CHARLES MALCHO V CLARK TOWNSHIP
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STATE OF MICHIGAN
COURT OF APPEALS
CHARLES MALCHO, TORTOLA
ENTERPRISES, INC., BRIAN MALCHO,
CHARLES W. ALLBRIGHT III, LEA
BRONSON, STEPHEN WITTMANN, GARY
DUMBAULD, FOX FAMILY PARTNERSHIP,
L.L.C., ROBERT FRAPPIER, MARIE E.
FRAPPIER, GREGORY MALCHO, LEE
HUBBARD, HENRY MAST, CONNIE MAST,
DAVID MCDANIEL, JANE MCDANIEL, and
JAMES G. ROMANUK,
UNPUBLISHED
October 21, 2010
Petitioners-Appellants,
v
No. 293137
Tax Tribunal
LC No. 00-294834
CLARK TOWNSHIP,
Respondent-Appellee.
Before: MURPHY, C.J., and BECKERING and M. J. KELLY, JJ.
PER CURIAM.
Petitioners appeal as of right the judgment of the Michigan Tax Tribunal determining the
true cash values, assessed values, and taxable values of 11 parcels of real property in Clark
Township for tax years 2002 through 2007. Because we conclude that there were no errors
warranting relief, we affirm.
Petitioners each acquired a 1/45th property interest in two lots that are operated as a
marina along the shore of Lake Huron in Mackinac County. Eleven parcels are at issue in this
appeal. The deeds under which petitioners acquired their property interests specified that
petitioners also obtained the rights associated with a specific dock and parking place. The docks
varied in length, and the prices that petitioners paid for their respective property interests varied
depending on the length of the assigned dock. That is, those petitioners who received rights to a
longer dock paid a greater price for their property interest compared to those petitioners who
received rights to a shorter dock. Petitioners maintain that after they acquired their property
interests, they discovered that a previous lease between the state of Michigan and the original
developer prohibited any condominium development from selling or leasing the right to use any
portion of the bottomlands of Lake Huron for more than a single boating season. Thus,
petitioners learned that they did not actually acquire any property interests in the assigned docks.
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Petitioners thereafter brought this action challenging the assessed, taxable, and true cash values
of their individual parcels for tax years 2002 to 2007, which petitioners maintained were based
on an inaccurate understanding of the nature of the property interests that they had acquired.
The Tax Tribunal determined that petitioners reasonably believed that they were
purchasing “something in the nature of a dockominium,” and that they did not actually acquire
any property interests in the bottomlands of Lake Huron or the docks themselves. Nonetheless,
the tribunal upheld respondent’s use of the sales comparison approach as the most accurate
approach for determining the true cash values of petitioners’ actual property interests. The
tribunal further found that “the “Dock Mooring rights referenced in each of the deeds, although
not conveying a fee or tangible interest in the mooring rights, is a valid value indicator and that
this value is best codified base[d] upon a linear foot basis.” Petitioners now challenge the Tax
Tribunal’s decision.
In the absence of a claim of fraud, this Court reviews “the Tax Tribunal’s decision for
misapplication of the law or adoption of a wrong principle.” Briggs Tax Serv, LLC v Detroit Pub
Sch, 485 Mich 69, 75; 780 NW2d 753 (2010). Further, we must accept the Tax Tribunal’s
factual findings “if they are supported by ‘competent, material, and substantial evidence on the
whole record.’ But when statutory interpretation is involved, this Court reviews the Tax
Tribunal’s decision de novo.” Id. (citation omitted).
At the outset, we emphasize that the issue in this appeal is not whether petitioners
received the actual property interests that they reasonably believed they were acquiring. Indeed,
the tribunal expressly found that petitioners reasonably believed that they were purchasing
“something in the nature of a dockominium,” but that they did not actually acquire any property
interests in the bottomlands of Lake Huron or the docks themselves. We have no reason to
question that finding. Instead, the sole issue in this appeal is whether respondent properly relied
on sales of approximately 41 conveyances of interests in this development, including sales for
the 11 parcels involved in this action, as providing an accurate indication of the true cash values
of petitioners’ actual property interests, notwithstanding petitioners’ misapprehension of the
nature of their interests.
