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Cain v. Custer County Board of Equalization

Supreme Court of Nebraska

February 2, 2018

Donald V. Cain, Jr., appellant,
v.
Custer County Board of Equalization, appellee.

         1. Taxation: Judgments: Appeal and Error. An appellate court reviews Nebraska Tax Equalization and Review Commission decisions for errors appearing on the record.

         2. ___: ___: ___ . When reviewing a Nebraska Tax Equalization and Review Commission judgment for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.

         3. Administrative Law. An administrative agency's decision is arbitrary when it is made in disregard of the facts or circumstances without some basis which would lead a reasonable person to the same conclusion.

         4. ___ . Administrative agency action taken in disregard of the agency's own substantive rules is arbitrary and capricious.

         5. Taxation: Appeal and Error. Questions of law arising during appellate review of Tax Equalization and Review Commission decisions are reviewed de novo.

         6. Constitutional Law: Due Process. The determination of whether the procedures afforded to an individual comport with constitutional requirements for procedural due process presents a question of law.

         7. Administrative Law: Statutes. The meaning and interpretation of statutes and regulations are questions of law.

         8. Due Process. Due process principles protect individuals from arbitrary deprivation of life, liberty, or property without due process of law.

         9. Administrative Law: Due Process. A party appearing in an adjudication hearing before an agency or tribunal is entitled to due process protections similar to those given to litigants in a judicial proceeding.

         10. Due Process: Notice. Due process does not guarantee an individual any particular form of state procedure. Instead, the requirements of due [298 Neb. 835] process are satisfied if a person has reasonable notice and an opportunity to be heard appropriate to the nature of the proceeding and the character of the rights which might be affected by it.

         11. Taxation. An owner is not deprived of his property without due process of law by means of taxation if he has an opportunity to question its validity or amount of such tax or assessment in some stage of the proceedings, either before that amount is finally determined or in a subsequent proceeding for its collection.

         12. Judges: Evidence. Generally, a successor judge may not make a decision based on conflicting evidence that a predecessor judge heard.

         13. Trial: Judges: Due Process: Witnesses. Due process entitles a litigant to have all the evidence submitted to a single judge who can see the witnesses testify and, thus, weigh their testimony and judge their credibility.

         14. Due Process. Oral argument is not an essential element of due process.

         15. Trial: Judges: Due Process: Waiver. A party has a due process right that a successor or substitute judge may not render a judgment for a predecessor judge who conducted the trial, but the party may waive this right and agree to have a successor judge decide the case.

         16. Taxation: Valuation: Presumptions: Evidence. A presumption exists that a county board of equalization has faithfully performed its official duties in making a property tax assessment and has acted upon sufficient competent evidence to justify its action. The presumption disappears when competent evidence to the contrary is presented. Once the presumption is rebutted, whether the valuation assessed is reasonable becomes a question of fact based on all of the evidence.

         17. Taxation: Valuation: Proof. The burden of showing a property tax valuation to be unreasonable rests upon the taxpayer.

         18. ___: ___: ___. The taxpayer's burden to show a property tax valuation to be unreasonable is not met by showing a mere difference of opinion. Rather, the taxpayer must establish the valuation placed upon the property when compared with valuations placed on other similar property is grossly excessive and is a result of arbitrary or unreasonable action and not just a mere error in judgment.

         19. Taxation: Notice: Proof. When the Tax Equalization and Review Commission hears a property tax protest under Neb. Rev. Stat. § 77-1507.01 (Reissue 2009) and performs the factfinding functions that a county board of equalization would have if the county had timely provided notice to the taxpayer, the taxpayer's burden of persuasion is by a preponderance of the evidence.

         20. Evidence: Words and Phrases. Competent evidence is evidence that is admissible and tends to establish a fact in issue.

         [298 Neb. 836] 21. Property: Valuation: Witnesses. A resident owner who is familiar with his or her property and knows its worth is permitted to testify as to its value without further foundation.

         22. Taxation: Valuation: Evidence. When an independent appraiser using professionally approved methods of mass appraisal certifies that an appraisal was performed according to professional standards, the appraisal is considered competent evidence under Nebraska law.

         23. Taxation: Valuation. In tax valuation cases, actual value is largely a matter of opinion and without a precise yardstick for determination with complete accuracy.

         24. Evidence: Presumptions. A presumption may take the place of evidence unless and until evidence appears to overcome or rebut it, and when evidence sufficient in quality appears to rebut it, the presumption disappears and thereafter the determination of the issues depends upon the evidence.

         25. ___: ___.A presumption is not evidence and should never be placed in the scale to be weighed as evidence.

         26. Administrative Law. If an agency rule is but an aid to help the agency in its decision, then the rule is not binding upon the agency unless the rule confers a procedural benefit upon a party.

         Appeal from the Tax Equalization and Review Commission. Reversed and remanded with directions.

          David A. Domina, of Domina Law Group, P.C., L.L.O.. for appellant.

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

          Heavican, C.J., Wright, Miller-Lerman, Cassel, Stacy, Kelch, and Funke, JJ.

          FUNKE, J.

