Case Title: Lee Gardens v. Arlington County Board

Citation: 

Docket Number: 

State: virginia

Court: Virginia Supreme Court

Date: 1995-11-03T00:00:00Z

Document:
Present:  Carrico, C.J., Compton, Stephenson, Lacy, Hassell and 
Koontz, JJ., and Poff, Senior Justice 
 
LEE GARDENS ARLINGTON LIMITED PARTNERSHIP 
 
                                          OPINION BY 
v.  Record No. 950305 
SENIOR JUSTICE RICHARD H. POFF 
                                        November 3, 1995 
 
ARLINGTON COUNTY BOARD, ET AL. 
 
 
FROM THE CIRCUIT COURT OF ARLINGTON COUNTY 
 
Benjamin N.A. Kendrick, Judge 
 
 
This is a taxpayer's appeal from a judgment upholding a tax 
assessment of Sheffield Court Apartments, a large garden 
apartment complex owned by Lee Gardens Arlington Limited 
Partnership (Lee Gardens, or the taxpayer). 
 
On January 16, 1992, the property was valued at $33,719,278. 
 The County Board of Arlington County (the County) approved a 
partial exemption for rehabilitation which reduced the assessed 
value to $24,539,900.  In October, based upon a review of a 
three-year history of Sheffield Court's report of operating 
income and expense and a redetermination of its net operating 
income, the County raised the January assessment to $26,896,600. 
 
In December 1993, Lee Gardens filed an application under 
Code §§ 58.1-3984 and -3987 to correct the revised assessment and 
to require a refund of overpayment.  Lee Gardens alleged that the 
1992 assessment "does not reflect the fair market value of the 
property [and] . . . is not uniform in its application."  The 
County filed a counterclaim asking the court to increase the 
assessment to $28,139,800 "based on actual net operating income 
. . . data . . . not received . . . until after the 1992 
assessment was made." 
 
During discovery, Lee Gardens requested disclosure of tax 
assessment worksheets used by the County, and the County filed a 
request for disclosure of certain taxpayer records.  The trial 
court denied the taxpayer's request and, in part, the County's 
request. 
 
As its final witness at trial, Lee Gardens introduced George 
Byrne, a private tax consultant, and asked the court to qualify 
him as an expert in valuation of commercial real estate and 
review of assessments.  Byrne was not licensed as an appraiser, 
and the court ruled that he was ineligible to testify as an 
expert witness. 
 
Lee Gardens moved for a continuance.  The court denied the 
motion.  The taxpayer moved for nonsuit, and the County moved to 
strike the taxpayer's evidence.  The court denied Lee Gardens' 
motion and granted the County's motion to strike the evidence.  
Thereupon, the County nonsuited its counterclaim. 
 
We awarded Lee Gardens an appeal, and we will consider the 
three questions raised by its assignments of error.   
 
I 
 
First, we address the question whether the trial court erred 
in denying the taxpayer's discovery request. 
 
The assessment formula employed here is called 
"capitalization of net operating income".  Under that formula, 
operating expenses are subtracted from operating income, and a 
capitalization rate is applied to the difference to determine the 
assessment.  As operating income remains constant, the quantum of 
the assessment will vary according to changes in the operating-
expense factor. 
 
In its application of the assessment formula, the County 
created a set of "guidelines" of income and expenses.  The set 
includes different guidelines for different types of taxable 
properties.  Thomas Rice, director of the County's department of 
assessments, testified that the guidelines were used as "the 
first indication on the value"; that the appraisal staff 
"examines each of the indications of value produced by those 
guidelines . . . the experience of the property, its history as 
reported"; that the staff "has the latitude of adjusting those 
guideline numbers . . . to reflect the operation of the 
particular property"; and that, absent such "historical . . . 
information, the last resort for the county is to rely on the 
guidelines". 
 
Rice said that the guidelines were not applied to Sheffield 
Court because its history of operation showed "higher rent" and 
"lower expenses" than those "indicated by the guidelines", and 
that no apartment complex with a history of income and expenses 
like those of Sheffield Court had been assessed by applying the 
guidelines.  As appears from the County's response to a request 
for admissions, approximately 40 percent of 1992 appraisals of 
large garden apartment complexes did not apply the guidelines.  
Rice testified further that the guidelines were not applied when 
actual expenses were historically higher than the guidelines. 
 
Lee Gardens argues on brief that use of actual expenses 
lower than guidelines "results in a . . . higher assessment" and 
that "this method . . . is not uniform in application."  Lee 
Gardens also contends that the County's use of actual expenses 
higher than the guidelines "is directly relevant to the non-
uniformity basis of the taxpayer's claim."  Consequently, Lee 
Gardens reasons, the trial court committed reversible error when 
it denied its discovery motion.  That motion requested disclosure 
of County "tax worksheets for all commercial properties whose 
expenses exceeded those for the guidelines, and whose actual, or 
stabilized, expenses were used to compute net operating income." 
 
Under Code § 58.1-3, income and expense information 
taxpayers provide tax officials is confidential, and any 
disclosure made without a court order is a Class 2 misdemeanor.  
Rule 4:1(b)(1) authorizes a trial court to order discovery 
"regarding any matter, not privileged, which is relevant to the 
subject matter involved", including any information "reasonably 
calculated to lead to the discovery of admissible evidence."  
With respect to the recipient of a discovery order, Rule 4:1(c) 
empowers the court to "make any order which justice requires to 
protect a party or person from . . . undue burden or expense, 
including one . . . that . . . confidential . . . commercial 
information not be disclosed". 
 
The record shows that the County assesses "approximately 
1000 parcels of real estate which are classified as apartment 
properties", including "some 500 plus . . . apartment complexes" 
with a total of "some 40,000 apartment units in Arlington 
County".  Lee Gardens' discovery request embraced not only 
apartment properties, but "tax worksheets for all commercial 
properties" in Arlington County.   
 
"All taxes . . . shall be uniform upon the same class of 
subjects".  Va. Const. art. X, § 1.  The constitutional mandate 
requires uniformity in the assessment of "properties having like 
characteristics and qualities, located in the same area."  Smith 
v. City of Covington, 205 Va. 104, 108, 135 S.E.2d 220, 223 
(1964).  Obviously, Lee Gardens' discovery request extends to a 
"class of subjects" with "characteristics and qualities" unlike 
apartment complexes and whose histories of income and expense are 
unlike that experienced by Sheffield Court.  
 
The trial court's order denying Lee Garden's request was 
based upon the court's finding that the request was "overbroad, 
burdensome and not reasonably calculated to lead to the discovery 
of admissible evidence".  Citing Rakes v. Fulcher, 210 Va. 542, 
546, 172 S.E.2d 751, 755 (1970), Lee Gardens acknowledges on 
brief that "[t]he granting or denying of a request for discovery 
is a matter within the trial court's discretion and will be 
reversed only if the action taken was improvident, and affected 
substantial rights." 
 
We are of opinion that the trial court's finding is 
supported by the record and complies with the provisions of Rule 
4:1.  Consequently, we cannot say that the order denying Lee 
Gardens' disclosure request was an abuse of the court's 
discretion, and we will affirm the order denying that request. 
 
II 
 
Next, we consider whether a person unqualified to obtain an 
appraiser's license can testify as an expert witness on real 
estate valuation. 
 
On voir dire, Byrne acknowledged that he was a tax 
consultant under contract with Lee Gardens' attorney; that he was 
being compensated for his testimony; that he would testify as to 
the value of Sheffield Court; and that he did not have a Virginia 
real estate appraiser's license.  Asked if he was "qualified to 
get a license", Byrne replied, "I don't have the course work."  
Sustaining the County's objection, the trial court ruled that 
Byrne "can't be qualified [as an expert witness] without a 
license." 
 
The question in issue is a matter of first impression in 
this Court.  However, the Attorney General of Virginia has issued 
an opinion relevant to that issue.  Op. Att'y Gen. 211 (1993).  
Construing the applicable statutes in Chapter 20.1 of Title 54.1 
of the Code, the Attorney General concluded that  
 
it is unlawful [under Code § 54.1-2011(A)] for anyone, 
including a licensed real estate broker, who does not 
have a real estate appraiser's license to testify for 
compensation about the value of real estate in any 
court proceeding, unless permitted under applicable 
statutory exceptions. 
 
Id. at 212. 
 
That conclusion was based, the Attorney General explained, 
upon the "clear language" of § 54.1-2011(A) which provides that 
"it shall be unlawful to engage in the appraisal of real estate 
. . . for compensation" and upon the "plain language" of § 54.1-
2009 under which, the Attorney General said, "an 'appraisal' 
includes any opinion or conclusion about the value of interest in 
real property.  An appraisal report may be either oral or 
written.  A broker's testimony in a . . . court proceeding, 
therefore, clearly falls within this definition of an 
'appraisal'." 
 
Lee Gardens contends that the statutory exception defined in 
Code § 54.1-2010(3) "clearly applies to Mr. Byrne."  That 
subsection of the statute creates an exception for "[a]ny person 
who, in the ordinary course of business, provides consulting 
services . . . for a fee".  Construing that language, the 
Attorney General decided: 
 
In ordinary usage, "consulting" is defined as 
"providing professional or expert advice."  Webster's 
Ninth New Collegiate Dictionary 282 (1990).  It is not 
clear that this definition is broad enough to include 
paid testimony in court, which goes beyond mere advice 
to the property owner paying for the testimony.  In 
view of the rule of strict construction that applies to 
exemptions from licensing statutes, therefore, it is my 
opinion that § 54.1-2010(3) does not except a real 
estate broker's testimony from the general prohibition 
in § 54.1-2011(A). 
 
Id. at 213. 
 
In City of Winchester v. American Woodmark Corporation, 250 
Va. ___, ___, ___ S.E.2d ___, ___ (1995), we said: 
 
[W]e have repeatedly held that the General Assembly is 
presumed to have knowledge of the Attorney General's 
interpretation of statutes and the General Assembly's 
failure to make corrective amendments evinces 
legislative acquiescence in the Attorney General's 
interpretation.  Browning-Ferris, Inc. v. Commonwealth, 
225 Va. 157, 161-62, 300 S.E.2d 603, 605-06 (1983); 
Richard L. Deal and Assoc. v. Commonwealth, 224 Va. 
618, 622, 299 S.E.2d 346, 348 (1983); Albemarle County 
v. Marshall, 215 Va. 756, 762, 214 S.E.2d 146, 150 
(1975). 
 
 
The Attorney General's statutory analysis of the Code 
Chapter entitled "Real Estate Appraisers" was published August 
18, 1993.  In 1994, the General Assembly amended Code § 8.01-
401.1 entitled "Opinion testimony by experts."  Acts 1994, c. 
328.  Had the legislature intended to make "corrective 
amendments" to Chapter 20.1 of Title 54.1 enacted in 1990, it 
could have done so.  It did not. 
 
We share the Attorney General's analysis of the applicable 
statutes, and we will affirm the trial court's ruling that Byrne 
was ineligible to testify as an expert witness. 
 
III 
 
Finally, we must decide whether the trial court erred in 
denying Lee Garden's motion for nonsuit.   
 
"A party shall not be allowed to nonsuit a cause of action, 
without the consent of the adverse party who has filed a 
counterclaim, . . . unless the counterclaim . . . can remain 
pending for independent adjudication by the court."  Code § 8.01-
380(C).  Absent the County's consent, the dispositive question is 
whether the County's counterclaim seeking an increase in the 
assessment could have remained pending on the docket for 
independent adjudication after Lee Gardens' claim seeking a 
decrease in assessment had been nonsuited. 
 
Subsection B of Code § 58.1-3984 affords the commissioner of 
revenue of a county or city the same right to initiate litigation 
of a tax assessment as that afforded a taxpayer by subsection A 
of that statute.  Lee Gardens concedes on brief that, to increase 
an under assessment, "the county's only recourse . . . is to 
petition the Circuit Court for an increase in the assessment, 
pursuant to sec. 58.1-3984(B)".  The County did not pursue that 
course.  Instead, it chose to assert an under-assessment claim in 
litigation initiated by the taxpayer's over-assessment claim. 
 
Fair market value was the ultimate issue common to both 
claims.  The County's counterclaim could not remain pending on 
the docket for an adjudication independent of an adjudication of 
the taxpayer's nonsuited claim; an adjudication of one claim 
would be an adjudication of both.  Accordingly, we will uphold 
the trial court's ruling that Lee Gardens was not entitled to 
nonsuit its claim without the County's consent. 
 
IV 
 
Finding no merit in Lee Gardens' assignments of error, we 
need not address the County's assignment of cross-error, and we 
will affirm the judgment of the trial court. 
 
Affirmed.