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09/12/89 Residential Real Estate v. the Illinois Property Tax

September 12, 1989

RESIDENTIAL REAL ESTATE COMPANY, PLAINTIFF-APPELLANT

v.

THE ILLINOIS PROPERTY TAX APPEAL BOARD ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT

543 N.E.2d 1358, 188 Ill. App. 3d 232, 135 Ill. Dec. 611 1989.IL.1414

Appeal from the Circuit Court of Madison County; the Hon. Michael Meehan, Judge, presiding.

APPELLATE Judges:

JUSTICE LEWIS delivered the opinion of the court. WELCH, P.J., and CHAPMAN, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LEWIS

The plaintiff, Residential Real Estate Co., a corporation, appeals from the judgment of the circuit court affirming a decision of the Property Tax Appeal Board of the State of Illinois (hereafter referred to as PTAB). The cause of action was brought in the circuit court on December 3, 1986, pursuant to the Administrative Review Law (Ill. Rev. Stat. 1985, ch. 110, par. 3-101 et seq.). The plaintiff presents two issues for review: (1) whether the amended decision of the PTAB should be reversed because the PTAB failed to apply the burden of proof established by the statute creating the PTAB and (2) whether the amended decision of the PTAB is against the manifest weight of the evidence "where the Board relied on a non-existent, unsupported presumption, and where said reliance caused it to misJudge the probative impact of all of appellant's evidence."

On the basis of overevaluation the plaintiff appealed to the PTAB of the State of Illinois concerning the assessment of three parcels for the year 1983. The first parcel, parcel No. 14-2-15-11-12-203-31, consisting of about 3.5 acres and improvements, had been assessed a value of $91,160 by the assessor and $71,160 by the Madison County Board of Review; the plaintiff claimed the proper assessment for that parcel was $22,285. The second parcel, parcel No. 14-2-15-11-16-403-026, consisting of about 2.1 acres and improvements, had been assessed a value of $34,070 by both the assessor and the Madison County Board of Review; the plaintiff claimed the proper assessment for that parcel was $8,329. The third parcel, parcel No. 14-2-15-12-13-301-002, consisting of about 1.3 acres of vacant land, had been assessed a value of $11,110 by both the assessor and the Madison County Board of Review; the plaintiff claimed the proper assessment for that parcel was $2,716. The assessment for this parcel was apparently reduced to $1,200 by the assessor after the appeal was filed with the PTAB. The assessment claimed by the plaintiff to be proper for the three parcels totals $33,330.

On March 18, 1986, a hearing was conducted before the PTAB concerning the assessment decision of the Madison County Board of Review. At that hearing only one witness testified, namely, Robert Little, the president of Residential Real Estate Company. He said that he had become president in March of 1983 when a stock redemption agreement had been effected with the previous owners. Prior to that time two brothers, Richard and Norman Stolze, had owned 50% of the company, and three other persons, Evelyn Little, Erma Keller, and Leola Hartman, had owned 50% of it in equal shares. Erma Keller and Evelyn Little are sisters, and Leola Hartman is a "sister-in-law." He described the three women as "cousins or cousins-in-law" of the Stolzes. He stated, "They were all fourth generation and they funneled down from two brothers who were third generations, and there was a resulting fifty/fifty (50/50) split in the stock." This arrangement had been in effect since about 1955. On March 5, 1983, Residential Real Estate Company redeemed all of the shares of Richard and Norman Stolze, leaving the three women as owners of the remaining stock. Residential Real Estate Company paid $50,000 to the Stolze brothers for the stock that was redeemed. The stock redemption agreements between Residential Real Estate Company and each of the two Stolze brothers are included in the record as exhibits.

Residential Real Estate Company was formed "probably in 1961" and owns the real estate parcels in question. Since the formation of Residential Real Estate Company, Illinois Lumber Company, Inc. (hereafter referred to as Illinois Lumber), has leased this property and continues to do so. In May of 1984 Illinois Lumber filed a Chapter 11 petition in bankruptcy and was in Chapter 11 reorganization from May through December of 1984. He said that the lease payments had "started out at about [$28,000] per year" for the purpose of operating a lumberyard, but that in 1983 Illinois Lumber was unable to pay the entire amount because of its lack of funds. He testified that in 1983 Illinois Lumber lost $597,675. In 1984 the amount to be paid for the lease was "[d]own to about [$15,000]" because, he said, "[t]hey still relied on Illinois Lumber's ability to pay and what we felt the property was worth to rent for the sized business we were doing after and during the reorganization." In 1984, he said, Illinois Lumber lost $439,791. Financial statements of Illinois Lumber for the years ending 1983 and 1984 are included in the record as exhibits.

The plaintiff sought reduction of the "assessment," by which he appears to have meant "market value" ($33,330 multiplied by three equals $99,990), to a total of $100,000 for all three parcels taken together, explaining as follows:

"Well, the first reason is for the purchase price of the building and property. It was set up in the stock redemption, which was a hundred thousand, and at that time Illinois Lumber Company was losing money and they felt that was a fair and equitable assignment of the price to the building and the property."

Asked, "And, when you say 'they felt,' who was that?" the witness answered, "Well, it was between ourselves, as buyers, and Richard and Norman Stolze, as then operating Illinois Lumber Company." Asked how the selling price had been reached, the witness responded, "We felt that was a fair market price for Illinois Lumber Company's building and property. We paid a total price for all of the assets of Illinois Lumber Company and Residential Real Estate, and of that total purchase price, a hundred thousand was a fair and equitable price for Residential Real Estate's building and property." The total purchase price for both the business and the real estate was $500,000; the stock redemption in the amount of $50,000, he indicated, reflected one-half of the value ascribed to the real property. He said, "We estimated a fair market price to both the assets of Illinois Lumber Company and the assets of Residential Real Estate." The witness stated that "throughout our Chapter 11 reorganization we have attempted to reorganize and get relief in order to continue to operate a business at those premises, and we're asking the same of the Appeals Board in that in order for us to continue in business and further our reorganization we need relief on our taxes."

The hearing officer asked the witness whether he believed that the property "could possibly have been leased to someone else besides people in the family," to which the witness responded, "My opinion at the time was that it could be leased for exactly what it is, and that is a lumberyard and a mill working company." Asked by the hearing officer, "But, it was never put out one the market to see if that property could be used to [ sic ] anybody else for a higher value?" the witness answered, "No." Asked by the hearing officer, "At the time that you were preparing the information for this hearing a couple of years ago, did you have anybody come in and appraise the property to see what they felt the property was worth?" the witness answered, "No." Asked further by the hearing officer, "Never had anybody come in and physically inspect the property and compare it to other lumber companies?" the witness responded, "No." Asked, "Did you go out and check and see what other similar properties in the area were leasing for?" he answered, "We did not." The property had not been offered for sale.

In his opening statement counsel for the plaintiff described the plaintiff as a "title-holding company" and stated that "the only assets of Residential Real Estate is [ sic ] the real estate in question. It has no other assets, so it's a company that holds the real estate, it's a stock ownership of real estate value." On plaintiff's assessment complaint form of Madison County Board of Review, Robert Little, as president of Residential Real Estate Company stated in part, ...


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