{ "id": 4351352, "name": "IN THE MATTER OF: APPEAL OF: OCEAN ISLE PALMS LLC from the decision of the Brunswick County Board of Equalization and Review concerning the valuation and taxation of real property for tax year 2010", "name_abbreviation": "In re Appeal of Ocean Isle Palms LLC", "decision_date": "2013-01-25", "docket_number": "No. 128A12", "first_page": "351", "last_page": "359", "citations": [ { "type": "official", "cite": "366 N.C. 351" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "723 S.E.2d 543", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2012, "opinion_index": -1 }, { "cite": "519 S.E.2d 52", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 5, "year": 1999, "pin_cites": [ { "page": "55-56" } ], "opinion_index": 0 }, { "cite": "351 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1155593 ], "year": 1999, "pin_cites": [ { "page": "5-7" } ], "opinion_index": 0, "case_paths": [ "/nc/351/0001-01" ] }, { "cite": "723 S.E.2d 543", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 27, "year": 2012, "pin_cites": [ { "page": "551" }, { "page": "550" }, { "page": "550" }, { "page": "550" }, { "page": "551" }, { "page": "550-51" }, { "page": "551" }, { "page": "551", "parenthetical": "Beasley, J., concurring in part and dissenting in part" }, { "page": "551" }, { "page": "551" }, { "page": "551" }, { "page": "551" } ], "opinion_index": 0 } ], "analysis": { "cardinality": 762, "char_count": 21209, "ocr_confidence": 0.757, "pagerank": { "raw": 4.03580807328026e-08, "percentile": 0.1480524540233813 }, "sha256": "ad618aa8586a660590f8cfe5617033db8e6d5c65df1f3ed03182959b29dc45d7", "simhash": "1:27f0c50946772f56", "word_count": 3390 }, "last_updated": "2023-07-14T15:35:25.873086+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Justices HUDSON and BEASLEY did not participate in the consideration or decision of this case." ], "parties": [ "IN THE MATTER OF: APPEAL OF: OCEAN ISLE PALMS LLC from the decision of the Brunswick County Board of Equalization and Review concerning the valuation and taxation of real property for tax year 2010" ], "opinions": [ { "text": "EDMUNDS, Justice.\nA North Carolina county may appraise property for taxation purposes only in specified years. Brunswick County (\u201cthe County\u201d) conducted such an authorized appraisal of all property in the County in 2007. In this case, we consider whether the County acted lawfully when it reassessed the tax value of real property belonging to taxpayer Ocean Isle Palms LLC (\u201cOcean Isle\u201d) in 2008, which was not a statutorily designated year for setting property values for tax purposes. Although the County argues that it was merely correcting an error in an existing appraisal that arose from a misapplication of its 2007 schedule of values of land in the County, we conclude that the County\u2019s 2008 action constituted an improper reappraisal. Because 2008 was not a year in which a general reappraisal was permitted, the North Carolina Property Tax Commission correctly entered judgment in favor of Ocean Isle. Accordingly, we reverse the decision of the Court of Appeals reversing the Commission\u2019s decision.\nWe begin our analysis by considering the statutes pertinent to the valuation of real property and the County\u2019s application of those statutes. To ensure accurate and uniform taxation of real property across North Carolina, the General Assembly has established \u201cStandards for Appraisal and Assessment\u201d of property that each county must implement, N.C.G.S. \u00a7\u00a7 105-283, -284 (2011), along with a framework setting out the \u201cTime for Listing and Appraising Property for Taxation,\u201d id. \u00a7\u00a7 105-285 to -287 (2011). Under these statutory standards, all real property must be appraised or valued \u201cat its true value in money.\u201d Id. \u00a7 105-283. \u201cTrue value\u201d is defined as \u201cmarket value,\u201d the price\nat which the property would change hands between a willing and financially able buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of all the uses to which the property is adapted and for which it is capable of being used.\nId.