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State ex rel. Peter Ogden Family Trust of 2008 v. Board of Review for Town of Delafield

Court of Appeals of Wisconsin, District II

March 7, 2018

State of Wisconsin ex rel. The Peter Ogden Family Trust of 2008 and The Therese A. Mahoney-Ogden Family Trust of 2008, Petitioners-Appellants,
v.
Board of Review for the Town of Delafield, Respondent-Respondent.

         APPEAL from an order of the circuit court for Waukesha County, Cir. Ct. No. 2016CV1707 KATHRYN W. FOSTER, Judge. Reversed and cause remanded with directions.

          Before Neubauer, C.J., Gundrum and Hagedorn, JJ.

          GUNDRUM, J.

         ¶1 The Peter Ogden Family Trust of 2008 and The Therese A. Mahoney-Ogden Family Trust of 2008 (collectively "the Trust") filed this action for certiorari review of a decision of the Board of Review for the Town of Delafield sustaining the 2016 property tax assessment of the Trust's real property. The Trust argues the Board failed to act according to law when it sustained the assessment, which was based upon the assessor's change in the classification of the property from agricultural and agricultural forest to residential. Specifically, the Trust claims the classification change was erroneous because it was based upon the assessor's and the Board's mistaken legal belief that in order for land to qualify as agricultural land, crops grown on the property must be grown for a business purpose. Because we agree that both the assessor's change of the classification to residential and the Board's sustainment of that change were based upon the erroneous legal belief that a business purpose was necessary for an agricultural classification, we reverse and remand this matter to the circuit court.

         Background

         ¶2 In April 2003, Peter Ogden and Theresa Mahoney-Ogden purchased the land at issue in this case. At the time, the land was classified as residential for property tax purposes, and it remained so classified until 2012, when the assessor changed the classification to agricultural and agricultural forest based upon pine trees, apple trees, and hay the Ogdens planted on the property. In 2016, the assessor reclassified the property as residential after concluding that it failed to qualify for the agricultural and agricultural forest classifications. If the property had remained classified as agricultural and agricultural forest, it would have been valued at $17, 100, whereas it was valued at $886, 000 when reclassified as residential-resulting in a significant difference in property tax owed.

         ¶3 The Trust objected to the 2016 property tax assessment, challenging the reclassification of the property to residential. The Board of Review held an evidentiary hearing. After hearing testimony and receiving exhibits, two members of the Board voted to sustain the residential reclassification and related tax assessment and two members voted to not sustain. Because the vote was tied, the assessor's reclassification of the property and the assessment were sustained. The Trust sought certiorari review and the circuit court upheld the Board's decision. The Trust appeals.

         Discussion

         ¶4 On certiorari, we review the actions of the Board, not the circuit court. Fee v. Board of Review of Florence, 2003 WI.App. 17, ¶11, 259 Wis.2d 868, 657 N.W.2d 112 (2002). Our review is limited to whether the Board (1) kept within its jurisdiction; (2) acted according to law; (3) acted arbitrarily, oppressively, or unreasonably; and (4) supported its decision with substantial evidence. Whitecaps Homes, Inc. v. Kenosha Cty. Bd. of Review, 212 Wis.2d 714, 720, 569 N.W.2d 714 (Ct. App. 1997). At issue in this case is whether the Board acted according to law, which is a question of law we review de novo. Lloyd v. Board of Review of Stoughton, 179 Wis.2d 33, 36, 505 N.W.2d 465 (Ct. App. 1993). Resolving this question requires us to interpret our statutes and administrative rules, which are also matters of law we review independently. State v. Jensen, 2010 WI 38, ¶8, 324 Wis.2d 586, 782 N.W.2d 415 (statutory interpretation); Orion Flight Servs. v. Basler Flight Serv., 2006 WI 51, ¶18, 290 Wis.2d 421, 714 N.W.2d 130 (administrative rule interpretation). Because we agree with the Trust that the Board failed to act according to law in sustaining the reclassification, and thus the assessment, of the property, we reverse.

         ¶5 When a taxpayer appeals an assessor's valuation to a board of review, the board presumes the valuation is correct; however, this presumption may be rebutted by a proper showing by the taxpayer that it is incorrect. Anic v. Board of Review of Wilson, 2008 WI.App. 71, ¶10, 311 Wis.2d 701, 751 N.W.2d 870; see also W . S . § 70.47(8)(i) (2015-16). The presumption of is tat [1] correctness, however, "presuppose[s] the method of evaluation is in accordance with the statutes." State ex. rel. Markarian v. City of Cudahy, 45 Wis.2d 683, 686, 173 N.W.2d 627 (1970). "Errors of law should be corrected by the court on certiorari and the failure to make an assessment on the statutory basis is an error of law." Id. If we "find[] upon the undisputed evidence before the board that the assessment has not been fixed upon the statutory basis, the assessment should be set aside." State ex. rel. Boostrom v. Board of Review of Linn, 42 Wis.2d 149, 156, 166 N.W.2d 184 (1969); see also State v. Town of Mosel, 32 Wis.2d 253, 262-63, 145 N.W.2d 129 (1966) (determining that an assessment "was not made on the statutory basis" in part because "the board of review drew the unwarranted conclusion that the assessors had proceeded according to the methods permissible under the statute").

