                                      NO. COA13-759

                        NORTH CAROLINA COURT OF APPEALS

                               Filed:       18 March 2014

IN THE MATTER OF:                                  North Carolina Property Tax
APPEAL OF: Pace/Dowd Properties                    Commission
Ltd. from the decisions of the                     No. 10 PTC 638
Union County Board of Equalization
and Review regarding the
valuations of certain property for
tax year 2010.



      Appeal     by    Union   County       from    final    decision       entered   24

January   2013    by    the    North    Carolina         Property    Tax    Commission.

Heard in the Court of Appeals 20 November 2013.


      K&L Gates LLP,            by     Samuel       T.    Reaves,     for    Pace/Dowd
      Properties, Ltd.

      Hamilton Stephens Steele              &   Martin,      PLLC,    by    Rebecca   K.
      Cheney, for Union County.


      McCULLOUGH, Judge.


      Union County appeals from a decision by the North Carolina

Tax   Commission,      holding       that   Union    County    used    an    arbitrary

method of valuation in assessing two parcels of land owned by

Pace/Dowd Properties, Ltd.              Based on the following reasons, we

affirm the decision of the North Carolina Tax Commission.

                                 I.     Background
                                          -2-
    Union       County     appeals       from      a   24   January      2013   “Final

Decision”      of   the     North     Carolina         Property    Tax     Commission

(“Commission”) concerning the tax value of two parcels of land

located within Union County.              The two parcels of land at issue,

purchased by appellee Pace/Dowd Properties Ltd. (“Pace/Dowd”),

consist of Union County Tax Parcel Number 06-135-003 (“Parcel

3”) and Parcel Number 06-135-003A (“Parcel 3A”).                         Parcel 3 is

comprised of 216 acres of land.                 Pace/Dowd purchased it in 2005

for $11,212,500, with the intent to develop Parcel 3 as the

second   and    third     phases    of    a   residential      development      called

“Lawson” with 245 lots.            Parcel 3A is comprised of 173.85 acres

of land.       It was purchased in 2003 for $7,375,298, with the

intent to develop Parcel 3A as the fourth phase of the Lawson

development with 404 lots.

    During Union County’s 2008 countywide general reappraisal,

Parcel 3 was valued by Union County at a property tax value of

$10,201,240 and Parcel 3A was valued at $1,135,420.                         In 2009,

Pace/Dowd did not appeal the tax valuations.                      However, in 2010,

Pace/Dowd      contested    the     value     of   both     parcels   by   filing   an

appeal with the Union County Board of Equalization and Review

(“County Board”).
                                            -3-
       Union County became aware it had wrongly classified Parcel

3A as a subdivision common area and notified Pace/Dowd that it

was    increasing      the    tax    value        of    Parcel     3A    to     $9,166,280

effective 1 January 2008 for tax years 2008, 2009, and 2010.

The County Board heard Pace/Dowd’s challenges to Union County’s

assessments on 22 June 2010 and declined to consider Pace/Dowd’s

appeal on Parcel 3 for tax years 2008 and 2009.                               Furthermore,

the County Board reduced the value of Parcel 3 from $10,201,240

to    $7,975,200      effective        1    January      2010      and    affirmed       the

valuation of Parcel 3A at $9,166,280.

       Subsequently,         Pace/Dowd        appealed        to    the        Commission,

presenting     several       issues.       First,      Pace/Dowd    argued       that    the

subject parcels were appraised in excess of the true value of

the subject property as of 1 January 2008.                         Pace/Dowd asserted

that the assigned values exceeded fair market value (“FMV”) as

defined in N.C. Gen. Stat. § 105-283 and that the FMV of Parcel

3    should   be    $2,400,000      and     the   FMV    of   Parcel      3A    should    be

$1,837,500.        Next, Pace/Dowd argued that Union County applied an

arbitrary method of appraisal in reaching the following values:

Parcel 3 valued at $10,201,240 and later reduced to $7,975,220;

Parcel    3A       valued    at     $1,135,420          and   later       increased      to
                                -4-
$9,166,280.    Lastly, Pace argued that Union County improperly

“discovered” Parcel 3A for tax years 2008, 2009, and 2010.

    Following hearings held on 15 February 2012 and 18 April

2012, the Commission entered the “Final Decision” on 24 January

2013.   The Commission made the following findings of fact, in

pertinent part:

          4.   Under orders of the State of North
               Carolina (the “State”), Union County
               imposed a moratorium on new sewer taps in
               February 2007.     Thereafter, the State
               denied Union County’s request to expand
               its largest sewer treatment plant, and
               the moratorium continued.