\nThe General Assembly required each county to conduct an initial valuation of all real properties within its borders, followed by subsequent revaluations of the property, in accordance with a schedule set by statute. N.C.G.S. \u00a7 105-286. During a year in which a revaluation is permitted, and only during such years, every property in a county is reappraised and its current taxable value established, reflecting any changes that may have occurred since the last revaluation to ensure that the new true value is accurate. Id. -, see also In re Allred, 351 N.C. 1, 5-7, 519 S.E.2d 52, 55-56 (1999). Because of the need for consistency in these reappraisals, each county must develop and review uniform schedules of values, standards, and rules that detail the methodology appraisers will apply when determining a property\u2019s true value. N.C.G.S. \u00a7 105-317 (2011). These schedules must be revised by a county tax assessor and approved by a county board of commissioners before the arrival of each revaluation year. Id. \u00a7 105-317(b), (c). Any reappraisals must be complete as of the first day of January in a reappraisal year, when the current true value of all real property in a county is set. Id. \u00a7 105-285(d). These newly set values are carried forward until the next revaluation year unless specified circumstances arise that justify reassessment in an intervening year, such as the need to correct a clerical or mathematical error. Id. \u00a7 105-287(a).\nAlthough revaluations are required every eight years, a county may elect to increase their frequency. Id. \u00a7 105-286. The record indicates that Brunswick County conducted revaluations in 1999, 2003, and 2007. For each of these revaluations, Brunswick County developed and approved a schedule of values setting out the methodologies its appraisers could apply. Under one methodology, known as the \u201csales comparison\u201d or \u201clot price\u201d method, true value is calculated using recent sales price data for similarly situated parcels. However, because available sales data predominantly captured the value of developed parcels sold with completed infrastructure, the sales comparison method in its pure form failed accurately to reflect the true value of an undeveloped parcel.\nTo account for the difference in value between developed and undeveloped parcels, the County approved, and appraisers applied, a \u201ccondition factor\u201d to the sales comparison method. The condition factor is an adjustment that allowed appraisers to account for the lower true value of undeveloped property. To derive the true value for an undeveloped parcel, the appraiser would first use the sales comparison method to determine a base value for the parcel. The appraiser would then calculate the condition factor, in the form of a decimal fraction, reflecting the property\u2019s degree of development. The base value of the property in question would be multiplied by the condition factor, yielding a lower amount that represented the value of the property in its undeveloped state. The condition factor (shorn of its decimal and treated as a whole number) would be entered on the property\u2019s tax card to adjust the value of the parcel to compensate for its undeveloped state. For example, a property without water, sewer, other utilities, or paved roads could be assigned a condition factor of .20, which would be entered on the property\u2019s tax card as \u201c20.\u201d The sales comparison value of a developed but otherwise similarly situated parcel would be multiplied by .20, yielding a true value for the undeveloped lot of 20% of the base value of comparable developed property. Appraisers generally assigned a condition factor of 20 when vacant property in an area intended for residential use lacked water and sewer services, paved roads or curbing, or other amenities. As infrastructure was added to such property, the condition factor would increase, reflecting the rising true value of the property. This condition factor method had been used in Brunswick County since \u201cat least since 1976\u201d and was applied in a manner consistent with past practices during the 2007 revaluation.\nTo prepare for the 2007 revaluation, which was completed in February of that year, the County began appraising property eighteen months earlier. The Brunswick County Board of Commissioners also began reviewing the 2007 schedule of values and adopted it in November 2006. This 2007 schedule was compiled after reviewing schedules that had been approved for the revaluation years 1999 and 2003.\nBetween 2005 and 2006, the number of undeveloped parcels sold in the County rose, increasing the sales data available for assessing the trae value of such parcels. Even so, as in past years, the schedule adopted by the Board contained no details discussing the propriety of applying the condition factor, which was neither required nor prohibited in any particular situation. Instead, the schedule\u2019s text only described the numerical format of the condition factor and explained how the factor entered into the calculation of the total adjusted unit price. The schedule\u2019s text further stated that \u201c[t]here exists no \u2018all encompassing\u2019 set of rales\u201d to ensure accuracy and that ultimately, the County relies on appraisers\u2019 \u201cexperience and expertise-... as well as their personal judgment\u201d when applying the schedule.