Opinion
No. 11–1768.
2013-11-21
Charles R. WRIGHT and Linda D. Wright, Petitioners Below, Petitioners v. Angela BANKS, Assessor of Jefferson County, Respondent Below, Respondent.
Charles R. Wright, Ranson, WV, pro se. Stephanie F. Grove, Esq., Assistant Prosecuting Attorney, Charles Town, WV, for Respondent.
Syllabus by the Court
“ ‘ ‘An assessment made by a board of review and equalization and approved by the circuit court will not be reversed when supported by substantial evidence unless plainly wrong.’ Syllabus Point 1, West Penn Power Co. v. Board of Review and Equalization, 112 W.Va. 442, 164 S.E. 862 (1932) (other internal citations omitted).' Syllabus Point 3, In re: Tax Assessment of Foster Foundation's Woodlands Retirement Community, 223 W.Va. 14, 672 S.E.2d 150 (2008).” Syllabus Point 2, Mountain America, LLC v. Huffman, 224 W.Va. 669, 687 S.E.2d 768 (2009).
Charles R. Wright, Ranson, WV, pro se. Stephanie F. Grove, Esq., Assistant Prosecuting Attorney, Charles Town, WV, for Respondent.
PER CURIAM:
Petitioners Charles and Linda Wright appeal an order by the Circuit Court of Jefferson County affirming the decision of the Jefferson County Board of Equalization and Review (“Board of Review”). The Wrights purchased a house on June 23, 2010, for $234,000.00. Six months later, on December 30, 2010, the Jefferson County Assessor (“Assessor”) appraised the property and found its fair market value was $355,200.00. The Wrights appealed the Assessor's valuation of their property to the Board of Review. The Board of Review ruled in favor of the Assessor and upheld the $355,200.00 valuation. Thereafter, the circuit court affirmed the Board of Review's order.
On appeal, the Wrights argue that the circuit court erred by failing to apply previous rulings of this Court which have held that the price paid for real estate in a recent arm's length transaction is a substantial indicator of the property's true and actual value. Additionally, the Wrights argue that the circuit court erred by accepting the Assessor's conclusion that the $234,000.00 purchase price the Wrights paid for the property was an “anomaly.” The Wrights argue that their purchase of the property was in an arm's length transaction on the open real estate market. They assert that the Assessor did not investigate or analyze their sale or present any evidence that the sale was an “anomaly.”
After review, we find that the circuit court was plainly wrong by failing to consider the June 23, 2010, purchase price of the property. The circuit court's order states that the Wrights “did not offer any competent evidence” in opposition to the Assessor's testimony that the true and actual value of the property was $355,200.00. However, the record shows that the Wrights presented undisputed evidence that their property was purchased in a recent arm's length transaction on the open market for $234,000.00. This Court has held that the price paid for real estate in a recent arm's length transaction is a substantial indication of its true and actual value. Crouch v. County Court of Wyoming County, 116 W.Va. 476, 477, 181 S.E. 819, 819 (1935). Further, this Court has stated that “the price paid for a parcel of land in a recent arm's length transaction is an indicator of market value on a par with the testimony of a qualified appraiser.” Kline v. McCloud, 174 W.Va. 369, 373, 326 S.E.2d 715, 719 (1985). Because the circuit court failed to consider the purchase price of the Wrights' property, we reverse the circuit court's order affirming the Board of Review.
I. Factual & Procedural Background
David and Irene Park listed their two-story house for sale in December 2009 for $229,995.00.
On June 23, 2010, the Wrights purchased the house from the Parks for $234,000.00. It is undisputed that this was an open market sale. In December 2010, the Wrights were informed by the Assessor that their property was being valued at $355,200.00 for the 2011 tax year. The property was assessed for ad valorem tax based upon the $355,200.00 valuation. The Wrights filed a timely appeal of this assessment to the Board of Review.
The property is located at 166 Watercourse Drive in Jefferson County, West Virginia. The property is situated on .13 acres. The house was built in 2007. The Assessor stated that the house has 4,260 square feet.
