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Reybold Venture Group V-A, LLC v. New Castle County Office of Assessment & New Castle County Board of Assessment Review

Superior Court of Delaware

June 27, 2018

REYBOLD VENTURE GROUP V-A, LLC Appellant,
v.
NEW CASTLE COUNTY OFFICE OF ASSESSMENT & NEW CASTLE COUNTY BOARD OF ASSESSMENT REVIEW Appellees.

          Submitted: March 1, 2018

          Upon Appeal from the New Castle County Board of Assessment REMANDED.

          Michael J. Issacs, Esquire, Attorney for Appellant.

          Wali W. Rushdan, II, Esquire, Attorney for Appellant.

          Adam Singer, Esquire, Attorney for Appellees.

          OPINION

          Diane Clarke Streett, Judge.

         Introduction

         On appeal from the New Castle County Board of Assessment Review (the "Board"), Reybold Venture Group V-A, LLC ("Appellant" or "Reybold") asserts that its lack of access to the appraisal data of the New Castle County Office of Assessment ("County") prior to a Board hearing and the Board's decision not to grant Reybold's mid-hearing request for a continuance violated Reybold's right to due process.

         The County and the Board contend that Appellant had no right to pre-hearing discovery and had sufficient time to review the County's appraisal data during a brief hearing recess.

         The Court finds that, under the totality of the circumstances, Appellant was denied due process.

         Factual and Procedural History

         Between 2011-2017, Appellant constructed St. Andrews Addition, a 118 rental townhouse community in the Bear area of New Castle County.

         In 2013, the County sent a notice of increased tax assessments. Appellant thought that the assessment was too high and compared the tax assessments of St. Andrews Addition to St. Andrews, a nearby subdivision of 327 rental townhomes, which was also constructed by Appellant between 2001-2005. Appellant believed that there was an unjustified difference between the tax assessments of St. Andrews Addition and St. Andrews (as much as a 50% increase in assessment) which appeared to be the product of a significant overvaluation.

         In 2014, Appellant appealed the tax assessments of 35 of the St. Andrews Addition townhomes.[1] Appellant and the County negotiated the matter for more than three years (2014-2017).[2] During that time, Appellant disclosed its data to the County and asked for the County's data. The County refused to provide the County's appraisal data. An agreement was eventually reached concerning the land assessments, however, there was no agreement reached concerning the assessment of the structures. The structure assessment disparity was negotiated until approximately 30 days prior to the Board hearing.

         The Board hearing ("Hearing") was held on July 20, 2017. The Hearing started later than the appointed time because the Board considered and adopted an amendment to its procedural rules immediately prior to the Hearing.[3] The amendment created an appellant's right to obtain pre-hearing appraisal data from the County upon request.[4]

         At the Hearing, Jerome S. Heisler, Jr. testified for Reybold. Georgianna Trietley testified for the County. Mr. Heisler, the managing member of Reybold, compared the tax assessments of the St. Andrews Addition to the tax assessments of St. Andrews.[5] Mr. Heisler acknowledged that the tax assessments of St. Andrews Addition should be higher than the tax assessments for St. Andrews (because the newer townhomes are larger) but opined that the 50% difference in assessment between the two subdivisions was too high.[6] Mr. Heisler also noted that "[w]e know the person who did the original assessments was let go from the County"[7] and "[a]s part of [] dialogue [with the County] I learned that, one, there was a new assessor out there and she was later let go from the County because of inaccuracies in her assessment."[8]

         Georgiana Trietley, a licensed assessor for the County[9], was the County's witness. Ms. Trietley testified that the County's appraisal data was comprised of "county records, public records, recorder of deeds, [and] our own data for the properties that were comparable."[10] She stated that although St. Andrews Addition was rental property, it should be assessed by using 1983 sales comparables [instead of rentals] because the base year for tax assessments is July 1, 1983. Ms. Trietley created a table with the data based on the comparable properties and that table was put into evidence as Exhibit 2. Two other exhibits were also admitted into evidence.[11]

