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LLC v. Jefferson Davis Parish Board of Review

Court of Appeals of Louisiana, Third Circuit

December 30, 2019



          Brian A. Eddington Attorney for Appellant, Donald Kratzer, Jefferson Davis Parish Assessor

          Phyllis D. Sims Linda S. Akehin Angela Adolph Kean Miller LLP Phyllis D. Sims Linda S. Akehin Angela Adolph Kean Miller LLP Attorneys for Appellee, D90 Energy, LLC

          Terrence D. McCay Kean Miller LLP Kyle P. Polozola Kean Miller LLP Attorney for Appellee, D90 Energy, LLC

          Court composed of Sylvia R. Cooks, Billy H. Ezell, and John E. Conery, Judges.



         D90 Energy, LLC (D90) acquired three oil wells and one saltwater disposal well in Jefferson Davis Parish in October 2012. D90's tax representative, Cochran & Company (Cochran), submitted a letter to Jefferson Davis Tax Assessor, Donald Kratzer (Kratzer), in March of 2013, with a copy of a document identified as an "Assignment, Conveyance and Bill of Sale" (Bill of Sale) along with a copy of a cancelled check in the amount of $100, 000. On the basis of these documents Cochran asserted its client D90 had purchased the three wells in Jefferson Davis Parish from Goldking Resources for the sum of $100, 000, despite the written representation in the Bill of Sale that the wells were purchased "for and in consideration of Ten and No/100 ($10) and other good and valuable consideration." No other documentation was provided to Kratzer by D90 or anyone on its behalf. Based on its letter and attached documentation, Cochran asserted D90's wells should be valued by Kratzer at $100, 000 for tax assessment purposes. D90 submitted these same documents for subsequent tax years including 2014 and 2015, asserting each time these wells should be valued at $100, 000 for tax assessment purposes. For tax year 2016, D90 informed Kratzer that the wells were all shut in but provided no supporting documentation. Based upon that representation D90 asserted the property should now be valued at $10, 000. Kratzer found public information from the State of Louisiana indicating the wells were shut in as of June 2, 2017.

         Kratzer did not consider the information submitted by D90 sufficient to make a determination of the value for assessing ad valorem property taxes on these wells. Additionally, Kratzer did not use D90's suggested sales price valuation approach as the sole method to establish fair market value, but, instead, used valuation tables promulgated by the Louisiana Tax Commission (Commission) which resulted in a valuation of $3, 347, 240 for tax year 2013 and $3, 347, 240 for tax year 2014. The method used for valuation was based on the "age of the well; the depth of the well; the type of well; and the production." The Jefferson Davis Parish Board of Review (the Board) determined the values to be the same as those of Assessor Kratzer. D90 appealed that decision to the Louisiana Tax Commission (Commission). The Commission's Assistant Director, Celeste Moss, calculated the value for tax year 2013 at $3, 344, 584, according to her application of the Commission's Rules and Regulations. The Commission, using documentary evidence and testimony presented at the hearing before it, determined that the correct fair market value of the property for 2013 and 2014 was $235, 000. The Commission arrived at this valuation accepting D90's evidence of a purchase price of $100, 000 and D90's evidence submitted to the Commission that it had a plug-and-abandon liability cost of $135, 000 for each of the three wells. Assessor Kratzer, having been provided the same information by D90 for tax year 2015 as for the previous years assessed the wells at $3, 140, 372 for tax year 2015. D90 suggested to Kratzer that the actual value, based on the alleged sale price, should be $100, 000. The Board upheld the assessor's valuation. The Commission set a fair market value for tax year 2015 at the same $235, 000 as for the previous tax years on the same basis. For tax year 2016, Kratzer valued the property at $1, 821, 213. D90 maintained the value for tax year 2016 should be lowered to $10, 000 based on its assertion that the wells were shut in as of December 2016. The Board again upheld Kratzer's valuation. The Commission set the fair market value for tax year 2016 at $145, 000.

         D90 paid its tax obligation for 2013 and 2014 under protest but it did not pay any tax, under protest or otherwise, for tax years 2015 and 2016. D90 objected to all four years of assessments and filed protests with the Jefferson Davis Board of Review. The Board denied all of D90's protests and upheld Kratzer's assessments for 2013, 2014, 2015 and 2016. D90 appealed those rulings to the Louisiana Tax Commission. Kratzer filed exceptions challenging D90's right to attack the assessments for 2015 and 2016 because D90 had not paid those taxes under protest or otherwise.