Under our Constitution, the Legislature is required to provide for the uniform general ad
valorem taxation of real and tangible personal property, not exempt by law, and must determine
the “true cash value” of such property. Const 1963, art 9, § 3. For purposes of taxation, the true
cash value is generally the value that could be obtained in a private sale:
As used in this act, “true cash value” means the usual selling price at the
place where the property to which the term is applied is at the time of assessment,
being the price that could be obtained for the property at private sale, and not at
auction sale except as otherwise provided in this section, or at forced sale. The
usual selling price may include sales at public auction held by a nongovernmental
agency or person if those sales have become a common method of acquisition in
the jurisdiction for the class of property being valued. The usual selling price
does not include sales at public auction if the sale is part of a liquidation of the
seller’s assets in a bankruptcy proceeding or if the seller is unable to use common
marketing techniques to obtain the usual selling price for the property. . . . In
determining the true cash value, the assessor shall also consider the advantages
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and disadvantages of location; quality of soil; zoning; existing use; present
economic income of structures, including farm structures; present economic
income of land if the land is being farmed or otherwise put to income producing
use; quantity and value of standing timber; water power and privileges; and
mines, minerals, quarries, or other valuable deposits known to be available in the
land and their value. . . . [MCL 211.27(1) (emphasis added).]
Petitioners had the burden of establishing the true cash values of their properties. See MCL
205.737(3).
In Antisdale v City of Galesburg, 420 Mich 265, 276-277; 362 NW2d 632 (1984), our
Supreme Court observed:
Generally, there presently are three methods of valuation which are
acceptable to the Michigan Tax Tribunal and the courts. They are the cost-lessdepreciation approach, the capitalization-of-income approach, and the market
approach. It is the duty of the Tax Tribunal to select the approach which provides
the most accurate valuation under the circumstances of the individual case.
[Citations and footnote omitted.]
In this case, respondent used the market or sales approach to determine the true cash
values of petitioners’ properties. In particular, because the evidence showed that the amount
petitioners paid for their interests varied, depending on the size of the dock they were entitled to
use, respondent utilized the records of sales for interests in the development during the relevant
time period to arrive at a linear foot price based on the length of each dock.
In Great Lakes Div of Nat’l Steel Corp v City of Ecorse, 227 Mich App 379, 391; 576
NW2d 667 (1998), this Court explained:
The sales-comparison or market approach has been described as requiring
an analysis of recent sales of similar properties, a comparison of the sales with the
subject property, and adjustments to the sale prices of the comparable properties
to reflect differences between the properties. It has been described as the only
approach that directly reflects the balance of supply and demand for property in
marketplace trading. [Citations omitted.]
Under the sales approach, however,
the selling price of a particular piece of property is not conclusive as evidence of
the value of that piece of property. The Legislature has commanded that property
be assessed at its “usual selling price.” The most obvious deficiency in using the
sales price of a piece of property as conclusive evidence of its value is that the
ultimate sale price of the property, as a result of many factors, personal to the
parties or otherwise, might not be its “usual” price. The market approach to value
has the capacity to cure this deficiency because evidence of the sales prices of a
number of comparable properties, if sufficiently similar, supports the conclusion
that factors extrinsic to the properties have not entered into the value placed on
the properties by the parties. Nevertheless, if it can be shown that the sale price of
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each of the comparable properties has been determined by a flawed method the
result of the market approach to valuation will also be flawed. [Antisdale, 420
Mich at 278-279 (citations omitted).]
“Regardless of which approach is used, the value determined by the Tax Tribunal must be the
usual price for which the property would sell.” Great Lakes Div of Nat’l Steel, 227 Mich App at
390.
Although the Tax Tribunal found that petitioners did not acquire the actual property
interests they reasonably believed they were acquiring (that is, the ownership interests in the
docks that were associated with their properties), this does not mean that the prices petitioners
paid for their property interests did not accurately reflect the fair market value of the interests
they actually received. MCL 211.27(1) provides that an assessor may consider the “existing use”
of property as a guideline for determining the fair market value of property: “existing use may be
indicative of the use to which a potential buyer would put the property and is, therefore, relevant
to the fair market value of the property.” Safran Printing Co v Detroit, 88 Mich App 376, 382;
276 NW2d 602 (1979).
The evidence in this case showed that petitioners purchased their property interests to
provide them with use of a dock to moor their boat in a market where dock availability was
limited. Throughout the relevant time periods, petitioners had uninterrupted use of their property
interests for this purpose. The evidence also showed that during the relevant time periods and
even after the discovery of the true nature of the property interests, no one interfered with
petitioners’ access to, or usage of, their respective boat slips. Although petitioners contend that
the State’s interest in the bottomlands prevents them from transferring any rights associated with
the docks to future purchasers, they failed to show that this affected the fair market values of
their property interests. On the contrary, the evidence showed that since the discovery of the
bottomlands lease, resales of property interests in the development to third parties continued to
occur, at a slight increase in value compared to earlier sales. Moreover, several petitioners
admitted that, despite their misunderstanding of the nature of the property interests they received,
they were not sure that they had actually overpaid for their interests. For these reasons, the Tax
Tribunal’s finding that the sales comparison method provided an accurate indication of the
values of petitioners’ property interests is supported by competent, material, and substantial
evidence on the whole record.