          5.   On September 17, 2007, Union County
               adopted   the   “Policy  for   Allocating
               Wastewater Treatment Capacity (“SAP”),
               after which the State allowed Union
               County to lift the moratorium.

          6.   Pursuant to the SAP, 50 lots within
               Parcel [3] and 100 lots within Parcel
               [3A] were included within the first
               priority of properties to receive sewer
               and permits and 449 lots from Parcel [3]
               and [3A] were placed in the last priority
               of properties to receive sewer permits.
               Notwithstanding      that     [Pace/Dowd]
               purchased the subject parcels at purchase
               prices which included water and sewer
               capacity for residential development, the
               parcels were never developed.

          7.   As of the January 1, 2008 countywide
               general reappraisal of all real property
               in Union County, Parcel [3] was assessed
               at a value of $10,210,240, and, based
               upon   [Pace/Dowd’s]  2010  appeal,  the
                      -5-
     County Board reduced the assessment to a
     value of $7,975,220; and, based upon
     [Pace/Dowd’s] 2010 appeal, Union County
     increased the assessed value of parcel
     [3A] from $1,135,420 to $9,166,280 and
     assigned    the   increased    value   of
     $9,116,280 for tax years 2008, 2009 and
     2010.      Further,  Union   County   has
     collected taxes from [Pace/Dowd] based on
     the increased value of Parcel [3A]
     ($9,166,280) for tax years 2008, 2009 and
     2010.

8.   Union County is required to value all
     property for ad valorem tax purposes at
     its true value in money, which is “market
     value.” N.C. Gen. Stat. § 105-283. . . .

9.   An important factor in determining the
     property’s market value is its highest
     and best use.   The highest and best use
     of the subject property, as improved,
     would be residential development. . . .

10. However, under orders of [the State],
    Union County imposed a moratorium on new
    sewer taps in February 2007, which caused
    declines in the market values of the
    subject   parcels.   Accordingly,   Union
    County shall, whenever any real property
    is appraised, consider the factors set
    forth in N.C. Gen. Stat. § 105-317.    In
    particular, Union County shall consider
    how the county’s sewer allocation policy
    affects the market value of the subject
    parcels, and the availability of water
    and sewer to Parcels [3 and 3A].

11. Consequently, [Pace/Dowd] did rebut the
    initial presumption of correctness as to
    Union County’s assessments of the subject
    parcels by offering evidence tending to
    show that Union County used an arbitrary
    method of assessment and that Union
                                         -6-
                 County’s   assessments  of   the  subject
                 parcels substantially exceeded the market
                 values of the parcels when the county
                 assessed Parcel [3] at a value of
                 $7,975,220;   and    by  increasing   the
                 valuation of Parcel [3A] from $1,135,420
                 to $9,166,280, and when Union County did
                 not consider the factors set forth in
                 N.C. Gen. Stat. § 105-317 (i.e. the
                 availability of water and sewer to
                 Parcels [3 and 3A]).

            12. Accordingly, the burden then shifts to
                Union County to go forward with the
                evidence and to demonstrate that its
                methods would in fact produce true
                value[.]

            13. [T]he Commission . . . determines that
                Union County did not meet its burden
                regarding the valuations of the subject
                parcels   when  Union   County   did  not
                consider certain relevant factors, as
                required by N.C. Gen. Stat. § 105-317[.]

            14. Accordingly,    the   Commission,    when
                considering the expert testimony of Mr.
                Willcox [sic], finds that the true value
                in money, which is “market value,” as
                that term is defined in N.C. Gen. Stat. §
                105-283, for Parcel [3] was $3,987,600,
                and the true value in money of Parcel
                [3A] was $4,583,140.

    The     Commission         concluded     that    Pace/Dowd      rebutted    the

presumption that Union County’s ad valorem tax assessment was

correct   by    showing    that    the     county    tax   supervisor    used   an

arbitrary      method     of     valuation     and    that    the     assessments

substantially exceeded the true value in money of the parcels.
                                -7-
Furthermore, the Commission determined that the true value in

money of Parcel 3 was $3,987,600 and the true value in money of

Parcel 3A was $4,583,140 as of the 1 January 2008 appraisal.

    Union County appeals.

                     II.    Standard of Review

    In reviewing a decision from the North Carolina Property

Tax Commission:

         [this] court shall decide all relevant
         questions of law, interpret constitutional
         and statutory provisions, and determine the
         meaning and applicability of the terms of
         any Commission action. The court may affirm
         or reverse the decision of the Commission,
         declare the same null and void, or remand
         the case for further proceedings; or it may
         reverse or modify the decision if the
         substantial rights of the appellants have
         been prejudiced because the Commission’s
         findings,     inferences,    conclusions    or
         decisions are:
         (1) In     violation      of    constitutional
             provisions; or
         (2) In excess of statutory authority or
             jurisdiction of the Commission; or
         (3) Made upon unlawful proceedings; or
         (4) Affected by other errors of law; or
         (5) Unsupported by competent material and
             substantial evidence in view of the
             entire record as submitted; or
         (6) Arbitrary or capricious.