         Ms. Trietley explained her methodology and that the appraisal data presented at the Hearing had been compiled shortly before the Hearing- "within the past 30 days" (of the Hearing).[12] She further testified that she selected (with difficulty)[13]five comparable 1983 sales of residential homes in the Bear, Delaware area, [14]adjusted the square footage of the selected comparable properties to the square footage of the St. Andrews Addition, and then applied the comparable property price per square foot to the square footage of the disputed St. Andrews Addition structures.[15]

         Ms. Trietley acknowledged that the square footage upon which the County based its original assessments [and on which Appellant appealed to the Board] was incorrect. She stated that "[someone] [] went out and re-measured all of the parcels, you know, all of the St. Andrews Addition buildings, so that you know, some of them did have bad measurements, so they've been corrected, and my new assessed value sheet have the corrected square footage that we currently have."[16] She also conceded that the tenant appeal of the recently selected comparables was different from the tenant appeal of the townhomes at St. Andrews Addition.[17]

         The Board then took a brief recess to make copies of the County's exhibits.[18]Appellant remarked that it would like to review the exhibits during the recess. Appellant was allowed to review the exhibits. After the recess, the County continued its direct examination of Ms. Trietely.

         On cross-examination, Ms. Trietley acknowledged that "she was concerned that St. Andrews [was] not assessed high enough"[19] and that the difference in assessments between St. Andrews and St. Andrews Addition was the result of "the divergence in the types of buildings from the 1, 200-square-foot to the 2, 500-square-foot. And that, you know, and in a tenant-appeal situation, St. Andrews is, you know, 15 years old, and [St. Andrews Addition] is only, is newer, less than five years old."[20]

         Mr. Heisler then testified as Appellant's rebuttal witness. Mr. Heisler challenged the County's choices of comparable properties.[21] He explained that St. Andrews Addition and St. Andrews have comparable amenities because the larger St. Andrews units "have finished basements some of them, decks, similar to the ones - - with patios underneath, similar to the ones we have in [St. Andrews Addition]. So there is comparability"[22] and he proffered Appellant's calculation of the square footage of the St. Andrews Addition structures. Mr. Heisler also commented that he had not seen the County's data exhibits until the Board Hearing recess[23] and that the County's calculation of the square footage of the St. Andrews Addition structures was inaccurate.[24] Mr. Heisler also expressed frustration with the County's methodology.[25]

         Mr. Heisler then asked for a continuance so that he could address the exhibits.[26] The Chairman of the Board appreciated Appellant's need to study the presented data, including the changes to it, but denied the request.[27] The Chairman said, "I believe that there is enough of a reasonable cause that's been made by the County to offer the [A]ppellant some improvements [lower assessments] from what were the assessed values before you came here."[28]

         After Mr. Heisler challenged the County's calculations, Ms. Trietley admitted to the Chairman that her data was internally flawed and asked for an opportunity to "run [the numbers] again."[29]

THE CHAIRMAN:

So you had 88, 300 represented the final value of land and building.

MS. TRIETLEY:

Correct.

THE CHAIRMAN:

Okay. And then you have a new building value of 73, 800.

MS. TRIETLEY:

Correct,

THE CHAIRMAN:

And if you subtract that from the 88, 300-

MS. TRIETLEY:

No. You have to look at the final value or the building value. The building value previously was 80, 600.

THE CHAIRMAN:

Right. And now you're at 73, 800.

MS. TRIETLEY:

Now we're at 73, 800.

THE CHAIRMAN:

So how do you get a difference of minus $14, 500?

MS. TRIETLEY:

Because you have to add in the land.

THE CHAIRMAN:

Okay. But when you add in the land, isn't that new value $81, 500?

MS. TRIETLEY:

Yes.

THE CHAIRMAN:

If you compare 81, 500 to 88, 300, which was the land and the building, how do you get $14, 500?

MS. TRIETLEY:

My excel didn't do that right because they-88, 300

THE CHAIRMAN:

And I'm looking at that being the case in all of them.

MR. HEISLER:

It is. It's a formula error.

MS. TRIETLEY:

I think that, yeah the difference would be that-88, 300-

UNIDENTIFIED SPEAKER:

6, 800

MS. TRIETLEY:

Yeah. 6, 700.