The Board of Review held a hearing on February 10, 2011. June Bowers, a senior appraiser for the Assessor's Office, testified at this hearing that the property was properly valued at $355,200.00.
Ms. Bowers stated that a valuation is made after collecting information on the house including its age, the quality of the construction material used and the house's “amenities.” However, Ms. Bowers testified that she had not been inside the Wright's house and she did not offer any testimony about the specific interior “amenities” of the Wrights' house.
Ms. Bowers testified that the house was appraised at $310,800.00 and that the land was appraised at $44,400.00 for a total value of $355,200.00.
She noted that the Wrights' house was a “model home” and “in my experience every model home that I've been in does have the higher quality amenities in it. It's got the extras and the bells and whistles that other places wouldn't.”
Ms. Bowers testified that she offered to inspect the interior of the house. It is unclear, based on the record before us, why this inspection did not take place. Neither Ms. Bowers, nor the Wrights, testified as to why an interior inspection of the house did not occur.
The process to determine the valuation on the Wrights' property included a comparable sales analysis. The circuit court's order described how the Assessor used the collected data and the comparable sales approach to arrive at the assessment:
Next, all sales in the neighborhood for the taxable year are added into the equation, a process that is updated every year. All sales of an “arm's length” nature are considered by the Assessor. Unlike appraisals based upon “comparable sales” done in a real estate context where only similar properties of similar size and style are considered and compared by their total estimated market value, for tax purposes all arm's length sales are considered and converted into an average square-foot value for residential space.
(Emphasis added).
Ms. Bowers testified that she compared the Wrights' property to seven “comparable sales” in the neighborhood during the look-back period.
She testified that these seven sales were “open market” arm's length transactions. Ms. Bowers stated that the price range for all arm's length transactions ranged from $210,000.00 for a smaller house (2,650 square feet), to a high of $350,000.00 for a larger house (4,296 square feet).
Ms. Bowers testified that the look-back period was from July 1, 2009, to June 30, 2010.
Ms. Bowers stated that she considered and excluded three sales during the look-back period because they were “foreclosure-related sales.” Similarly, Ms. Bowers stated that the sale of the Wrights' property, which occurred during the look-back period, “shouldn't be considered because it's an anomaly.” Mr. Wright questioned Ms. Bowers at this hearing and asked her to identify the three “foreclosure-related sales” that were omitted from consideration. Ms. Bowers stated that she did not have the data showing the specific sales information on the “foreclosure-related sales.”
Mr. Wright also testified at the Board of Review hearing. He argued that the best evidence of his property's value was the purchase price paid for the property during the look-back period. He testified that the sale was an open market arm's length transaction for $234,000.00. The Assessor did not present any evidence rebutting Mr. Wright's testimony that the sale occurred in a recent arm's length transaction on the open real estate market. Similarly, no evidence was presented showing that the sellers were under any pressure, compulsion, or duress to sell the property.
At the conclusion of the hearing, the Board of Review ruled in favor of the Assessor and approved the $355,200.00 valuation. Mr. Wright asked the Board to explain why it ruled in favor of the Assessor. Board of Review member Lyn Widmyer stated, “I'm going with what the Assessor said based on the information she's provided.” Another Board member, Frances Morgan, stated, “the winning argument for the Assessor for me is that this was a model home that rises above some of these other sales and so I will vote for the Assessor's recommendation.”
The Wrights appealed the Board of Review's ruling to the circuit court.
We note that the Assessor did not present any specific information on the Wrights' “model home.” Rather, the Assessor testified that, in general, model homes have “higher quality amenities.”
The circuit court denied the Wrights' appeal by order entered on November 15, 2011. The circuit court's order recited the testimony offered by Ms. Bowers and Mr. Wright before the Board of Review. The order notes that Mr. Wright “established that he had indeed purchased his house in June of 2010 for $234,000.00.” Despite its finding that the Wrights purchased the property in a recent transaction for $234,000.00, the circuit court nevertheless concluded:
Because the Petitioners [Wrights] did not offer any competent evidence to the contrary and certainly not the clear and convincing evidence it would be their burden to provide, the Court must assume that this appraised value is in line with the State Tax Department mandated range[.]
