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Thoma v. Village of Slinger

Supreme Court of Wisconsin

May 10, 2018

Donald J. Thoma and Polk Properties LLC, Petitioners-Appellants-Petitioners,
Village of Slinger, Respondent-Respondent.

          SUBMITTED ON BRIEFS: ORAL ARGUMENT: February 21, 2018

          Circuit Court Washington County (L.C. No. 2014CV700) Andrew T. Gonring, Judge

         REVIEW OF DECISION OF THE COURT OF APPEALS (2015AP1970) AND ON BYPASS FROM THE COURT OF APPEALS (2016AP2528) Reported at 373 Wis.2d 766, 895 N.W.2d 854 (2017 - Unpublished)

          For the petitioners-appellants-petitioners, there were briefs filed by Erik S. Olsen, Andrew D. Weininger, and Eminent Domain Services, LLC, Madison. There was an oral argument by Erik S. Olsen.

          For the respondent-respondent, there was a brief filed by Dustin T. Woehl, Thomas A. Cabush, and Kasdorf Lewis & Swietlik, SC, Milwaukee. There was an oral argument by Thomas A. Cabush.

          There was an amicus curiae brief filed on behalf of Wisconsin Farm Bureau Federation by H. Dale Peterson, John J. Laubmeier, and Stroud, Willink, & Howard, LLC, Madison. There was an oral argument by H. Dale Peterson.

          There was an amicus curiae brief filed on behalf of the Wisconsin REALTORS Association, Wisconsin Builders Association, and NAIOP-WI by Thomas D. Larson and Wisconsin REALTORS Association, Madison.


         ¶1 We accepted review in these cases[1] to decide whether an injunction prohibiting agricultural use of a residentially-zoned property controls the property's tax assessment classification. As it turns out, all parties agree that the classification of real property for tax purposes is based on the actual use of the property, and that an injunction obtained based on a restrictive covenant does not control tax assessment classification. This is in fact the law in Wisconsin. See Wis.Stat. § 70.32(2) (a) (2013-14) .[2]

         ¶2 What remains to be determined in this consolidated appeal is: (1) whether Donald J. Thoma and Polk Properties LLC (Thoma) presented sufficient evidence to the Village of Slinger Board of Review to overturn the 2014 tax assessment, and (2) whether the circuit court erroneously exercised its discretion when it denied Thoma's Wis.Stat. § 806.07(1) (h) motion asking the circuit court to vacate its original order affirming the Board's decision and remand to the Board for a new hearing. Because the record before the Board contains no evidence that Thoma used the property agriculturally within the meaning of Wisconsin tax law, we hold the Board's decision upholding the tax assessment was lawful, supported by a reasonable view of the evidence, and therefore cannot be disturbed. We further hold that the circuit court did not erroneously exercise its discretion when it denied Thoma's request to vacate the original order. Accordingly, we affirm the decision of the court of appeals in 2015AP1970, and we affirm the order of the circuit court in 2016AP2528.

         I. BACKGROUND

         ¶3 This case centers on Thoma's challenge to the Village of Slinger's 2014 property tax assessment for property he purchased in 2004 and has attempted to develop into a residential subdivision known as Pleasant Farm Estates. Before Thoma purchased the land, it operated as a farm and received an agricultural classification for tax assessment purposes. The Village of Slinger continued to classify Thoma's property as agricultural until the 2014 assessment.

         ¶4 In attempting to develop Pleasant Farm Estates, Thoma worked with the Village of Slinger to rezone the area to residential so individual lots could be sold for construction of single family homes. Other lots were intended for construction of condominiums. Thoma and the Village of Slinger entered into a Developer's Agreement, which set forth three phases of development. The Agreement also contained restrictive covenants, one of which prohibited Thoma from using the land for agriculture-Thoma's use had to be residential.[3] Only two lots were actually sold and the property remains mostly vacant land. The vacant land has ground cover, which is maintained by regular mowing.

         ¶5 In 2011, the Village of Slinger filed suit against Thoma to enforce the restrictive covenant and in 2012 successfully obtained an injunction prohibiting Thoma from using the land for agricultural purposes. See Vill. of Slinger v. Polk Prop. LLC, Washington Cty. Circuit Ct. Case No. 2011CV1224. The injunction lawsuit occurred contemporaneously with Thoma's tax assessment challenge, and Thoma's appeal in the injunction lawsuit is currently pending in the court of appeals. See Vill. of Slinger v. Polk Prop. LLC, 2017AP2244 (Record transmitted to court of appeals on Feb. 27, 2018).

