899 N.W.2d 451
Minn.2017Background
- Macy’s challenged Hennepin County/Minneapolis Assessor’s valuations of its downtown Minneapolis property for 2008–2010; Assessor valuations exceeded Macy’s appraiser’s values.
- Property: 12‑story former department store on Nicollet Mall; experts agreed highest-and-best use was operate as‑is in 2008 and later redevelop into an office tower (Nicollet) and residential tower (8th St.).
- Macy’s appraiser (Reid) used the market approach, concluded development not feasible until 2013–2014, and deducted holding costs for 2009–2010; County appraiser (Bakken) used the income approach for 2008 and argued development could begin in 2009 (no holding-cost deduction).
- Tax court adopted the market approach for all years, agreed construction could feasibly begin in 2009 (crediting Bakken on submarket strength), rejected Macy’s holding‑cost deductions, and relied mainly on two comparable sales to value the office component.
- Macy’s moved (repeatedly) to strike parts of Bakken’s testimony/reports after discovering withheld lease/rent documents; the tax court denied exclusion as an inappropriate sanction and found no prejudicial nondisclosure.
- Macy’s appealed, arguing (1) clear error in highest‑and‑best use/feasibility and comparable‑sales choices and (2) abuse of discretion in refusing to exclude Bakken’s evidence; the appellate court affirmed.
Issues
| Issue | Macy’s Argument | County’s Argument | Held |
|---|---|---|---|
| Whether construction of the office tower could have feasibly begun in 2009 (affecting holding‑cost deductions) | Development not feasible until 2013–14; tax court should have allowed holding‑cost deductions for 2009–2010 | Targetville submarket strength and potential anchor tenants made 2009 feasible; no holding costs warranted | Affirmed tax court: not clearly erroneous to find 2009 feasible and reject Macy’s holding‑cost deductions |
| Appropriate valuation method for 2008 (income vs market approach) | Reid: income approach unreliable for 2008; use market approach | Bakken used income approach for 2008 | Tax court adopted market approach for all years; affirmed |
| Whether the court abused discretion by refusing to strike parts of Bakken’s report/testimony for discovery violations (withheld lease/rent docs) | Withholding violated Rule 705 and warranted exclusion of testimony or other sanctions | Withholding was based on claimed confidentiality, not willful; exclusion is a drastic sanction and less severe remedies were available; no prejudice shown | Affirmed: tax court did not abuse discretion; applied Dennie factors and reasonably denied exclusion |
| Whether tax court erred by not relying on sale of 1000 Nicollet Mall as a comparable | 1000 Nicollet should have been analyzed and given weight; omission prejudiced Macy’s valuation | Both experts gave little weight to that sale; one expert said it was too small to be comparable | Affirmed: tax court reasonably declined to rely on 1000 Nicollet Mall; selection of comparables not clearly erroneous |
Key Cases Cited
- Equitable Life Assurance Soc’y of U.S. v. County of Ramsey, 530 N.W.2d 544 (Minn. 1995) (market approach compares prices paid in transactions involving comparables)
- Eden Prairie Mall, LLC v. County of Hennepin, 797 N.W.2d 186 (Minn. 2011) (appellate deference to tax court valuations absent clear error)
- Lewis v. County of Hennepin, 623 N.W.2d 258 (Minn. 2001) (standard for clearly erroneous factual findings)
- Berry & Co. v. County of Hennepin, 806 N.W.2d 31 (Minn. 2011) (appellate review standard — "definite and firm conviction")
- Beck v. County of Todd, 824 N.W.2d 636 (Minn. 2013) (tax court must exercise independent skill and judgment in valuation)
- KCP Hastings, LLC v. County of Dakota, 868 N.W.2d 268 (Minn. 2015) (tax court’s role in weighing appraiser credibility)
- Montgomery Ward & Co. v. County of Hennepin, 450 N.W.2d 299 (Minn. 1990) (courts need not accept an appraiser’s opinion in its entirety)
- Continental Retail, LLC v. County of Hennepin, 801 N.W.2d 395 (Minn. 2011) (trial court’s evidentiary rulings reviewed for abuse of discretion)
- Dennie v. Metropolitan Medical Center, 387 N.W.2d 401 (Minn. 1986) (factors to weigh before suppressing expert testimony for nondisclosure)
- Cornfeldt v. Tongen, 262 N.W.2d 684 (Minn. 1977) (trial courts have discretion in sanctions for discovery violations)
- Archway Marketing Services v. County of Hennepin, 882 N.W.2d 890 (Minn. 2016) (selection of comparable sales reviewed for clear error)
- Thiele v. Stich, 425 N.W.2d 580 (Minn. 1988) (issues not raised in trial court are forfeited on appeal)