(Emphasis added). After entry of the circuit court's order affirming the Board of Review, the Wrights filed the present appeal.
II. Standard of Review
The Wrights ask this Court to reverse the circuit court's order adopting the Board of Review's ruling in favor of the assessor. This Court utilizes “a two-pronged inquiry” in reviewing tax assessment cases, i.e., whether the evidence supports the findings below and whether there was an error of law. Kline, supra, 174 W.Va. at 371, 326 S.E.2d at 717. This Court has stated that “ ‘ ‘[a]n assessment made by a board of review and equalization and approved by the circuit court will not be reversed when supported by substantial evidence unless plainly wrong.’ Syllabus Point 1, West Penn Power Co. v. Board of Review and Equalization, 112 W.Va. 442, 164 S.E. 862 (1932) (other internal citations omitted).' Syllabus Point 3, In re: Tax Assessment of Foster Foundation's Woodlands Retirement Community, 223 W.Va. 14, 672 S.E.2d 150 (2008).” Syllabus Point 2, Mountain America, LLC v. Huffman, 224 W.Va. 669, 687 S.E.2d 768 (2009).
We note that “[a]s a general rule, there is a presumption that valuation for taxation purposes fixed by an assessor are correct.... The burden is on the taxpayer challenging the assessments to demonstrate by clear and convincing evidence that the tax assessment is erroneous.” Mountain America, LLC, supra, 224 W.Va. at 686, 687 S.E.2d at 785 (internal citation omitted).
With these standards in mind, we consider the parties' arguments.
III. Analysis
The Wrights have challenged the circuit court's order affirming the Board of Review's ruling in favor of the Assessor. Before specifically addressing the Wrights' argument, we note that Article X, Section 1 of the West Virginia Constitutionrequires that “all property, both real and personal, shall be taxed in proportion to its value to be ascertained as directed by law.” Further, W.Va.Code § 11–3–1 [2010] instructs that all property
shall be assessed annually as of July 1 at sixty percent of its true and actual value, that is to say, at the price for which the property would sell if voluntarily offered for sale by the owner thereof, upon the terms as the property, the value of which is sought to be ascertained, is usually sold, and not the price which might be realized if the property were sold at a forced sale.
(Emphasis added). This Court stated in Kline that “determining ‘true and actual value’ is the first step in taxing real property.” 174 W.Va. at 372, 326 S.E.2d at 718. “True and actual value” has been defined as “market value” and the price paid for property in an arm's length transaction. Mountain America, LLC, 224 W.Va. at 686, 687 S.E.2d at 785. Additionally, W.Va.C.S.R. § 110–1F–2.24 [1987], provides the following definition of “true and actual value”:
The terms “Value”, “Market Value”, and “True and Actual Value” shall have the same meaning and shall mean the price at or for which a particular parcel or species of property would sell if it were sold to a willing buyer by a willing seller in an arms length transaction without either the buyer or the seller being under any compulsion to buy or sell: Provided, [t]hat in determining value, primary consideration shall be given to the trends of price paid for like or similar property in the area or locality wherein such property is situate over a period of not less than three (3) nor more than eight (8) years next preceding the base year[.]
This Court has consistently held that the purchase price paid for property in a recent arm's length transaction is a substantial factor in determining the property's true and actual value. For instance, in Syllabus Point 2 of Kline, in part, the Court held that “[t]he price paid for property in an arm's length transaction, while not conclusive, is relevant evidence of its true and actual value.”
