Opinion
Case Number: 116882
12-05-2019
KAST TRUST FARMS, Petitioner/Appellant, v. CLAYTON TWYMAN, WASHITA COUNTY ASSESSOR, Respondent/Appellee.
Donelle H. Ratheal, Jason Gresham, Eric P. Warner, RATHEAL, MAGGARD & FORTUNE, PLLC, Oklahoma City, Oklahoma, for Petitioner/Appellant, Mart Tisdal, Luke Adams, Michael Housley, TISDAL & O'HARA, Clinton, Oklahoma, for Respondent/Appellee.
APPEAL FROM THE DISTRICT COURT OF
WASHITA COUNTY, OKLAHOMA
HONORABLE DOUG HAUGHT, JUDGE
REVERSED AND REMANDED
Donelle H. Ratheal, Jason Gresham, Eric P. Warner, RATHEAL, MAGGARD & FORTUNE, PLLC, Oklahoma City, Oklahoma, for Petitioner/Appellant,
Mart Tisdal, Luke Adams, Michael Housley, TISDAL & O'HARA, Clinton, Oklahoma, for Respondent/Appellee.
ROBERT D. BELL, JUDGE:
¶1 This is an appeal from the district court's de novo review and denial of the ad valorem tax protest filed by Petitioner/Appellant, Kast Trust Farms (Taxpayer). The district court upheld the determinations of Clayton Twyman, Washita County Assessor (Assessor) and the Washita County Board of Equalization (Board) to reclassify and assess ten (10) acres of Taxpayer's agricultural real property as commercial property. Assessor reclassified the property after Taxpayer granted a surface site easement on the 10-acre tract to Chesapeake Midstream Gas Services (Chesapeake) and Chesapeake built a gas compressor facility thereon. Having reviewed the record, we hold the district court erred when it denied Taxpayer's protest. The district court's judgment is reversed and this matter is remanded to the district court with instructions to grant Taxpayer's protest. The district court shall also order Assessor to correct the tax rolls in accord with this opinion and refund all excess ad valorem taxes paid by Taxpayer.
¶2 Taxpayer owns several farms in Washita County. In 2002, Taxpayer bought a 160-acre farm from the Janzen family. From 2002 through 2015, Janzen Farm was classified as agricultural land and the farm's assessed value was $44,213. In July of 2010, Petitioner granted a surface site easement to Chesapeake over 10 acres of the 160-acre tract. Taxpayer was paid a one-time $60,000.00 surface damages sum. The easement recites the consideration paid for the easement settles "any and all damages, temporary and/or permanent, to the Easement at any time" resulting from the taking and use of the 10 acres. Chesapeake built a gas compressor facility on the 10-acre tract, graveled the area, and placed a fence around the facility. The easement provides Chesapeake has the absolute right to remove any and all property placed or maintained on the easement. If Chesapeake abandons the site, the easement reverts to Taxpayer.
¶3 In 2016, Assessor sent notice to Taxpayer that the 10-acre tract of land was being reclassified as commercial property because it was the situs of the gas collection facility. The reclassification of the 10 acres increased the 160-acre Farm's assessed value to over double the previous value, from $44,213 to $96,333. Assessor claims he determined the fair cash value of the entirety of the 160-acres to be $96,333, the taxable value at $96,333, and the assessed value at $10,597. Prior to trial, Assessor admitted he erroneously failed to use the five percent (5%) cap as required by the Okla. Const. Art. X, §8(b) and he adjusted the taxable value of the 160 acres to $44,374 to follow the 5% Constitutional cap. The taxable value will increase each year by 5% until it matches the fair cash value assessed by Assessor.
¶4 According to Taxpayer, the 2016 reclassification increased the 10-acre's value from $2,763.00 to $55,000.00. Taxpayer timely protested the reclassification and increase in value. At the informal hearing, Assessor produced comparable land sales, by warranty or quit claim deed, to gas production companies as support for the reclassification and denied the protest.
¶5 Taxpayer appealed the assessment to the Board. The Board affirmed Assessor's decision. Taxpayer appealed the Board's decision to the district court. At a trial de novo, the district court heard testimony from Taxpayer's expert, Wes Cabaniss, a licensed Oklahoma general appraiser, Dr. Wollman, the trustee/representative of Kast Trust Farm, and Assessor. Assessor testified only the 10-acres was reclassified from agricultural to commercial. Based on the presence of a gas compressor station, gravel and the perimeter fence, Assessor testified that he categorized the actual use of the 10-acre tract as commercial property.
¶6 The court held the 10-acre tract upon which the facility was built is commercial real estate and upheld Assessor's reclassification of the 10-acre tract as commercial land. Because Taxpayer has a right of reversion in the easement, the court held Taxpayer is responsible for the commercial tax liability on the 10 acres. The district court's journal entry noted, "A distinction must be made between the ten acres used for the gas compressor facility and the remaining farmland." Taxpayer now appeals the district court's decision to this Court.
¶7 This is an appeal in a special statutory proceeding to ascertain whether Taxpayer is entitled to a refund of ad valorem taxes paid under protest. See In the Matter of the Assessment of Pers. Prop. Taxes Against Mo. Gas Energy, Div. of S. Union Co., for Tax Years 1998, 1999 and 2000, 2008 OK 94, ¶17, 234 P.3d 938. In such an appeal, the district court's judgment should be affirmed unless it is against the clear weight of the evidence or is contrary to law or equity. Id. The district court's statutory construction is reviewed de novo. Id.