N.C. Gen. Stat. § 105-345.2(b) (2013).
                                       -8-
    “[A]n act is arbitrary when it is done without adequate

determining principle.”          In re Parkdale Mills, __ N.C. App. __,

__, 741 S.E.2d 416, 419 (2013) (citation omitted).

    Our Court “shall review the whole record or such portions

thereof as may be cited by any party and due account shall be

taken   of   the   rule    of    prejudicial    error.”      N.C.G.S.   §    105-

345.2(c).

             The “whole record” test does not allow the
             reviewing      court     to       replace     the
             [Commission’s]    judgment    as    between   two
             reasonably conflicting views, even though
             the court could justifiably have reached a
             different result had the matter been before
             it de novo.     On the other hand, the “whole
             record”   rule     requires    the    court,   in
             determining the substantiality of evidence
             supporting the [Commission’s] decision, to
             take into account whatever in the record
             fairly detracts from the weight of the
             [Commission’s] evidence.       Under the whole
             evidence rule, the court may not consider
             the   evidence    which   in    and   of   itself
             justifies the [Commission’s] result, without
             taking into account contradictory evidence
             or    evidence     from     which     conflicting
             inferences could be drawn.

In re Parkdale Mills, __ N.C. App. at __, 741 S.E.2d at 419

(citation omitted).

    However, “the ‘whole record’ test is not a tool of judicial

intrusion;     ‘instead,    it    merely     gives   a   reviewing   court   the

capability to determine whether an administrative decision has a
                                            -9-
rational basis in the evidence.’”                      In re Appeal of Owens, 132

N.C.    App.     281,    286,    511      S.E.2d       319,   323    (1999)    (citation

omitted).        “[T]his Court cannot reweigh the evidence presented

and substitute its evaluation for the Commission’s.”                                 In re

Parkdale Mills, __ N.C. App. at __, 741 S.E.2d at 419 (citation

omitted).        “If    the   Commission’s         decision,        considered      in   the

light    of    the     foregoing     rules,       is    supported      by    substantial

evidence, it cannot be overturned.”                       In re Appeal of Philip

Morris,    130    N.C.    App.     529,    533,    503    S.E.2d      679,    682   (1998)

(citation omitted).

                           III. Discussion

       On appeal, Union County argues that the Commission erred

by:     (A) concluding that Pace/Dowd had rebutted the presumption

that Union County’s ad valorem tax assessment was correct by

finding that Union County used an arbitrary method of valuation,

resulting in a valuation of the parcels substantially exceeding

the true values; (B) finding that as of 1 January 2008, the true

values    of     the     parcels     were     $3,987,600        for     Parcel      3    and

$4,583,140 for Parcel 3A; and (C) concluding, in conclusion of

law number 3, that Pace/Dowd does not owe additional 2008 and

2009 taxes for Parcel 3A.

                  A.     Union County’s Method of Valuation
                                       -10-
      First, Union County asserts that the Commission erred by

concluding that Pace/Dowd had rebutted the presumption set out

in In re Appeal of Amp, Inc., 287 N.C. 547, 215 S.E.2d 752

(1975).      Union County argues that the Commission erroneously

found that Union County used an arbitrary method of valuation,

resulting    in   a   valuation   of    the    parcels   which   substantially

exceed the true value in money.          We disagree.

      In In re Appeal of Amp, Inc., 287 N.C. 547, 215 S.E.2d 752

(1975), our Supreme Court stated that it is a “sound and []

fundamental principle of law in this State that ad valorem tax

assessments are presumed to be correct.”              Id. at 562, 215 S.E.2d

at 761 (citation omitted).             “[T]he presumption is only one of

fact and is therefore rebuttable.”               Id. at 563, 215 S.E.2d at

762 (hereinafter “the Amp presumption”).

            [I]n order for the taxpayer to rebut the
            presumption   he   must  produce   competent,
            material and substantial evidence that tends
            to show that:     (1) Either the county tax
            supervisor used an arbitrary method of
            valuation; or (2) the county tax supervisor
            used an illegal method of valuation; AND (3)
            the assessment substantially exceeded the
            true value in money of the property.