THE CHAIRMAN:

It would be 6, 800.

MS. TRIETLEY:

Right.

THE CHAIRMAN:

It's 81, 500 against 88, 300.

MS. TRIETLEY:

Right. It's 6, 700.

THE CHAIRMAN:

6, 800.

MS. TRIETLEY:

6, 800.

THE CHAIRMAN:

Right. So this-

MS. TRIETLEY:

Column is wrong.[30]

         The Board then acknowledged that the County's witness had presented incorrect information.

THE CHAIRMAN:

This column is wrong. So when we were talking about the benefit to the appellant was almost $186, 000, that's not true.

MS. TRIETLEY:

We can-I can go back and try to run it again. Yeah.

THE CHAIRMAN:

I'm not trying to change everything. You know, this is a document that's going into the record, and that column is not accurate.[31]

         The Chairman then struck the inaccurate portion of Ms. Trietley's data from the record.[32] The Board considered the revised reassessment and unanimously accepted the newly announced assessed values, which were lower (and based on different data), than the assessed values that Appellant first challenged.

         On August 10, 2017, the Board issued its formal Opinion. The Opinion explained that the comparable sales approach utilized by the County was a "recognized method of valuation, "[33] that the comparable sales properties that the County used in support of its valuation were all within two miles of St. Andrews Addition, [34] and that the Court has historically supported the comparable sales method and rejected the comparable assessments method.[35]

         On September 15, 2017, Appellant filed its Notice of Appeal of the Board's decision.

         Parties' Contentions

         On December 29, 2017, Appellant filed its Opening Brief. Appellant asserts that the Board violated Appellant's right to due process when it denied Appellant's request for pre-hearing discovery and denied Appellant's request, during the Hearing, for a continuance in order to have sufficient time to review the County's newly revealed appraisal data which resulted in an assessment lower than the appealed assessment.[36]

         Specifically, Appellant contends that "[considering the important nature of this appraisal data, disclosing the appraisal data on the same date of the Hearing failed to provide Appellant the proper notice to which it [was] entitled"[37] and that "Appellant explicitly requested [the County's appraisal data] on several occasions between fall 2013 and the Hearing, but the County refused to provide this information to the Appellant."[38] Appellant also asserts that the continuance denial unfairly prejudiced Appellant and was somewhat ironic in light of the Board's amendment of a procedural rule, moments before the Hearing, which recognized the importance of informed and germane appeals.[39]

         Appellant argues that the denial of a continuance was unfair because Appellant had little basis upon which to challenge the County's new revised reassessments that only became known after Appellant's witness had testified. Appellant asks the Court to remand this matter because "[t]his denial prohibited Appellant from having a fair opportunity to analyze and rebut the County's appraisal data in advance of the Hearing."[40] Appellant further claims that "[t]he County's last minute introduction of their appraisal data on the same day of the Hearing materially prejudiced Appellant's ability to properly analyze and rebut the same."[41]

         On February 6, 2018, Appellees filed their Answering Brief. Appellees argue that the absence of formal discovery in administrative proceedings does not violate due process, [42] "[n]othing precluded [Appellant] from conducting its own research of comparable properties that were sold and presenting that evidence to the Board in its case in chief, "[43] and "[Appellant] [] failed to show how a continuance would have changed the outcome."[44]

         On February 27, 2018, Appellant filed its Reply in Further Support of Its Opening Brief. Appellant asserted that allowing Appellant to view the County's appraisal data during a brief recess "hardly cured the prejudice that Reybold faced by having to confront this data for the first time at the [H]earing."[45]

         Standard of Review

         This Court's authority to review appeals from the Board is governed by 9 Del. C. § 8312(c), which provides that "[t]he decision of [the Board] shall be prima facie correct and the burden of proof shall be on the appellant to show that such body acted contrary to law, fraudulently, arbitrarily or capriciously."[46] The Appellant faces "a substantial evidential burden" before both the Board and this Court.[47] At a hearing before the Board, there is a presumption of accuracy in favor of the County's assessment.[48] That presumption can only be overcome by competent evidence sufficient to show a substantial overvaluation.[49] On appeal to this Court from the Board, "[t]he reviewing court is not to reverse if it finds that the Board relied in part on incompetent evidence but only if the Board's findings are clearly wrong and its conclusions not the product of an orderly and logical deductive process."[50] The Board's decision not to grant Appellant's request for a continuance is reviewed under an abuse of discretion standard.[51] This Court may remand a matter back to the Board "to clarify issues of fact or to make findings consistent with the Court's decision."[52]

