Charles R. and Linda D. Wright v. Angela Banks, Assessor

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2013 Term FILED
_______________
November 21, 2013
released at 3:00 p.m.
No. 11-1768 RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
_______________ OF WEST VIRGINIA
CHARLES R. WRIGHT and LINDA D. WRIGHT,
Petitioners Below, Petitioners
v.
ANGELA BANKS, ASSESSOR OF JEFFERSON COUNTY,
Respondent Below, Respondent
____________________________________________________________
Appeal from the Circuit Court of Jefferson County
The Honorable David H. Sanders, Judge
Civil Action No. 11-AA-1
REVERSED AND REMANDED
____________________________________________________________
Submitted: October 2, 2013
Filed: November 21, 2013
Charles R. Wright Stephanie F. Grove, Esq.
Pro Se Assistant Prosecuting Attorney
Ranson, West Virginia Charles Town, West Virginia
Counsel for Respondent
The Opinion of the Court was delivered PER CURIAM.
CHIEF JUSTICE BENJAMIN concurs and reserves the right to file a concurring
Opinion.
JUSTICE LOUGHRY dissents and reserves the right to file a dissenting Opinion.
SYLLABUS BY THE COURT
“‘‘An assessment made by a board of review and equalization and approved
by the circuit court will not be reversed when supported by substantial evidence unless
plainly wrong.’ Syllabus Point 1, West Penn Power Co. v. Board of Review and
Equalization, 112 W.Va. 442, 164 S.E. 862 (1932) (other internal citations omitted).’
Syllabus Point 3, In re: Tax Assessment of Foster Foundation’s Woodlands Retirement
Community, 223 W.Va. 14, 672 S.E.2d 150 (2008).” Syllabus Point 2, Mountain
America, LLC v. Huffman, 224 W.Va. 669, 687 S.E.2d 768 (2009).
i
Per Curiam:
Petitioners Charles and Linda Wright appeal an order by the Circuit Court of
Jefferson County affirming the decision of the Jefferson County Board of Equalization
and Review (“Board of Review”). The Wrights purchased a house on June 23, 2010, for
$234,000.00. Six months later, on December 30, 2010, the Jefferson County Assessor
(“Assessor”) appraised the property and found its fair market value was $355,200.00. The
Wrights appealed the Assessor’s valuation of their property to the Board of Review. The
Board of Review ruled in favor of the Assessor and upheld the $355,200.00 valuation.
Thereafter, the circuit court affirmed the Board of Review’s order.
On appeal, the Wrights argue that the circuit court erred by failing to apply
previous rulings of this Court which have held that the price paid for real estate in a recent
arm’s length transaction is a substantial indicator of the property’s true and actual value.
Additionally, the Wrights argue that the circuit court erred by accepting the Assessor’s
conclusion that the $234,000.00 purchase price the Wrights paid for the property was an
“anomaly.” The Wrights argue that their purchase of the property was in an arm’s length
transaction on the open real estate market. They assert that the Assessor did not
investigate or analyze their sale or present any evidence that the sale was an “anomaly.”
After review, we find that the circuit court was plainly wrong by failing to
consider the June 23, 2010, purchase price of the property. The circuit court’s order states
that the Wrights “did not offer any competent evidence” in opposition to the Assessor’s
1
testimony that the true and actual value of the property was $355,200.00. However, the
record shows that the Wrights presented undisputed evidence that their property was
purchased in a recent arm’s length transaction on the open market for $234,000.00. This
Court has held that the price paid for real estate in a recent arm’s length transaction is a
substantial indication of its true and actual value. Crouch v. County Court of Wyoming
County, 116 W.Va. 476, 477, 181 S.E. 819, 819 (1935). Further, this Court has stated that
“the price paid for a parcel of land in a recent arm’s length transaction is an indicator of
market value on a par with the testimony of a qualified appraiser.” Kline v. McCloud, 174
W.Va. 369, 373, 326 S.E.2d 715, 719 (1985). Because the circuit court failed to consider
the purchase price of the Wrights’ property, we reverse the circuit court’s order affirming
the Board of Review.