         At the hearing before the Tax Commission D90 introduced new evidence and testimony in addition to the documents it originally provided to Kratzer. As to the information regarding each tax year submitted to the Commission in support of D90's position it is admitted that all such information regarding a given tax year was available to D90 at the time it or its agent submitted the original limited information to Kratzer. The Commission rendered a decision in which it determined the fair market value of the wells as recited above. It did not rule on Kratzer's exceptions concerning tax years 2015 and 2016, stating:

The Commission rules allow for properly documented sales to be considered by the Assessor as evidence of Fair Market Value. Based on testimony and the evidence provided at [sic] hearing, we find the Fair Market Value of the wells in questions [sic] to be $100, 000, plus the cost of plugging and abandonment. The Taxpayer stated that the prior owner was beginning the process to plug and abandon and, therefore, discounted the wells by an equal amount, which was reflected in the sales price.
Therefore, the total Fair Market Value for each of years 2013 and 2014 of the wells in question should be $235, 000 considering the $100, 000 purchase price and the plug and abandon liability cost of $135, 000 for the three wells.

         Despite D90's admission at the hearing that it had not paid any amount of its 2015 or 2016 tax obligation, the Commission reached the same decision regarding tax years 2015 and 2016 without mentioning Kratzer's exceptions. Kratzer appealed the Commission's rulings to the district court. The cases were consolidated and after a hearing on the consolidated matters the district court affirmed the Commission's rulings and ordered all taxes paid under protest be refunded to D90. The trial court stated its reasons for ruling orally:

I have to look at it from the viewpoint that the tax commissioners listened to the testimony. It viewed the witnesses. I do that all the time. It goes up on appeal, okay. The one thing I don't want the Court of Appeals to do is to put themselves as a fact finder instead of myself. And I'm not going to do that. The tax commissioner [sic] I don't see abused the discretion because there was-there was evidence presented at the hearing in front of them to justify their decision, all right.

         Kratzer appeals the judgment of the district court asserting five assignments of error:

1. The District Court applied an incorrect standard of review;
2. The District Court erred in failing to review the correctness of Assessor Kratzer's assessment and whether Assessor Kratzer's determination that D90 failed to submit adequate documentation of sales price constituted an abuse of discretion;
3. The District Court erred in failing to recognize that valuation of the wells owned by D90 based on a purported sales price violated the uniformity requirements of Art. VII, §18 of the Louisiana Constitution;
4. The District Court erred when it failed to dismiss D90's protests for tax years 2015 and 2016 for failure to pay the taxes due for those years;
5. The District Court erred in affirming and upholding he Tax Commission's determination of value.


         Under the Louisiana State Constitution, Article VII, §18[1], the Parish Tax Assessor is given the exclusive right to determine the fair market value of property subject to ad valorem taxation within its jurisdiction. Fair market value is defined in La.R.S. 47:2321 as follows:

Fair market value is the price for property which would be agreed upon between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances; it shall be the highest price estimated in terms of money which property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used.
The criteria for determining Fair Market Value is provided in La.R.S. 47:2323

(footnote omitted):

A. The criteria for determining fair market value shall apply uniformly throughout the state. Uniform guidelines, procedures and rules and regulations as are necessary to implement said criteria shall be adopted by the Louisiana Tax Commission only after public hearings held pursuant to the Administrative Procedure Act.
B. Each assessor shall follow the uniform guidelines, procedures, and rules and regulations in determining the fair market value of all property subject to taxation within his respective parish or district. Any manual or manuals used by an assessor shall be subject to approval by the Louisiana Tax Commission or its successor agency.
C. Criteria.
The fair market value of real and personal property shall be determined by the following generally recognized appraisal procedures: the market approach, the cost approach, and/or the income approach.
(1) In utilizing the market approach, the assessor shall use an appraisal technique in which the market value estimate is predicated upon prices paid in actual market transactions and current listings.
(2) In utilizing the cost approach, the assessor shall use a method in which the value of a property is derived by estimating the replacement or reproduction cost of the improvements; deducting therefrom the estimated depreciation; and then adding the market value of the land, if any.
(3) In utilizing the income approach, the assessor shall use an appraisal technique in which the anticipated net income is capitalized to indicate the capital amount of the investment which produces the net income.

