Kline, P.J.

Certified for Partial Publication.

Tim Phillis, Pro. Per.

Office of County Counsel, Jeffrey S. Blanck, County Counsel, Jefferson Billingsley, Interim County Counsel, for Respondent.

Kline, P.J. Appellants Tim and Kathy Phillips sought a reduction in the value at which property they purchased at a trustee's sale was assessed, then challenged the value determined by the Assessment Appeals Board (Board) in superior court. They appeal from the judgment against them, arguing the Board improperly failed to apply the statutory presumption that the purchase price established the property's value, conducted a flawed comparable sales analysis, and made various other errors. We affirm.

BACKGROUND

On June 26, 2013, appellants purchased real property in Humboldt County at a public trustee sale for $153.806.41. The trustee's deed, was recorded on July 12, 2013.

The property consists of two 80-acre parcels (parcel 101-122-006 & 101-131-001), which appellant testified had been merged in May 2000, and which were treated as one appraisal unit by the Humboldt County Assessor (Assessor). The terrain is mostly steep and wooded.

As described by the appraiser, there is a 1,508 square foot, three-bedroom, two-bathroom, manufactured home on a permanent foundation on parcel 101-131-001, which uses a solar generator system for power, a spring-fed water system, and septic system. There are also several outbuildings and sheds that are in poor condition and do not add to the overall value of the property.

According to appellant's testimony, the property had been purchased in May 2000 for $125,000, and the owner added the modular home in 2001 at a cost of $85,000. The prior owners tried without success to sell all or a portion of the property in 2005, 2006, and 2009, and the mortgage holder foreclosed in 2012. The property is approximately two miles from a public road. When the prior owners left the property, they took the gas-powered generator, which was the only source of power; PG&E is two miles away. The prior owners had drilled two wells that failed to produce water and "had been hauling domestic water for years." Mice had ruined the central heat ducting under the house and the private road had been neglected for years. As appellant noted, the appraiser stated the property was in "poor" condition. After purchasing the property, appellant found a water source and installed a solar pump to pump water for the house, as well as an operating solar system.

On November 26, 2013, appellants submitted an application for changed assessment (application No. 13-26); they filed an additional application (application No. 14-68) on November 10, 2014, and two more (application Nos. 14-72 & 14-73) on November 12, 2014. The enrolled property value challenged in application Nos. 13-26, 14-72, and 14-73 was $469,976, which was the prior owner's assessment. In November 2014, the Assessor reappraised the property at $415,000, using a comparable sales analysis, and this was the value challenged in application No. 14-68. The Assessor explained that this appraisal was the result of a "2013 Prop 8" conducted as an "interim" measure because appellants had purchased the property and were responsible for the outstanding taxes but "could not appeal the base year for 2013," and a value had not yet been set for the date of acquisition....

Appellants’ applications were initially heard by the Board on March 12, 2015. Relying upon the presumption stated in Revenue and Taxation Code section 110, subdivision (b), that the purchase price of real property is rebuttably presumed to be its "full cash value" or "fair market value" "if the terms of the transaction were negotiated at arms length between a knowledgeable transferor and transferee neither of which could take advantage of the exigencies of the other," appellant argued at the hearing that the price he paid for the property had to be treated as its taxable value unless respondent County of Humboldt could prove the foreclosure sale at which it was purchased was not an open market, arms length transaction.

The Assessor took the position that a foreclosure sale is not an open market transaction. The appraiser testified that although the trustee's sale is public, potential purchasers at a public trustee sale in the county are limited by the requirements that a deposit of $2,500 be submitted prior to the auction and a winning bid must be paid within three days after the auction, so "traditional financing" is not available. The Assessor's office pointed to an annotation from the California State Board of Equalization (SBE) stating that "[t]he presumptions of full cash value under Revenue and Taxation Code section 110 do not apply to execution and/or foreclosure sales, since these are forced sales and thus considered non-market transactions." (Board of Equalization, Property Taxes Law Guide (Revision 2017), Annotation No. 460.0031 (Mar. 26, 1999) < https://www.boe.ca.gov/lawguides/property/current/ptlg/annt/460-0031.html> [as of Dec. 31, 2020].)

Appellant also challenged the Assessor's comparable sales analysis, which was summarized on a spreadsheet comparing various aspects of appellants’ property with seven others, referred to as "Comp 1" through "Comp 5," "711 Sawdust trail," and "Off Centerville Rd." Appellant argued the properties used as comparisons were "vastly different in size" and a "considerable distance" from the subject property; unlike his property, all but one of the comparison properties had PG&E service and all had water; the climate differed between the properties; and the subject property was in "substantially worse condition" than the others. In addition, appellant stated the Assessor's office had "no calculations to arrive at the lot size value adjustment." In response to questions from the Board, appellant testified that his property was about two miles off a public road; the appraiser testified that while some of the comparable properties were closer to public roads, he did not feel this required adjustment because the properties were "drastically further" from cities and towns than the distance from appellants’ property to Ferndale. Asked about adjustments for the absence of public utilities on the property, the appraiser testified that he was not aware there was a problem with water or power and had been told "it was on solar" and had well water. He testified that if he had known, "I don't know that it would make that big of a difference. A lot of these rural properties have issues with power and water." Acknowledging appellant's statement that the comparables did not have a problem with power, the appraiser said the information he had did not indicate one way or the other.

After Board members expressed agreement with the Assessor's view that a foreclosure sale is not an open market transaction, the matter was continued to allow the parties to attempt to reach a mutually acceptable determination of value in light of this view, and for the appraiser to address issues of concern to the Board regarding the comparables, including the properties’ access to utilities and distance from a public road. At the continued hearing in July 2015, appellant continued to rely upon the purchase price presumption as the measure of value, and argued the SBE annotation addressed tax sales rather than foreclosure sales. The appraiser provided information on whether each of the comparables had utility services and the distance of each from a public road. Appellant again argued the properties were not sufficiently similar to comply with the governing rules, while the appraiser explained that it was difficult to find comparable properties because the subject property is "unique" and these were "the best comps we could find," "rural properties with a manufactured home on it."

The Board concluded that a foreclosure sale is not a fair market value sale and determined the value of the property to be $250,000, finding the comparable sales provided by the Assessor's office "of marginal help due to condition, location, topography and parcel size."

Appellants filed a tax refund action in superior court in November 2015, which was resolved by a stipulation for remand to the Board for determination of the value of the property based on evidence in the administrative record of the March 12 and July 20, 2015 proceedings. The stipulation and order vacating the Board's 2015 decision, remanding the matter for a new hearing, decision and findings of fact, and dismissing the superior court action, was filed on March 8, 2017. Prior to the hearing on remand, appellants objected to the participation of one member of the Board. After a hearing, the request for disqualification was denied.

At the June 8, 2017 hearing on remand, appellant again maintained the purchase price was the proper measure of value of the property, argued the comparative sales analysis could not be utilized unless the Assessor proved the foreclosure sale was not an open market transaction, and argued the properties the Assessor used as comparables were too dissimilar for this purpose. The Assessor reiterated the position that the foreclosure sale was not a market transaction, again pointing to Annotation No. 460.0031. The Assessor also noted the discussion of open market transactions in the Assessment Appeals Manual, which states that that "[o]pen market conditions which tend to produce a ‘full cash value’ or ‘fair market value’ as defined in section 110 include: [¶] Exposure on the open market for a sufficient amount of time [¶] Neither the buyer nor the seller is able to take advantage of the exigencies of the other [¶] Both parties are seeking to maximize their gains [¶] Both buyer and seller have full knowledge of the property and are acting prudently." (SBE, Assessment Appeals Manual (May 2003) pp. 88–89.) Appellant asked the Board to remove the annotation from the record, arguing the Assessor violated statutory exchange of information rules by failing to provide it in response to appellants’ request for evidence that the foreclosure sale was not an open market transaction.

The Board issued its ruling on August 3, 2017, finding the fair market value of the property on July 12, 2013, was $335,000. The Board disagreed with both the Assessor's determination of $415,000 as the fair market value of the property and appellant's position that the fair market value was $153,806.41. Its written findings state that a foreclosure sale "is generally not considered an open market transaction for purposes of determining fair market value," citing the SBE letter underlying Annotation No. 460.0031, and, with respect to appellant's objection, stating the document was considered as legal authority offered by the Assessor rather than as factual evidence. The Board also found that even if foreclosure sales could be considered open market in some circumstances, the sale in this case did not meet the required parameters in that it required potential bidders to pay a cash deposit and pay the total amount in cash within three days, thus excluding purchasers using traditional financing; the seller was forced to sell and not necessarily a " ‘willing’ seller at the auction price"; the sale lacked "the exposure typical to real estate marketing"; and the buyer was in "at least the potential position" of being able to take advantage of the owner's necessity to sell. The Board found the comparable sales evidence was "of sufficient weight to establish that the $153,806.41 paid by the Applicant was below the fair market value of the Subject Property on the date of transfer." Noting that appellant claimed the property was not habitable due to lack of power and water, that the comparables were habitable properties and that appellant had restored water to the property at a cost of about $7,000, the Board found the condition of appellants’ property was "generally of lower quality" than the comparables and assigned $15,000 to $20,000 as a "reasonable range of value for that difference in condition." Disagreeing with the Assessor's value and adjustments for the difference in size between appellants’ parcel and the comparison properties, the Board found "an amount of approximately $500 per acre to be a more reasonable value" for purposes of adjustment for size. The Board applied its adjustments, excluding the "high value and low value of comparable properties 1-5 plus Sawdust Trail," resulting in an "approximate average" of $336,200 for the comparable properties, and concluded "a reasonable fair market value" for appellants’ property on the date of transfer was $335,000.

