Opinion
Supreme Court No. S-12729.
October 15, 2008.
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Kenai, Charles T. Huguelet, Judge, Superior Court No. 3KN-06-00571 CI.
Karen Bretz, Anchorage, for Appellants. Scott Bloom, Assistant Borough Attorney, and Colette G. Thompson, Borough Attorney, Soldotna, for Appellee.
Before: Fabe, Chief Justice, Matthews, Eastaugh, Carpeneti, and Winfree, Justices.
MEMORANDUM OPINION AND JUDGMENT
Entered pursuant to Appellate Rule 214.
I. INTRODUCTION
Condominium owners appeal the Kenai Peninsula Borough's 2006 real property tax assessment of $1.242 million for a twelve-unit building in Seward. The owners maintain that the Board of Equalization failed to consider written evidence of a contract of sale for $1 million. The owners also contend that the Board made inadequate findings of fact. Because the Board considered the evidence presented and made adequate findings, we affirm the Board's decision.
II. FACTS AND PROCEEDINGS
A. Facts
David and Bonnie Faulk bought the twelve-unit Harbor Lights Condominium building in Seward in 1993 for $495,000. The building has been used as a rental property since its purchase. The Faulks made a total of $76,056.15 in improvements to the property in 2004 and 2005.
Faulk v. Bd. of Equalization, Kenai Peninsula Borough ( Faulk I), 934 P.2d 750, 750 (Alaska 1997).
In early 2006 the Faulks appealed the Kenai Peninsula Borough's 2006 real property tax assessment on the building to the Borough's Board of Equalization. In their appeal, the Faulks alleged that they were under contract to sell the building. The Faulks represented to the Board that the sale price was $1 million and that "[i]n order to facilitate this sale, [they would] be spending between $150,000 [and] $200,000 for . . . deferred maintenance and repairs." The Faulks proffered two pages of an earnest money agreement dated February 21, 2006, signed only by the potential buyers, Dennis and Mary Bailey, offering to purchase the building for $1 million. The agreement indicated that the buyers were purchasing the property "`AS IS WHERE IS.'" The agreement was not signed by the Faulks and the Faulks presented no evidence that the offer was accepted.
The Faulks had apparently attempted to sell the building before then. According to Kenai Peninsula Borough Board of Equalization Member Saylor Rehm, in 1999, "they were on the market . . . for a total of one million five . . . for 77 days and the listing was canceled."
The Record and Excerpt of Record include only pages 1 and 6 of this document.
B. Proceedings
The Faulks were assessed at $1.242 million for 2006 real property taxes: $72,000 for land value and $1.17 million for improvements to the property. They filed their appeal with the Board of Equalization on March 22, 2006. The Faulks submitted the following evidence to the Board in support of their appeal: a copy of pages 1 and 6 of the earnest money agreement, containing the Baileys' offer but not signed by the Faulks; a copy of the front of the earnest money check but not the back, so that it was not clear whether it had been deposited in any escrow account; a copy of the condominium's income and expense statements for 2004 and 2005; the Faulks' insurance documents, which show a valuation of $1,505,194; and a letter dated May 5, 2006 addressing other issues, including the building's unavailability for inspection. The Faulks also attempted to submit rebuttal evidence shortly before the hearing, but the Board's attorney ruled that the evidence was inadmissible.
On May 22, 2006, the Board held a hearing on the Faulks' appeal. The Faulks did not attend. Randy Hughes, a Borough appraiser, testified for the Borough and presented the Board with the Faulks' evidence. In discussing the evidence of the pending Faulk-Bailey sale in his testimony, Hughes pointed out that the earnest money agreement was not signed by the Faulks and that the Faulks had submitted only pages 1 and 6 of the document. He highlighted the discrepancy between the Faulks' representation of their intent to make repairs to the property as part of the sale and the representation on the earnest money agreement that the property was being sold "`AS IS WHERE IS.'" Hughes maintained that the contract price of $1 million was "pretty unofficial," and that he "ha[d] no idea what the final sales price" would be. Finally, Hughes testified that the Faulks had submitted their "fire insurance" documents, "[w]hich list[ed] the value at 1.5 million."
After this presentation, the Board briefly discussed the evidence presented by Hughes, and a Board member moved to uphold the assessor's valuation:
I move that the Borough Assessor's valuation on the property described as . . . [p]arcel numbers 147-300-08 through 147-300-19, the Appellants, being David and Bonnie Faulk, have not presented sufficient evidence to prove an unequal, excessive, improper or [under valuation] for the following reasons, and they haven't submitted very much data, and, in fact, that data that they have submitted, the insurance data would indicate the value may be higher, so we just do not have — they have not proved their case.