I. Factual & Procedural Background
David and Irene Park listed their two-story house for sale in December 2009
for $229,995.00.1 On June 23, 2010, the Wrights purchased the house from the Parks for
$234,000.00. It is undisputed that this was an open market sale. In December 2010, the
Wrights were informed by the Assessor that their property was being valued at
1
The property is located at 166 Watercourse Drive in Jefferson County, West
Virginia. The property is situated on .13 acres. The house was built in 2007. The
Assessor stated that the house has 4,260 square feet.
2
$355,200.00 for the 2011 tax year. The property was assessed for ad valorem tax based
upon the $355,200.00 valuation. The Wrights filed a timely appeal of this assessment to
the Board of Review.
The Board of Review held a hearing on February 10, 2011. June Bowers, a
senior appraiser for the Assessor’s Office, testified at this hearing that the property was
properly valued at $355,200.00.2 Ms. Bowers stated that a valuation is made after
collecting information on the house including its age, the quality of the construction
material used and the house’s “amenities.” However, Ms. Bowers testified that she had
not been inside the Wright’s house and she did not offer any testimony about the specific
interior “amenities” of the Wrights’ house.3 She noted that the Wrights’ house was a
“model home” and “in my experience every model home that I’ve been in does have the
higher quality amenities in it. It’s got the extras and the bells and whistles that other
places wouldn’t.”
The process to determine the valuation on the Wrights’ property included a
comparable sales analysis. The circuit court’s order described how the Assessor used the
collected data and the comparable sales approach to arrive at the assessment:
2
Ms. Bowers testified that the house was appraised at $310,800.00 and that the land
was appraised at $44,400.00 for a total value of $355,200.00.
3
Ms. Bowers testified that she offered to inspect the interior of the house. It is
unclear, based on the record before us, why this inspection did not take place. Neither Ms.
Bowers, nor the Wrights, testified as to why an interior inspection of the house did not
occur.
3
Next, all sales in the neighborhood for the taxable year
are added into the equation, a process that is updated every
year. All sales of an “arm’s length” nature are considered by
the Assessor. Unlike appraisals based upon “comparable sales”
done in a real estate context where only similar properties of
similar size and style are considered and compared by their
total estimated market value, for tax purposes all arm’s length
sales are considered and converted into an average square-foot
value for residential space.
(Emphasis added).
Ms. Bowers testified that she compared the Wrights’ property to seven
“comparable sales” in the neighborhood during the look-back period.5 She testified that
these seven sales were “open market” arm’s length transactions. Ms. Bowers stated that
the price range for all arm’s length transactions ranged from $210,000.00 for a smaller
house (2,650 square feet), to a high of $350,000.00 for a larger house (4,296 square feet).
Ms. Bowers stated that she considered and excluded three sales during the
look-back period because they were “foreclosure-related sales.” Similarly, Ms. Bowers
stated that the sale of the Wrights’ property, which occurred during the look-back period,
“shouldn’t be considered because it’s an anomaly.” Mr. Wright questioned Ms. Bowers at
this hearing and asked her to identify the three “foreclosure-related sales” that were
omitted from consideration. Ms. Bowers stated that she did not have the data showing the
specific sales information on the “foreclosure-related sales.”
5
Ms. Bowers testified that the look-back period was from July 1, 2009, to June 30,
2010.
4
Mr. Wright also testified at the Board of Review hearing. He argued that the
best evidence of his property’s value was the purchase price paid for the property during
the look-back period. He testified that the sale was an open market arm’s length
transaction for $234,000.00. The Assessor did not present any evidence rebutting Mr.
Wright’s testimony that the sale occurred in a recent arm’s length transaction on the open
real estate market. Similarly, no evidence was presented showing that the sellers were
under any pressure, compulsion, or duress to sell the property.
At the conclusion of the hearing, the Board of Review ruled in favor of the
Assessor and approved the $355,200.00 valuation. Mr. Wright asked the Board to explain
why it ruled in favor of the Assessor. Board of Review member Lyn Widmyer stated,
“I’m going with what the Assessor said based on the information she’s provided.”