         ¶6 In order to contest his 2014 tax assessment, Thoma and his counsel appeared before the Village of Slinger Board of Review for a hearing in June 2014. Three witnesses were sworn to testify: Thoma; his counsel; and the Village of Slinger's assessor, Michael Grota. Thoma testified that he thought the property should be classified as agricultural because that was the classification it carried the prior year. Thoma contended the 62 acres had zero value. Thoma urged the Board to apply the agricultural classification because nothing had changed on the property from the previous year, he maintained ground cover on the vacant land, and he was having trouble selling the lots. He shared with the Board vague information about a few other residential development projects that were also struggling and claimed that market value for these projects had dropped substantially. Thoma did not present any documentation to support these statements, and he offered no testimony or evidence that the property was being used for farming or that he was harvesting crops for food or fiber. Although Thoma left the hearing early to attend a funeral, his counsel remained and reaffirmed several times that Thoma was not farming the property; rather, he was "just maintaining the ground cover, " as well as "maintain[ing] the property, to try to sell the lots, " and "keeping the ground cover maintained and - and making sure that they're appropriate for - for sale . . . it's not farming, it's just kind of maintaining the - the property."

         ¶7 Assessor Grota testified that he changed the use classification from agricultural to residential because it was his understanding that the injunction prohibiting any agricultural use on the property required the property to be classified as residential for tax assessment purposes. Grota said his opinion was based on his conversation with Patrick Chaneske, "the Regional Supervisor for the Department of Revenue, in charge of Equalization in Southeastern Wisconsin." Grota submitted comparable sales of similar properties to support the numbers he used to reach his assessment.

         ¶8 The Board's attorney advised the Board members that maintaining ground cover was not sufficient to obtain an agricultural use classification: "Well, let me clarify. If it is simply maintaining ground cover, it's not an ag[ricutural] use." Ultimately, the Board voted 2-1 to uphold the assessor's assessment because Thoma failed to submit sufficient evidence to prove the assessor's number (or classification) was wrong: "There's a motion on the table to uphold the assessor's assessment of the property values. Since the objector did not provide adequate evidence in rebuttal and we will now take a roll call vote." Two of the Board's members voted affirmatively. The third Board member voted against the motion because she believed, based on her personal observation, that Thoma was using the property for what she believed qualified as agricultural use-"I've seen the guy on the tractor with the bailer."[4]

         ¶9 Thoma petitioned for a writ of certiorari pursuant to Wis.Stat. § 70.47(13), and the circuit court affirmed the decision of the Board in July 2015.[5] Thoma appealed to the court of appeals, which also affirmed the decision of the Board. Thoma v. Village of Slinger, No. 2015AP1970, unpublished slip op. (Wis. Ct. App. Jan. 18, 2017) . In October 2016, while Thoma's appeal was pending in 2015AP1970, he filed a motion in the circuit court to vacate the circuit court's first decision affirming the Board, claiming that Assessor Grota gave faulty testimony at the Board of Review Hearing. Specifically, Thoma claimed that Grota misrepresented to the Board that the Wisconsin Department of Revenue required him to classify Thoma's property as residential because of the injunction. Thoma asserted that the Board's decision erroneously relied on Grota's faulty testimony; therefore, Thoma argued, the circuit court should vacate its original order affirming the Board and send it back for a new Board hearing. The circuit court entered an order denying Thoma's motion to vacate. Thoma filed a new appeal, 2016AP2528, and petitioned this court to bypass the court of appeals so that review of this circuit court order could be consolidated with review of the court of appeals decision. We granted Thoma's bypass petition and consolidated these cases.[6]


         ¶10 In certiorari review under Wis.Stat. § 70.47(13), we review the Board of Review's decision, not the decisions of the circuit court or court of appeals, although we benefit from their analyses. See Sausen v. Town of Black Creek Bd. of Rev., 2014 WI 9, ¶¶4-5, 352 Wis.2d 576, 843 N.W.2d 39. Review is limited to "the record made before the board of review." Saddle Ridge Corp. v. Bd. of Rev., 2010 WI 47, ¶36, 325 Wis.2d 29, 784 N.W.2d 527. Our review is confined to deciding "whether the board's actions were: (1) within its jurisdiction; (2) according to law; (3) arbitrary, oppressive, or unreasonable and represented its will and not its judgment; and (4) supported by evidence such that the board might reasonably make the order or determination in question." Sausen, 352 Wis.2d 576, ¶6 (footnote omitted). The taxpayer challenging an assessment based on improper classification bears the burden of proving the classification is erroneous. Id., ¶10. If the taxpayer does not meet his burden of proof and "the board's determination to maintain the assessment is supported by a reasonable view of the evidence, " we will affirm the Board's decision. Id.

