Opinion ID: 1478581
Heading Depth: 1
Heading Rank: 2

Heading: walnut hill

Text: The second property, referred to as Walnut Hill, is a 125-unit housing development with a mixture of subsidized and nonsubsidized apartments. The Walnut Hill units that are subsidized by HUD are done so pursuant to § 221(d)(3) of the National Housing Act. See 12 U.S.C.A. § 1715L (West 1989). No oral testimony was presented relative to the valuation of the Walnut Hill complex. Rather the parties agreed to submit the appraisals of Coyle, Sciuto, and Wilcox. All the documentary evidence was presented by stipulation. The city assessed Walnut Hill at $4,533,920 for each of the years in question. Coyle, using the income approach, calculated a value of $2,856,936. The trial justice based his decision on Sciuto's valuation of $2,634,084, which was derived from a cash-flow analysis and a 6-percent capitalization rate. The trial justice then added a depreciation expense of $115,000 to the net income, which was based on the property's average depreciation over the previous four years, and arrived at a 75-percent valuation of $2,777,123. He concluded from this assessment that plaintiff was entitled to the following tax refunds: YEAR REFUND 1988 $35,218 1989 $36,085 1990 $40,453 1991 $43,205 After awarding plaintiff interest in the amount of $44,789 and costs in the amount of $400, the trial justice concluded that plaintiff was entitled to a total refund of $200,152 for Walnut Hill. [6] In both the Plaza Village and the Walnut Hill judgments, the trial justice ruled that the fair-market value calculated for each piece of real estate shall remain in effect until the next municipal wide revaluation or until such time as the propert[ies] are no longer subject to federal regulations. We now turn to an analysis of the issues raised by both parties on appeal.

The first argument presented by defendant is that Coyle's testimony lacked proper foundation and, as such, should have been disregarded by the trial justice. The defendant contends that Coyle's testimony was suspect because his calculations remained the same despite variations in the data he was using. The defendant claims that Coyle could have arrived at any desired valuation simply by adjusting the rate of depreciation or the rate of capitalization. It is well settled that the findings of a trial justice sitting without a jury are accorded great deference and will not be disturbed unless it is demonstrated that the trial justice misconceived or overlooked material evidence or was otherwise clearly wrong. Green v. Green, 559 A.2d 1047, 1048 (R.I. 1989). This court has previously stated that [f]acts upon which the opinion of the expert is based must be stated; otherwise, `it becomes impossible to ascertain whether the conclusion drawn from them possesses sufficient probative force; or is not mere conjecture or speculation.' Gorham v. Public Building Authority of Providence, 612 A.2d 708, 717 (R.I. 1992) (quoting Alterio v. Biltmore Construction Corp., 119 R.I. 307, 313, 377 A.2d 237, 240 (1977), and Dickinson-Tidewater, Inc. v. Supervisor of Assessments, 273 Md. 245, 253, 329 A.2d 18, 23-24 (1974)). If the expert fails specifically to set forth the factual basis for his conclusion, the court must disregard his testimony. Burrillville Racing Ass'n v. Tellier, 574 A.2d 749, 752 (R.I. 1990). A review of the trial transcript leads us to conclude that Coyle adequately explained the factual basis for his conclusions. Coyle's extensive testimony included a step-by-step account of how he arrived at each of his valuations. Coyle disclosed all the capitalization rates he used in determining fair-market value. He also explained the differing expense figures he employed to calculate Plaza Village's net income. Moreover, Coyle submitted into evidence reports detailing the numbers and figures he utilized in each analysis. Accordingly we find that Coyle's testimony did not lack proper foundation and that the trial justice was not clearly wrong in allowing Coyle to testify.