Id.    (citations      and   quotation        marks   omitted)   (emphasis   in

original).     “[I]t is not enough for the taxpayer to show that

the means adopted by the tax supervisor were wrong, he must also
                                  -11-
show that the result arrived at is substantially greater than

the true value in money of the property assessed, i.e., that the

valuation    was   unreasonably   high.”    Id.   (citation   omitted)

(emphasis in original).

    N.C. Gen. Stat. § 105-286(a) (2013) provides:

            (a) Octennial Cycle. - Each county must
                reappraise     all     real   property   in
                accordance with the provisions of G.S.
                105-283 and G.S. 105-317 as of January 1 of
                the year set out in the following
                schedule     and     every    eighth   year
                thereafter[.]

N.C. Gen. Stat. § 105-283 (2013), entitled “Uniform appraisal

standards,” states that:

            [a]ll property, real and personal, shall as
            far as practicable be appraised or valued at
            its true value in money. When used in this
            Subchapter, the words "true value" shall be
            interpreted as meaning market value, that
            is, the price estimated in terms of money at
            which   the  property   would  change  hands
            between a willing and financially able buyer
            and a willing seller, neither being under
            any compulsion to buy or to sell and both
            having reasonable knowledge of all the uses
            to which the property is adapted and for
            which it is capable of being used.

When real property is being appraised, our General Assembly has

mandated that

            it shall be the duty of the persons making
            appraisals:
                 (1) In determining the true value of
                      land, to consider as to each
                                     -12-
                        tract, parcel, or lot separately
                        listed at least its advantages and
                        disadvantages   as  to    location;
                        zoning;     quality    of     soil;
                        waterpower; water privileges; . .
                        . adaptability for agricultural,
                        timber-producing,       commercial,
                        industrial, or other uses;. . . .
                        and any other factors that may
                        affect its value except growing
                        crops of a seasonal or annual
                        nature.

N.C. Gen. Stat. § 105-317(a)(1) (2013) (emphasis added).

      At the hearing before the Commission, Pace/Dowd called four

witnesses: Steven Pace, principal and president of Pace/Dowd who

was   tendered   as    an   expert   in   real   property   acquisition   and

residential development; Robert Palmer Wilcox, Jr., an expert in

soil science; Alfred Tucker, an appraiser; and Phillip Every,

serving as an adverse witness.

      Steven Pace testified that Pace/Dowd purchased the parcels

with the intention to develop Parcel 3 as phases 2 and 3 of the

Lawson development, with 245 lots, and to develop Parcel 3A as

phase   4   of   the   Lawson   development,      with   404   lots.      When

Pace/Dowd purchased the parcels, Pace/Dowd did not have sewer

and water permits, but Steven Pace testified that he made the

purchases after he “confirmed [verbally] with Union County that

there would be absolutely no restrictions at all on me having

sewer and water to develop this site[.]”             Steven Pace admitted
                                         -13-
that although he did not have written confirmation from Union

County, he did receive reasonable assurances from the Director

of Public Works that he would “be able to get sewer and water

without any restrictions for capacity or moratoriums.”                          At no

point during his testimony did Steven Pace testify as to Union

County’s method of valuing the parcels.

       Robert Palmer Wilcox, Jr., a soil science expert with Soil

and Material Engineers, testified regarding his evaluation of

the septic system needs           and sewer capacity of both parcels.

Wilcox      testified    that    in     September    2007,       he   performed     a

preliminary soil evaluation of Parcel 3.                  Wilcox determined that

greater than fifty (50) to sixty (60) percent of Parcel 3 was

“in that category of not being able to be utilized for septic

suitability.”       In    January       2012,   Wilcox     separately    evaluated

Parcel 3 and testified that there was no chance that the soil

conditions could have changed from 1 January 2008.                        Wilcox’s

findings in regards to Parcel 3A were “very identical” to the

findings of Parcel 3 “as there is very limited capacity to use

on-site septic systems[.]”

       Phillip Every, appraisal manager of Union County and mass

appraiser certified by the State of North Carolina, testified

that   he    reviewed    the    final    numbers    for    the   1    January    2008
                                           -14-
revaluation.      Every testified, that as a mass appraiser valuing

93,000    parcels,     he     uses    “models     to        capture    valuation       –     to

reflect valuation in the marketplace and apply that to large

masses of the properties to come up with a, hopefully, rational,

reasonable reflection of the value of the property.”                              As part of

mass    appraisal,     a    schedule       of   values        (“SOV”)       is    developed.

Every    testified     that    a     SOV   is   “our        means,    our    methods,       our

numbers we’re going to use to determine valuation, and it has to

be   approved     by   our    commissioners.”                “The    objective       of     the

schedules    is   to   develop        standards        by    which    all        property    is

valued at market value.”              Every agreed that “for a property to

be developed residentially, you would have to have some sewer

and water available” and also agreed that all other things being

equal, “the value of property with access to sewer and water . .