\nDuring the 2007 revaluation, the appraisal supervisor was Marlon Long, who had worked as an appraiser in the County since 1996. The primary appraiser for vacant parcels, Jim Callahan, had worked as an appraiser for the County for eight or nine years. Both men had used the condition factor method to determine the true value of undeveloped property throughout their employment with the County. Callahan visited the undeveloped lots, observed the degree to which development had progressed, determined the condition factor in a manner consistent with its application in the revaluation years 1999 and 2003, and assigned a condition factor based on his observations. The County tax office was aware that condition factors ranging from 20% to 40% were being applied to unfinished properties and that the 2007 schedule of values was adopted in 2006 with an intention of maintaining consistency with this appraisal practice.\nAgainst this background, we turn now to the property at issue in this action. Callahan appraised each of Ocean Isle\u2019s one hundred nine undeveloped parcels. Except for areas designated for common use, he assigned each parcel a condition factor of .20, causing the true values of those properties to be set at 20% of the base values of comparable developed properties. This approach to the appraisal of Ocean Isle\u2019s undeveloped lots resulted in the assignment of true values for the 2007 revaluation ranging from $45,000 to $60,000 per parcel.\nFollowing the conclusion of the revaluation, Callahan continued to apply the condition factor in assessments of property value through the remainder of 2007. However, a newly appointed County tax assessor ordered that, effective 1 January 2008, a nonrevaluation year, the condition factor be removed from all tax cards and the value of all undevelpped properties be reset to 100% of their assigned base value. As a result, for the year 2008, Ocean Isle\u2019s parcels were reassessed at taxable values ranging from $191,250 to $718,630 per parcel.\nOcean Isle did not challenge the reassessment, but promptly approached the County and, after discussion between the parties, the tax values of the undeveloped parcels were decreased slightly. These values were carried forward for tax years 2009 and 2010. However, in 2010 Ocean Isle disputed the 2010 tax values before the Brunswick County Board of Equalization and Review, arguing that the values were unlawful because they were based on an invalid reassessment. Specifically, Ocean Isle argued that 2008 was not a year in which a general reappraisal was authorized and that the County used improper, arbitrary, and illegal methods while failing to follow the applicable statutes.\nThe County Board of Equalization and Review heard Ocean Isle\u2019s challenge and declined to change the valuations. On 26 July 2010, Ocean Isle appealed the Board\u2019s decision to the North Carolina Property Tax Commission (\u201cthe Commission\u201d), where it moved for summary judgment, arguing that the 2008 reassessments were not permissible because they did not occur in a designated reappraisal year, in violation of N.C.G.S. \u00a7\u00a7 105-286(c) and lOS^^ia). The County opposed Ocean Isle\u2019s summary judgment motion, arguing that the reassessment was proper under section 105-287(a)(2), which permits reappraisals in off years to \u201c[c]orrect an appraisal error resulting from a misapplication of the schedules, standards, and rules used in the county\u2019s most recent general reappraisal.\u201d According to the County, application of the condition factor to Ocean Isle\u2019s undeveloped lots in 2007 constituted a misapplication of the schedule of values, thereby justifying changing the appraised value of property in a nonreassessment year pursuant to the statute.\nOn 24 June 2011, the Commission found that the 2007 schedule of values had not been misapplied. As a result, the Commission determined that the 2008 revaluation was unlawful and the values then set had not been carried forward legally in 2009 and 2010. The Commission granted Ocean Isle\u2019s summary judgment motion and ordered the County to value the parcels as of 1 January 2010 using the same condition factor adjustment applied for the 2007 revaluation.\nThe County appealed, arguing among other issues that the Commission erred in granting summary judgment for Ocean Isle because genuine issues of material fact exist as to whether the schedule of values was misapplied in 2007 and whether the 2008 assessment constituted a lawful correction. On 21 February 2012, a divided panel of the Court of Appeals reversed the Commission\u2019s order. In re Ocean Isle Palms, \u2014 N.C. App. at \u2014, 723 S.E.2d at 551.