Similarly, the Court stated in Eastern Am. Energy Corp. v. Thorn, 189 W.Va. 75, 78, 428 S.E.2d 56, 59 (1993), overruled, in part, on other grounds by In re: Tax Assessment of Foster Foundation's Woodlands Retirement Community, supra, that “as long as the property changes hands in an arm's length transaction, the price paid for the property is strongly indicative of its true and actual value.” We also recognized this principle in Crouch, supra, stating, “ [t]he price paid for property is not conclusive as to value, but it may be a very important element of proof where there has been an open transaction between competent parties dealing at arm's length[.]” 116 W.Va. at 477, 181 S.E. at 819.
In Kline, this Court recognized that “in many jurisdictions, evidence of current market value is given substantial, if not conclusive, weight.” 174 W.Va. at 372, 326 S.E.2d at 719.See U.S. Oil Co., Inc. v. City of Milwaukee, 331 Wis.2d 407, 794 N.W.2d 904 (Ct.App.2010) (The best information of fair market value for purposes of a property tax assessment is a recent sale of the property at issue.); and Berea City School Dist. Bd. of Ed. v. Cuyahoga County Bd. of Revision, 106 Ohio St.3d 269, 834 N.E.2d 782 (2005) (Ohio Supreme Court held that the purchase price in a recent arm's length transaction was the true and actual value for taxation purposes.).
Finally, this Court has stated that “the price paid for a parcel of land in a recent arm's length transaction is an indicator of market value on a par with the testimony of a qualified appraiser.” Kline, 174 W.Va. at 373, 326 S.E.2d at 719.
In Crouch, a buyer purchased a tract of land for $75,000.00 in January of 1933. The property was subsequently assessed at approximately $116,000.00 in 1934. This discrepancy caused the Court to observe, “Our attention is first arrested by the fact that the assessed valuation is nearly $50,000.00 in excess of the price for which the property recently sold.” Id. at 477, 181 S.E.2d at 819. Based on the discrepancy between the purchase price and the assessed value, and on the “lack of evidence in the record tending to establish a basis for the valuations reflected in the assessment,” the Court reversed the circuit court's order approving the assessment. Id.
In addition to relying on the purchase price paid for property in a recent arm's length transaction, this Court has stated that “[i]n determining the fair market value of a piece of land, a county assessor must seek out all information which would enable him to properly fulfill his legal obligation.” Id. at 372, 326 S.E.2d at 718 (Emphasis added, internal citation omitted). Further, the Court stated in In re Shonk Land Co., 157 W.Va. 757, 761, 204 S.E.2d 68, 70 (1974), that an Assessor “is not restricted in his search for information leading to the true and actual value of properties[.]”
A number of learned treatises agree with this Court's statements in Kline and Shonk Land, and have found that appraisers should obtain all relevant information, including information about the conditions surrounding the sale of the subject property, to determine the property's true and actual value. One treatise concluded that
[i]t is not sufficient simply to report a prior sale of the property in question; the sale must be analyzed to determine its relevancy. If the appraiser finds that the sale did not represent market value and was not an arms-length transaction, that conclusion and the reasoning behind it should also be reported. It is not enough to state, “Based upon my analysis of the sale of the subject property, which occurred six months ago, I am of the opinion that the sale did not represent market value.” Why didn't it represent market value? If changes in the property since the date of sale—e.g., rezoning, improvement, destruction—render the prior sale meaningless as a reference to current value, these factors must be reported and explained.
J.D. Eaton, Real Estate Valuation in Litigation, 202 (2d ed. 1995) (Emphasis added). Real Estate Valuation in Litigation also states that “[i]t is imperative ... that the appraiser investigate and thoroughly analyze any fairly recent sale of the property being assessed.” Id. at 205. Further, Real Estate Valuation in Litigation instructs that the appraiser “should personally verify sales with either the buyer or seller.... Verification of a sale with the broker or attorney and the buyer or seller will usually produce the greatest amount of useful, reliable information.” Id.
