SYLLABUS 1. Appellate review of the Minnesota Tax Court's decision on remand is for an abuse of discretion. Although that review is deferential, the tax court must execute a remand order according to its instructions and has no power to modify those instructions. 2. The tax court abused its discretion in determining the market values for the mall on remand when it failed to explain its reasoning and describe the factual support in the record for fundamentally changing how it determined the overall capitalization rates.
The opinion of the court was delivered by: Dietzen, Justice.
Considered and decided by the court without oral argument.
This case is before us to determine whether the Minnesota Tax Court followed our remand instructions in Eden Prairie Mall, LLC v. County of Hennepin (EPM I), 797 N.W.2d 186, 192-200 (Minn. 2011). Originally, relator Eden Prairie Mall, LLC (EPM) sought certiorari review of the tax court's market value determinations for the Eden Prairie Mall and one of its anchor tenants, for the assessment dates January 2, 2005 and January 2, 2006. The tax court adopted the market values for the mall parcel proposed by respondent Hennepin County in its post-trial brief, which were higher than the value opinions presented by either party's appraiser at trial. On appeal, we concluded that the tax court's value determinations for the mall were not supported by the record. We remanded to the tax court with instructions to explain its reasoning and describe the factual support in the record for its determinations. On remand, the tax court adopted market values that exceeded its earlier determinations in EPM I. Because we conclude that the tax court failed to follow our remand instructions when it determined the overall capitalization rates, we reverse.
EPM owns and operates the Eden Prairie Mall, a super-regional shopping center located in Eden Prairie.*fn1 Included in the mall parcel for property tax purposes are the mall's in-line tenants, five anchor tenants, and an AMC movie theater complex.*fn2 The County Assessor estimated the market value of the mall as of January 2, 2005 at $90,000,000, and as of January 2, 2006 at $100,000,000. EPM filed a petition under Minn. Stat. § 278.01, subd. 1 (2012), claiming that the mall had been assessed at values greater than its actual market values, and that it had been unfairly and unequally assessed.
At trial, both parties introduced expert appraisal reports and testimony regarding the mall's market value. EPM presented the appraisal testimony of David C. Lennhoff, who testified that the market value of the mall was $68,750,000 for 2005 and $60,550,000 for 2006. The County presented the appraisal testimony of Jason L. Messner and appraisal review testimony of Mark T. Kenney. Messner testified that the market value of the mall was $110,000,000 for 2005 and $115,000,000 for 2006.
In its post-trial brief, the County argued that the EPM appraiser's revenue and expense assumptions were unsupported by the record. Instead, the County proposed recalculating the EPM appraiser's value determinations using different revenue and expense figures. The effect of the different assumptions was to substantially increase the EPM appraiser's value determinations to $122,876,142 for 2005 and $120,142,410 for 2006. The tax court adopted, nearly verbatim, those value determinations. Eden Prairie Mall, LLC v. Cnty. of Hennepin, Nos. 27-CV-06-04210, 27-CV-06-04212, 27-CV-07-08003, 27-CV-07-08004, 2009 WL 3335630, at *5 (Minn. T.C. Oct. 13, 2009).
On appeal, we concluded, among other things, that the tax court's nearly verbatim adoption of the County's proposed value determinations articulated in its post-trial brief-which were significantly higher than either party's appraisal opinions and reflected several mathematical errors-suggested that the tax court "failed to exercise its own skill and independent judgment." EPM I, 797 N.W.2d at 192. Accordingly, we remanded to the tax court with instructions "to adequately explain the reasons for the value determinations and to describe in detail the evidence upon which it relies to support its determinations." Id. at 200. We also indicated that the tax court could reopen the record and conduct a further evidentiary hearing "if necessary." Id.
On remand, the tax court elected not to conduct an evidentiary hearing, but did permit the parties to submit additional briefing. After receiving memoranda from both parties, the court issued its order, which increased the mall's 2005 assessed value from $90,000,000 to $127,000,000, and its 2006 assessed value from $100,000,000 to $127,500,000. Eden Prairie Mall, LLC v. Cnty. of Hennepin, Nos. 27-CV-06-04210, 27-CV-07-08003, 27-CV-06-04212, 27-CV-07-08004, 2012 WL 360453, at *5-6 (Minn. T.C. Jan. 25, 2012).
A summary of the County's assessed values, the parties' appraisal opinions, and the tax court's value determinations in both of its orders is as follows:
January 2, 2005 $90,000,000 $68,750,000 $110,000,000 $122,876,000 $127,000,000 January 2, 2006 $100,000,000 $60,550,000 ...