Dr. Hardam Azad & Trading Fair Houston, Inc. v. Harris County Appraisal District & Harris County Appraisal Review Board

Opinion issued July 3, 2003 In The Court of Appeals For The First District of Texas NO. 01-02-00684-CV HARDAM AZAD AND TRADING FAIR HOUSTON, INC., Appellants V. HARRIS COUNTY APPRAISAL DISTRICT AND HARRIS COUNTY APPRAISAL REVIEW BOARD, Appellees On Appeal from the 133rd District Court Harris County, Texas Trial Court Cause No. 2001-29844 MEMORANDUM OPINION This is an appeal of a take-nothing judgment rendered in favor of appellees, Harris County Appraisal District and Harris County Appraisal Review Board (collectively, HCAD). Appellants, Hardam Azad and Trading Fair Houston, Inc. (collectively, Azad), complain in two issues that (1) the evidence presented was legally and factually sufficient to support a prima facie case, precluding the trial court from granting HCAD’s motion for judgment, and (2) the trial court erred in refusing to allow Azad to testify regarding the fair market value of the property. We affirm. Background In October 2000, Azad purchased Trading Fair Houston, Inc., which consists of a large flea market and the land on which it is built. Before Azad bought it, the property had been on the market with a commercial real estate broker for most of the year 2000. The property is composed of three adjacent tracts of land: an unimproved tract (Tract 1) that HCAD lists in one account, and the two tracts on which the flea market stands (Tracts 2 and 3E) that HCAD lists in a second, separate account. The contract price that Azad paid for the property as a whole was $2,200,000; the contract did not differentiate one tract from another or allocate separate prices for each tract. For tax year 2000, HCAD appraised Tract 1 at $540,470 and Tracts 2 and 3E at $1,930,100, resulting in a total appraised value of $2,470,570 for the property as a whole. For tax year 2001, HCAD appraised Tracts 2 and 3E at $1,824,300. Azad did not challenge the appraised value of Tract 1 for either of these tax years, but protested the appraisal of Tracts 2 and 3E for tax year 2001 under the usual administrative proceedings governing taxpayers protests, achieving a reduction in the appraised value of Tracts 2 and 3E from $1,824,300 to $1,329,530. For tax year 2000, however, it was too late for Azad to protest in the usual manner because he bought the property after the time to protest had expired. Instead, therefore, Azad challenged the appraisal by filing a Real Property Correct Request/Motion to correct the over-appraisal under section 25.25(d) of the Tax Code, which provides: At any time prior to the date the taxes become delinquent, a property owner or the chief appraiser may file a motion with the appraisal review board to change the appraisal roll to correct an error that resulted in an incorrect appraised value for the owner’s property. However, the error may not be corrected unless it resulted in an appraised value that exceeds by more than one-third the correct appraised value. Tex. Tax Code Ann. § 25.25(d) (Vernon 2002). HCAD’s review board denied Azad’s request for correction and Azad sought review of that decision in the district court. At the close of Azad’s case-in-chief, HCAD moved for judgment as a matter of law. The trial court granted the motion and entered a take nothing judgment in favor of HCAD. Sufficiency of the Evidence In his first issue, Azad argues that he presented legally and factually sufficient evidence to support a prima facie case; thus, he contends that the trial court was precluded from granting HCAD’s motion for judgment. Standard of Review As the fact-finder in a bench trial, the judge has the authority to rule on both the legal and factual sufficiency of the plaintiff’s evidence on the defendant’s motion for judgment, after hearing only the plaintiff’s evidence. Ashcreek Homeowner’s Ass’n, Inc. v. Smith, 902 S.W.2d 586, 587 (Tex. App.—Houston [1st Dist.] 1995, no writ). On appeal, the legal and factual sufficiency of the evidence to support the judgment may be challenged as in any other nonjury case. Id. When we review legal sufficiency, we review the evidence in a light that tends to support the finding of the disputed facts and disregard all evidence and inferences to the contrary. Lee Lewis Constr., Inc. v. Harrison, 70 S.W.3d 778, 782 (Tex. 2001). When we review factual sufficiency, we conduct a neutral review of all the evidence. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We will reverse for factual insufficiency only if the ruling is so against the great weight and preponderance of the evidence as to be manifestly erroneous or unjust. Minucci v. Sogevalor, S.A., 14 S.W.3d 790, 794 (Tex. App.—Houston [1st Dist.] 2000, no pet.). Fair Market Value of the Property Taxes for each year are based on the market value of the taxable property as appraised on January 1 of that year. Tex. Tax Code Ann. §23.01 (Vernon 2002). HCAD contends that there was no evidence of the appraised value of the property as of January 1, 2000; thus, Azad cannot prevail. Azad contends that the value of the property when he bought it in October 2000 should be deemed the value as of January 1, 2000, because the property was listed for sale for most of the year 2000, the use of the property had not changed, and the income flow for the property had not changed. The Texas Constitution provides that [n]o property of any kind in this State shall ever be assessed for ad valorem taxes at a greater value than its fair market value nor shall any Board of equalization of any governmental or political subdivision or taxing district within the State fix the value of any property for tax purposes at more than its fair market value . . . Tex. Const. art. VIII, §20. Market value is defined as the price at which a property would transfer for cash . . . under prevailing market conditions if (A) exposed for sale in the open market with a reasonable time for the seller to find a purchaser; (B) both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and (C) both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other. Tex. Tax Code Ann. §1.04(7); see also Bailey County Appraisal Dist. v. Smallwood, 848 S.W.2d 822, 824-25 (Tex. App.