.    is greater than the value of the same property without the

access.”

       In regards to the 1 January 2008 valuation, Every testified

that    Union   County      was    required       by    statute       to    appraise        the

parcels at its true and actual value in money, which meant that

Union County “is required to consider each parcel separately

listed as to its particular advantages and disadvantages and its
                               -15-
adaptability to particular uses.”     Nonetheless, Every testified

to the following:

         [Pace/Dowd:] Do you make a determination in
         carrying out that analysis of what the
         highest and best use of the property is?

         [Every:]   Yes.

         [Pace/Dowd:]      And  did   you   make   a
         determination – did the County make a
         determination with respect to the Pace
         parcels as to what the highest and best use
         of those parcels were as of the date of
         revaluation?

         [Every:]   We valued it as raw land. Large
         acreage, raw land.

         [Pace/Dowd:]   Did you value it as raw land
         for residential construction or not for
         residential construction?

         [Every:]   Just say large acreage of raw
         land. We didn’t go any further than that.

         . . . .

         [Every:]      We did not parse it down that
         fine, no.      We valued the land all of the
         parts. We     made no premium – put no premium
         on it to be   a subdivision.

         . . . .

         [Pace/Dowd:] Okay. Now, did you – did the
         County, in conducting the reappraisal of
         these lots in connection with the countywide
         revaluation in January of 2008, take the SAP
         into account?

         [Every:]   Directly, no.
                                -16-
            [Pace/Dowd:]   When you say, “Directly, no,”
            what do you mean?

            [Every:]    In that this problem had been
            well-known for a great period of time, I
            believe back to 2003, that the County was
            our [SIC] sewer and water.    I believe that
            the sales we used, the majority of the sales
            in this list were sold and bought knowing
            that sewer and water was an issue.      So I
            believe   that  this  problem   was  already
            accounted for in these land sales.      So I
            believe in that way, yes, we did.     Did we
            then go out and do something in addition
            after the sale? No, we didn’t.

    Furthermore, Every testified that in selecting comparable

parcels to assist in valuing the parcels at issue, Union County

did not take sewer and water availability into account.

              [Every:]   [W]e weren’t going and looking
              at these large-acreage tracts and go,
              which ones have sewer and water, which
              ones don’t.   We just were looking at, we
              have sales, and there are large-acreage
              tracts, and we’ll use them for the
              valuation of other large-acreage tracts.

The comparables Every used concerned sales of property made from

2004 through 2006.    None of the comparables used were from dates

on or after Union County adopted the SAP in 2007.              Also, in

selecting    comparables,   Every   testified   that   Union     County

selected comparables that were within the same school district.

When questioned regarding this method of selecting a comparable,

the following exchange occurred:
                              -17-
         [Pace/Dowd:]   And, Mr. Every, do you have
         any evidence that you’re prepared to present
         that would say that the market value, the
         school zones of raw, undeveloped land would
         affect market value so significantly that
         you’re only going to consider comparables in
         the same school zone?

         [Every:]   I believe that location is a very
         well-established appraisal principle.    You
         can get fairly close [geographically], and
         we did that. . . .     And I believe, again,
         that in our – in our situation, schools are
         a prime driver. . . .

         [Pace/Dowd:]   But – but beyond just that
         general statement, you don’t have anything
         specifically that would correlate property
         value to the school zone?

         [Every:]   Do I have anything prepared for
         you today? No.

Every explained that he did not rely on any data that supported

the idea that a specific school zone had a greater increase in

value over a property located in another school zone but rather

limited comparables to school zones because it was “the simplest

solution.”

    Alfred Louis Tucker, Jr., also testified at the hearing.

Tucker, an expert witness for Pace/Dowd, testified that he owned

his own appraisal company, A.O. Tucker and Associates.    Tucker

completed two appraisals of the properties; one on 29 June 2007

valued as of 12 June 2007, and one on 10 May 2011 valued as of 1

January 2008.   The purpose of the June 2007 appraisal was for
                                   -18-
mortgage loan financing.       As of 12 June 2007, Tucker appraised

Parcel 3 at $14,565,000 and Parcel 3A at $15,321,750, with both

of these values reflecting his assumption that sewer and water

would be available.

    Tucker also performed an appraisal of the parcels in May of

2011 valued as of 1 January 2008, the date of the last Union

County tax revaluation.        Parcel 3 was valued at $2,400,000 and

Parcel 3A was valued at $1,837,500.          Tucker’s 2008 appraisal

took into consideration the SAP, providing that “[a]ccording to

local developers and officials in the Union County Public Works

Department, no water or sewer taps are expected to be available

to the [parcels] for some 6 to 8 years from January 1, 2008, the

date of the last Union County tax revaluation.”            Union County

argues, and Pace/Dowd concedes, that the Commission extensively

questioned Tucker’s 2007 appraisal and ultimately did not adopt

his valuation or cite his opinion in the 24 January 2013 Final

Decision.

    Union County argues that even if Pace/Dowd was able               to

rebut the Amp presumption, Union County was able to establish

that its method of valuing the parcels produced true values.

Union   County   relies   on    Every’s   testimony   to   support   its

contention that there was no evidence to support the conclusion
                                             -19-
that Union County used an arbitrary appraisal method.                                However,

we    find   this     argument        to    be   without       merit.         The    evidence

discussed above sufficiently supports the Commission’s finding

that    Pace/Dowd          rebutted        the   Amp     presumption          “by    offering

evidence tending to show that Union County used an arbitrary

method of assessment . . . when Union County did not consider

the factors set forth in N.C. Gen. Stat. § 105-317 (i.e. the

availability         of    water   and      sewer   to    Parcels       [3]    and    [3A]).”

Applying       the        whole    record        test,    we     conclude           that     the

Commission’s finding is rationally based on testimony provided

by Every, which established that Union County failed to consider

water and sewer availability in its valuation of the parcels.

       Because       the    challenged       findings      and   conclusions          of     the

Commission have a rational basis in the evidence and it is not

our duty to substitute our judgment for that of the Commission,

we overrule Union County’s arguments.

 B.     True Value of Parcel 3 and Parcel 3A as of 1 January 2008

       Next,    Union       County    argues      that    the    Commission          erred    by

finding the true value of Parcel 3 to be $3,987,600 and Parcel

3A to be $4,583,140 as of the 1 January 2008 general reappraisal

where there was no competent evidence in the record to support

this valuation.            We disagree.
                                       -20-
    In the 24 January 2013 “Final Decision,” the Commission

found the following:

              14.     Accordingly, the Commission, when
              considering the expert testimony of Mr.
              Willcox [sic], finds that the true value in
              money, which is “market value,” as that term
              is defined in N.C. Gen. Stat. § 105-283, for
              Parcel [3] was $3,987,600, and the true
              value   in   money   of  Parcel   [3A]   was
              $4,583,140.

In a footnote to finding of fact 14, the Commission stated that:

              Based upon the expert testimony of Mr.
              Robert P. Willcox [sic], Jr., L.S.S., an
              expert in soil sites, Union County should
              reduce the county’s values of Parcels [3]
              and [3A] by fifty percent (50%).      (See
              Stipulation 3(w) stating that the county
              contends the value of Parcel [3] to be
              $7,975,200.  ($7,975,200 divided by 50% =
              $3,987,600 for Parcel [3] and $9,166,280
              divided by 50% = $4,583,140 for Parcel
              [3A]).

    After       thorough     review,      we    conclude    that    the     record

sufficiently      supports    the      Commission’s      finding    that    Union

County’s      arbitrary    method      of      assessment    resulted      in   an

assessment of the parcels that substantially exceeded the market

values   of    the   parcels.       The     Commission     relied   on    Wilcox’s

testimony, which provided that greater than fifty (50) to sixty

(60) percent of the parcels was “in that category of not being

able to be utilized for septic suitability.”                 Based on Wilcox’s

expert testimony, the Commission reduced Union County’s values
                                     -21-
of the parcels by fifty percent (50%) resulting in values of

$3,987,600      ($7,975,200     divided     by       50%)    for   Parcel     3    and

$4,583,140      ($9,166,280     divided         by    50%)     for     Parcel      3A.

Accordingly, we overrule Union County’s arguments.

                         C. Conclusion of Law Number 3

    In    its    last    argument,      Union    County      contends      that    the

Commission erred by concluding the following:

              3. . . . Union County improperly “discovered”
                 Parcel [3A] for tax years 2008 and 2009
                 when N.C. Gen. Stat. § 105-287 is the
                 applicable  statute   regarding   [Pace’s]
                 appeal.

    Originally,         after   Pace/Dowd        challenged        Union    County’s

property tax values of Parcel 3A in 2010, Union County sent

notice   to    Pace/Dowd    that   it    had     “discovered”        Parcel   3A   by

increasing the value to $9,166,280 for tax years 2008 and 2009.