The defendant next claims that the cost approach is the only practical method for conducting mass appraisals such as a municipal revaluation. The defendant therefore believes that the trial justice erred in rejecting the city's valuation of the two properties based on the cost approach. After reviewing our decision in Kargman v. Jacobs, 122 R.I. 720, 411 A.2d 1326 (1980) ( Kargman II ), we find defendant's contention to be without merit. In Kargman II this court addressed a set of circumstances similar to the facts of the case at hand. The taxpayers in Kargman II, owners of an apartment complex financed by the Federal Government pursuant to § 221(d)(3) of the National Housing Act, filed several petitions for relief from alleged over-assessment of taxes. The tax assessor had based his valuation on figures derived from the cost approach. At trial the taxpayers presented testimony of expert appraisers who valued the same real estate pursuant to the income approach. The trial justice granted the taxpayers' petitions, claiming that the income approach was the preferable method of valuing the federally financed apartment complex. According to the trial justice, the property's income capacity would certainly affect the property's cash value because a prudent buyer would only purchase the property for investment purposes. Consequently the trial justice rejected the assessor's valuation based on the cost approach because the assessor did not accord any weight to the property's income. On appeal the tax assessor in Kargman II claimed that the trial justice erred in rejecting his assessment. The tax assessor believed that our decision in Kargman v. Jacobs, 113 R.I. 696, 325 A.2d 543 (1974) ( Kargman I ), wherein we upheld earlier tax assessments on the same property, applying the cost approach, insulated his use of the cost approach from further challenge. We upheld the ruling of the trial justice in Kargman II, finding that the trial justice acted well within his capacity as factfinder. We additionally determined that federal regulations limiting the rents of an apartment complex are a relevant factor to consider in assessing its value. In light of Kargman II, we find defendant's characterization of the cost approach as the only practical method of conducting municipal valuations to be incorrect. Moreover, this court has construed the term fair-market value to mean that price the property would probably bring in a transaction in a fair market between a willing seller and a willing buyer. Rosen v. Restrepo, 119 R.I. 398, 400, 380 A.2d 960, 961 (1977). We believe that this definition supports the use of the income approach in the case at hand because a prudent buyer of the two properties would not be interested in their replacement cost. Rather a prudent buyer would only be interested in what gains he or she might realize from the capital investment. Accordingly we conclude that the trial justice was not clearly wrong in rejecting defendant's calculations based on the cost approach. We are well aware that the tax assessor is not bound by any particular formula, rule or method    to ascertain the fair market value of real estate. His choice of one of the recognized methods of valuation is simply an exercise of [his] discretion. Kargman I, 113 R.I. at 704, 325 A.2d at 547-48. We are also aware that tax assessors are entitled to a presumption that they have performed their official acts properly until the contrary is proven. Kargman II, 122 R.I. at 731, 411 A.2d at 1332; Greenough v. Board of Canvassers and Registration, 33 R.I. 559, 571, 82 A. 406, 410-11 (1912). The burden of proof is on the taxpayer to establish    that defendant assessor has set a value on the subject property that is greater than its full and fair cash value. Kargman I, 113 R.I. at 703, 325 A.2d at 547. For the reasons stated above, we are of the opinion that the trial justice did not err in finding that plaintiff had satisfied its burden.
The defendant argues that the trial justice improperly based his decision on the testimony of Sciuto. Although conceding that Sciuto was a tax and accounting expert, defendant contends that his expertise was not related either to municipal tax assessments or to the appraisal of real estate. Citing Kargman I, defendant avers that Sciuto's allocation of the properties' income based on cash flow and tax considerations created a mathematical morass in valuing the two properties. We disagree. Determinations of trial justices regarding the competency of expert witnesses have traditionally been afforded great latitude. The test of qualification as an expert witness lies in the sound discretion of the trial justice, and his or her determinations in this regard will not be disturbed in the absence of clear error or abuse. Bateman v. Mello, 617 A.2d 877, 879 (R.I. 1992) (quoting Cobe v. Hersey, 576 A.2d 1226, 1232 (R.I. 1990)). After reviewing Sciuto's extensive resume, we find that the trial justice did not abuse his discretion in allowing Sciuto to testify on the valuation of Plaza Village. Sciuto's valuation was consumed with complex principles of taxation and accounting. In his cash-flow analysis, Sciuto applied complicated accounting formulas to the facts and figures of the case at hand. Indeed, we believe that Sciuto was just as qualified to value the two parcels as any real estate appraisal expert. We are also of the opinion that the trial justice was not clearly wrong in basing his decision on Sciuto's testimony. This court has held that a trier of fact can accept the property valuation of one set of experts and reject that of another set of experts. Kargman II, 122 R.I. at 735, 411 A.2d at 1334; Socony-Vacuum Oil Co. v. French, 88 R.I. 6, 11-12, 143 A.2d 318, 321 (1958). Just as a trial justice may pick and choose among evidence presented by laypersons, he or she may do the same when dealing with evidence of experts. As stated above, Sciuto provided extensive testimony and figures supporting his valuation. We therefore find that the trial justice acted within the bounds of his discretion in relying on Sciuto's testimony.
The next argument raised by defendant on appeal is that the trial justice erred by not including in his valuations a separate value for the land independent of the buildings. In support of this contention defendant points to the hybrid approach utilized in Kargman II, wherein the trial justice attributed a separate value for the land in the assessment based on the income approach. Accordingly defendant asks this court to modify the trial justice's valuations by adding to them the value of the undeveloped land for both properties. As Sciuto testified, when one uses the income approach, the resulting valuation includes the value of income from the whole project. Unlike the cost approach wherein the land and the buildings must be valued separately, the income approach produces one total project value. When arriving at a total value, the appraiser may allocate separate amounts for the land, the buildings, and the fixtures. An appraiser, however, is not obligated to provide separate valuations. Although we recognize that the trial justice in Kargman II attributed a separate valuation for the undeveloped land, the necessity of doing so was not raised as an issue in that case. Moreover, Coyle testified that the undeveloped land of Plaza Village held no separate value because nothing more could have been built on this land. He noted that Plaza Village was already built to the maximum number of units allowed under the zoning code. Furthermore, even if the zoning board had approved the construction of additional units, the land's topography physically prevented such an addition. Although the trial justice did not refer to this testimony in his decision, we find that it provides further support for our conclusion that the trial justice did not err by failing to provide a separate valuation for the land without the buildings.
Another issue raised by defendant is that the trial justice exceeded his authority by ordering the tax assessments of Plaza Village and Walnut Hill to remain in effect until the next citywide valuation or until the properties are no longer subject to federal regulations. The defendant bases his argument on the fact that taxpayers are required to dispute tax assessments on a yearly basis. See Northgate Associates v. Shorey, 541 A.2d 1192, 1193 (R.I. 1988); G.L. 1956 (1988 Reenactment) § 44-5-26. According to defendant, the trial justice's ruling would relieve plaintiff of its statutory duty to file annual petitions contesting defendant's assessments of Plaza Village and Walnut Hill. In contesting the trial justice's ruling on this issue, defendant is laboring under the mistaken belief that he may repeat an assessment found to be invalid by the court. If this were true, then plaintiff would be forced to relitigate annually the issue of fair-market value. Such a contention completely ignores the doctrine of res judicata. Once a court of competent jurisdiction has decided issues of fact and law, both parties to the action are precluded from relitigating the same issues in a subsequent lawsuit. Rhode Island Student Loan Authority v. NELS, Inc., 600 A.2d 717, 720 (R.I. 1991). We therefore conclude that the trial justice did not abuse his discretion by ordering the tax assessments of Plaza Village and Walnut Hill to remain in effect until the next citywide valuation or until the properties were no longer subject to federal regulations. Without the occurrence of one of these events plaintiff would be required to relitigate issues already decided.
Lastly defendant argues that G.L. 1956 (1988 Reenactment) §§ 44-5-11, 44-5-26, and 44-5-27 are inconsistent and irreconcilable with one another. The defendant claims that these statutes provide the taxpayer and municipalities with differing and conflicting directions for relief. Section 44-5-11 prevents municipalities from changing a property's assessed value during the ten-year cycle of valuation without conducting an entire revaluation. On the other hand, § 44-5-26 allows the individual taxpayer to challenge the assessed value of his or her property on a yearly basis. The defendant alleges that this statutory scheme leads to inequitable results. It is a well-settled rule of appellate practice that matters not brought to the attention of the trial justice may not be raised for the first time in this court on appeal. 632 Metacom Associates v. Pub Dennis of Warren, Inc., 591 A.2d 379 (R.I. 1991). Our review of the trial record reveals that defendant did not raise this issue below. Consequently we need not address the issue on appeal. For all the reasons stated, we hereby deny and dismiss defendant's appeal on all counts. We now turn to a discussion of the issues raised by plaintiff's appeal.