         Discussion

         Appellant asserts that it was denied its right to due process because the Board refused to provide pre-hearing discovery and declined to grant Appellant's mid-Hearing request for a continuance in order for Appellant to sufficiently evaluate the County's changing and inaccurate appraisal data (particularly since the County denied Appellant's request for the County's appraisal data prior to the Hearing). A determination on this issue is fact-specific.[53]

         Concerning the continuance request made during the Hearing after the County presented its witness and exhibits, Mr. Heisler stated that "I would actually like time to respond to the exhibit... I think this is sort of a shotgun approach if this is the only time I get on something this major. I would like time to respond to this because I think it's important to the overall process."[54] However, the Board denied the request and offered as its reason that the revised reassessments were "some improvement" (lower than the original County assessments that Appellant appealed).[55] The Board did not address Appellant's concern about the process.[56]

         Based on the totality of the circumstances, the Court finds that the Board's decision to deny a continuance was an abuse of discretion. Appellant was prejudiced by the Board's denial. In O'Neill v. Board of Assessment Review, [57] this Court held that a proceeding before the Board was "fundamentally unfair" when the County presented proposed reassessed property valuation figures at a hearing where the appellant contended that such evidence "constituted surprise" and "deprived [] her [of her] right to effectively cross-examine and present evidence."[58] Upon a finding that the Board relied on figures that were not introduced into evidence or made available to the Appellant prior to the hearing in O 'Neill, the Court remanded for a new administrative hearing.[59]

         Here, although Appellant learned of the figures and revised figures during the Hearing, Appellant did not have an opportunity to meaningfully review or challenge the County's reassessments and/or the revised reassessments. Despite Reybold's negotiations concerning pre-hearing assessments with the County for almost four years, the County did not present those pre-hearing assessments during the Hearing.[60] During the Hearing, the County's witness conceded that the assessed values that were used during negotiations and formed the basis of Appellant's appeal were incorrect because they were based on inaccurate square-footage measurements of the St. Andrews Addition structures.[61] The County, instead, presented reassessments and then as the Hearing progressed, revised those reassessments. As such, the County proffered two new and different assessments during the Hearing.

         Appellant's presentation of its case at the Hearing focused on pre-Hearing assessments put forth by the County during negotiations. Appellant was not informed of the County's new figures or any basis for the new figures until after Appellant had presented its case, rested, and the County presented its witness. Appellant only had a brief period of time during the copying break to review and consider the County's post-negotiation figures which were revealed at the Hearing (and had been compiled only approximately 30 days prior to the Hearing). Furthermore, this was not the County's final version. The County's figures continued to change during the Hearing and were again revised after cross-examination and rebuttal. Moreover, the record does not reflect that Appellant had an opportunity to challenge the inaccurate revised reassessment figures that had been proffered after the recess.

         There were protracted pre-Hearing negotiations, the County abandoned its pre-Hearing figures, and the County presented reassessments at the Hearing after those negotiations. The County did not present a firm, accurate, or unchanging assessment. Additionally, the County's witness wanted to go over the numbers again.[62] As such, the Court finds that the Board abused its discretion when it declined to grant the continuance.

         Appellant appeared at the Hearing for the purpose of challenging the original assessments. Appellant was not aware of newly revised assessments or the changing nature of the revised assessment until after the County's witness testified. Due process requires that an appellant have notice of the subject matter of the proceedings[63] and due process is violated when "notice [] fail[s] to inform, and this lack of information [] prejudice[s] the party's ability to defend against the charges."[64]Although Appellant obviously knew the generalized nature of the subject matter (tax assessments of St. Andrews Addition rental townhomes), Appellant did not have notice that the County had been negotiating with incorrect assessment ...


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