer alleges that, as a matter of law, since the trial court found a portion of the District's assessment invalid, it had an obligation under Burlington to reject the entire assessment and either reinstate the most recent valid assessment or determine the valuation independently based on evidence presented at trial (and without regard to the discredited assessment). We think the taxpayer misreads Burlington.
The taxpayer points to our statement in Burlington that "where an assessment is [345 ASSOCLTDPARTNERSHIP vDC, 721 A2d Page 966]
based not upon a valuation made according to law but rather upon a figure determined by the court to be erroneous, arbitrary, and unlawful, the figure thus rejected must be considered a mere nullity, incapable of valid future applicability." Burlington, supra, 375 A.2d at 1057 (internal quotation marks omitted). But this language simply signifies that a discredited assessment must give way to the trial court's own valuation, determined by its reconciliation of the evidence presented at trial, which "becomes the basis for taxation until a subsequent reassessment has been made according to law." Burlington, supra, 375 A.2d at 1056. It is within the trial court's broad discretion as the finder of fact to sift through the evidence and arrive at an independent valuation. Within this process, the court may certainly credit whatever elements of the assessment it deems valid. This breadth of discretion is reflected in Brisker v. District of Columbia, 510 A.2d 1037, 1039-40 (D.C. 1986):
D.C.Code § 47-3305 authorizes the trial court to affirm, cancel, reduce or increase an assessment. The statute thus provides the court with broad discretion in a situation . . . where it has held that both the District's proposed assessment and the taxpayers' proffered alternative assessment are flawed. In such an instance, the trial court is free to direct that the case be reopened and free even to call its own witnesses in order to create a record that will support its valuation. Another option is for the court simply to cancel the District's proposed assessment, leaving in place the last assessment carried out in accordance with the statute. See District of Columbia v. Burlington Apartment House, supra, 375 A.2d at 1056.
In sum, we hold that the trial court was fully empowered to accept whatever elements of the assessment it deemed valid and incorporate that into its overall valuation. Here, the court credited all aspects of the assessment with the single exception of the failure to take into account the duty to preserve the interior of the building. As a purely legal matter, we can find no fault with the general approach the court followed. *fn4
We turn next to the merits of the taxpayer's argument regarding the specifics of the trial court's method to account for the duty to preserve the McLachlen Building's interior. As already noted, the trial court has "broad discretion in a situation . . . where it has been held that both the District's proposed assessment and the taxpayers' proffered alternative assessment are flawed." Brisker, supra, 510 A.2d at 1040. The court may "affirm, cancel, reduce, or increase the assessment." D.C.Code § 47-3303 (emphasis added). In our view the taxpayer has not demonstrated an abuse of discretion, for the court's adjustment was based exclusively on the taxpayer's own figures proffered at trial. By leading to at least some not insignificant adjustment, the court's approach could even have worked to the taxpayer's advantage, given that (1) the court rejected the relevance of the 1986 sale of the subject property, which formed the basis of the taxpayer's expert's determination that the preservation requirement diminished the value of the property by twenty-five percent, *fn5 [345 ASSOCLTDPARTNERSHIP vDC, 721 A2d Page 967]
see infra Part II(A), and (2) the assessor testified that had he known about the interior preservation requirement the assessment would "not [change] substantially in terms of the value."
The taxpayer's own expert, Ms. Saad, testified that she reduced each of the comparable sales figures (that she consulted in calculating her appraisal of the subject property) by twenty-five percent, solely to reflect the diminution in value of the property owing to the historical landmark designation of the McLachlen Building. See supra note 6. Taking Ms. Saad's formulation of the burden of the entire McLachlen Building and applying it to the District's assessment, the twenty-five percent reduction represented a value of $9,690,245. The only concrete estimate that Ms. Saad could give of the cost of maintaining the exterior was $7,000,000. *fn6 Thus, the cost of maintaining the interior and, for that matter, any other costs associated with the building, would be, by Ms. Saad's figures, approximately $2,690,245. The court reduced the assessment by that amount.