—Amarillo 1993, no writ) (noting fair market value results from willing purchaser, willing seller, and no pressure to buy or sell property). Because the transaction in which Azad acquired the property (1) involved a willing buyer and seller with no pressure to buy or sell, and (2) because there were apparently no events that significantly altered the property’s value between January and October of 2000, we will assume, without deciding, that the value of the property in January was the same as its value in October. Azad testified that, although the contract price for the property as a whole was $2,200,000, the actual price, after subtracting the real estate commission of $132,000 and a cash distribution from the seller of $175,000 to be used as a tenant retention releasing inducement, was $1,893,000. Although we are not entirely satisfied that it is appropriate to use what Azad terms the “net price,” as opposed to using the contract price to determine the fair market value, HCAD has indicated that it is willing to accept $1,893,000 as the fair market value of the property as a whole for purposes of this appeal. Accordingly, we will also accept this amount as representing the value of the property. Appraised Value HCAD contends that the appraisal amount of $2,470,570 for tax year 2000—which is the total of the appraised value of Tracts 1, 2, and 3E—did not exceed the market value of all three tracts of land, $1,893,000, by more than one third, as required by statute for the taxpayer to obtain a correction. Thus, it argues that Azad is not entitled to a correction. See Tex. Tax Code Ann. § 25.25(d) (specifying no correction required unless original appraised value is at least one-third higher than corrected appraised value). As noted, HCAD separated the three tracts of land into two accounts, and Azad did not contest the appraised value of Tract 1. He contested only the appraised value of $1,930,100 for Tracts 2 and 3E. HCAD argues that Azad should not be able to accept the appraised value of Tract I but contest the appraised value of Tracts 2 and 3E because (1) he bought an undivided piece of property and, (2) the total appraised value of $2,470,000 does not exceed the total fair market value of $1,893,000 by more than one third. We agree. Moreover, even if we broke down the market value and the appraised value by tracts, as Azad requests, we would not change our opinion that Azad is not entitled to a correction. By subtracting the uncontested appraised value of Tract I, $540,000, from the fair market value of the entire property, $1,893,000, Azad contends that the fair market value of Tracts 2 and 3E is $1,353,000. Because the appraised value of Tracts 2 and 3E ($1,930,000) is more than one-third greater than the fair market value he has calculated for those tracts ($1,352,530), Azad contends that he is entitled to a correction. The problem with Azad’s argument is that he mixes inconsistent figures in his calculation to reach the desired result, thus leading to the perplexing and paradoxical result of the appraised amount of the whole property not exceeding one-third of the market value while a portion of the property does appear to exceed it. Specifically, Azad’s calculation depends upon his subtracting the appraised value of Tract I from the market value of Tracts 2 and 3E. It is not the Tract I appraised value of $540,000 that should be subtracted from the total market value, but the market value of Tract I that should be subtracted. The correct calculation should be based on the proportion of value that HCAD has assigned to Tract I, which Azad has not contested. By appraising Tract I at $540,000, Tracts 2 and 3E at $1,930,000, and the total property value at $2,470,000, HCAD has determined that Tract I is worth approximately 21% of the total value of the property while Tracts 2 and 3E are worth approximately 79% of the total value. When we apply these percentages, the result is that Tract I has a market value of $397,530 and Tracts 2 and 3E have a market value of $1,542,470. Thus, when we subtract the market value of Tract I from the market value of Tracts 2 and 3E, the remainder is $1,495,470, not $1,352,530. We then apply Azad’s method of calculation to determine whether the appraised value exceeds the market value by more than one third. When we use the correct figures, the appraised value of Tracts 2 and 3E ($1,930,000) is not more than one-third greater than the total market value we have calculated ($1,495,470); therefore, Azad does not satisfy the statutory requirement, his challenge fails and the trial court did not err in granting HCAD’s motion for judgment. We overrule the first issue. Exclusion of Testimony In his second issue, Azad argues that the trial court erred in refusing to allow him to testify about the fair market value of the property. He contends that the Tax Code does not require that testimony about the fair market value has to be given by a certified real estate appraiser. HCAD contends that the trial court properly sustained its objection to the testimony. We consider this issue moot. It is evident from the record that the trial court, while appearing to sustain HCAD’s objection, actually accepted Azad’s claim that the fair market value of the property was $1,893,000. We, too, have accepted it for purposes of this appeal. Thus, error, if any, is moot. We overrule Azad’s second issue. We affirm the trial court’s judgment. Evelyn V. Keyes Justice Panel consists of Justices Hedges, Nuchia, and Keyes.