         ¶11 In reviewing a circuit court's order denying relief under Wis.Stat. § 806.07(1)(h), we apply the erroneous exercise of discretion standard. See Miller v. Hanover Ins. Co., 2010 WI 75, ¶29, 326 Wis.2d 640, 785 N.W.2d 493. If the circuit court based its decision on the pertinent facts in the record, applied the correct legal standard, and reached a reasonable determination, it properly exercised its discretion and we will uphold its decision. See Larry v. Harris, 2008 WI 81, ¶15, 311 Wis.2d 326, 752 N.W.2d 279.


         ¶12 Thoma wants his land classified as agricultural for tax assessment purposes. His arguments before this court rest on three basic propositions: (1) Thoma and Grota previously agreed that ground cover counted as agricultural use; (2) Grota's testimony that the injunction controlled over actual use caused the Board to reach the wrong decision; and (3) the hay and alfalfa being cut on his property falls under subsector 111, Crop Production, of the North American Industry Classification System (NAICS), which satisfies the legal tax definition of agricultural use.[7]

         ¶13 Our review is limited both by the applicable standard of review in certiorari actions and by the evidence presented to the Board at the hearing "no matter how incomplete or inadequate it may be." See State ex el. Hemker v. Huggett, 114 Wis.2d 320, 323, 338 N.W.2d 335 (Ct. App. 1983) . These two constraints lead us to a simple conclusion: Thoma did not present sufficient evidence to the Board to support an agricultural classification of his property under the tax assessment law. To the contrary, the evidence presented to the Board supports the assessor's residential classification. Thus, we must affirm the Board's decision upholding the assessment. See Dempze Cranberry Co., Inc. v. Bd. of Rev., 143 Wis.2d 879, 884, 422 N.W.2d 902 (Ct. App. 1988); Northland Whitehall Apts. Ltd. P'ship v. City of Whitehall Bd. of Rev., 2006 WI.App. 60, ¶24, 290 Wis.2d 488, 713 N.W.2d 646. We must affirm even if Thoma and Grota wrongly believed that ground cover qualified as agricultural use and even if Grota classified the property as residential based on the injunction, because our decision depends on the evidence before the Board and what the law is, not on off-the-record conversations or an assessor's misunderstanding of the law. Although Grota erred both in basing his classification solely on the injunction and testifying that the injunction determined classification, neither error impacts our conclusion. Thoma's failure to submit any evidence to prove agricultural activity was taking place on his property leaves the residential classification unrebutted, supported by the evidence, consistent with applicable law, and therefore correct.

         A. Tax Assessment Agricultural Classification

         ¶14 Before addressing the merits of this case, we set forth the law applicable to tax assessment and the requirements for land to receive classification as agricultural. A property is assessed according to its classification, which is determined by its use. Wis.Stat. § 70.32(2)(a). There are eight classes of property, including residential and agricultural.[8] Id. Wisconsin Stat. § 70.32 specifically cross-references "ch. Tax 18 Wis. Adm. Code, " which provides that an assessor "shall classify as agricultural land devoted primarily to agricultural use." Wis. Admin. Code DOR § Tax 18.06(1). "'Land devoted primarily to agricultural use' means land in an agricultural use for the production season of the prior year, and not in a use that is incompatible with agricultural use on January 1 of the assessment year." Wis. Admin. Code DOR § Tax 18.05(4).[9]

         ¶15 Wisconsin Stat. § 70.32 also provides: "'Agricultural land' means land, exclusive of buildings and improvements and the land necessary for their location and convenience, that is devoted primarily to agricultural use." Wis.Stat. § 70.32(2) (c) (lg); and "'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).

         ¶16 The Department of Revenue defines "agricultural use" to mean "[a]ctivities included in subsector 111 Crop Production, set forth in the North American Industry Classification System (NAICS)." Wis. Admin. Code DOR § Tax 18 . 05 (1) (a) .[10] The NAICS is reproduced in full in the Wisconsin Property Assessment Manual (WPAM). The NAICS explains that "[i]ndustries in the crop production subsector grow crops mainly for food and fiber, " and the "production process is typically completed when the raw product or commodity grown reaches the 'farm gate' for market." WPAM, ch. 11, App. A-13. It further describes "Crop Production" "establishments" "as farms, orchards, groves, greenhouses, and nurseries, primarily engaged in growing crops, plants, vines, or trees and their seeds." Id.

         ¶17 We emphasize what is clear under applicable law and undisputed by the parties: classification of real property for tax assessments is based on how the property is being used. See Wis. Stat. § 70.32(2); Wis. Admin. Code DOR § Tax 18.05(1). Zoning, injunctions, ordinances, and contracts do not trump actual use for tax assessment purposes. See Fee v. Bd. of Rev., 2003 WI.App. 17, ¶12, 259 Wis.2d 868, 657 N.W.2d 112; Wis.Stat. § 70.32(2) (c) (1g); (last visited Feb. 28, 2018) . Although an injunction, contract, or ordinance may be presented to argue how the property is supposed to be used, none can be the decisive factor for tax assessment purposes. Actual use controls whether property qualifies for agricultural or any other classification for tax assessment purposes. In order to obtain agricultural use classification, the property owner must meet the definition of agricultural use set forth in the statutes and tax code.

         ¶18 Property falls under a residential classification if it is a "parcel or part of a parcel of unfilled land that is not suitable for the production of row crops, on which a dwelling or other form of human abode is located and which is not otherwise classified under this subsection." Wis.Stat. § 70.32(2) (c)3. In determining "whether vacant land should be classified as residential" the following questions are considered:

• "Are the actions of the owner (s) consistent with an intent for residential use?";
• "Is the size of the parcel typical of residential or developing residential parcels in the area?";
• "Is the parcel zoned residential or is residential zoning likely to be allowed?";
• "Is the parcel located in a residential plat, subdivision, CSM or near other residential development?";
• "Does the parcel's topography or physical features allow for residential use?";
• "Is the parcel located in an urban or rapidly changing to urban area, as contrasted with a location distant from much residential activity?";
• "Are there any other factors affecting the parcel which would indicate residential use is reasonably likely or imminent?".

         Wisconsin Property Assessment Manual 12-1 (Rev. 12/2017) .

         B. Thoma's Burden & Presentation at the Board Hearing

         ¶19 In property tax assessment challenges, the taxpayer bears the burden of proving the assessment is wrong. See Sausen, 352 Wis.2d 576, ¶37. If the taxpayer fails to meet his burden of justifying a change in the assessment, then the Board's only option is to accept the assessor's assessment. This is so because a presumption attaches to the assessor's valuation, Wis.Stat. § 70.47(8) (i), [11] and unless the taxpayer presents information proving the assessor's classification or valuation is wrong, the taxpayer is stuck with the assessment. See Woller v. DOT, 35 Wis.2d 227, 232, 151 N.W.2d 170 (1967) ("When the assessment is disputed, as here, the burden of proof is on the taxpayer to show error."); State ex rel. Giroux v. Lien, 108 Wis. 316, 318, 84 N.W. 422 (1900) ("The assessment needs no support by evidence in the first instance, but must stand, unless shown to be incorrect by reasonably direct and unambiguous evidence.").

         ¶20 Thoma challenged his 2014 tax assessment because he believed the classification was wrong. The assessor based the 2014 assessment on the residential classification and Thoma believed the property should have been classified as agricultural. Thus, Thoma had the burden to prove to the Board that his property was being used for agricultural use as defined in the tax code. As noted, "agricultural use" bears a very specific meaning for tax assessment purposes.

         ¶21 Thoma did not present any such evidence. Rather, Thoma and his attorney repeatedly denied that any farming was taking place. Thoma and his attorney testified only that he was growing ground cover to maintain the property, hoping the lots could be sold for residential construction. This dooms Thoma's case.

         ¶22 Thoma's erroneous belief that growing ground cover qualified the property for agricultural classification has no impact on the analysis, nor does his contention that he and Assessor Grota privately agreed that ground cover constitutes agricultural use. We must apply the law as it exists, not how a party or an assessor mistakes it to be. The law does not permit agricultural classification for the use Thoma told the Board existed at the time of the Board hearing. Because Thoma admitted he was using the property only for maintaining ground cover, and ground cover does not fall within the statutory definition of agricultural use, the Board had no choice but to uphold the assessment. In so doing, it acted within its jurisdiction, according to law, in a reasonable manner, and with evidentiary support.

