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 subject property on remand when it failed to explain its reasoning and describe the factual support in the record for its calculation of parking income and expenses.
The opinion of the court was delivered by: Dietzen, Justice.
Office of Appellate Courts
Considered and decided by the court without oral argument.
In this appeal, we consider whether the Minnesota Tax Court followed our remand instructions in 444 Lafayette, LLC v. County of Ramsey (444 Lafayette I), 811 N.W.2d 106 (Minn. 2012). Originally, relators 444 Lafayette, LLC and Meritex Enterprises, Inc. sought certiorari review of the tax court's market value determinations for the subject property for the assessment dates January 2, 2007; January 2, 2008; and January 2, 2009. After trial, the tax court adopted the market values proposed by respondent Ramsey County in its post-trial brief, which were higher than the value opinions presented by either party's appraiser at trial. Relators appealed, and we reversed and remanded with instructions for the tax court to carefully explain its reasoning for rejecting the appraisal testimony and describe the factual support in the record for its determinations. On remand, the tax court again adopted market values that exceeded the parties' appraisal opinions. Because we conclude that the tax court failed to follow our remand instructions when it calculated parking income and expenses, we reverse.
The subject property is located at 444 Lafayette Road in Saint Paul, Minnesota. It is improved by a six-story, single-tenant office building, which is currently leased to the Minnesota Department of Human Services. During the relevant time period, the subject property was owned by either Meritex Enterprises or 444 Lafayette. Because there are no parking spaces on the subject property, a Reciprocal Easement Agreement (REA) provides access to parking spaces on three adjacent properties. The REA expressly runs with the land and grants to the subject property, among other things, the right to lease 979 parking spaces on designated portions of the adjacent properties for use by employees, visitors, and delivery persons. In addition, the REA provides that the income generated and expenses incurred from leasing the parking spaces on the adjacent properties shall be attributed to the subject property.
The County Assessor estimated the market value of the subject property at $22,500,000 for all three assessment dates. Relators filed a petition under Minn. Stat. § 278.01, subd. 1 (2012), challenging the County's assessments. At trial, both parties introduced expert appraisal reports and opinions as to market value. Relators presented the appraisal testimony of Michael F. Amundson, who estimated the subject property's market value at $16,200,000 for 2007; $16,300,000 for 2008; and $13,800,000 for 2009. The County presented the appraisal testimony of Jason L. Messner, who estimated market value at $23,900,000 for 2007; $25,000,000 for 2008; and $20,100,000 for 2009.
In its post-trial brief, the County argued for higher value determinations than the value opinions of either party's appraiser. The tax court adopted, verbatim, the County's proposed value determinations of $26,164,000 for 2007; $27,420,000 for 2008; and $22,094,000 for 2009. 444 Lafayette, LLC v. Cnty. of Ramsey, Nos. 62-CV-08-4369, 62-CV-09-4709, 62-CV-10-166, 2011 WL 1364461, at *2 (Minn. T.C. Apr. 7, 2011).
On appeal, we reversed the tax court's value determinations and remanded the case for further proceedings. 444 Lafayette I, 811 N.W.2d at 107-08. We observed that the tax court "incorporated into its findings a nearly verbatim recitation of many of the County's post-trial arguments, including several typographical errors found in the County's post-trial brief." Id. at 107. Consequently, we concluded that the tax court " 'failed to exercise its own skill and independent judgment' in valuing the subject property." Id. at 108 (quoting Eden Prairie Mall, LLC v. Cnty. of Hennepin, 797 N.W.2d 186, 192 (Minn. 2011)). We therefore instructed the tax court to "carefully explain its reasoning for rejecting the appraisal testimony and the grounds for adopting a lower or higher value, and adequately describe the factual support in the record for its determination[s]." Id. (citation omitted) (internal quotation marks omitted).
On remand, the tax court requested additional briefing from the parties. Subsequently, the tax court issued its remand order, which again determined market values for the subject property that were higher than the opinions of either party's appraiser. 444 Lafayette, LLC v. Cnty. of Ramsey, Nos. 62-CV-08-4369, 62-CV-09-4709, 62-CV-10-166, 2012 WL 1191598, at *2 (Minn. T.C. Apr. 5, 2012), amended by 2012 WL 1191601, at *1 (Minn. T.C. Apr. 12, 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: