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Cain v. Custer Cnty. Bd. of Equalization

Supreme Court of Nebraska

August 28, 2015


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Appeal from the Tax Equalization and Review Commission.


Patrick M. Heng and Lindsay E. Pedersen, of Waite, McWha & Heng, and Steven P. Vinton, of Bacon & Vinton, L.L.C., for appellant.

Steven R. Bowers, Custer County Attorney, and Glenn A. Clark for appellee.



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[291 Neb. 731] Wright, J.


In 2012, the Custer County assessor (Assessor) increased the assessed value of property owned by Donald V. Cain, Jr., from $734,968 to $1,834,925. Cain challenged this valuation increase by filing petitions with the Tax Equalization [291 Neb. 732] and Review Commission (TERC) pursuant to Neb. Rev. Stat. § 77-1507.01 (Reissue 2009). A divided panel of two TERC commissioners affirmed the Assessor's increased valuations for 2012, and Cain appeals. Because we find plain error in the standard of review applied by TERC to Cain's petitions, we reverse the order of TERC which affirmed the Assessor's valuations and remand the cause for reconsideration on the record using the preponderance, or greater weight, of the evidence standard applicable to protests before a county board of equalization.


Appellate courts review decisions rendered by TERC for errors appearing on the record. Krings v. Garfield Cty. Bd. of Equal., 286 Neb. 352, 835 N.W.2d 750 (2013). When reviewing a judgment for errors appearing on the record, an appellate court's inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. Id.

Questions of law arising during appellate review of TERC decisions are reviewed de novo on the record. Id. A question of jurisdiction is a question of law. Sherman T. v. Karyn N., 286 Neb. 468, 837 N.W.2d 746 (2013).

Although an appellate court ordinarily considers only those errors assigned and discussed in the briefs, the appellate court may, at its option, notice plain error. Connelly v. City of Omaha, 284 Neb. 131, 816 N.W.2d 742 (2012). Plain error is error plainly evident from the record and of such a nature that to leave it uncorrected would result in damage to the integrity, reputation, or fairness of the judicial process. Id.

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Cain owns 10 contiguous parcels of land in Custer County, Nebraska, which total over 1,093 acres. Approximately 70 percent of the property, or 756 acres, is irrigated " native grass" upon which Cain grazes cattle. The remainder of the property is nonirrigated grassland.

[291 Neb. 733] In 2012, as the result of a change in the way the Assessor classified irrigated grassland for purposes of valuation, there was a dramatic increase in the assessed value of the irrigated portions of Cain's property. The manner in which the Assessor classified and valued the nonirrigated portions of his property did not change. Almost entirely due to the change in valuation of the irrigated grassland, the total assessed value of the parcels increased from $734,968 to $1,834,925.

In situations such as this, where there is a change in the assessed value of real property, Neb. Rev. Stat. § 77-1315(2) (Supp. 2011) requires the county assessor to send notice to the property owners on or before June 1. But in the instant case, for reasons that are not clear from the record, Cain never received such notice. He did not learn of the change in assessed values until November 2012, when he contacted the Assessor.

By the time Cain learned of the change in assessed values, the deadline to file protests with the county board of equalization pursuant to Neb. Rev. Stat. § 77-1502(1) (Cum. Supp. 2014) had passed. Consequently, he sought to challenge the valuation increases pursuant to § 77-1507.01. This statute provides that " on or before December 31," a person may petition TERC " to determine the actual value or special value of real property . . . if a failure to give notice prevented timely filing of a protest or appeal provided for in sections 77-1501 to 77-1510."

On December 28, 2012, Cain petitioned TERC to determine the actual value of each parcel pursuant to § 77-1507.01. He alleged that he had not received the notices of valuation increase required by § 77-1315(2) and that he would have filed valuation protests with regard to each parcel if he had received the required notices. He claimed that the actual value of the parcels was $778,625 and asked TERC to hold a hearing to determine the actual value of his property for tax year 2012.

TERC held two separate hearings on Cain's petitions. On each occasion, the hearing was held before commissioners [291 Neb. 734] Nancy J. Salmon and Thomas D. Freimuth. At the time of these hearings, TERC had three commissioners, and two commissioners constituted a quorum to transact business. See Neb. Rev. Stat. § § 77-5003(1) and 77-5005(2) (Cum. Supp. 2014).

The first hearing was a " show cause hearing" to determine if TERC had jurisdiction over Cain's petitions. The jurisdictional question was whether Cain was entitled to file his petitions pursuant to § 77-1507.01. TERC determined (1) that Cain had " provided sufficient evidence that the . . . Assessor failed to provide proper notice as required by . . . section 77-1315" ; (2) that " this failure prevented [Cain] from timely filing protests by June 30, 2012, under . . . section 77-1502" ; and (3) that Cain " had until December 31, 2012, to file appeals with [TERC] concerning his tax valuations under . . . section 77-1507.01." Therefore, TERC concluded that it had jurisdiction to consider Cain's petitions.