On November 17, 2017, appellants filed a second lawsuit, alleging causes of action for property tax refund, federal and state due process violations, violations of title 42, United States Code section 1983, and declaratory relief. The trial court granted respondent's motion for summary adjudication of the second through fifth causes of action, which were based on the same factual allegations as the first cause of action, leaving only the tax refund claim for trial.

After a bench trial, the court ruled in favor of respondent, finding the property was not obtained in an open market transaction, there was substantial evidence to support the Board's conclusion as to the assessed value of the property, and appellants’ due process rights were not violated by the procedural issues appellants raised. Judgment was filed on August 26, 2019.

DISCUSSION

"The proper scope of review of assessment decisions is well established. ( Bret Harte Inn, Inc. v. City and County of San Francisco (1976) 16 Cal.3d 14, 21–23 [127 Cal.Rptr. 154, 544 P.2d 1354].) ‘When the assessor utilizes an approved valuation method, his factual findings and determinations of value based upon the appropriate assessment method are presumed to be correct and will be sustained if supported by substantial evidence.’ ( Service America Corp. v. County of San Diego (1993) 15 Cal.App.4th 1232, 1235 ( Service America Corp. ).) However, where the taxpayer attacks the validity of the valuation method itself, the issue becomes a question of law subject to de novo review. ( Ibid. ; see

GTE Sprint [Communications Corp. v. County of Alameda (1994)] 26 Cal.App.4th [992,] 1001 .)" ( Elk Hills Power, LLC v. Board of Equalization (2013) 57 Cal.4th 593, 606, 160 Cal.Rptr.3d 387, 304 P.3d 1052.) Here, appellants’ argument that the Board was required to accept their purchase price as the taxable value of the property unless respondent proved by a preponderance of the evidence the property was not purchased in an open market, arms length transaction is a challenge to the methodology of valuation, presenting a question of law. The same is true to the extent appellants argue the properties used in the Assessor's comparative sales analysis were not sufficiently similar to the subject property to be used for that purpose. To the extent appellants challenge the application of the comparable sales analysis—the findings of fact and determinations of value resulting from the analysis—we review for substantial evidence.

I.

" California Constitution, article XIII, section 1, provides that all property ‘is taxable and shall be assessed at the same percentage of fair market value,’ with certain exceptions not relevant here. California Constitution, article XIII A, section 1, places certain restrictions on the assessment of taxes on real property and does so by reference to the ‘full cash value’ of the property. Section 2, subdivision (a) of article XIII A defines ‘full cash value’ for properties purchased after 1975 as ‘the appraised value’ of the property at the time of purchase. Where the full cash value is established upon purchase and sale of the property, the term ‘full cash value’ has the same meaning as fair market value measured at the date of such purchase. ( Blackwell Homes v. County of Santa Clara (1991) 226 Cal.App.3d 1009, 1013 .)" ( Maples v. Kern County Assessment Appeals Bd. (2002) 103 Cal.App.4th 172, 179–180, 126 Cal.Rptr.2d 585 ( Maples ).)

Section 110, subdivision (a) provides that " ‘full cash value’ or ‘fair market value’ means the amount of cash or its equivalent that property would bring if exposed for sale in the open market under conditions in which neither buyer nor seller could take advantage of the exigencies of the other, and both the buyer and the seller have knowledge of all of the uses and purposes to which the property is adapted and for which it is capable of being used, and of the enforceable restrictions upon those uses and purposes."

The tax rules promulgated by the SBE further provide: "In addition to the meaning ascribed to them in the Revenue and Taxation Code, the words ‘full value’, ‘full cash value’, ‘cash value’, ‘actual value’, and ‘fair market value’ mean the price at which a property, if exposed for sale in the open market with a reasonable time for the seller to find a purchaser, would transfer for cash or its equivalent under prevailing market conditions between parties who have knowledge of the uses to which the property may be put, both seeking to maximize their gains and neither being in a position to take advantage of the exigencies of the other. [¶] When applied to real property, the words ‘full value’, ‘full cash value’, ‘cash value’, ‘actual value’ and ‘fair market value’ mean the price at which the unencumbered or unrestricted fee simple interest in the real property (subject to any legally enforceable governmental restrictions) would transfer for cash or its equivalent under the conditions set forth in the preceding sentence." ( Cal. Code Regs., tit. 18, § 2, subd. (a).)

