Opinion
A114664 A114831
4-30-2007
COUNTY OF SONOMA, Plaintiff and Appellant, v. SONOMA COUNTY ASSESSMENT APPEALS BOARD, Defendant and Respondent; FOUNTAINGROVE LLC et al., Real Parties in Interest and Respondents.
NOT TO BE PUBLISHED
Appellant County of Sonoma (the County) appeals from a judgment denying its petition for a peremptory writ of mandate. The County sought to overturn a decision of respondent Sonoma County Assessment Appeals Board (the Board) setting the purchase price as the full market value of certain real property purchased by real parties in interest and respondents Fountaingrove LLC, Ken and Donna Martin, and Willard and Nancy Carle, impacting the assessment of the property. We affirm the judgment.
The County filed two separate Notices of Appeal, one on June 20, 2006, after the notice of entry of the order denying the petition was served, and the other on July 17, 2006, after the judgment was entered. Both appeals were consolidated for purposes of briefing, oral argument and decision.
BACKGROUND
On October 31, 2002, Oakmont Senior Living LLC and Fountaingrove LLC entered into an option agreement with RNM Fountaingrove Club, L.P.; RNM Santa Rosa, Inc., and RNM Oaks, L.P. (the RNM entities) to purchase property in the Fountaingrove area for a purchase price of $8 million. The property subject to the option agreement consisted of a number of parcels that together formed the Fountaingrove Golf and Athletic Club, including an 18-hole golf course, a 22,000-square-foot clubhouse, tennis courts, a driving range, and an equipment maintenance building (collectively the golf course), a 7.5-acre parcel of undeveloped land, and another 29 acres referred to as resort property. On December 6, 2002, the option was exercised and the properties were purchased for a total of $8 million. Specifically, Fountaingrove LLC purchased the golf course, the Martins and Carles purchased the 7.5-acre parcel, and Oakmont Senior Living LLC, owned by William Gallaher, purchased the 29-acre parcel. The parties completed Preliminary Change of Ownership Reports (PCORs) which broke down the purchase price as follows: $3 million for the golf course, $500,000 for the 7.5-acre parcel, and $ 4.5 million for the 29-acre resort property.
Fountaingrove LLC is made up of 18 people, 11 of whom were members at Fountaingrove Golf and Athletic Club. Messrs. Carle, Martin, and Gallaher were among those individuals making up the LLC.
The Sonoma County assessor initially enrolled a value of $10.5 million for the golf course and $1.5 million for the 7.5-acre parcel. Fountaingrove LLC and the Martins and Carles challenged the assessed values which exceeded their purchase prices for the properties. The Board heard evidence regarding the 7.5-acre parcel and the golf course and found the sale was an arms-length transaction, there was no evidence of exigent circumstances, and the PCORs correctly reflected all information relevant to the transaction. The Board found Fountaingrove LLC and the Martins and Carles were entitled to rely on the rebuttable presumption that the purchase price represented the full market value of the property, and the assessor failed to rebut this presumption. On April 22, 2005, the Board directed the assessor to accept the purchase price value of $2.7 million for the golf course (representing the $3 million purchase price adjusted down to account for personal property) and $500,000 for the 7.5-acre parcel.
The assessor accepted the $4.5 million purchase price as the value for the resort property. Oakmont Senior Living LLC and the 29-acre parcel were not a part of the proceedings before the Board nor are they part of this appeal.
On September 19, 2005, the County petitioned the superior court for a peremptory writ of mandate to compel the Board to disregard the purchase price presumption for the properties at issue and, instead, to utilize one of the other valuation methods presented by the County. The superior court found substantial evidence supported the Boards determination and the court denied the Countys petition. This appeal followed.
DISCUSSION
On appeal, the County challenges the Boards use of the purchase price presumption and argues that even if such method was valid, substantial evidence does not support the Boards factual findings. The County also contends it suffered procedural unfairness and the Board placed an erroneous burden of proof on the assessor. We conclude the Boards application of the purchase price presumption was correct, as was its assignment of the burden of proof. We also conclude substantial evidence supported the Boards conclusion that the propertys fair market value was determined by its purchase price, and the hearing was not procedurally unfair.
I. Standard of Review
"Whether the valuation method used by an assessor is valid constitutes a question of law. The court must determine `whether the challenged method of valuation is arbitrary, in excess of discretion, or in violation of the standards prescribed by law. " (Dennis v. County of Santa Clara (1989) 215 Cal.App.3d 1019, 1025-1026, quoting Bret Harte Inn, Inc. v. City and County of San Francisco (1976) 16 Cal.3d 14, 23.) "In reviewing the application of a valid valuation method, the trial court reviews the entire record to determine if the findings are supported by substantial evidence. [Citations.] A board of assessment appeals is ` "the sole judge of questions of fact and of the values of property." [Citation.] . . . [¶] Like the trial court, the appellate court may not independently weigh the evidence, but must apply the substantial evidence rule." (Dennis, at p. 1026.)
II. Determining The Full Market Value of Property—Purchase Price Presumption
Article XIII, section 1, subdivision (a) of the California Constitution provides that "[a]ll property is taxable and shall be assessed at the same percentage of fair market value." "Full cash value" or "fair market value" is statutorily defined as "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." (Rev. & Tax Code, § 110, subd. (a).)
All further statutory references are to the Revenue and Taxation Code unless otherwise indicated.
"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." (§ 110, subd. (b).) However, if the preliminary change of ownership statement does not provide information as the board shall prescribe relative to whether the terms of the transaction were negotiated at arms-length, "the rebuttable presumption provided by subdivision (b) shall not apply." (§ 110, subd. (c).)
California Code of Regulations, title 18, section 321, subdivision (e) provides: "In hearings involving change in ownership, except as provided in section 110 of the Revenue and Taxation Code, the purchase price is rebuttably presumed to be the full cash value. The party seeking to rebut the presumption bears the burden of proof by a preponderance of the evidence."
III. The Board Correctly Applied The Law Regarding The Purchase Price Presumption
The County contends it was fundamentally inappropriate for the Board to end its analysis with a determination that the transaction was arms-length and therefore the purchase price presumption applied. To the extent the County alleges the Boards use of the purchase price presumption was arbitrary, in excess of discretion, or a violation of the standards prescribed by law, the County is correct in saying our review is de novo. (Dennis v. County of Santa Clara, supra, 215 Cal.App.3d at pp. 1025-1026.)
As set forth above, the purchase price is rebuttably presumed to be the full cash value if the terms of the transaction were negotiated at arms-length. (§ 110, subd. (b).) Here, after considering testimonial and documentary evidence from both sides, the Board concluded the transaction at issue was arms-length and there were no exigent circumstances. Based on these factual findings, the Board properly concluded the purchase price presumption applied. Further, the Board found the PCORs sufficiently provided the relevant information, and, therefore, the presumption was not barred by section 110, subdivision (c). Given the application of the purchase price presumption, the burden of proving a value other than the purchase price by a preponderance of the evidence shifted to the County.
In this section, we review the Boards action for errors of law given the findings of fact it made. In the next section we review the record for substantial evidence supporting these findings of fact.
The Board considered the Countys evidence of alternative valuation methods and found the County failed to rebut the purchase price presumption. The Board stated, "Assessor presented evidence related to all three methods of valuation." Although the Board found the income approach to be the most relevant, the Board concluded, "We do not believe that the testimony of [the Countys witness] on this point is sufficiently persuasive to establish a value different from the purchase price of the property." The Board also rejected the Countys comparable sales evidence and stated, "[W]e find the assessors evidence does not effectively rebut the presumption that the allocated sales price was the full cash value of the property."
Despite the Countys contentions on appeal, the Board did not erroneously end its analysis after finding the purchase price presumption applied; rather, it considered the Countys evidence and found it insufficient to overcome that presumption and establish a different value for the properties. We find the Board properly followed the statutorily prescribed analysis, and there was no error as a matter of law.
The County also asserts that as a matter of law, the purchase price presumption cannot be conclusive on value. The County cites Guild Wineries & Distilleries v. County of Fresno (1975) 51 Cal.App.3d 182, 187 to say "the sale, by itself, does not provide sufficient, reliable data to enable the assessor to make an accurate valuation of that property [citation]; it is only a starting point in appraising the property." However, the more recent case of Maples v. Kern County Assessment Appeals Bd. (2002) 103 Cal.App.4th 172, 183 addressed this statement from Guild Wineries and stated, "By its adoption of [Revenue and Taxation Code section 110, subdivision (b)], the Legislature changed that rule. The sale, by itself, is now sufficient to establish the fair market value in the absence of evidence the property would not have sold for that price in an open market transaction." The Countys reliance on Dennis v. County of Santa Clara, supra, 215 Cal.App.3d 1019 on this point is also misplaced. Dennis merely illustrated a situation where, given the facts of the case, the assessment appeals board reasonably found the purchase price presumption had been rebutted and agreed with the assessors reliance on other valid valuation methods. (Id. at pp. 1022-1033.) The Dennis court clarified that the board was not conclusively bound by the purchase price presumption, and establishing the purchase price was not necessarily the end of the inquiry. (Id. at pp. 1027-1028.) Dennis clearly does not require that a board reject the purchase price presumption in any case where contrary evidence is presented. Had the County, by a preponderance of the evidence, successfully rebutted the presumption, additional evidence supporting the purchase price would have been required.
IV. Substantial Evidence Supports the Boards Conclusions
Having concluded the Boards analysis was proper as a matter of law, we now review the record for substantial evidence to support the factual findings made by the Board in reaching its conclusion.
First, the Board found the transaction was arms-length, and without exigencies. At the Board hearing, Willard Carle (hereafter Carle) (who represented the real parties in interest at the Board hearing) testified the seller of the properties was the Robert Miner Trust, and none of Robert Miners family members were part of Fountaingrove LLC nor did they retain any other interest in the property after the sale. The Robert Miner Trust manages a substantial amount of real estate and other holdings. In 2001, Colliers International was retained to market and sell the Fountaingrove properties. The listing agent for the properties, Bill Carr, had previously represented a number of property owners in the area and for this listing he made 150 contacts and sent 40 brochures. The properties were marketed nationwide and Omni Hotels, Marriott, and Fandango Resorts all looked at them. In November 2001, Berg Holdings made an offer of $12 million for the three bundled properties, but the sale did not go through. As mentioned, real parties in interest purchased the three bundled properties for a total of $8 million in December 2002. Substantial evidence supported the Boards conclusion that the transaction was arms-length and not exigent.
Second, the Board found the PCORs correctly reflected all basic information relevant to the transaction. The PCOR submitted for the golf course contained the names of the seller and buyer, the parcel numbers involved, the total purchase price for the golf course, the value of included personal property, and answers to most of the check-the-box questions throughout the form. The PCOR for the 7.5-acre parcel also contained the names of the seller and buyers, the parcel number, the total purchase price for the parcel, and checks in almost all of the boxes. One question on the forms asked, "Please explain any special terms, seller concessions, or financing and any other information that would help the Assessor understand the purchase price and terms of sale." The answer to this question was left blank on both forms, and Carle testified in his view there were no special terms or financing with regard to the particular purchase prices for the parcels. The County argues the forms were deficient due to the parties failure to volunteer the fact that all three properties were part of the same transaction, but the questions did not directly solicit this information and the Board could reasonably have concluded this additional piece of information was not pertinent to whether the transaction was arms-length. Thomas, a commercial real estate appraiser who testified for the County, stated it would be "traditional" for a buyer to indicate if the purchase was part of a larger purchase of other parcels, but he was unable to say the circumstances affected the arms-length nature of the transaction. Based on this evidence, the Board reasonably found the PCORs contained sufficient information so as not to bar the application of the purchase price presumption under section 110, subdivision (c).
Also, although the County complains the Board erroneously added a requirement as evidenced by its statement that the forms were "in no way misleading," this additional comment does not affect the Boards finding that the information provided on the forms was sufficient.
Third, the Board concluded that the County failed to rebut the purchase price presumption with its evidence of other valuation methods. Regarding the golf course, the County asserted an income valuation of $11.3 million, based on a national report on financial profiles of golf courses. The Countys calculation assumed an annual net income of nearly $1.1 million. But, Carle testified this golf course had consistently lost between $467,000 and $2.5 million each year since 1999. The County also suggested a value of $10.8 million based on sales comparisons of other golf course properties in the area and based on the cost approach. But, as Carle also pointed out, the comparable sales included properties that were operating profitably, which Fountaingrove Golf and Athletic Club had not yet accomplished. The Board reasonably rejected the Countys alternative valuations that did not take into account this golf courses continued pattern of losing money.
For the 7.5-acre parcel, the County suggested a value of $1.5 million based on a sales comparison approach. However, Carle testified a substantial portion of the property is on a hillside, and less than 20 percent of the property was under a 25-degree slope. Also, the property is zoned for parks and recreation with a resort overlay. The comparable sales used by the County were zoned neighborhood commercial, office commercial, or cluster residential. Thomas admitted he did not look at any similarly zoned comparable sales. The Board therefore also reasonably rejected the Countys alternative valuation method based on comparable sales.
The County makes the additional argument that the parties internal agreement regarding value should be disregarded. However, the County does not support this assertion. "This court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or the record." (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.)
V. The Hearing Was Not Procedurally Unfair
Finally, the County argues it suffered procedural unfairness in the earlier part of the hearing regarding the 7.5-acre parcel. Specifically, the County argues the Board reversed its initial determination that real parties in interest had the burden of proof, and instead stated the purchase price presumption applied and the County had the burden of proof to rebut the presumption. We find no procedural unfairness. At the outset of the hearing, both sides offered explanations of the relevant presumptions and burdens of proof. The Board stated the taxpayer had the burden of going forward, and allowed Carle to proceed. The Board heard testimony from Carle regarding the nature of the transaction and the circumstances of the 7.5-acre parcel, and then from Thomas regarding how he used the comparable sales method to value the property at $1.5 million. The Board then concluded the transaction was arms-length, and the purchase price presumption applied. In its written findings of fact, the Board stated it did not find the Countys comparable sales evidence sufficiently rebutted the purchase price presumption due to the zoning uncertainties. The fact that the Board could not say conclusively at the outset that the purchase price presumption applied is understandable as it had not yet heard testimony regarding the arms-length nature of the transaction. Under section 110, subdivision (b), the Board was required to shift the burden of proof to the County once the Board concluded the presumption applied, and we assume the County was well aware of this statutory provision. The County was not precluded from offering any of its evidence on its valuation method, and the Board simply chose not to credit the Countys method over the purchase price presumption. We find no procedural unfairness resulted to the County at the hearing.
To the extent the County argues procedural unfairness due to the treatment of the purchase price presumption or an improper placement of the burden of proof, we restate our conclusion reached above that the Board properly used the presumption and shifted the burden of proof appropriately as a matter of law.
DISPOSITION
The judgment is affirmed.
We concur.
GEMELLO, J.
NEEDHAM, J.