Opinion
No. 5-024 / 04-0631
Filed April 13, 2005
Appeal from the Iowa District Court for Wright County, Kurt L. Wilke, Judge.
A property owner and the Board of Review both appeal from the district court's decision in this property tax assessment case. AFFIRMED.
Robert W. Brinton of Brinton, Bordwell Johnson, Clarion, for appellant.
Bruce B. Green, Frank W. Pechacek, Jr. Brett Ryan of Willson Pechacek, P.L.C., Council Bluffs, for appellee.
Heard by Vogel, P.J., and Mahan and Vaitheswaran, JJ.
In this property tax assessment case, both the taxpayer and the Board of Review appeal the district court's determination of the property's value.
I. Background Facts and Proceedings
Jevin Corp. owns 11.6 acres of property near Belmond. Two buildings are situated on the property. One was built in 1998 and the other in 2000. The buildings are used primarily as warehouses for chemical or seed.
The property was assessed at $927,300 as of January 1, 2003. Jevin protested this assessment, arguing that the property with buildings should be assessed at no more than $487,000. The assessor denied the protest based on Jevin's failure to document its request. Jevin sought district court review.
At trial, the parties agreed the assessment was too high but disagreed on the appropriate value. Jevin offered the testimony of certified appraisers Jerry Jorgensen and Richard Vander Werff, who valued the property at $600,000.00 and $660,000.00, respectively. The Board offered the testimony of certified appraisers Paul Elher of Vanguard Appraisals, Inc. and Russ Manternach. They valued the property at $870,000.00 and $850,000.00, respectively.
The district court may consider additional evidence pertaining to those grounds raised before the Board. Iowa Code § 441.38(1) (2003).
Following trial, the district court reduced the assessment to $791,587.50. Jevin appealed and the Board cross-appealed. Our review of the court's assessment is de novo. Iowa Code § 441.39 (2003); Riley v. Iowa City Bd. of Review, 549 N.W.2d 289, 290 (Iowa 1996).
II. Valuation
Iowa Code chapter 441 governs the assessment and valuation of property. The district court may increase, decrease or affirm the Board's assessment. Iowa Code § 441.43. There is no presumption as to the correctness of the Board's valuation. Id. § 441.39.
Although there are several valuation methods, chapter 441 expresses a preference for valuations based on comparable sales. Boekeloo v. Bd. of Review, 529 N.W.2d 275, 277 (Iowa 1995). All the appraisers used the comparable sales method. The dispute lies in whether some of the selected properties were in fact comparable to the Jevin property. The district court resolved this dispute by declining to consider certain sales. Both parties take issue with the court's treatment of the comparable sales. They also argue that the court should have rejected the other side's appraisals in their entirety. We will examine the appraisals with these issues in mind.
A. Jorgensen Appraisal
Jorgensen testified for Jevin. He arrived at a valuation of $600,000. The district court examined the comparables he used and agreed with the Board that all but one were objectionable. This conclusion is supported by the record. Jorgensen's data reveals that the three rejected properties had much older buildings than those on the Jevin property. Jorgensen did not make any adjustments based on the age of these buildings. He also did not make adjustments based on these older buildings' condition. In light of these omissions, all three comparables were properly excluded.
Jorgensen's first comparable was problematic for an additional reason. Jorgensen acknowledged that this comparable was a contract sale that might require an adjustment. See Iowa Code § 441.21 (requiring exclusion of sales prices in "abnormal transactions" or adjustment "to eliminate the effect of factors which distorts market value"). He made no such adjustment, likening the sale to a normal cash transaction. Because he did not furnish the contract or testify to its specific terms, the district court had no way of determining if the transaction was indeed normal as claimed. See Riley, 549 N.W.2d at 290 (stating abnormal sales such as contract sales not to be considered "unless the distorting factors can be clearly accounted for"); Payton Apartments v. Bd. of Review, 358 N.W.2d 325, 328 (Iowa Ct. App. 1984) (stating appraisers should exercise caution when using contract sales as comparable sales). Therefore, the district court acted equitably in rejecting this comparable sale.