The presumption appellants rely upon in this case is established in subdivision (b) of section 110 : "For purposes of determining the ‘full cash value’ or ‘fair market value’ of real property, other than possessory interests, being appraised upon a purchase, ‘full cash value’ or ‘fair market value’ is the purchase price paid in the transaction unless it is established by a preponderance of the evidence that the real property would not have transferred for that purchase price in an open market transaction. The purchase price shall, however, be rebuttably presumed to be the ‘full cash value’ or ‘fair market value’ if the terms of the transaction were negotiated at arms length between a knowledgeable transferor and transferee neither of which could take advantage of the exigencies of the other. ‘Purchase price,’ as used in this section, means the total consideration provided by the purchaser or on the purchaser's behalf, valued in money, whether paid in money or otherwise...."

The tax rules elaborate that in valuing real property as a result of a change in ownership, "it shall be rebuttably presumed that the consideration valued in money, whether paid in money or otherwise, is the full cash value of the property. The presumption shall shift the burden of proving value by a preponderance of the evidence to the party seeking to overcome the presumption. The presumption may be rebutted by evidence that the full cash value of the property is significantly more or less than the total cash equivalent of the consideration paid for the property. A significant deviation means a deviation of more than 5% of the total consideration." ( Cal. Code Regs., tit. 18, § 2, subd. (b).)

Appellants argue that under the above provisions, the Assessor had the burden of proving the foreclosure sale in which they purchased the property was not an open market transaction and establishing by a preponderance of the evidence that the price would have been different if the sale had taken place under open market conditions. Appellants complain that, despite the Assessor's failure to produce evidence the transaction was not an open market sale, the Board improperly rejected the purchase price presumption by relying upon the Board chairman's personal opinion that a public trustee auction is never an open market sale and Annotation No. 460.0013, expressing the same view. Reliance upon the Board chairman's opinion, appellants’ urge, violates regulations requiring the Board to render its decision "on the basis of proper evidence at the hearing." ( Cal. Code Regs., tit. 18, § 302 ) As to the annotation, appellants emphasize that SBE annotations, as staff interpretations of statutory law, are not binding authority. ( Helene Curtis, Inc. v. Assessment Appeals Bd. (1999) 76 Cal.App.4th 124, 132, 90 Cal.Rptr.2d 31 ; Yamaha, supra, 19 Cal.4th at p. 7, 78 Cal.Rptr.2d 1, 960 P.2d 1031.)

Appellants’ position assumes the rebuttable purchase price presumption applies in every case, and controls absent evidence the particular purchase in question was not an arms length, open market transaction. The Board (and superior court) found the presumption does not apply to purchases at foreclosure sales because such sales, by their nature, are not open market transactions and, therefore, the precondition to application of the presumption is not met. The SBE has expressed this view not only in Annotation No. 460.0031 (< https://www.boe.ca.gov/lawguides/property/current/ptlg/annt/460-0000-all.html> [as of Dec. 31, 2020]), but also Annotation No. 848.0003 (< https://www.boe.ca.gov/lawguides/property/current/ptlg/annt/848-0000-all.html> [as of Dec. 31, 2020]). We agree.

" ‘[I]t is common knowledge that at forced sales such as a trustee's sale the full potential value of the property being sold is rarely realized.’ ( Strutt v. Ontario Sav. & Loan Assn. (1972) 28 Cal.App.3d 866, 876 ; see also Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1236 [44 Cal.Rptr.2d 352, 900 P.2d 601] [property's price at trustee's sale ‘is not deemed the equivalent of the property's fair market value’].)" ( Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1254, 26 Cal.Rptr.3d 413.) Alliance Mortgage Co., at pages 1236–1237, 44 Cal.Rptr.2d 352, 900 P.2d 601 ( Alliance Mortgage ), explained why "[t]he price at a foreclosure sale is not deemed the equivalent of the property's fair market value" with a quotation from BFP v. Resolution Trust Corp. (1994) 511 U.S. 531, 114 S.Ct. 1757, 128 L.Ed.2d 556 ( BFP ), " ‘An appraiser's reconstruction of "fair market value" could show what similar property would be worth if it did not have to be sold within the time and manner strictures of state-prescribed foreclosure. But property that must be sold within those strictures is simply worth less. No one would pay as much to own such property as he would pay to own real estate that could be sold at leisure and pursuant to normal marketing techniques.’ " ( Alliance Mortgage , at p. 1237, 44 Cal.Rptr.2d 352, 900 P.2d 601.)