Another Board member, Frances Morgan, stated, “the winning argument for the Assessor
for me is that this was a model home that rises above some of these other sales and so I
will vote for the Assessor’s recommendation.”6 The Wrights appealed the Board of
Review’s ruling to the circuit court.
The circuit court denied the Wrights’ appeal by order entered on November
15, 2011. The circuit court’s order recited the testimony offered by Ms. Bowers and Mr.
6
We note that the Assessor did not present any specific information on the Wrights’
“model home.” Rather, the Assessor testified that, in general, model homes have “higher
quality amenities.”
5
Wright before the Board of Review. The order notes that Mr. Wright “established that he
had indeed purchased his house in June of 2010 for $234,000.00.” Despite its finding that
the Wrights purchased the property in a recent transaction for $234,000.00, the circuit
court nevertheless concluded:
Because the Petitioners [Wrights] did not offer any competent
evidence to the contrary and certainly not the clear and
convincing evidence it would be their burden to provide, the
Court must assume that this appraised value is in line with the
State Tax Department mandated range[.]
(Emphasis added). After entry of the circuit court’s order affirming the Board of Review,
the Wrights filed the present appeal.
II. Standard of Review
The Wrights ask this Court to reverse the circuit court’s order adopting the
Board of Review’s ruling in favor of the assessor. This Court utilizes “a two-pronged
inquiry” in reviewing tax assessment cases, i.e., whether the evidence supports the
findings below and whether there was an error of law. Kline, supra, 174 W.Va. at 371,
326 S.E.2d at 717. This Court has stated that “‘‘[a]n assessment made by a board of
review and equalization and approved by the circuit court will not be reversed when
supported by substantial evidence unless plainly wrong.’ Syllabus Point 1, West Penn
Power Co. v. Board of Review and Equalization, 112 W.Va. 442, 164 S.E. 862 (1932)
(other internal citations omitted).’ Syllabus Point 3, In re: Tax Assessment of Foster
Foundation’s Woodlands Retirement Community, 223 W.Va. 14, 672 S.E.2d 150 (2008).”
6
Syllabus Point 2, Mountain America, LLC v. Huffman, 224 W.Va. 669, 687 S.E.2d 768
(2009).
We note that “[a]s a general rule, there is a presumption that valuation for
taxation purposes fixed by an assessor are correct. . . . The burden is on the taxpayer
challenging the assessments to demonstrate by clear and convincing evidence that the tax
assessment is erroneous.” Mountain America, LLC, supra, 224 W.Va. at 686, 687 S.E.2d
at 785 (internal citation omitted).
With these standards in mind, we consider the parties’ arguments.
III. Analysis
The Wrights have challenged the circuit court’s order affirming the Board of
Review’s ruling in favor of the Assessor. Before specifically addressing the Wrights’
argument, we note that Article X, Section 1 of the West Virginia Constitution requires that
“all property, both real and personal, shall be taxed in proportion to its value to be
ascertained as directed by law.” Further, W.Va. Code § 11-3-1 [2010] instructs that all
property
shall be assessed annually as of July 1 at sixty percent of its
true and actual value, that is to say, at the price for which the
property would sell if voluntarily offered for sale by the owner
thereof, upon the terms as the property, the value of which is
sought to be ascertained, is usually sold, and not the price
which might be realized if the property were sold at a forced
sale.
7
(Emphasis added). This Court stated in Kline that “determining ‘true and actual value’ is
the first step in taxing real property.” 174 W.Va. at 372, 326 S.E.2d at 718. “True and
actual value” has been defined as “market value” and the price paid for property in an
arm’s length transaction. Mountain America, LLC, 224 W.Va. at 686, 687 S.E.2d at 785.
Additionally, W.Va.C.S.R. § 110-1F-2.24 [1987], provides the following definition of
“true and actual value”:
The terms “Value”, “Market Value”, and “True and Actual
Value” shall have the same meaning and shall mean the price
at or for which a particular parcel or species of property would
sell if it were sold to a willing buyer by a willing seller in an
arms length transaction without either the buyer or the seller
being under any compulsion to buy or sell: Provided, [t]hat in
determining value, primary consideration shall be given to the
trends of price paid for like or similar property in the area or
locality wherein such property is situate over a period of not
less than three (3) nor more than eight (8) years next preceding
the base year[.]
