Opinion
No. 3-015 / 02-0241.
Filed June 25, 2003.
Appeal from the Iowa District Court for Calhoun County, Michael J. Moon, Judge.
The defendant appeals, and plaintiff cross-appeals, from a district court ruling affirming in part and reversing in part the board of review's classification and tax assessment of the plaintiff's property. AFFIRMED.
James Brick of Brick, Gentry, Bowers, Swartz, Stoltze, Schuling, Levis, P.C., Des Moines, for appellant.
Gregg Owens of Ladegaard, Maah, Owens, Spirit Lake, for appellee.
Heard by Sackett, C.J., and Miller and Eisenhauer, JJ.
The defendant, Calhoun County Board of Review (Board) appeals a district court ruling affirming in part and reversing in part its decision regarding classification and tax assessment of the plaintiff's property. The Board contends the district court erred in (1) concluding the valuations assessed to the plaintiff's property was excessive, (2) improperly assigning the burden of proof, (3) reducing the valuation of plaintiff's property, and (4) assessing it all costs. On cross-appeal, the plaintiff argues the district court erred in (1) failing to reduce the back lots' assessed values to at least their 1999 assessment values, and (2) not reclassifying the property from residential to agricultural. We affirm.
I. Background Facts and Proceedings. The property at issue is part of the Manson farm located in Calhoun County adjacent to the northern of two Twin Lakes, and is part of the Garwin Stein trust created for the benefit of Garwin's wife. Either Garwin or the trust farmed the land continuously until 1969, when the county condemned a portion of the land to construct a roadway along the lake. That same year, the trust created Stein's Fourth Subdivision and sold residential lots adjoining the lake. Across the road, an additional ten lots were created, known as the "back lots". The back lots did not have a view of or direct access to the lake. Although the lots were classified by the county as residential, the land adjacent to the back lots was classified agricultural. The back lots remained unsold until 1999, when Lot R was purchased for $29,000 to provide the buyer with access to the lake through Lot N. No improvements have been made to Lot R.
The parties' first tax dispute regarding assessment of the properties occurred in 1979. Although the properties were considered residential, the Board valued Lots 1 through 46 based on what prime agricultural land was selling for in the area. On appeal the district court concluded the lots would be considered residential, but reduced the valuation on some of them based on their specific characteristics. In 1998, the parties again disputed the properties' valuation. The district court valued the back lots at $47,970. The decree provided that the county would have the right to increase the stipulated values for the 2000 assessment year.
In 2000, the county assessed a valuation to the properties of $88,200. For year 2001, the county assessed the properties at $259,800. The trust challenged the valuation and classification of the properties. The trust argued the back lots had failed to sell except for one and were worth a fraction of the assessed value, and that the properties should be reclassified as agricultural.
At trial, John Lawson, deputy assessor for Calhoun County, testified he used a Vanguard computer program to assess the properties' values, but admitted the only criteria for such a dramatic increase in 2000 was the sale of Lot R. For 2001, Lawson testified he adopted the appraisal conducted by Robert Ehler. Ehler testified he conducted his 2001 assessment by conducting a fee appraisal on Lot R.
The trust called John Kesterson and Timothy Dubois to testify regarding the properties' value. Kesterson stated the best use of the back lots was agricultural. He maintained they had minimal residential appeal since none offered a view of the lake. Timothy Dubois testified the back properties should be classified agricultural. He asserted there were similar properties in Webster County and that even though they were classified residential, they were used for crops.
The district court concluded the properties would remain classified residential since they have been classified as such for twenty years and were part of a subdivision on which numerous homes were built. The court, however, concluded the increased assessments were excessive, and assessed the properties' value at $45,600. The defendant appeals, and the plaintiff cross-appeals.
II. Scope of Review. Our review of the Board's action is de novo. Riley v. Bd. of Review, 549 N.W.2d 289, 290 (Iowa 1996). There is no presumption as to the correctness of the Board's valuation. Iowa Code § 441.39 (2001). The trust has the burden to prove by a preponderance of the evidence (1) the challenged valuation is excessive, inadequate, or capricious, and (2) what the valuation should be. Post-Newsweek Cable, Inc, v. Bd. of Review, 497 N.W.2d 810, 813-14 (Iowa 1993). The trust also has the burden of showing there has been a change in the condition or use of the land before a reclassification may occur. State v. Cott, 442 N.W.2d 78, 81 (Iowa 1989).
III. Assessment. The Board contends the district court erred in ruling its tax assessment of the lots was excessive. It contends its use of a contract sale to determine the proper assessment was permissible under Iowa Code section 441.21 (2001). The Board further maintains the trust failed to introduce testimony regarding value from two disinterested parties and thus failed to meet its burden of proof of showing the Board's valuation was excessive.
In order to challenge the Board's assessment, the trust must (1) show it was excessive, and (2) introduce testimony from two disinterested parties that the market value is less than that determined by the assessor, (3) show the market value at issue, and (4) demonstrate that the owner's property is assessed at a higher proportion of its market value than the ratio of the assessed and market values of comparable properties. Iowa Code § 441.21(3) (2001); Metropolitan Jacobson Dev. Venture v. Bd. of Review, 524 N.W.2d 189, 192 (Iowa 1994). Once a complainant satisfies this burden of proof, the burden of proof shifts to the Board. Post-Newsweek Cable, 497 N.W.2d at 813; Milroy v. Bd. of Review, 226 N.W.2d 814, 817 (Iowa 1975).