         Donald V. Cain, Jr., appeals an order of the Tax Equalization and Review Commission (TERC) affirming the decision of the Custer County assessor (Assessor) regarding the 2012 taxable value of his agricultural property. Because we find error on the record, we reverse the TERC's order and remand the cause with directions to sustain Cain's property valuation protests for the 2012 tax year.

         [298 Neb. 837] I. BACKGROUND

         Cain owns property in Custer County southwest of Broken Bow, Nebraska. The subject property encompasses 10 contiguous parcels totaling 1, 093.93 acres of agricultural land exclusively used for cattle production and grazing. The land consists of rolling hills with Valentine sand and native grass. About 756 acres of the property is irrigated native grass upon which Cain grazes cattle. In 2006, Cain improved this portion of his land with center pivot irrigation systems to enhance livestock grazing. Cain does not cultivate row crops on the subject property.

         In 2012, the Assessor increased the total assessed value of Cain's property from $734, 968 to $1, 834, 925. This represented nearly a 250-percent property tax increase from the prior year, without improvements being made to the property during that time. This sharp increase was largely due to the Assessor's decision to change the classification of irrigated grassland for purposes of valuation. From 2006 to 2012, the Assessor had used a Nebraska Department of Revenue formula to adjust the value of irrigated native grassland. In 2012, the Assessor reclassified irrigated grassland by uniformly classifying all irrigated land as irrigated cropland, whether the land is used for "cultivated row crops, small grains, seeded hay, forage crops, or grasses."[1]

         Cain protested. Because Cain had not been provided timely notice of the increased assessments, he was not afforded an evidentiary hearing for his protests before the Custer County Board of Equalization. Pursuant to Neb. Rev. Stat. § 77-1507.01 (Reissue 2009), Cain directly petitioned the TERC to determine the actual value of each parcel. The TERC consolidated Cain's protests and afforded him a hearing on his petitions. A divided panel of two TERC commissioners, Nancy J. Salmon and Thomas D. Freimuth, affirmed the Assessor's increased valuations of Cain's property for 2012.

         [298 Neb. 838] Following an appeal, in Cain v. Custer Cty. Bd. of Equal. (Cain I), [2] we found plain error and reversed, and remanded. We found the TERC's role according to the procedure provided under § 77-1507.01 was to '"determine the actual value or special value of real property for that year.'"[3] We found the TERC's decision to determine Cain's protests using the clear and convincing evidence standard provided under Neb. Rev. Stat. § 77-5016(9) (Cum. Supp. 2016) was erroneous, because such standard applied in '"all appeals'" before the TERC.[4] However, the TERC's role was not to conduct an appellate review but to perform an initial review of Cain's challenges to the increased assessments. We held the TERC's decision erroneously increased the taxpayer's burden of proof in a proceeding under § 77-1507.01. We remanded the cause with instructions for the TERC to reconsider the matter on the record using the preponderance of the evidence standard applicable to initial protests before a county board of equalization.

         Freimuth resigned as a TERC commissioner in September 2015, so upon remand, the matter was assigned to another commissioner, Robert W. Hotz. Cain moved for a new hearing on the merits and an opportunity to present supplemental evidence and argue the case under the preponderance of the evidence standard. He also filed a notice of constitutional issues in which he requested the TERC to vacate the Assessor's valuations of his property and determine that the statutes he challenged were unconstitutional. The TERC denied both requests, determining that it had no authority to do anything other than follow this court's instructions on remand.

         Both Hotz and Salmon reviewed the full record and, without an additional hearing, considered Cain's protests. The TERC issued a new order which reversed in part the Assessor's [298 Neb. 839] determination with respect to three parcels of Cain's land, because, due to clerical errors, these parcels had been incorrectly assessed as including water wells. For the remaining seven parcels, the TERC accepted the Assessor's reasoning and affirmed the Assessor's 2012 valuations of Cain's property. The TERC's order stated, "[TERC] finds that the presumptions in favor of the initial valuations by the . . . Assessor have not been rebutted by a preponderance of the evidence . . . ." Cain timely appeals.

         II. ASSIGNMENTS OF ERROR

         Cain assigns, restated, that the TERC erred by (1) failing to conduct a hearing following remand which permitted him argument under the correct standard of review, (2) failing to hear constitutional claims and decide those issues, (3) rendering a decision not supported by sufficient evidence, (4) failing to follow remand instructions, (5) making errors of law; and (6) violating Cain's constitutional rights by failing to classify his property in a uniform and proportionate manner.

         III. STANDARD OF REVIEW

         We review decisions of the TERC for error appearing on the record of the commission.[5] When reviewing a TERC judgment for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable.[6] An administrative agency's decision is arbitrary when it is made in disregard of the facts or circumstances without some basis which would lead a reasonable person to the same conclusion.[7] Administrative agency action [298 Neb. 840] taken in disregard of the agency's own substantive rules is also arbitrary and capricious.[8] Questions of law arising during appellate review of the TERC's decisions are reviewed de novo.[9]

         The determination of whether the procedures afforded to an individual comport with constitutional requirements for procedural due process presents a question of law.[10] The meaning and interpretation of statutes and regulations are questions of law.[11]

         IV. ANALYSIS

         We first address whether Cain's due process rights were violated. We then address whether the TERC erred in affirming the Assessor's valuation ...


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