¶8 While Taxpayer raises several assignments of error on appeal, we find the resolution of this appeal depends on the impact of Chesapeake's easement on the value of Taxpayer's property for ad valorem tax purposes. "An easement creates a legal relationship between two parties. The easement holder is referred to as the dominant estate; and the owner of land subject to an easement is known as the servient estate." Logan Cty. Conservation Dist. v. Pleasant Oaks Homeowners Ass'n, 2016 OK 65, ¶14, 374 P.3d 755 (citations omitted). Chesapeake, the easement holder, is the dominant estate and Taxpayer, the land owner, is the servient estate. An easement affords its titleholder a limited non-possessory right to use a parcel of land for a specific purpose. Id.
¶9 Oklahoma law recognizes that an easement burdens the servient estate. These burdens include, among other things: (1) decreased property value, (2) increased noise and traffic or interference with the servient owner's peace and enjoyment of the land, and (3) physical damage to the servient estate. Burkhart v. Jacob, 1999 OK 11, ¶12, 976 P.2d 1046. Indisputably, the evidence shows the facility on the 10 acres meaningfully impacts Taxpayer's use and enjoyment of the servient estate as farmland. We recognize there is a valuable commercial gas production facility situated upon the easement. However, the easement specifies that the facility belongs to and may be removed by Chesapeake. The facility is not an improvement to the 10-acre tract that benefits Taxpayer. In truth, the easement and the facility situated thereon benefit only Chesapeake, the owner of the dominant estate.
Taxpayer argues Assessor has created a double tax because Assessor taxes the facility as Chesapeake's business personal property and Assessor also taxes the same facility as a commercial improvement to Taxpayer's real property. --------
¶10 This Court can find no Oklahoma authority directly addressing the reclassification and assessment of increased ad valorem taxes against the servient estate owner due to the dominant estate owner's placement of facilities on the real property. In American Southwest Properties, Inc. v. Tulsa Cty. Bd. of Equalization, 2014 OK CIV APP 90, ¶14, 338 P.3d 647, the appellate court mentioned the recent construction of a bridge and road on an easement across the subject property was relevant evidence in an assessor's decision to change the use from agricultural to commercial. However, American Southwest Properties, Inc. did not delve into the impact of an easement on the valuation of the servient estate owner's interest in real property.
¶11 Sister courts have addressed the issue in similar circumstances. These courts generally adhere to the principle that "When an easement is carved out of one property for the benefit of another the market value of the servient estate is thereby lessened, and that of the dominant increased practically by just the value of the easement; the respective tenements should therefore be assessed accordingly." Lake Monticello Owners' Ass'n v. Ritter, 229 Va. 205, 209, 327 S.E.2d 117, 119 (1985).
An easement cannot be appurtenant to both the dominant and the servient tenement. The dominant tenement is taxed upon its value, and the easement appurtenant enhances that value. It cannot pass upon the tax sale of the servient tenement. The servient tenement is also taxed upon its value, which the easement has diminished. Taxes assessed against the servient tenement cover the property minus the easement which has been carved out of it and which has become attached to and is appurtenant to the adjoining property.Alvin v. Johnson, 241 Minn. 257, 262-63, 63 N.W.2d 22, 26 (1954). "'[A] landowner whose property is subject to an easement [typically] is entitled to a reduced valuation,' and when a 'property is so encumbered with easements that no use can be made of it, the fee owner pays no tax.'" Breezy Knoll Ass'n., Inc. v. Town of Morris, 286 Conn. 766, 780, 946 A.2d 215 (2008) (citation omitted).
¶12 Based on the foregoing, we find the instant easement has a negative effect on Taxpayer's use value of the 10-acre tract for ad valorem tax purposes. Due to this negative effect, we hold the higher commercial use value imposed by Assessor on Taxpayer's real estate does not exist. We further reject the district court's holding that Taxpayer's reversionary interest in the easement makes Taxpayer liable for the increased ad valorem tax. Chesapeake has not abandoned the easement. Taxpayer's interest in the real property consists only of what is left after Chesapeake's taking of the easement.
¶13 We conclude the district court erred when it denied Taxpayer's protest of Assessor's reclassification and assessment of increased ad valorem taxes on the 10 acres. The fee owner's interest in the 10-acre tract should only be assessed for a nominal amount. The district court's order is reversed and this matter is remanded to the district court with instructions to enter judgment in favor of Taxpayer. On remand, the district court shall order Assessor to correct the tax rolls in accord with this opinion and refund all excess ad valorem taxes paid by Taxpayer.
¶14 Taxpayer also requests an award of attorney fees and costs. Rule 1.14(B), Oklahoma Supreme Court Rules, 12 O.S. Supp. 2013, Ch. 15, App. 1, provides, "A motion for an appeal related attorney's fee must be made by a separately filed and labeled motion in the appellate court prior to issuance of mandate." Taxpayer's request for appeal related attorney's fee is denied without prejudice to refiling pursuant to Rule 1.14.
¶15 REVERSED AND REMANDED.
MITCHELL, P.J. and SWINTON, J., concur.
ROBERT D. BELL, JUDGE: