Opinion ID: 1057295
Heading Depth: 1
Heading Rank: 1

Heading: Landrum Valuation

Text: ¶ 27. We begin with the reconsideration of the Landrum interest valuation. Husband contends that the court erred in revising, sua sponte, its findings of fact and conclusions of law in responding to the parties' motions to amend under Vermont Rule of Civil Procedure 59(e). See V.R.F.P. 4(a)(1), 4(j)(1) (making Vermont Rules of Civil Procedure generally applicable in divorce proceedings, and V.R.C.P. 59 specifically applicable). Husband asserts that the court cannot amend a judgment sua sponte more than ten days after the entry of judgment unless there is a manifest error of law or fact. Husband argues that because no such error was present here, the court erred in amending the valuation of the Landrum interest. ¶ 28. Rule 59(e) gives the court broad power to alter or amend a judgment on motion within ten days after entry thereof. Reporter's Notes, V.R.C.P. 59. Rule 59(e) codified the trial court's inherent power to open and correct, modify, or vacate its judgments. West v. West, 131 Vt. 621, 623, 312 A.2d 920, 921 (1973). A motion under Rule 59(e) suspends the finality of the judgment, and allows the trial court to revise its initial judgment if necessary to relieve a party against the unjust operation of a record resulting from the mistake or inadvertence of the court and not the fault or neglect of a party. Haven v. Ward Estate, 118 Vt. 499, 502, 114 A.2d 413, 415 (1955). ¶ 29. Vermont Rule 59(e) is substantially identical to Federal Rule of Civil Procedure 59(e), and we have looked to federal decisions interpreting the federal rule for guidance in applying the Vermont rule. See In re Robinson/Keir Partnership, 154 Vt. 50, 54, 573 A.2d 1188, 1190 (1990). Husband argues that the court's power to amend a judgment sua sponte can be exercised only within ten days after entry of judgment and points to federal authority holding to that effect. See, e.g., Burnam v. Amoco Container Co., 738 F.2d 1230, 1232 (11th Cir.1984). We recognize this precedent, but find it inapplicable. The question before us is whether, when one or both parties files a timely motion to amend under Rule 59, the court may address a question not explicitly mentioned in either party's motion. Our case of Robinson/Keir Partnership broadly described the power as one to reconsider issues previously before it, and generally [to] examine the correctness of the judgment itself, but did not address the precise issue before us. 154 Vt. at 54, 573 A.2d at 1190 (quotations omitted). ¶ 30. The United States Courts of Appeal divide into two camps on this issue. The majority of the courts that have considered the issue recognize that once a Rule 59(e) motion is filed, the trial court has the power to make any appropriate modification or amendment, even with respect to issues not raised in the Rule 59(e) motion or motions. United States v. Hollis, 424 F.2d 188, 191 (4th Cir.1970) (holding that although a party filed a Rule 59(e) motion only with respect to the amount of damages, the court could amend its decision with respect to the defendant's negligence as it is not restricted to the modifications suggested by the parties and because a judge should not be forced to perpetuate a finding of fact ... which he discovers to be erroneous); see EEOC v. United Ass'n of Journeymen & Apprentices, 235 F.3d 244, 250 (6th Cir.2000); Morganroth & Morganroth v. DeLorean, 213 F.3d 1301, 1313-14 (10th Cir.2000); McNabola v. Chicago Transit Auth., 10 F.3d 501, 520 (7th Cir. 1993); King Fisher Marine Serv., Inc. v. NP Sunbonnet, 724 F.2d 1181, 1187 (5th Cir.1984); see also Henderson v. Koveleski, 717 So.2d 803, 806 (Ala.Civ.App.1998) (citing federal cases and following majority view with regard to corresponding Alabama rule). ¶ 31. The Eleventh Circuit has reasoned to the contrary, and husband relies on a decision from that court, Hidle v. Geneva County Board of Education, 792 F.2d 1098 (11th Cir.1986). In Hidle, the plaintiff moved to amend only the remedies portion of a favorable judgment in a suit alleging employment gender discrimination. The trial court denied this motion, set aside its earlier judgment for the plaintiff, and entered judgment for the defendant on the merits. On appeal, the Eleventh Circuit assumed that the lower court had the authority to change the judgment, but concluded that the lower court had abused its discretion in doing so, based on several factors. Id. at 1100. First, the court reasoned that a contrary holding would inhibit[ ] the error-correcting function of ... Rule 59(e), because a successful plaintiff given a less-than-complete remedy could not ask for correction without putting at risk the judgment in her favor. Id. The court also emphasized the length of time between the filing of the motion to amend and the court's decision, holding that the interest of the parties and society in the finality of judgments, and the legitimate expectation of the parties concerning the judgment to the extent it is not questioned by the parties stood against the lower court's course of action. Id. ¶ 32. We find the majority approach more persuasive generally, but also for a specific reason applicable to this case. This is not a case like Hidle where the party made a motion with respect to damages and the court reopened the liability judgment. Here, husband argued that the court made an error in valuing the Landrum interest, and the court reexamined that valuation. It found not only an error with respect to a mortgage, but also a greater error in the evaluation of the evidence. Husband cannot expect that a reopening of the Landrum