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Hanning Regency LLC v. Town of Brookfield Board of Review

Court of Appeals of Wisconsin, District II

July 3, 2019

Hanning Regency LLC, Petitioner-Appellant,
v.
Town of Brookfield Board of Review, Respondent-Respondent.

          APPEAL FROM AN ORDER OF THE CIRCUIT COURT FOR WAUKESHA COUNTY, NO. 2017CV1899 WILLIAM DOMINA, JUDGE.

          Before Reilly, P.J., Gundrum and Hagedorn, JJ.

          HAGEDORN, J.

         ¶1 Hanning Regency LLC asserts that the Town of Brookfield Board of Review improperly disregarded the statutory standard for real property valuations when it sustained an assessor's valuations that were nearly twice the amount of a recent arm's-length purchase of two properties. We agree and reverse the circuit court's decision to deny Hanning's certiorari challenge and remand for further proceedings.

         ¶2 For tax assessment purposes real property valuations are governed by Wis.Stat. § 70.32(1) (2017-18), [1] which provides:

Real property shall be valued by the assessor in the manner specified in the Wisconsin property assessment manual provided under [Wis. Stat. §] 73.03(2a) from actual view or from the best information that the assessor can practicably obtain, at the full value which could ordinarily be obtained therefor at private sale. In determining the value, the assessor shall consider recent arm's-length sales of the property to be assessed if according to professionally acceptable appraisal practices those sales conform to recent arm's-length sales of reasonably comparable property; recent arm's-length sales of reasonably comparable property; and all factors that, according to professionally acceptable appraisal practices, affect the value of the property to be assessed.

         ¶3 The statute's second sentence is a codification of an assessment hierarchy that was developed under common law. See State ex rel. Campbell v. Township of Delavan, 210 Wis.2d 239, 256-57 & n.5, 565 N.W.2d 209 (Ct. App. 1997) (citing State ex rel. Markarian v. City of Cudahy, 45 Wis.2d 683, 686, 173 N.W.2d 627 (1970)). Often cited for its articulation in Markarian, the hierarchy broadly recognizes that a property's "full value" is best determined with consideration of three sources-or "tiers"-of information: an arm's-length sale of the subject property, recent arm's-length sales of reasonably comparable properties, and all other factors that collectively have a bearing on the property's value. Metropolitan Assocs. v. City of Milwaukee, 2018 WI 4, ¶¶31-34, 379 Wis.2d 141, 905 N.W.2d 784 (citing Markarian, 45 Wis.2d at 686).

         ¶4 Simply reading the statute might lead one to think that assessors should gather all three tiers of information, consider them, and then make a determination. As explained further below, the assessor and Board here thought precisely that. But our cases are clear-and we are bound to follow them-this "consider everything together" approach is not the law. Instead, the hierarchy's three tiers must be considered in order. You do not get to tier two if tier one information is available, and you do not get to tier three if tier two (or tier one) information is available. See Metropolitan Assocs., 379 Wis.2d 141, ¶¶31-34; Great Lakes Quick Lube, LP v. City of Milwaukee, 2011 WI.App. 7, ¶¶17-18, 331 Wis.2d 137, 794 N.W.2d 510 (2010). Failure to follow this hierarchy structure "constitutes an error of law." Campbell, 210 Wis.2d at 259. And that is what occurred here.[2]

         ¶5 In August 2016, Hanning purchased two commercial office buildings for a combined price of $875, 000. In 2017, the Town of Brookfield reassessed the properties for tax purposes, concluding that their respective values were $884, 600 and $768, 500, or a combined total of $1, 653, 100. Hanning objected to the valuations, and the Board held a hearing. At the conclusion of the hearing, the Board sustained the assessor's valuations, finding that Hanning had not overcome the presumption of correctness accorded to the assessor. Wis.Stat. § 70.47(8)(i). Hanning now appeals from the dismissal of its certiorari challenge to that decision.[3]

         ¶6 On appeal from a certiorari order, we review the decision of the Board to determine whether (1) it kept within its jurisdiction; (2) it proceeded on a correct theory of law; (3) its action was arbitrary, oppressive, or unreasonable and represented its will and not its judgment; and (4) the evidence was such that it might reasonably make the order or determination in question. Sausen v. Town of Black Creek Bd. of Review, 2014 WI 9, ¶6, 352 Wis.2d 576, 843 N.W.2d 39.

         ¶7 Hanning asserts that the Board disregarded the hierarchy under Wis.Stat. § 70.32(1) by sustaining the assessor's valuations based on his use of an income-approach methodology-a tier three consideration[4]-notwithstanding its conclusion that the properties were purchased at arm's length.

         ¶8 While the hearing transcript is not a model of clarity, our best reading of the proceedings below leads us to conclude that both the assessor and the Board failed to adhere to the statutory hierarchy in the assessment of Hanning's properties.

         ¶9 At the hearing, the property owner spoke about the details of Hanning's purchase, as well as his belief that the sale constituted an arm's-length transaction. The owner proposed alternative valuations of the properties that, combined, matched the purchase price of $875, 000.

         ¶10 Then the assessor spoke in support of his assessments, noting first that the purchase price was considered and the sale appeared to be at arm's length. Even so, he stated that he did not "necessarily have to accept that sale as an absolute in the assessment of a property" because "sales have a range and … one sale does not make a market." Consistent with that theory, the assessor proceeded to explain that he found no recent sales of comparable properties and used income and expense ...


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