BFP further explained: "[M]arket value, as it is commonly understood, has no applicability in the forced-sale context; indeed, it is the very antithesis of forced-sale value. ‘The market value of ... a piece of property is the price which it might be expected to bring if offered for sale in a fair market; not the price which might be obtained on a sale at public auction or a sale forced by the necessities of the owner, but such a price as would be fixed by negotiation and mutual agreement, after ample time to find a purchaser, as between a vendor who is willing (but not compelled) to sell and a purchaser who desires to buy but is not compelled to take the particular ... piece of property.’ Black's Law Dictionary 971 (6th ed. 1990). In short, ‘fair market value’ presumes market conditions that, by definition, simply do not obtain in the context of a forced sale." ( BFP, supra, 511 U.S. at pp. 537–538, 114 S.Ct. 1757.)

Appellants argue that the sale in the present case was not "forced" because the trustee "was a willing party" and, according to appellant's testimony, the public auction was noticed for seven months before it actually took place and there was " ‘no time limit or a minimum price paid by law, nor were there any additional liens by a public entity’ to be paid." Appellants also state that their purchase met a minimum acceptable value that was established prior to the trustee's sale, and emphasize that the property failed to sell when it was listed on the open market in 2005, 2006, and 2009. These factors, they maintain, distinguish the particular trustee's sale in the present case from the "reasoning" of Alliance Mortgage . The argument is not persuasive. All foreclosure sales must be conducted in accordance with statutory requirements regarding notice, timing, bids, and other particulars. The trustee is not attempting to maximize gain, as would be expected of a seller in an open market transaction; he or she is attempting to recoup the amount of a defaulted loan, regardless of the actual value of the security property, and the lender does not keep any surplus over the amount of the secured obligation and costs of foreclosure. ( Civ. Code, § 2924k ; Zieve, Brodnax & Steele, LLP v. Dhindsa (2020) 49 Cal.App.5th 27, 30–31, 262 Cal.Rptr.3d 567.) " ‘[N]either appraisal nor judicial determination of fair value is required’ " ( Alliance Mortgage, supra, 10 Cal.4th at p. 1236, 44 Cal.Rptr.2d 352, 900 P.2d 601, quoting Sheneman, Cal. Foreclosure: Law and Practice (1994) § 6.01, p. 6–3), and a foreclosure sale is valid even if there is "great disparity between the foreclosure price and the value of the property." ( Knapp v. Doherty (2004) 123 Cal.App.4th 76, 94, 20 Cal.Rptr.3d 1.)

In the present case, as the Board indicated in its findings, the trustee's sale required bidders to pay a cash deposit in order to participate and to pay the total purchase price within three days, thus excluding potential purchasers relying upon traditional financing; the seller was forced to sell in order to recover anything on the defaulted loan; and the sale lacked typical real estate marketing. The Board's statement that the "seller was not necessarily a ‘willing’ seller at the auction price" is certainly justified by the fact that the price appellants paid—153,153,806.41—was considerably less than the $228,460.69 outstanding debt secured by the property. As for the fact that the property did not sell in 2005, 2006, and 2009, appellants offer no information about the market conditions or other circumstances of those attempted sales and how they compare to the situation at the time of the sale in 2013.

In short, whatever distinctions there might be between the specific foreclosure sale here and another held more quickly, or on an obligation subject to additional liens, a foreclosure sale is by nature not an open market transaction supporting application of the section 110 purchase price presumption.

Appellants’ argument that the Board improperly relied upon the chairman's opinion that foreclosure sales are not open market transactions necessarily depends on the faulty premise that this point must be proven by the evidence in any given case. Despite being framed as an "opinion" in the chairman's remarks during the hearing (and those of other members), the Board's conclusion that a foreclosure sale is not considered an open market transaction for purposes of determining fair market value was an interpretation of law, not a factual conclusion required to be drawn from evidence in the case regarding this particular transaction. Nor did the Board act improperly in considering the SBE annotation. While not dispositive, such agency interpretations are "entitled to consideration and respect by the courts" ( Yamaha, supra, 19 Cal.4th at p. 7, 78 Cal.Rptr.2d 1, 960 P.2d 1031 ) and, no less so, by the Board. Here, as discussed, the annotation expressed a view entirely consistent with legal authority.

II.–III.

DISPOSITION

The judgment is affirmed.

Costs to respondent County of Humboldt.

We concur:

Richman, J.

Miller, J.