Nevertheless, petitioners argue that because they did not actually receive any property
rights in the assigned docks, it was improper to consider dock length as a valid value influencer
in setting the tax assessments. We do not agree. The Tax Tribunal has a duty to determine the
most accurate valuation, which may depend on a variety of relevant factors:
[W]hile all relevant circumstances that tend to affect property value should
be considered in the valuation process, there is no rule of law that requires the Tax
Tribunal to quantify every possible factor affecting value. The Tax Tribunal’s
overall duty is to determine the most accurate valuation under the individual
circumstances of the case. [Great Lakes Div of Nat’l Steel, 227 Mich App at 398399 (citations omitted).]
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Although petitioners emphasize that they did not actually acquire any property rights in
the docks as a result of the bottomlands lease, the evidence showed that they had uninterrupted
access to their assigned docks during the relevant time periods. Furthermore, the evidence
showed that there was a correlation between the prices that petitioners paid for their respective
property interests and the lengths of the docks each petitioner was assigned in return. Given this
evidence, we agree with the Tax Tribunal’s conclusion that the dock length was relevant: “[T]he
Dock Mooring rights referenced in each of the deeds, although not conveying a fee or tangible
interest in the mooring rights, is a valid value influencer and that this value influence is best
codified base[d] upon a linear foot basis.”
We also disagree with petitioners’ argument that it was improper for the Tax Tribunal to
consider the mooring rights because those rights can only be considered an intangible value
influencer. Contrary to what petitioners assert, intangible factors may be considered when
assessing property. Huron Ridge LP v Ypsilanti Twp, 275 Mich App 23, 43; 737 NW2d 187
(2007). Courts “have held that the value of nontaxable intangible assets may be included in the
assessment of real property or tangible business property if the intangibles ‘are deemed to be
directly related to the tangible property, but not [where they] are deemed to be related to the
business in which the tangible property is used.’” Id. at 37-38, quoting Anno: Inclusion of
intangible asset values in tangible property tax assessments, 90 ALR5th 547, § 2(a), pp 562-563.
Thus, even if the mooring rights can be considered intangible assets, it was not improper for the
Tax Tribunal to consider them where the evidence showed a direct correlation between the prices
paid for the various property interests and the lengths of the docks associated with each
respective property interest.
We also disagree with petitioners’ argument that the Tax Tribunal erred by rejecting their
own appraiser’s method for valuing the respective property interests. Petitioners’ appraiser,
Terrell Oetzel, believed that the most appropriate way to value each interest acquired by a deed
was to determine the entire value of the property as a whole, and then divide that amount by 45.
An assessment should reflect the probable price that a willing buyer and a willing seller would
arrive at through arm’s length negotiation. Huron Ridge, 275 Mich App at 28. The Tax Tribunal
properly rejected petitioners’ method for appraising the property because it failed to consider the
different prices that different buyers were willing to pay to acquire the use of different size
docks. Under petitioners’ proposal, each property owner would be treated as possessing an equal
property interest, despite the differences in the sizes of the docks that they had a right to use.
This method would be unfair to property owners who paid less to obtain access to a shorter dock
and would unfairly benefit those owners who paid more to obtain access to a longer dock.
Although assessments must be uniform among similarly situated taxpayers, Edward Rose Bldg
Co v Independence Twp, 436 Mich 620, 640; 462 NW2d 325 (1990), the property owners in this
case were not similarly situated because the docks that they had access to varied in length.
Conversely, respondent appropriately used a uniform method for determining the value of each
owner’s property interest by applying a uniform rate to the linear footage of each dock. Finally,
while we agree with petitioners that an assessment must be based on a legal use of property, id.
at 633, there was no showing of an illegal use in this case. For these reasons, the Tax Tribunal
did not err in rejecting petitioners’ proposed valuation method.
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There were no errors warranting relief.
Affirmed.
/s/ William B. Murphy
/s/ Jane M. Beckering
/s/ Michael J. Kelly
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