This “discovery” implicates N.C. Gen. Stat. § 105-312 (2013),

titled “Discovered property; appraisal; penalty.”                     Union County

now argues that N.C.G.S. § 105-287 is not applicable to the case

sub judice and that N.C. Gen. Stat. § 105-394 is the correct

statute regarding Pace/Dowd’s appeal, allowing Union County to

recover taxes on the corrected value of Parcel 3A for years 2008

and 2009.      We disagree.
                                          -22-
    N.C. Gen. Stat. § 105-287, titled “Changing appraised value

of real property in years in which general reappraisal is not

made,” provides the following:

             (a) In a year in which a general reappraisal
                 of real property in the county is not
                 made under G.S. 105-286, the property
                 shall be listed at the value assigned
                 when last appraised unless the value is
                 changed in accordance with this section.
                 The assessor shall increase or decrease
                 the appraised value of real property, as
                 determined   under   G.S.  105-286,   to
                 recognize a change in the property’s
                 value resulting from one or more of the
                 following reasons . . . .

N.C.G.S. § 105-287(a) (2013).                The statute proceeds to list

reasons such as: to correct a clerical or mathematical error; to

correct an appraisal error resulting from a misapplication of

schedules, standards, and rules used in the county’s most recent

general appraisal; to recognize an increase or decrease in the

value   of    the     property       resulting   from   a   conservation      or

preservation     agreement,      a    physical    change    in   the   land   or

improvements on the land, and a change in the legally permitted

use of the property, etc.        Id.

    N.C.       Gen.     Stat.         §     105-394,    titled     “Immaterial

irregularities,” provides the following:

             Immaterial irregularities in the listing,
             appraisal, or assessment of property for
             taxation or in the levy or collection of the
                                     -23-
            property tax or in any other proceeding or
            requirement of this Subchapter shall not
            invalidate the tax imposed upon any property
            or   any  process   of  listing,  appraisal,
            assessment, levy, collection, or any other
            proceeding under this Subchapter.

N.C.G.S.     §    105-394     (2013).            Examples         of      immaterial

irregularities    are    listed.         Union   County   argues        that   “[t]he

failure to list, appraise, or assess any property for taxation

or to levy any tax within the time prescribed by law” is the

applicable subsection to the facts before us.                     N.C.G.S. § 105-

394(3).

    Union County relies on two cases for their arguments:                            In

re Appeal of Morgan, 186 N.C. App. 567, 652 S.E.2d 655, (2007),

rev’d, 362 N.C. 339, 661 S.E.2d 733 (2008), and In re Appeal of

Dickey, 110 N.C. App. 823, 431 S.E.2d 203 (1993).                       However, we

find both of the cases to be distinguishable from our present

case and hold neither of these cases to be controlling.

    In      Morgan,     although    the     taxpayers       had     listed       their

residence    on   the    county    tax    listing    form    in        1993    and   an

appraiser with Henderson County’s Tax Assessor’s Office visited

the taxpayers’ property during countywide reappraisals in 1999

and 2003, the tax assessor failed to assess any taxes on the

residence from the years 1995 through 2003.                   Morgan, 186 N.C.

App. at 568, 652 S.E.2d at 656.            In 2004, Henderson County’s Tax
                                        -24-
Assessor’s Office finally assessed taxes on the residence and

asserted that the taxpayers owed back taxes and interest in the

amount of $8,533.61 for tax years 1995 through 2003.                          Id.     The

Commission concluded, and our Court affirmed, that the failure

of the tax assessor to assess taxes on the residence was not an

“immaterial    irregularity”      pursuant          to    N.C.G.S.     §   105-394    and

barred Henderson County from attempting to collect back taxes.

Id.   Our Court held that N.C.G.S. § 105-394 was “intended to

cover cases where there is no dispute that but for the clerical

error, the tax would have been valid.”                     Id. at 571, 652 S.E.2d

at 658 (citation omitted)             (emphasis in original).                 Henderson

County’s failure to assess the residence was not an “immaterial

irregularity”       because      it     was     neither          a     clerical       nor

administrative error.           Id. at 570, 652 S.E.2d at 657.                       In a

dissenting opinion, Judge Geer stated that the plain language of

N.C.G.S. § 105-394 did not require that the failure to assess

any property for taxation be due to a clerical or administrative

error.     Rather,      Judge    Geer    opined          that   Henderson     County’s

failure   to   assess     the   taxpayers’          residence        within   the    time

prescribed     by   law    constituted         an         immaterial       irregularity

pursuant to N.C.G.S. § 105-394 and that it did not invalidate

the tax levied on the property.               Id.        For the reasons stated in
                                        -25-
Judge Geer’s dissent, our Supreme Court reversed the Court of

Appeal’s opinion in In re Appeal of Morgan, 362 N.C. 339, 661

S.E.2d 733 (2008).