\nThe majority found that a genuine issue of material fact existed as to whether a misapplication of the schedule had occurred under section 105-287(a)(2). Id. at \u2014, 723 S.E.2d at 550. Although the panel unanimously held that application of a condition factor was not itself erroneous, the majority focused on allegations that the factor had not been applied uniformly. Id. at \u2014, 723 S.E.2d at 550. The majority concluded that conflicting evidence had been presented as to whether application of the condition factor in 2007 had resulted in uniform, consistent^ and accurate assessments of the true value of the lots. Id. at \u2014, 723 S.E.2d at 550. Accordingly, the majority reversed and remanded the Commission\u2019s order for further proceedings to determine whether the procedures used by the County, as established in the schedule of values, had been \u201capplied in a uniform and equitable manner,\u201d id. at \u2014, 723 S.E.2d at 551, or whether the procedures had resulted \u201cin lots being valued far below or far above their true values and in a manner inconsistent with the valuation of other lots in the same county,\u201d id. at \u2014, 723 S.E.2d at 550-51. The majority concluded that inaccurate and inconsistent application of a condition factor \u201cis a misapplication of the schedule.\u201d Id. at \u2014, 723 S.E.2d at 551.\nThe dissenting judge disagreed. Observing that the County had used the condition factor method for decades and that its application had always required appraisers to use their sound discretion, id. at \u2014, 723 S.E.2d at 551 (Beasley, J., concurring in part and dissenting in part), the dissenting judge stated that she did \u201cnot believe there are any genuine issues of material fact regarding whether the County\u2019s 2007 Schedule of Values was misapplied\u201d during the 2007 revaluation, id. at \u2014, 723 S.E.2d at 551. Instead, the dissent discerned that the real dispute between the parties was whether the condition factor could be applied at all. Id. at \u2014, 723 S.E.2d at 551. The dissenting judge believed that the County\u2019s action in 2008 was not simply a correction of a misapplication of the 2007 schedule of values but instead constituted \u201ca new standard appraisal practice.\u201d Id. at \u2014, 723 S.E.2d at 551. Because the implementation of a new standard appraisal practice is not one of the circumstances listed in section 105.287(a) allowing an off-year change of an appraised value, the dissent would have affirmed the Commission\u2019s decision. Id. at \u2014, 723 S.E.2d at 551. Ocean Isle filed its notice of appeal based on the dissenting opinion.\nBefore us, the County argues that summary judgment was improper because genuine issues of material fact exist regarding whether its schedule of values was misapplied in 2007, permitting the 2008 reassessment. Our review of the record indicates that no such disputed issues of fact exist and that summary judgment in favor of Ocean Isle was proper.\nThe County contends that more information was available by 2008 as to the true value of undeveloped lots because Ocean Isle had sold a number of undeveloped lots between 5 May 2006 and the revaluation date of 1 January 2007, and the revenue stamps on the deeds to those parcels indicated an average price significantly higher than the value for similar parcels derived in the 2007 revaluation. In addition, the County contends that some undeveloped lots in the County located in subdivisions other than Ocean Isle were assessed in 2007 without application of \u201can undeveloped lot discount,\u201d resulting in inconsistent valuations of similar parcels. As a result, the County argues, the condition factor was not uniformly applied and, when applied, did not yield an accurate value. Thus, according to the County, the off-year reassessment of Ocean Isle\u2019s property was permissible because it \u201c[c]orrect[ed] an appraisal error resulting from a misapplication of the schedules, standards, and rules used in the county\u2019s most recent general reappraisal.\u201d N.C.G.S. \u00a7 105-287(a)(2).\nAlthough the County attempts to frame its actions in 2008 as the correction of an error, we find that the County instead instituted a new revaluation system. According to the record, shortly after the 2007 revaluation, the County\u2019s tax assessor ordered appraisers to stop using the condition factor method of appraisal and to reset the value of the parcels at issue here without any consideration of, or adjustment for, the degree to which the property had been developed. In other words, the County\u2019s response to the alleged shortcomings of the 2007 appraisals of Ocean Isle\u2019s lots was not to correct the application of the condition factor to reflect new information but to throw out the condition factor altogether. Consequently, the County\u2019s reaction to the perceived erroneous revaluations cannot be seen as a mere correction of a methodology used with approval in the past. Instead, the County imposed a revised system of valuation. We must now consider whether doing so in an off year violated the relevant statutes, a question of law.