One basis upon which an assessment may be appealed is that "the property is assessed for more than the value authorized by law." Iowa Code § 441.37(1)(b). The value authorized by law is the fair and reasonable market value of the property. Boekeloo v. Bd. of Review, 529 N.W.2d 275, 277 (Iowa 1995). The Board maintains the trust failed to show reasonable market value by failing to introduce the testimony of two disinterested witnesses regarding the properties' value.
The trust called Kesterson and DuBois to support their contention the Board's assessment was excessive. Kesterson, a certified appraiser, testified the best use of the back lots was agricultural, and offered an opinion regarding the value of the land if so classified. He stated the back lots had no value as residential lots. He testified there were no comparable sales in the area since Lot R was purchased in 1999 and that the sole purpose of that sale was to allow the purchaser access to the lake. He stated no improvements had been made to Lot R. Kesterson, however, did not offer a written report regarding his analysis, nor did he give an appraisal on the fair market value of the property.
Dubois testified he believed the property should be classified agricultural. He maintained there were similar properties in Webster County that were platted residential but were planted in crops and assessed as agricultural. Dubois, however, did not offer an appraisal of the back lots fair market value and stated he was not in court to render an opinion on that issue.
John Lawson, the deputy assessor, was called by the Board to testify regarding the methods he used in determining the properties' value. Lawson testified the 2001 assessment was increased based on the appraisal completed by Robert Ehler from Vanguard Appraisal. He stated the market value of the property was based solely on the contract sale concluded in 1999 on Lot R. Lawson also testified they removed the obsolescence factors used to determine the 2000 assessment. However, Lawson admitted in a 2001 deposition that the use of a contract sale was not a good criterion to use in assessing value, and that there was no comparable property in the area on which to make a comparison.
We conclude that based on the testimony elicited at trial, the trust failed to introduce the testimony of two disinterested witnesses, and that the burden remained on the trust to prove the assessment was excessive. They are assisted, however, by the presumption arising from the court-established 1999 and 2000 assessments. See Metropolitan, 524 N.W.2d at 192. "[I]t is presumed that a valuation fixed by the court continues to be the true value of the property in subsequent years" unless a change in value is shown. Id.
This same presumption benefits the trust here. The record reveals that the back lots sat empty until 1999, when Lot R was sold solely for the purpose of providing the purchaser with access to the lake. No improvements were made to the property and none were planned. Testimony was elicited from Lawson that the use of a contract sale was not a good criterion on which to base an appraisal of fair market value. There is no evidence there is any further market for the remaining unsold back lots. We conclude the trust has demonstrated the Board's assessment was excessive. We affirm the assessment of $45,600 as calculated in 1999 by the district court.
IV. Classification. On cross-appeal, the trust contends the district court erred in ruling that the properties should remain classified residential. The trust argues the land immediately adjacent to the back lots has been continuously farmed since the trust was created, and it would be difficult for anyone to use the back lots for anything other than agricultural purposes. The trust maintains this is especially true since the county relocated the roadway around the lake so that it bisects the property and separates the back lots from the lake lots.
In Cott, 442 N.W.2d at 81, the supreme court opined that "[w]hen it is admitted that the use of the real property is the same as it was in the prior years when the court adjudicated its classification, there is a strong presumption that no change has occurred." The court ruled it should not be forced to reexamine the same facts yearly, and that a condition once shown may be presumed to continue until the contrary is shown. Colt, 442 N.W.2d at 81 . "A classification in one year is competent and persuasive evidence of the property classification in a subsequent year." Colvin v. Bd. of Review, 653 N.W.2d 345, 349 (Iowa 2002). Although the court generally disfavors dual classification of single tract property, Iowa courts have recognized exceptions to this rule when the use of the property has not changed from the previous unappealed assessment. Id., Cott, 442 N.W.2d at 81.
In the present case, the trust maintains the property has little use as residential lots since they do not provide access to the lake and have not been improved since the original plat was filed. While Lot R was sold on a contract sale, it was purchased merely to gain access to the lake, and no improvements have been made. The trust additionally notes there have been no further inquiries regarding purchase of any of the back lots. The trust also notes the land immediately adjacent to the lots has been continuously farmed for years. The Board, however, notes that homes front the back lots on three sides, and that city utilities are available to the lots. The Board also argues it would be difficult to farm the back lots if the trust did not own the adjacent farmland.
We conclude the back lots were properly classified as residential. The properties have been so classified for over twenty years, and their use and condition, save one exception, has been static. At no time, until the present case, did the trust appeal the back lots' classification. Absent any evidence the use or condition of the land has changed, we find the trust has failed to show the district court erred in affirming the residential classification of the property.
V. Costs. The Board also contends the district court erred in taxing it all costs. The Board argues because it was successful on the issue of
classification, the costs of the litigation should be apportioned. We find no abuse of discretion and affirm on this issue.