During the discussion of the motion, it was suggested that the proper method of appraisal would be to value each condominium unit individually, rather than base the evaluation on the building as a whole:
[T]he owners of the property would like us to look at the whole property, . . . by law, and the way this property is listed as a condominium unit, the assessors are required to look at each individual unit. It would make — it possibly could make a difference, but when you're looking at each individual unit, given prices, there's no question in my mind that this is a fair price.
Voting then proceeded and the Board voted unanimously to uphold the assessor's valuation.
The Faulks appealed this ruling to the superior court, which affirmed the Board's assessment. The Faulks now appeal the superior court's decision, arguing that the Board violated AS 29.45.110(a) by failing to consider the sales evidence and that it made insufficient findings of fact to support its decision.
III. STANDARD OF REVIEW
"We give no deference to the decision of the superior court because it acted as an intermediate court of appeal," and we evaluate the merits of the Board's decision directly. We apply the reasonable basis standard of review because the Board's decision "involves questions of fact and law that involve agency expertise."
CH Kelly Trust v. Municipality of Anchorage, Bd. of Equalization, 909 P.2d 1381, 1382 (Alaska 1996).
See id.
Id.
IV. DISCUSSION
A. The Board of Equalization Did Not Violate AS 29.45.110(a).
The Faulks argue that although they "provided evidence of a pending sale of the condominium building for $1 million," there was no indication from the Board's decision or deliberations that it considered "the sales evidence." The Faulks further contend that the Board's failure to consider the sales evidence violated AS 29.45.110(a), which requires assessors to "assess property at its full and true value" and defines the "full and true value" as "the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer. . . ." The Faulks claim that they "established the fair market value of the project at no more than $1 million when they entered into a transaction to sell it" and that the Board's "failure to consider the pending sale of the Faulks' property constitute[d] a `fundamentally wrong principle of valuation.'" They rely on our decision in CH Kelly Trust v. Municipality of Anchorage, Board of Equalization to support their argument.
Id. at 1383.
The Borough reads CH Kelly Trust more narrowly, maintaining that case law "only requires that assessors consider actual recent sales" and that the Faulks "did not present evidence that established an actual sale for the assessor or [the Board] to consider." The Borough goes on to argue that while CH Kelly Trust requires that the Borough assessor consider evidence of a sale, the assessor need not have given the evidence "any particular weight." Finally, the Borough asserts that the Board considered the ten pages of evidence the Faulks submitted but ruled against the Faulks because they failed to meet the burden of proof to "substantiate their claims."
See AS 29.45.210(b) ("The appellant bears the burden of proof."); Kenai Peninsula Borough Code (KPBC) 05.12.060(P) (1998) ("The burden of proof is on the appellant. The only grounds for the board to adjust the assessment are proof of unequal, excessive, improper, or under valuation, based on facts proven at the appeal hearing.").
In CH Kelly Trust, we held that the Municipality of Anchorage assessor, who had failed to consider recent sales information, had "adopted a fundamentally wrong principle of valuation." In that case, the properties in question had been purchased at a Federal Deposit Insurance Corporation land liquidation auction seven months prior to the contested appraisal. We described the sales information as "directly relevant, albeit not conclusive, evidence of value." In coming to that conclusion, we relied on AS 29.45.110(a), which states that
909 P.2d at 1382 (internal quotations omitted).
Id. at 1381.
Id. at 1382.
Id. at 1382 n. 2.
[t]he assessor shall assess property at its full and true value as of January 1 of the assessment year, except as provided in this section, AS 29.45.060, and 29.45.230. The full and true value is the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer both conversant with the property and with prevailing general price levels.
But the Faulks did not provide sufficient evidence of a sale. They provided two pages of an earnest money agreement signed by a potential buyer. The earnest money agreement was not signed by the Faulks as sellers, so there is no evidence that they accepted the offer of $1 million. Thus, the evidence proffered by the Faulks does not indicate the "prevailing market conditions in a sale between a willing sellerand a willing buyer both conversant with the property." At most, the evidence indicates an offer to buy the condominium complex for $1 million. Because the Faulks provided no other sales information that would reflect the value of the property, the Board did not violate AS 29.45.110(a).
AS 29.45.110(a).
Furthermore, the Borough did provide the Board with ample evidence to support the valuation, including the assessor's analysis of the property for the lots in question, detailed descriptions of the fixtures and nature of each of the twelve units, and details of nine comparable sales from 2004 to 2006. Given the paucity of the Faulks' evidence, the substantial evidence provided by the Borough, and the assessor's discretion in valuing property, the Board had a reasonable basis to uphold the assessor's valuation. B. The Board Made Sufficient Findings of Fact To Support Its Decision To Uphold the Assessor's Valuation.