         ¶23 Further, Thoma's claim on appeal that he was also growing and harvesting hay and alfalfa does not alter our decision. We are bound by the record before the Board. See Saddle Ridge Corp., 325 Wis.2d 29, ¶36; Hemker, 114 Wis.2d at 323. Neither Thoma nor his attorney presented any testimony to the Board that the property was being operated as a hay and alfalfa farm or that any crop was being grown on the property to be sold for food or fiber. Instead, both adamantly denied any farming took place at all on the land and insisted that Thoma was maintaining ground cover only. The only reference to hay at the Board hearing came from the Board's attorney who explained that if a property owner is cutting and bailing hay and using it to feed livestock, then the property qualifies for agricultural use classification. The dissenting Board member's comments could potentially be construed to support a bailing hay use, [12]but no one testified that hay or alfalfa was being grown, bailed, or sold for food or fiber. The Board attorney was simply giving a hypothetical that hay bailing would be an agricultural use-not that this actually occurred on Thoma's property. The dissenting Board member believed something was being grown and bailed on the property but said nothing about it being sold or used for food or fiber. Regardless, neither the Board attorney nor the dissenting Board member were sworn witnesses. In short, Thoma failed to present any evidence that his use qualified as agricultural for tax assessment purposes.

         ¶24 We are unpersuaded by Thoma's attorney's attempt during oral argument to establish proof of agricultural use by linking three statements from the hearing: (1) a Board member's personal observation of hay growing on the property in the past; (2) Assessor Grota's testimony that the property's past use was agricultural; and (3) Thoma's testimony that its use had not changed. A Board member's personal observation is not testimony or evidence and the referenced testimony by Grota and Thoma does not change the fact that ground cover does not constitute agricultural use for tax assessment purposes.

         ¶25 We also reject Thoma's argument that Grota's erroneous view of the effect of the injunction on classification requires a reversal for a new Board hearing. It is troubling that the Village of Slinger's assessor presented his incorrect belief to the Board about the impact of the injunction. We expect assessors to know, understand, and apply the correct tax assessment laws. Nevertheless, we are bound by the record. The transcript of the proceedings does not demonstrate that the Board denied Thoma's challenge based on Grota's mistaken "injunction-controls" belief. Rather, the transcript establishes that the Board denied Thoma's challenge because the evidence indicated Thoma was maintaining ground cover on his land, which does not constitute a statutorily defined agricultural use.[13] Additionally, even though the assessor adduced the wrong basis for selecting residential classification, this property did in fact qualify as residential according to the statutory definition of residential use. It was unfilled land not suitable for production or row crops and was "not otherwise classified." See Wis.Stat. § 70.32(2) (c)3. And, there can be no dispute that the property was properly classified as residential since each of WPAM's inquiries for determining whether vacant land should be classified as residential would be answered affirmatively.

         C. Circuit Court Order Denying Thoma's Motion to Vacate

         ¶26 Thoma next contends the circuit court should have vacated its original order affirming the Board's decision to uphold the assessor's assessment of his property. He claims the circuit court should have granted his request for a new Board hearing because of Grota's "false" testimony at the hearing that the injunction controlled the tax classification. Because the circuit court did not erroneously exercise its discretion when it denied Thoma's motion to vacate, we reject Thoma's claim and affirm the circuit court's order.

         ¶27 After the circuit court affirmed the Board's decision and dismissed the writ for certiorari, and while Thoma's appeal was pending, he filed another lawsuit directly against Assessor Grota. See Polk Prop., LLC v. Grota Appraisals, LLC, Waukesha Cty. Circuit Ct., 2016CV63. Pursuant to that lawsuit, sometime in 2016, Thoma's counsel deposed Grota and Wisconsin Department of Revenue employee Patrick Chaneske.[14] In September 2016, Chaneske testified at his deposition that he never told Grota an injunction prohibiting agricultural use required Grota to change the classification of Thoma's property from agricultural to residential. Rather, Chaneske testified he advised Grota that actual use of the property controls classification.

         ¶28 Shortly after Chaneske's deposition, in October 2016, Thoma filed a motion asking the circuit court to exercise its discretionary authority under Wis.Stat. § 806.07[15] to vacate its original order affirming the Board's decision. Section 806.07(1) (h) allows circuit courts to relieve a party from a judgment or order for "[a]ny other reasons justifying relief from the operation of the judgment." Id. Thoma claimed Chaneske's deposition proved Grota presented faulty testimony to the Board and the Board relied on the faulty testimony; consequently, Thoma argued, an injustice ...

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