valuation would be limited to correcting only the error he cited. Not surprisingly, wife responded to husband's Rule 59(e) motion on this point with arguments as to why considering the mortgage would require certain modifications in the valuation in favor of wife and a general reargument that the law the court relied on in support of husband's expert witness was wrong. Husband would foreclose any meaningful response to his motion because the response had to come after the close of the ten-day period specified in Rule 59(e). The interests of finality do not justify limiting the trial court's options to that extent. ¶ 33. Generally, we are convinced that giving the power to the court to alter or amend a judgment beyond the specific request of a party is an appropriate balance between reconsideration and finality. The limited exception to finality gives the court a last opportunity to ensure the completeness and accuracy of its decision in part in order to avoid an appeal and its attendant delay. Osborn v. Osborn, 147 Vt. 432, 433, 519 A.2d 1161, 1163 (1986). We recognize that the presence of the court's power may inhibit a party from seeking a correction to an error for fear of reopening the underlying judgment. Nevertheless, these instances are very limited, and the party retains the remedy of appeal. ¶ 34. For the above reasons, we hold that the court did not exceed its authority under Rule 59 by considering the valuation of the Landrum interest generally although husband specifically raised only the failure of the court to consider a mortgage. ¶ 35. Husband next argues that even if the court could consider judgment amendments or revisions beyond those requested by the parties, it went beyond its power here because it did not correct an error, but instead reevaluated the credibility of a witness. Husband draws on our statement that a purpose of a Rule 59(e) motion is for the court to amend the decree when there has been mistake or inadvertence of the court. See Rubin v. Sterling Enters., Inc., 164 Vt. 582, 588, 674 A.2d 782, 786 (1996). Drawing on federal law, he asserts that there are only four proper grounds for amendment of a judgment: (1) to account for an intervening change in controlling law; (2) to account for newly discovered evidence; (3) to correct clear legal error; and (4) to prevent manifest injustice. 12 J. Moore, Moore's Federal Practice § 59.30[5][a][i], at 59-109 to 59-110 (3d ed. 2007). Because the court's original valuation of the Landrum property did not arise from mistake or inadvertence of the court, or any of the above grounds recognized in federal cases, husband contends that the court could not amend the judgment. ¶ 36. We find husband's view of the court's power to be too narrow. Rule 59(e) gives the court broad power to other or amend a judgment. Reporter's Notes, V.R.C.P. 59. Thus, `the court may reconsider issues previously before it, and generally may examine the correctness of the judgment.' Robinson/Keir Partnership, 154 Vt. at 54, 573 A.2d at 1190 (quoting Ray E. Friedman & Co. v. Jenkins, 824 F.2d 657, 660 (8th Cir.1987)); see also Bell v. Bell, 162 Vt. 192, 195, 643 A.2d 846, 848 (1994) (stating that the purpose of a Rule 59(e) motion is to examine the correctness of matters before the court at trial). Whether we view the court's action here as the correction of a mistake or inadvertence, or an appropriate reconsideration of an important part of the judgment, we conclude that the court acted within its power. Thus, we conclude that the court made no procedural error in revaluing the Landrum interest. ¶ 37. This brings us to the merits of the court's valuation decision. Husband alleges that the court committed two specific errors of law and one error of fact. Husband's first legal argument addresses the issue of fair market value. Husband contends that, as a matter of law, the court must presume a sale or transfer of the property without the Lane Press lease for the purposes of calculating fair market value. Thus, husband argues that the court could not accept an expert witness's opinion that was based on the presence of the Lane Press lease. [2] ¶ 38. We do not disagree that the concept of fair market value is based on the sale of the property being valued. Thus, for property taxation purposes, fair market value is the price which the property will bring in the market when offered for sale and purchased by another, taking into consideration all the elements of the availability of the property, its use both potential and prospective, any functional deficiencies, and all other elements such as age and condition which combine to give property a market value. 32 V.S.A. § 3481(1). The issue, then, is whether in considering such a sale, we must assume as a matter of law that the property has no tenant, even though its current use is as rental property. ¶ 39. The experts valued the property by the income capitalization method. As we noted in Beach Properties, Inc. v. Town of Ferrisburg, 161 Vt. 368, 372-73, 640 A.2d 50, 52 (1994), this method, while theoretically accurate, has serious difficulties in its implementation because small differences in the input factors can cause large differences in the valuation. Further, the income capitalization method must be based both on current income and on projections for future income. See id. at 374, 640 A.2d at 53; see also 32 V.S.A. § 3481(1) (valuation is based on both potential and prospective use). ¶ 40. Perhaps our most helpful precedent for this case is Woolen Mill Assocs. v. City of Winooski, 162 Vt. 461, 648 A.2d 860 (1994), in which the issue was the valuation for property taxation of a building containing residential and commercial rental units. In that case, one of the main disputed issues was the expected vacancy rate. The taxpayer's expert appraiser testified to the use of a particular vacancy rate derived from both the taxpayer's experience and the vacancy rate of a similar property. The State Board of Appraisers accepted the taxpayer's evidence, and this Court affirmed that decision as within the Board's discretion, noting the obligation to base valuation both on current experience and projections. Id. at 465, 648 A.2d at 863. For the same reason, we affirm here. The experts and the court were basing their valuation on prospective use of the Landrum property, a factor specifically authorized in the statutory definition of fair market value. [3] To refuse to consider the presence of the Lane Press lease would be to ignore the effect of prospective use on valuation. ¶ 41. In a related argument, husband challenges the consideration of the Lane Press lease because the lease is between related entities and was not negotiated at arm's length. Again, we reject the argument. Husband argues that two property tax cases hold that sales of properties through transactions that were not at arm's length do not, as a matter of law, establish the value of the property that was sold. See Great Bay Hydro Corp. v. Town of Derby, 2007 VT 10, ¶ 8, 181 Vt. 574, 917 A.2d 486 (mem.); Beach Properties, 161 Vt. at 375-76, 640 A.2d at 54. In this case, we are not valuing the lease, and thus, these precedents do not apply. Whether or not the lease was negotiated at arm's length, it represents the source of income for the property owners now and for some period in the future. The court properly considered it in valuing the property by the income capitalization method. ¶ 42. Husband's final argument in this category attacks the evidentiary basis of the court's valuation of the Landrum property. We will uphold a trial court's valuation when it is supported by adequate findings, which are in turn supported by sufficient evidence in the record. Kanaan v. Kanaan, 163 Vt. 402, 405, 659 A.2d 128, 131 (1995). Husband asserts that the following rulings were not supported by the evidence: (1) the court's decision that the Lane Press lease rate was within market range; and (2) the court's determination that the lease ran for seven years. We look at these arguments in order. ¶ 43. Husband first argues that the evidence does not support the court's conclusion that the lease rate was within market range. Specifically, husband argues that both experts testified that the lease rate was above the market rate. Based on the record, husband argues, there was no evidence to support the court's characterization of the lease. ¶ 44. We disagree. Although wife's expert did, at one point, state that the Lane Press lease rent was certainly above the market rate, the court based its decision to use the lease terms to value the Landrum property on several pieces of evidence in the record. The court found that the current rate under the lease was $6.39 per square foot and acknowledged that both experts testified to market rates below that amountthat is, ranges of between $4.50 and $5.75 per square foot and between $4.50 and $6.00 per square foot. The court's decision nonetheless to rely on the lease is based on record evidence that the lease was fair to both parties involved. The court stressed husband's testimony that he had not participated in the negotiation of the lease. Husband also testified that he had asked Chittenden Bank, the trustee of the ESOP plan, to review the terms of the lease. Furthermore, in spite of its findings concerning the reliability of the lease, the court considered relevant standards of appraisal practice, including the Uniform Standards of Professional Appraisal Practice and relevant commentary by the FDIC and other federal regulatory actors. The court reasonably read these authorities to permit appraisals based on similar leases so long as [the] source of the rent is clearly identified. We conclude that the court's finding was not clearly erroneous. ¶ 45. Again, we note that husband's argument on this claim is largely beside the point. Whether the lease is above market rate is not determinative of its use in valuating the Landrum interest, unless the rate somehow undermined the finding that Lane Press would remain a tenant. We turn to that question because husband has challenged the court's finding that Lane Press would remain a tenant in the building for another seven years. ¶ 46. In making this finding, the court relied on the testimony of wife's expert appraiser, who assumed Lane Press would remain as a tenant for the next seven years. The lease expired in less than two years, but Lane Press had an option to renew for the remainder of the seven years. ¶ 47. Even in its initial decision, however, the court found that it was unlikely that Lane Press would move within the foreseeable future. The building is one of the largest commercial buildings in the county and was modified three times to meet the unique needs of Lane Press. The cost for Lane Press to move to a new building would be substantial and would require a substantial amount of time. No witness testified that a move was likely for any reason. The court acknowledged in its reconsideration decision that Lane Press could fail, move overseas, or find a better location in Chittenden County and somehow break the lease, but also observed that there is no evidence that any of these scenarios are likely to occur. We conclude that the court's finding that Lane Press would remain a tenant for seven years was supported by the evidence.