Another learned treatise concludes that an appraiser should examine the motivations of the buyer and the seller to arrive at an accurate appraisal: “Data from completed transactions is considered the most reliable value indicator. The appraiser thoroughly researches the prices, real property rights conveyed, financing terms, [and] motivations of buyers and sellers [.]” Appraisal Institute, The Appraisal of Real Estate, 302 (13th ed. 2008) (Emphasis added).
In the instant case, the Wrights presented evidence to the circuit court that they bought the subject property in a recent arm's length transaction on the open market for $234,000.00. The Assessor did not present any evidence to the circuit court disputing that the sale occurred in a recent arm's length transaction. The Assessor presented no evidence that she investigated or thoroughly analyzed the sale to determine if it should not be considered as a comparable sale. Instead, the Assessor sought to minimize the weight placed on the purchase price of the property by merely stating that the Wrights “got a great deal on a substantial home, [and that the sale was] a stroke of good luck in a down market.” However, the Assessor offered no investigation or analysis of the sale to support this statement. Similarly, the Assessor argued that the purchase price of the Wrights' property was an “anomaly.” Again, the Assessor presented no evidence of an investigation or analysis of the sale to support this conclusion. The Assessor did not even present evidence that either the sellers or the Wrights were interviewed to determine how the parties arrived at the purchase price or that the sellers were under any pressure, compulsion or duress to sell the property for less than its true and actual value. To the contrary, the record shows that the sellers listed the property on the market for $229,000.00 and that the Wrights purchased the property for $234,000.00 in an arm's length transaction.
Despite this undisputed evidence that the Wrights bought the property in a recent arm's length transaction on the open market for $234,000.00, the circuit court's order concludes that the Wrights “did not offer any competent evidence” to dispute the Assessor's testimony that the property was properly valued at $355,200.00. This finding is a clear error of law under our previous rulings in Kline,Mountain America, LLC,Eastern American Energy, and Crouch. This Court stated in these cases that the purchase price paid for property in a recent arm's length transaction is a substantial element of proof. The purchase price paid for the Wrights' property cannot be excluded from consideration without a thorough investigation and analysis explaining why it is being excluded. Thus, the Wrights undisputed assertion that they purchased the property in a recent arm's length transaction for $234,000.00 was not only “competent evidence” of the true and actual value of the subject property; it is “substantial evidence” of the true and actual value of the subject property.
Lastly, the Assessor refused to consider the sale of the Wrights' property in her comparable sales analysis because of her conclusion that the Wrights' purchase was an “anomaly.” We are troubled by this omission. The Assessor did not investigate the conditions of the sale and did not offer any explanation or analysis demonstrating why an arm's length transaction on the open market was an “anomaly.”
Based on all of the foregoing, we find that the circuit court's conclusion that the Wrights “did not offer any competent evidence” to dispute the Assessor's testimony that the property was properly valued at $355,200.00, is plainly wrong. We reverse the judgment of the circuit court and remand this matter for further consideration. On remand, the parties may introduce all relevant evidence regarding the true and actual value of the property.
IV. Conclusion
For the foregoing reasons, the circuit court's November 15, 2011, order affirming the Board of Review is reversed. This case is remanded for further proceedings consistent with this Opinion.
Reversed and Remanded. Chief Justice BENJAMIN concurs and reserves the right to file a concurring Opinion.
Justice LOUGHRY dissents and reserves the right to file a dissenting Opinion.
LOUGHRY, Justice, dissenting.