         ¶6 "[L]and … that is devoted primarily to agricultural use" is "[a]gricultural land, " Wis.Stat. § 70.32(2)(c)1g., and such land "must be classified as agricultural, " Fee, 259 Wis.2d 868, ¶12. See also Wis. Admin. Code § Tax 18.06(1) (June 2015) ("An assessor shall classify as agricultural land devoted primarily to agricultural use." (emphasis added)). "Agricultural use" "means agricultural use as defined by the department of revenue by rule and includes the growing of short rotation woody crops, including poplars and willows, using agronomic practices." Wis.Stat. § 70.32(2)(c)1i. (emphasis added). Wisconsin Admin. Code § Tax 18.05(1) (June 2015), a Department of Revenue rule, defines "agricultural use" as including:

(a) Activities included in subsector 111 Crop Production, set forth in the North American Industry Classification System (NAICS), United States, 1997, published by the executive officer of the president, U.S. officer of management and budget[ or]
….
(c) Growing Christmas trees or ginseng. (Emphasis added.)

         "Activities" "included in subsector 111 Crop Production, " include the "growing" of apples and hay. See North American Industry Classification System (NAICS), United States, 1997, published by the office of the President, U.S. Office of Management and Budget, subsector 111 Crop Production. Of great import to this case, the plain language of the statute and rule refers to "growing" the relevant crops-here apples, hay, and Christmas trees-not marketing, selling, or profiting from them.

         ¶7 The Board acknowledges in passing the key "growing" language, stating that the Board "does not dispute that pursuant to these statutes and rules, the growing of alfalfa hay, Christmas trees, or apples may constitute an 'agricultural use.'" (Emphasis added.) Subsequently, however, the Board reasserts its position that land cannot be "devoted primarily to agricultural use" without "minimal sales, " "valid economic activity, " and crops being "marketed for sale." The Board cites to no statute, administrative rule, or case law in support of this position. We are not surprised because, as indicated above, according to the plain language of the relevant statute and administrative rule, the Board's position is not the law.

         ¶8 Based upon the above-identified statutory and regulatory provisions, we conclude that to qualify for the agricultural classification, it is sufficient that the land be devoted primarily to growing qualifying crops, whether or not those crops are grown for a business purpose. And, consistent with our case law and Wis. Admin. Code § Tax 18.06(1) (June 2015), if the land is thus devoted primarily to agricultural use, it must be classified as agricultural.

         ¶9 On appeal, the Trust maintains that the Board failed to act in accordance with the law because the assessor's reclassification of the property to residential and the Board's sustainment of that reclassification were based on the assessor's and the Board's erroneous legal belief that to qualify for the agricultural classification, the land must be farmed for a business purpose. The Board disputes this, asserting that "[i]t is clear the assessor did not impose a 'business' standard on the [Trust] when evaluating the extent of use of the property." Review of the transcript of the Board hearing, however, reveals that it is "clear" that the property was reclassified as residential based upon the assessor's and the Board's erroneous belief that the land did not qualify for the agricultural classification because the crops at issue were not being grown for a business purpose.

         ¶10 As part of his testimony before the Board, Peter Ogden read a memo from his legal counsel's office which indicated that for agricultural classification the property needed to be producing crops for a business purpose.[2] Ogden testified to planting and growing pine and apple trees on the property with the intent of eventually selling the pines as Christmas trees and selling the apples produced by his "orchard." He also testified to the "hay field" he and Lloyd Williams, a local farmer, seeded and harvested on the property, as well as a contractual arrangement he had with Williams related to this. Ogden explained that the apple trees were on the smaller of the two lots, comprising "at best" an acre of the 4.6 acre lot, and the hay field and "Christmas tree farm" were on the larger 7.76 acre lot. Ogden indicated he harvests "three plus acres" of hay on the latter lot and the "Christmas tree farm" comprises "four to five acres."

         ¶11 Responding to questioning from the assessor as to whether he had "filed a Schedule F, profit or loss from farming, " Ogden indicated he had not. Billy Cooley, one of the two Board members who voted to sustain the assessor's residential reclassification, also asked Ogden: "You did not file a Schedule F, which I am assuming is farm-inaudible. It was not brought up by your accountant or anything; correct?" Ogden responded: "To my knowledge I am not required to file a Schedule F." Larry Krause, the other Board member who voted to sustain the reclassification to residential, asked Ogden if Williams leased the hay acreage from him.

         ¶12 Counsel for the Board asked Ogden: "What is your business plan?" Ogden explained his plan of selling apples once the orchard had sufficiently matured, cutting the hay for Williams to use until Ogden "g[o]t cattle" as he explained was his future intent, and having individuals cut their own Christmas trees for a price and "then in the spring, we would replant where that stump is." When asked by counsel how he planned to advertise and market the Christmas trees and apples, Ogden discussed possible strategies. When asked by counsel "[w]hat kind of revenue" he expected, Ogden indicated he "hoped" he would "get somewhere between $65 and $75 a tree" for Christmas trees and approximately "$2.99 a pound" for the apples. Counsel continued ...


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