    In    Dickey,        the    taxpayers     purchased   a     lot    and    a   newly

constructed       house    in    1988   for    $272,500.00.           The    taxpayers

submitted their “1989 Property Tax Listing” and the 1989 tax

bill from Forsyth County assessed the taxpayers’ real property

valued at $37,500.00.            Dickey, 110 N.C. App. at 824, 431 S.E.2d

at 204.     In 1990, the tax assessor notified the taxpayers that

their property “ha[d] been taxed improperly” for the year 1989.

The tax assessor, “pursuant to N.C.G.S. § 105-312 (discovered

property), added to the previously assigned value the sum of

$185,500.00,       and     assessed      the     [taxpayers]      an        additional

$2,094.30 in taxes.”              Id. at 825, 431 S.E.2d at 204.                    The

taxpayers    appealed      to    Forsyth      County,   which    dismissed        their

appeal.     Id.    The taxpayers then appealed to the Commission, and

the Commission found that the taxpayers properly listed their

house on the property tax listing dated 17 January 1989 “on a

portion of the listing form which was designed to be torn off if

it was not completed.”              The Commission        stated that “[a]fter

receipt by the County, this portion of the form was removed and

destroyed even though it had been completed by the [taxpayers.]”
                                          -26-
Id. at 825, 431 S.E.2d at 204.                Because the taxpayers submitted

a timely and accurate property tax listing, the improvements on

the    taxpayers    lot    were    not      considered       “discovered”      property

under N.C.G.S. § 105-312.                 Furthermore, the Commission found

that because the tax assessor appraised the house at a value of

$0.00 for the tax year 1989, pursuant to N.C.G.S. § 105-287, the

assessor was authorized to reappraise the house in 1990.                              Such

reappraisal was effective as of 1 January of the year in which

it is made and was not retroactive.                  Id. at 825, 431 S.E.2d at

205.    Forsyth County appealed.             Our Court held that because the

tax    assessor    never    “appraised”       the    taxpayer’s      house     for    tax

purposes in 1989 as defined in N.C.G.S. § 105-2731, N.C.G.S. §

105-287 had no application.                 “There is no evidence that the

Assessor prior to 1990 attempted to ascertain the true value of

the [taxpayers’] house, and it is undisputed that the true value

of the house in 1989 was not zero dollars.”                         Id. at 828, 431

S.E.2d at 206.           Forsyth County argued that the tax assessor’s

failure    to     levy    any    tax   on    the     house    was    an   “immaterial

irregularity”      and     our    Court     agreed    that     N.C.G.S.    §    105-394

applied    since     it    had    been      previously       established       that    “a



1
 N.C. Gen. Stat. § 105-273 (2013) defines “appraisal” as “[t]he
true value of property or the process by which true value is
ascertained.”
                                            -27-
clerical error by a tax supervisor’s office is an immaterial

irregularity under G.S. 105-394 so as not to invalidate the tax

levied on the property.”             Id. at 829, 431 S.E.2d at 207 (citing

In re Notice of Attachment, 59 N.C. App. 332, 333-34, 296 S.E.2d

499, 500 (1982)).

       In both       Morgan    and Dickey, the properties at issue had

never been “appraised” as defined in N.C. Gen. Stat. § 105-273

or assessed for taxation purposes.                   The facts in both Morgan and

Dickey support the conclusion that the tax assessors’ actions

constituted an “immaterial irregularity” pursuant to N.C.G.S. §

105-394, in that the assessors failed “to list, appraise, or

assess any property for taxation or to levy any tax within the

time prescribed by law.”             N.C.G.S. § 105-394(3) (2013).                In the

case   sub     judice,      Union   County     did     not    fail   to    appraise     the

parcels for the years 2008 and 2009.                         To the contrary, Union

County appraised the parcels,                 but did so using an arbitrary

method    of     valuation       that       resulted     in    an    assessment       that

substantially exceeded the true value of the parcels.

       Based    on    the     foregoing,      the    Commission      did    not   err   by

concluding      that     N.C.G.S.       §    105-287     applied      to    Pace/Dowd’s

appeal, as Union County attempted to change the value of the

parcels in a year in which a general reappraisal was not made.
                                  -28-
Furthermore, the Commission did not err by holding that Union

County “improperly ‘discovered’ Parcel [3A] for tax years 2008

and 2009” as the General Assembly has stated that “[a]n increase

or   decrease   in   appraised   value   made   under   this   section   is

effective as of January 1 of the year in which it is made and is

not retroactive.”     N.C.G.S. § 105-287(c).

      Affirmed.

      Judges ELMORE and DAVIS concur.