The Wrights purchased their four bedroom, two and one-half bath, 4260 square foot home for $234,000 and quickly insured it for $332,500 on the advice of their insurance agent who, according to Mr. Wright, “used the same software that ... the Assessor's Office used to determine value....” If this were not a clear indication that their purchase price did not reflect their home's true and actual value, then surely the Assessor's appraisal of their home at $372,400 for the prior tax year signaled its true and actual value. Nonetheless, the Wrights claim that the Assessor erroneously appraised their home for Tax Year 2011 at $355,167, arguing that “the price [they] paid ... should have established the ‘true market value’ of their property for the tax assessment year ending June 30, 2010.” While the majority has not gone so far as to agree with the Wrights' overly-simplistic proposition that purchase price should equal appraised value, it has erroneously determined that the Assessor did not “consider” the Wrights' purchase price in her comparable sales analysis, erroneously misinterpreted our law concerning which party bears the burden of proof, and erroneously concluded that the Assessor, the Board of Equalization and Review (“the Board”), and the circuit court committed reversible error by giving insufficient evidentiary weight to the Wrights' purchase price. In doing so, the majority has essentially turned a blind eye to the Tax Commissioner's regulations and directives mandating the method by which real estate is to be valued by county assessors for ad valorem tax assessments in West Virginia, and has either ignored or misinterpreted our existing law regarding the evidentiary burden in taxpayer challenges to those assessments. Accordingly, I respectfully dissent.
I. Ad Valorem Tax Assessments
Under article ten, section one of the West Virginia Constitution, “taxation shall be equal and uniform throughout the State, and all property, both real and personal, shall be taxed in proportion to its value.... no one species of property for which a tax may be collected shall be taxed higher than any other species of property of equal value.” Similarly, the Legislature has expressly stated that all property should be equitably and fairly valued in this State:
(a) The Legislature hereby finds and declares that all property in this State should be fairly and equitably valued where it is situated so that all citizens will be treated fairly and no individual species or class of property will be overvalued or undervalued in relation to all other similar property within each county and throughout the State.
....
(c) The Legislature finds that requiring the valuation of property to occur in three-year cycles with an annual adjustment of assessments ... [is] an integral and indispensable part of a systematic review of all properties in order to achieve equality of assessed valuation within and among the counties of this state....
....
(d) The Legislature deems that the goal of this article is that ... all property shall be annually assessed at sixty percent of its then current fair market value
....
W.Va.Code § 11–1C–1, in part. While the Wrights have convinced the majority to be fixated on their purchase price, the discussion below demonstrates that the valuation of real property for ad valorem tax purposes in West Virginia involves much more than just a purchase price, which is necessary to fulfill both the constitutional and legislative mandate for fair and equitable valuation among all taxpayers statewide.
See infra n. 3.
The Legislature has provided that “[i]n determining the fair market value of the property in their jurisdictions, assessors may use as an aid to valuation any information available on the character and values of such property, including, but not limited to, the updated information found on any statewide electronic data processing system network[.]”
W.Va.Code § 11–1C–7(b). In this same regard, the Legislature requires county assessors to
This is a reference to the Integrated Assessment System, which is a computer software program administered by the Tax Commissioner. This program is also referred to in the record and briefs as “CAMA.” See infra n. 7.
maintain current values on the real and personal property within the county. In repeating three-year cycles, every parcel of real property shall be visited by a member of the assessor's staff who has been trained ... to determine if any changes have occurred which would affect the valuation for the property. With this information and information such as sales ratio studies provided by the Tax Commissioner, the assessor shall make such adjustments as are necessary to maintain accurate, current valuations of all the real and personal property in the county and shall adjust the assessments accordingly.
W.Va.Code § 11–1C–9 (2013) (footnote added). As the majority correctly states,
(a) All property ... shall be assessed annually as of July 1 at sixty percent of its true and actual value,
that is to say, at the price for which the property would sell if voluntarily offered for sale by the owner thereof, upon the terms as the property, the value of which is sought to be ascertained, is usually sold, and not the price which might be realized if the property were sold at a forced sale.