\nProperty values are not set in concrete. The statutes allow a county discretion to revise its standards, rules, and schedules to ensure that appraisals conducted in revaluation years reflect the true value of real property in light of changing conditions or available data. Here, if the County did not want the condition factor method to remain in use in 2007, its remedy was to revise the schedule of values for that revaluation year to reflect a change from its previously approved approach to undeveloped property appraisal. However, when no such timely change was made, the County may not retroactively label as error an historically approved methodology endorsed by the schedule.\nThe County also argues that the 2007 revaluation involved a correctable error because the condition factor; though applied to Ocean Isle\u2019s parcels, was not applied to all undeveloped properties in the County, resulting in a lack of uniformity. However, this argument does not affect the valuation of Ocean Isle\u2019s property, where the only question presented was whether appraisers could apply the condition factor at all. The Court of Appeals unanimously found no error in the County\u2019s decision to allow appraisers to use their discretion to decide whether or not to apply the condition factor during the 2007 revaluation, as had been done with the County\u2019s approval in past revaluations. Accordingly, if the County seeks to limit appraisers\u2019 use of their discretion in future revaluations, it may do so only prospectively.\nBased on the record, we find that no misapplication of Brunswick County\u2019s schedule of values occurred during the 2007 revaluation. Consequently, the reassessment conducted in the nonreappraisal year 2008 violated section 105-287(a)(2), and the alteration of the taxable value of Ocean Isle\u2019s property under the 2008 reassessment was unlawful. Therefore, the Commission properly granted summary judgment in favor of Ocean Isle. We reverse the decision of the Court of Appeals.\nREVERSED.\nJustices HUDSON and BEASLEY did not participate in the consideration or decision of this case.\n. When the challenged reassessment took place in 2008, section 105-286(c) addressed the value to be assigned to real property during a year when that property was not subject to reappraisal and provided in pertinent part that \u201c[i]n years in which real property within a county is not subject to appraisal or reappraisal under subsections (a) or (b), above, or under G.S. 105-287, it shall be listed at the value assigned when last appraised under this section or under G.S. 105-287.\u201d N.C.G.S. \u00a7 105-286(c) (repealed 2009) (codified as amended at N.C.G.S. \u00a7 105-287(a)).", "type": "majority", "author": "EDMUNDS, Justice." } ], "attorneys": [ "Nelson Mullins Riley & Scarborough LLP, by Charles H. Mercer, Jr. and Reed J. Hollander; and Elaine R. Jordan, General Counsel, The Coastal Companies, for taxpayer-appellant.", "Parker Poe Adams & Bernstein LLP, by Charles C. Meeker and Jamie Schwedler, for respondent-appellee." ], "corrections": "", "head_matter": "IN THE MATTER OF: APPEAL OF: OCEAN ISLE PALMS LLC from the decision of the Brunswick County Board of Equalization and Review concerning the valuation and taxation of real property for tax year 2010\nNo. 128A12\n(Filed 25 January 2013)\nTaxation\u2014 real property \u2014 county reassessment of value\u2014 improper reappraisal \u2014 permitted only in specified years\nThe North Carolina Property Tax Commission did not err by entering judgment in favor of Ocean Isle Palms LLC (Ocean Isle) arising from Brunswick County\u2019s (County) reassessment of the tax value of Ocean Isle\u2019s real property. Although the County argued that it was merely correcting an error in an existing appraisal that arose from a misapplication of its 2007 schedule of values of land in the county, its 2008 action constituted an improper reappraisal. 2008 was not a year in which a general reappraisal was permitted. A North Carolina county may appraise property for taxation purposes only in specified years.\nJustices HUDSON and BEASLEY did not participate in the consideration or decision of this case.\nAppeal pursuant to N.C.G.S. \u00a7 7A-30(2) from the decision of a divided panel of the Court of Appeals,-N.C. App. \u2014, 723 S.E.2d 543 (2012), reversing an order entered on 24 June 2011 by the North Carolina Property Tax Commission and remanding for further proceedings. Heard in the Supreme Court on 15 October 2012.\nNelson Mullins Riley & Scarborough LLP, by Charles H. Mercer, Jr. and Reed J. Hollander; and Elaine R. Jordan, General Counsel, The Coastal Companies, for taxpayer-appellant.\nParker Poe Adams & Bernstein LLP, by Charles C. Meeker and Jamie Schwedler, for respondent-appellee." }, "file_name": "0351-01", "first_page_order": 383, "last_page_order": 391 }