This Court has consistently held that the purchase price paid for property in
a recent arm’s length transaction is a substantial factor in determining the property’s true
and actual value. For instance, in Syllabus Point 2 of Kline, in part, the Court held that
“[t]he price paid for property in an arm’s length transaction, while not conclusive, is
relevant evidence of its true and actual value.”7 Similarly, the Court stated in Eastern Am.
7
In Kline, this Court recognized that “in many jurisdictions, evidence of current
market value is given substantial, if not conclusive, weight.” 174 W.Va. at 372, 326
S.E.2d at 719. See U.S. Oil Co., Inc. v. City of Milwaukee, 794 N.W.2d 904 (Wis.Ct.
App. 2010) (The best information of fair market value for purposes of a property tax
(continued . . .)
8
Energy Corp. v. Thorn, 189 W.Va. 75, 78, 428 S.E.2d 56, 78 (1993), overruled, in part, on
other grounds by In re: Tax Assessment of Foster Foundation’s Woodlands Retirement
Community, supra, that “as long as the property changes hands in an arm’s length
transaction, the price paid for the property is strongly indicative of its true and actual
value.” We also recognized this principle in Crouch, supra, stating, “[t]he price paid for
property is not conclusive as to value, but it may be a very important element of proof
where there has been an open transaction between competent parties dealing at arm’s
length[.]” 116 W.Va. at 477, 181 S.E.2d at 819.8 Finally, this Court has stated that “the
price paid for a parcel of land in a recent arm’s length transaction is an indicator of market
value on a par with the testimony of a qualified appraiser.” Kline, 174 W.Va. at 373, 326
S.E.2d at 719.
In addition to relying on the purchase price paid for property in a recent
arm’s length transaction, this Court has stated that “[i]n determining the fair market value
assessment is a recent sale of the property at issue.); and Berea City School Dist. Bd. of
Ed. v. Cuyahoga County Bd. of Revision, 834 N.E.2d 782 (2005) (Ohio Supreme Court
held that the purchase price in a recent arm’s length transaction was the true and actual
value for taxation purposes.).
8
In Crouch, a buyer purchased a tract of land for $75,000.00 in January of 1933.
The property was subsequently assessed at approximately $116,000.00 in 1934. This
discrepancy caused the Court to observe, “Our attention is first arrested by the fact that the
assessed valuation is nearly $50,000.00 in excess of the price for which the property
recently sold.” Id. at 477, 181 S.E.2d at 819. Based on the discrepancy between the
purchase price and the assessed value, and on the “lack of evidence in the record tending
to establish a basis for the valuations reflected in the assessment,” the Court reversed the
circuit court’s order approving the assessment. Id.
9
of a piece of land, a county assessor must seek out all information which would enable
him to properly fulfill his legal obligation.” Id. at 372, 326 S.E.2d at 718 (Emphasis
added, internal citation omitted). Further, the Court stated in In re Shonk Land Co., 157
W.Va. 757, 761, 204 S.E.2d 68, 70 (1974), that an Assessor “is not restricted in his search
for information leading to the true and actual value of properties[.]”
A number of learned treatises agree with this Court’s statements in Kline
and Shonk Land, and have found that appraisers should obtain all relevant information,
including information about the conditions surrounding the sale of the subject property, to
determine the property’s true and actual value. One treatise concluded that
[i]t is not sufficient simply to report a prior sale of the
property in question; the sale must be analyzed to
determine its relevancy. If the appraiser finds that the sale
did not represent market value and was not an arms-length
transaction, that conclusion and the reasoning behind it
should also be reported. It is not enough to state, “Based
upon my analysis of the sale of the subject property,
which occurred six months ago, I am of the opinion that
the sale did not represent market value.” Why didn’t it
represent market value? If changes in the property since
the date of sale – e.g., rezoning, improvement, destruction –
render the prior sale meaningless as a reference to current
value, these factors must be reported and explained.