Thus, the trial court's method was essentially a function of Ms. Saad's conception of the burden of the McLachlen Building as a whole on the value of the tract. Ms. Saad admitted that she had difficulty quantifying that exact burden and so arrived at a twenty-five percent reduction as a rough measure. As pointed out by the taxpayer in its brief, Ms. Saad was able to determine that two elements impacted on the cost of the requirement to maintain the building: additional construction costs and the reduced rental income available for the entire property because of the relatively small floorplate of the historic building. The taxpayer acknowledges that the $7,000,000 figure "did not include restoration of the interior or the second element [of reduced rental income]." Therefore, accepting Ms. Saad's $7,000,000 figure and her assertion that the building diminishes the value of the property by twenty-five percent, *fn7 the $2,690,245 figure, although perhaps somewhat imprecise, was a permissible adjustment on the record before the trial court to reflect the cost of interior maintenance, the effect of the smaller floorplate, and any other such expense associated with the building besides that of preserving the exterior.
We now examine the taxpayer's additional challenges to the assessment itself.
In what it calls "the single most glaring error below," the taxpayer first argues that the trial court erred in upholding most of the assessment despite the assessor's failure to take account of a sale in late 1986 of the subject property for $22,000,000. We detect no error. Section 47-820(a) of the real property tax and assessment statute sets forth several assessment guidelines:
The assessed value for all real property shall be the estimated market value of such property as of January 1st of the year preceding the tax year, as determined by the Mayor. . . . The Mayor shall take into account any factor which might have a bearing on the market value of the real property including, but not limited to, sales information on similar types of real property, mortgage, or other financial considerations, reproduction cost less accrued depreciation because of age, condition, and other factors, income-earning potential (if [345 ASSOCLTDPARTNERSHIP vDC, 721 A2d Page 968]
any), zoning, and government-imposed restrictions.
(Emphasis added.) See also 9 DCMR § 307.1 (1996). We have recognized that where a factor is not shown to bear upon the market value, "the assessor commits no misdeed in failing to consider it." Wolf v. District of Columbia, 609 A.2d 672, 676 (D.C. 1992) ("Wolf II").
The trial court found that the taxpayer failed to show that consideration by the assessor of the prior sale would have altered the overall assessment value reached. This finding is supported by the record and therefore must be affirmed. Although the sale took place on December 12, 1986, almost thirteen months prior to the January 1, 1988, valuation date for tax year 1989, there was testimony that the price had been established much earlier in a November 1983 option agreement.
Ryland Mitchell, the District's expert appraiser who, incidentally, valued the subject property even higher than the assessor, indicated that he gave little weight to the sale because he considered the price too remote to be relevant to the tax year 1989 valuation. *fn8 Additionally, the District's assessor, Troy Davis, testified that had he known about the sale, its impact on his valuation would have been affected by the date at which the price was determined. When asked by counsel for the taxpayer whether, had he known about it, he would have "taken that into account as the best evidence of market value of the property," Davis replied, "[w]ell based on my understanding of that — of the sale as I understand it now, no, I would not have take[n] that as the best evidence of the value of the property." He continued, "[m]y consideration of this sale would have had to weigh the time frame in which the price was negotiated, was set." *fn8
In contrast, Ms. Saad, the taxpayer's expert appraiser, indicated that she relied heavily on the 1986 sale; however, the mere presence of an alternative viewpoint does not satisfy the taxpayer's burden here to show error in the District's assessment. See Safeway Stores, Inc. v. District of Columbia, 525 A.2d 207, 211 (D.C. 1987) ("[A] taxpayer bears the burden of proving that an assessment is incorrect or illegal, not merely that alternative methods exist giving a different result.").
We have difficulty fathoming the District assessor's failure to be aware of the 1986 sale. Nevertheless, the trial court reasonably could conclude that the 1986 sale price reflected the property's November 1983 value and, based on the explanations of Mitchell and Davis, that such a figure was too remote to have relevance to the tax year 1989 assessment.
Second, the taxpayer argues that the trial court erred in declining to admit evidence regarding an assessment of the subject property conducted by Mr. Davis for the second half of tax year 1988. *fn9 The taxpayer had maintained that this assessment, effective December 31, 1987, would aid in the valuation for the following tax year, dated January 1, 1988, because the two valuations were undertaken only one day apart. The sixty-three percent valuation differential, argued the taxpayer, occurring in a single day, ...