         Judicial review of administrative matters is set forth in the Administrative Procedures Act, La.R.S. 49:964:

A. (1) Except as provided in R.S. 15:1171 through 1177, a person who is aggrieved by a final decision or order in an adjudication proceeding is entitled to judicial review under this Chapter whether or not he has applied to the agency for rehearing, without limiting, however, utilization of or the scope of judicial review available under other means of review, redress, relief, or trial de novo provided by law. A preliminary, procedural, or intermediate agency action or ruling is immediately reviewable if review of the final agency decision would not provide an adequate remedy and would inflict irreparable injury.
(2)(a) No agency or official thereof or other person acting on behalf of an agency or official thereof shall be entitled to judicial review under this Chapter.
(b) The provisions of Subparagraph (a) of this Paragraph shall not apply to the Department of Children and Family Services or an official thereof or other person acting on behalf of the department or official in appeals brought pursuant to Children's Code Article 616.1.1.
B. Proceedings for review may be instituted by filing a petition in the district court of the parish in which the agency is located within thirty days after the transmittal of notice of the final decision by the agency or, if a rehearing is requested, within thirty days after the decision thereon. Copies of the petition shall be served upon the agency and all parties of record.
C. The filing of the petition does not itself stay enforcement of the agency decision. The agency may grant, or the reviewing court may order, a stay ex parte upon appropriate terms, except as otherwise provided by Title 37 of the Louisiana Revised Statutes of 1950, relative to professions and occupations. The court may require that the stay be granted in accordance with the local rules of the reviewing court pertaining to injunctive relief and the issuance of temporary restraining orders.
D. Within thirty days after the service of the petition, or within further time allowed by the court, the agency shall transmit to the reviewing court the original or a certified copy of the entire record of the proceeding under review. By stipulation of all parties to the review proceedings, the record may be shortened. A party unreasonably refusing to stipulate to limit the record may be taxed by the court for the additional costs. The court may require or permit subsequent corrections or additions to the record.
E. If, before the date set for hearing, application is made to the court for leave to present additional evidence, and it is shown to the satisfaction of the court that the additional evidence is material and that there were good reasons for failure to present it in the proceeding before the agency, the court may order that the additional evidence be taken before the agency upon conditions determined by the court. The agency may modify its findings and decision by reason of the additional evidence and shall file that evidence and any modifications, new findings, or decisions with the reviewing court.
F. The review shall be conducted by the court without a jury and shall be confined to the record. In cases of alleged irregularities in procedure before the agency, not shown in the record, proof thereon may be taken in the court. The court, upon request, shall hear oral argument and receive written briefs.
G. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion; or
(6) Not supported and sustainable by a preponderance of evidence as determined by the reviewing court. In the application of this rule, the court shall make its own determination and conclusions of fact by a preponderance of evidence based upon its own evaluation of the record reviewed in its entirety upon judicial review. In the application of the rule, where the agency has the opportunity to judge the credibility of witnesses by first-hand observation of demeanor on the witness stand and the reviewing court does not, due regard shall be given to the agency's determination of credibility issues.

         Before we review the ruling of the district court in this matter, we first find that both the Commission and the district court erred as a matter of law in failing to grant Kratzer's exception concerning the taxpayer's right to proceed for tax years 2015 and 2016. Kratzer asserted below, and maintains here, that D90's failure to pay its taxes for 2015 and 2016, either under protest or otherwise, preclude it from attacking those assessments. The district court was silent regarding Kratzer's exception and such silence leaves this court with the presumption that the exception was overruled.

         D90's representative, Daniel Silverman, owner and president of the two-man operation, testified at the Commission hearing regarding tax years 2015 and 2016:

Q. Did D90 pay the taxes on the wells it is contesting?
A. No, sir.
Q. You did not pay taxes?
A. No.
Q. Paid them under protest?
A. No.
Q. Just didn't pay them at all?
A. No.
. . . ...

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