"[T]he precise method for determining the `full and true value' of property is within the assessor's discretion." Fairbanks N. Star Borough Assessor's Office v. Golden Heart Utils., Inc., 13 P.3d 263, 268 (Alaska 2000). We intrude upon this discretion only if the assessor has committed fraud or has clearly adopted "a fundamentally wrong principle of valuation." CH Kelly Trust, 919 P.2d at 1382 (internal quotations omitted).
The Faulks contend that the Board did not make adequate findings of fact, relying on our decision in Faulk v. Board of Equalization, Kenai Peninsula Borough ( Faulk I) as support for their position. Specifically, they argue that the Board failed to satisfy both the Kenai Peninsula Borough Code's requirement that the Board's action should "be taken by motions that set out specific findings of fact" and our requirement that "zoning boards and other agencies making adjudicative decisions . . . articulate the reasons for their decisions." The Faulks further claim that "[t]his case is factually indistinguishable" from Faulk I. In that 1994 appeal of the Faulks' Harbor Lights Condominium property tax assessment, the Board member who moved to uphold the Borough's valuation offered the following verbal findings of fact: "[T]he appellant, Mr. Faulk, has not presented sufficient evidence to prove an unequal, excessive or improper valuation." Based on this limited finding, the Board voted to deny the Faulks' appeal. Holding that this finding was inadequate as a matter of law, we remanded the case to the superior court with instructions to remand the matter to the Board for further proceedings.
934 P.2d 750 (Alaska 1997).
KPBC 05.12.060(O).
S. Anchorage Concerned Coal., Inc. v. Coffey, 862 P.2d 168, 175 (Alaska1993).
Faulk I, 934 P.2d at 751 (internal quotations omitted).
Id.
Id. at 753. We commented that
[t]he motion presented to the Board reveals little about the Board's reason for denying the Faulks' appeal other than explaining in conclusory fashion that the Board was not persuaded by the Faulks' arguments and evidence. Because all taxpayers bear the burden of proof when challenging a Borough assessment, such a statement would be true of any decision by the Board to deny a party's appeal.
Id. at 751.
In evaluating the adequacy of an agency's factual findings, we examine "whether the record sufficiently reflects the basis for the [agency's] decision so as to enable meaningful judicial review." Specifically, we have held that "`[t]he test of sufficiency is . . . a functional one: do the [agency's] findings facilitate this court's review, assist the parties and restrain the agency within proper bounds?'" And most recently, we stated that "[f]indings are adequate to permit appellate review when `at a minimum, they show that the Board considered each issue of significance, demonstrate the basis for the Board's decision, and are sufficiently detailed.'"
Fields v. Kodiak City Council, 628 P.2d 927, 932 (Alaska 1981).
Faulk I, 934 P.2d at 751 (alterations in original) (quoting S. Anchorage Concerned Coal., Inc., 862 P.2d at 175).
Lindhag v. State, Dep't of Natural Res., 123 P.3d 948, 953 (Alaska 2005) (quoting Stephens v. ITT/Felec Servs., 915 P.2d 620, 629 (Alaska 1996) (Matthews, J., dissenting in part)).
The Board's written decision included a review of the evidence submitted in the appeal. Specifically, the Board reviewed Borough Assessor Hughes's extensive testimony rebutting the Faulks' arguments and explaining the Borough's valuation, including his observation that the Faulks had not signed the earnest money agreement. The Board stated:
After hearing the testimony of Mr. Hughes, and reviewing the evidence presented, the Board finds by unanimous decision that the Borough Assessor's valuation of the property be upheld. Mr. Faulk did not present sufficient evidence to prove an unequal, excessive or improper valuation for the following reasons: 1) Mr. Faulk presented very little information supporting his appeal; 2) the insurance certificate indicated a higher value; and 3) since the property is classified as a condominium, the individual units must be valued separately.
Thus, we are not left to "speculate about why the Board thought that the Faulks' evidence was insufficient," as we were in Faulk I. In Faulk I, the Board simply stated its conclusion that the Faulks had not met their burden; it offered no explanation indicating how it came to that conclusion. But here, the Board provided reasons to justify its conclusion. These findings reflect that the Board "considered each issue of significance," they "demonstrate the basis for the Board's decision," and they are "sufficiently detailed." The Board's findings were adequate.
Faulk I, 934 P.2d at 752.
Lindhag, 123 P.3d at 953 (internal quotation omitted).
V. CONCLUSION
We AFFIRM the Board of Equalization's decision.