We turn to the Board's argument that, because the district court only found one of Jorgensen's comparable sales viable, the court should have rejected the appraisal in its entirety. We are not persuaded by this argument. Chapter 441 does not require an appraiser to use a minimum number of comparable sales. Additionally, a district court "is free to give no weight to proffered evidence of comparable sales which it finds not to be reflective of market value." Heritage Cablevision v. Bd. of Review, 457 N.W.2d 594, 597 (Iowa 1990). It is free to accept "that evidence which it finds to be most reliable" and reject "that which is determined to be unreliable." Id. at 598. Indeed, in an opinion cited by the Board for a contrary proposition, the court rejected one comparable offered by an appraiser but considered the remaining comparables. Bartlett Co. Grain v. Bd. of Review, 253 N.W.2d 86, 94 (Iowa 1977). Cf. Ross v. Bd. of Review, 417 N.W.2d 462, 465 (Iowa 1988) (rejecting appraiser's entire opinion as incompetent because appraiser "did not use the `sales prices' approach when adequate evidence of comparable sales was available to readily establish market value by that approach"). Having concluded that one of Jorgensen's comparables was appropriate, the district court was free to credit his opinion derived from that comparable sale.
B. Vander Werff's Appraisal
Vander Werff also testified for Jevin. He valued the property at $660,000. The district court rejected two of his four comparable sales. Again, we conclude the court's decision is supported by the record. One of the rejected sales was an unadjusted contract sale. Although Vander Werff testified the "contract terms were similar to cash," he also stated the contract required a "$50,000 down payment and 50 payments after that." Similarly, another property used by Vander Werff was acquired through foreclosure and then resold. Unlike the Jevin property, the building was vacant at the time of the sale. No adjustments were made for these factors.
Having appropriately rejected these comparables, the district court was free to accept the remaining comparables used by Vander Werff as well as his opinion derived from those comparables. Heritage, 457 N.W.2d at 597.
C. Manternach Ehler Appraisals
Manternach and Ehler testified for the Board. As noted, they valued the Jevin property at $850,000 and $870,000, respectively. The district court did not reject any of their comparables. Jevin contends this was inequitable, as the structures on the properties were manufacturing rather than warehouse buildings, many of which were in a "superior economic climate than that of Belmond." We are not persuaded by this argument because Manternach and Ehler adjusted their figures to account for this difference. For example, Manternach testified, "I adjusted for all factors, including location, age, condition and any factors I deemed necessary. . . ." Similarly, Ehler testified to various adjustments he made, including downward adjustments based on the location of certain sites. The district court acted equitably in considering all the comparable sales used by the Board's appraisers.
Jevin also argues that the appraisals of Manternach and Ehler should be rejected because both individuals had a continuing relationship with county boards of review. Even if we were to accept the proposition that the Board's witnesses were biased, there is no question that their testimony could be considered on the merits. See Security Mut. Ins. Ass'n v. Bd. of Review, 467 N.W.2d 301, 307 (Iowa Ct.App. 1991) ("Whether a witness is disinterested affects only burden shifting, and does not affect whether the witness's testimony may be considered on the merits."). Therefore, we reject this contention.
D. District Court's Valuation
The district court concluded that "the average value of all of the remaining comparables after adjustment is $15.15 per square foot." From this figure, the court arrived at a value of $791,587.00 for the Jevin property. The Board contends the court's methodology of averaging the un-rejected comparables was the equivalent of an impermissible "quotient verdict." We disagree. The district court asked Ehler to explain the wide variance in appraisals. Ehler responded, "the real estate market is an uncertain thing" and further stated, "I take my sales and stratify them by order and then I go to the middle to get the most probable. I try to eliminate the highs and lows." This testimony supports what the district court did.
The district court's methodology is also supported by an examination of three "common" comparables used by appraisers for both parties. First, both Jorgensen and Ehler used a September 2002 sale of a Clarksville property. Jorgensen's adjusted price per square foot was $15.78, and Ehler's was $16.26. Second, Vander Werff and Ehler both used a June/July 2003 sale of a property in Bancroft. Vander Werff's price per square foot, after adjustments, was $13.11, and Ehler's was $14.07. Finally, Vander Werff and Manternach both used an August 2001 sale in Estherville. Vander Werff's adjusted price was $13.57 per square foot, and Maternach's was $15.74 per square foot. The average price per square foot of these common sales is $14.75, just forty cents per square foot lower than the court's price. This reinforces the district court's decision on the Jevin property's value.
Finally, the averaging method used by the district court was essentially an assignment of weight to each witness's testimony, a matter within the particular province of the court. Cf. Payton Apartments, 358 N.W.2d at 329 (noting selected percentage was "between the extremes" of the percentages offered).
III. Disposition
We have considered all arguments, whether or not explicitly addressed in this opinion. The district court is affirmed, with costs taxed equally to the parties.