At a hearing on the merits, Salmon and Freimuth heard evidence that for purposes of valuation, the Assessor has divided Custer County into five " market areas" based on her analysis of real estate markets and recent sales. Market area 1 covers the majority of Custer County and is the market

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area with the highest average sale price. Within each market area, property is classified according to a use category (irrigated, dryland, grassland, canyon, Sandhills-type land, " frequently flooded," and waste) and a soil type (a numeric value between 1 and 4, with 1 representing the highest quality). For each market area, there is a standard value per acre for property of the same use and soil type.

Cain's property is located within market area 1 and has been valued as part of that market area for some time. In terms of use category, for tax year 2012, the Assessor classified the non-irrigated portions of Cain's property (approximately 337 acres) as grassland and valued them between $495 and $505 per acre, depending on soil type. The Assessor classified the irrigated parts of his property (approximately 756 acres) as irrigated [291 Neb. 735] land. Almost 600 of these irrigated acres were valued at $2,100 per acre, because they were determined to have type " 4A" soil, which is the poorest quality. The remaining irrigated acres were valued between $2,105 and $2,930 per acre, depending on soil type.

Cain adduced evidence that the irrigated portions of his land had been " inequitably classified" and valued. He presented testimony that in 2012, the irrigated portions of his property were valued similarly to irrigated cropland, but that his property was not comparable to irrigated cropland in terms of soil type or topography. He also presented testimony that his property was located in market area 1 for purposes of valuation but that because of the soil type, it was more comparable in value to the property in market area 2 or area 3. Cain argued that a " more equitable" way of valuing his property would be to lower its assessed value to the level of the irrigated grassland in market area 2 or area 3.

The Assessor explained how she classified Cain's property. She testified that Cain's property had a different soil type than the properties in market area 2, even though both had sandy soils. She also testified that under the relevant statutes and regulations, she was allowed to differentiate between parcels of irrigated land according to soil type but not actual use of the land and that, as a consequence, she could not treat irrigated grassland differently than other irrigated land.

On July 31, 2014, Salmon entered an order on behalf of TERC on the merits of Cain's petitions. She first addressed whether the lack of notice rendered the valuation increases void. She stated that in prior cases, this court held that assessments were void where there was a failure to provide the required notice. But she concluded that these cases were " supersede[d]" by the adoption of § 77-1507.01. She explained as follows:

In cases concerning failures to provide sufficient notice, the [Nebraska Supreme Court and Court of Appeals] concluded that because the taxpayer had lost its access [291 Neb. 736] to review, the increased assessment was void. However, all of these cases were prior to the adoption of . . . section 77-1507.01.
Under . . . section 77-1507.01 taxpayers now have an avenue for appeal by December 31 of each tax year if notice was not timely provided. [TERC], therefore, has jurisdiction over petitions which it did not otherwise have prior to the passage of the statute. Because [TERC] now has jurisdiction and the taxpayer has an avenue for review, the previous Nebraska Supreme Court and Court of Appeals decisions are no longer applicable; it appears that . . . section 77-1507.01 now supersedes these decisions in instances where a taxpayer petitions [TERC] prior to December 31 of a

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tax year where a failure of notice from the County Assessor or County Board prevents timely filing under other statutes.

Salmon therefore dismissed Cain's argument that the increased assessments were void due to lack of notice. Freimuth agreed with this determination.

On the merits, Salmon rejected Cain's argument that his property should have been valued within market area 2 or area 3. She concluded that there was not clear and convincing evidence that the Assessor's decision to classify Cain's property within market area 1 for 2012 was arbitrary or unreasonable. She explained that the soil types on Cain's property were " more suitable to irrigation and production than the soils located in Market Area 2 and Market Area 3" and that this difference in soil " support[ed] the . . . Assessor['s] assertion that the Subject Property [was] more valuable than irrigated grassland in Market Area 2 and Market Area 3."

Freimuth dissented from the determination that the increased valuations were neither arbitrary nor unreasonable. He stated that he would find Cain had " provided sufficient evidence to show that the [Assessor's] valuation determinations . . . were arbitrary or unreasonable . . . in part because the Subject Property is unique as compared to other Market Area 1 [291 Neb. 737] property and is substantially similar to the northern portion of Custer County (i.e., Market Areas 2 and 3)." Freimuth would have accepted Cain's opinion as to the actual value of the property.

Neb. Rev. Stat. ยง 77-5016(13) (Cum. Supp. 2014) provides that TERC " shall deny relief to the appellant or petitioner in any hearing or proceeding unless a majority of the commissioners present determine that the relief should be granted." As such, given that Salmon and Freimuth did not agree, TERC denied ...

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