J.D. Eaton, Real Estate Valuation in Litigation, 202 (2d ed. 1995) (Emphasis added). Real
Estate Valuation in Litigation also states that “[i]t is imperative . . . that the appraiser
investigate and thoroughly analyze any fairly recent sale of the property being assessed.”
Id. at 205. Further, Real Estate Valuation in Litigation instructs that the appraiser “should
personally verify sales with either the buyer or seller. . . . Verification of a sale with the
10
broker or attorney and the buyer or seller will usually produce the greatest amount of
useful, reliable information.” Id.
Another learned treatise concludes that an appraiser should examine the
motivations of the buyer and the seller to arrive at an accurate appraisal: “Data from
completed transactions is considered the most reliable value indicator. The appraiser
thoroughly researches the prices, real property rights conveyed, financing terms, [and]
motivations of buyers and sellers[.]” Appraisal Institute, The Appraisal of Real Estate,
302 (13th ed. 2008) (Emphasis added).
In the instant case, the Wrights presented evidence to the circuit court that
they bought the subject property in a recent arm’s length transaction on the open market
for $234,000.00. The Assessor did not present any evidence to the circuit court disputing
that the sale occurred in a recent arm’s length transaction. The Assessor presented no
evidence that she investigated or thoroughly analyzed the sale to determine if it should not
be considered as a comparable sale. Instead, the Assessor sought to minimize the weight
placed on the purchase price of the property by merely stating that the Wrights “got a
great deal on a substantial home, [and that the sale was] a stroke of good luck in a down
market.” However, the Assessor offered no investigation or analysis of the sale to support
this statement. Similarly, the Assessor argued that the purchase price of the Wrights’
property was an “anomaly.” Again, the Assessor presented no evidence of an
investigation or analysis of the sale to support this conclusion. The Assessor did not even
present evidence that either the sellers or the Wrights were interviewed to determine how
11
the parties arrived at the purchase price or that the sellers were under any pressure,
compulsion or duress to sell the property for less than its true and actual value. To the
contrary, the record shows that the sellers listed the property on the market for
$229,000.00 and that the Wrights purchased the property for $234,000.00 in an arm’s
length transaction.
Despite this undisputed evidence that the Wrights bought the property in a
recent arm’s length transaction on the open market for $234,000.00, the circuit court’s
order concludes that the Wrights “did not offer any competent evidence” to dispute the
Assessor’s testimony that the property was properly valued at $355,200.00. This finding
is a clear error of law under our previous rulings in Kline, Mountain America, LLC,
Eastern American Energy, and Crouch. This Court stated in these cases that the purchase
price paid for property in a recent arm’s length transaction is a substantial element of
proof. The purchase price paid for the Wrights’ property cannot be excluded from
consideration without a thorough investigation and analysis explaining why it is being
excluded. Thus, the Wrights undisputed assertion that they purchased the property in a
recent arm’s length transaction for $234,000.00 was not only “competent evidence” of the
true and actual value of the subject property; it is “substantial evidence” of the true and
actual value of the subject property.
Lastly, the Assessor refused to consider the sale of the Wrights’ property in
her comparable sales analysis because of her conclusion that the Wrights’ purchase was an
“anomaly.” We are troubled by this omission. The Assessor did not investigate the
12
conditions of the sale and did not offer any explanation or analysis demonstrating why an
arm’s length transaction on the open market was an “anomaly.”
Based on all of the foregoing, we find that the circuit court’s conclusion that
the Wrights “did not offer any competent evidence” to dispute the Assessor’s testimony
that the property was properly valued at $355,200.00, is plainly wrong. We reverse the
judgment of the circuit court and remand this matter for further consideration. On
remand, the parties may introduce all relevant evidence regarding the true and actual value
of the property.
IV. Conclusion
For the foregoing reasons, the circuit court’s November 15, 2011, order
affirming the Board of Review is reversed. This case is remanded for further proceedings
consistent with this Opinion.
Reversed and Remanded.
13