W.Va.Code § 11–3–1 (2013) (footnote added); see also Syl. Pt. 3, in part, Killen v. Logan Cty. Comm'n, 170 W.Va. 602, 295 S.E.2d 689 (1982) ( “Assessments of property for taxation purposes are based on the property's ‘true and actual’ value, W.Va.Code § 11–3–1 (1977) (Repl.Vol.2008), which has been defined as ‘its market value.’ ”), overruled on other grounds by In re: Tax Assessment of Foster Foundation's Woodlands Retirement Community, 223 W.Va. 14, 672 S.E.2d 150 (2008). In addition to West Virginia Code § 11–3–1 above, the majority cites West Virginia Code of State Rules § 110–1F–2.24, which defines “true and actual value,” in pertinent part, as “the price at or for which a particular parcel or species of property would sell if it were sold to a willing buyer by a willing seller in an arms length transaction without either the buyer or the seller being under any compulsion to buy or sell [.]” However, what the majority fails to acknowledge is that this regulatory definition also contains the proviso that “ primary consideration shall be given to the trends of price paid for like or similar property in the area or locality wherein such property is situate [ d ][.]”
“ ‘True and actual value’ means fair market value—what property would sell for if sold on the open market.” Kline v. McCloud, 174 W.Va. 369, 372, 326 S.E.2d 715, 718 (1985) (internal citations omitted).
[Emphasis added.]. As more fully discussed below, the Assessor in the case sub judice clearly and properly adhered to this requirement.
“ ‘The function of a proviso in a statute is to modify, restrain, or conditionally qualify the preceding subject to which it refers.’ Syl. pt. 2, State v. Ellsworth J.R., 175 W.Va. 64, 331 S.E.2d 503 (1985).” Syl. Pt. 1, State ex rel. Browne v. Hechler, 197 W.Va. 612, 476 S.E.2d 559 (1996).
In furtherance of the constitutional and legislative mandate that all property be equitably and fairly valued, the Legislature has given the Tax Commissioner the authority to “[d]etermine the methods of valuation for both real and personal property....” W.Va.Code § 11–1C–5(a)(2) (2013). In turn, the Legislature has expressly directed that all county assessors must “appraise all real and personal property in their jurisdiction at fair market value ... utiliz[ing] the procedures and methodologies established by the Property Valuation Training and Procedures Commission
and the valuation system established by the Tax Commissioner.” W.Va.Code § 11–1C–7(a) (2013). Accordingly, rather than focusing on a purchase price as the majority has done, it is imperative to consider the Tax Commissioner's methodology by which county assessors are to value real property in determining whether the Assessor erred in her valuation of the Wrights' home.
Through West Virginia Code § 11–1C–3, the Legislature created a Property Valuation Training and Procedures Commission (hereinafter “the Procedures Commission”) whose membership includes the Tax Commissioner or his designee. The Procedures Commission has the power, inter alia, to
[e]stablish uniform, statewide procedures and methodologies for the mapping, visitation, identification and collection of information on the different species of property, which procedures and methodologies shall include reasonable requirements for visitation of property, including a requirement that a good faith effort be made to contact any owner of owner-occupied residential property: Provided, That the commission is not authorized to establish the methods to value real and personal property, but shall have the authority to approve such methods.
W.Va.Code § 11–1C–4 (a)(2) (2013). In turn, the Tax Commissioner is directed to provide periodic training sessions concerning the basic criteria set by the Procedures Commission “of a continuing education nature for all assessors and appropriate staff members” at least once each year. W.Va.Code § 11–1C–6(a) (2013).
II. Tax Commissioner's Methodology
As directed by the Legislature, the Tax Commissioner has set forth the method by which county assessors are to appraise real property statewide in his Administrative Notice 2010–16 (Jan. 29, 2010) (“Administrative Notice”),
which was admitted into evidence in this matter before the Board. This Administrative Notice clearly demonstrates that a property's value is more than just its purchase price. The Administrative Notice describes the Integrated Assessment System (hereinafter “IAS”),
The State Tax Department's website reveals that this same Administrative Notice is issued annually.
which is the software program that is accessed statewide through computers in each county assessor's office.
The authority for the implementation of the IAS is found in West Virginia Code § 11–1A–21(a) (2013), which provides, in pertinent part, that the “Tax Commissioner shall devise and cause to be established a statewide electronic data processing system network, to facilitate administration of the ad valorem property tax on real and personal property, through the timely sharing of property tax information among county assessors and the Tax Commissioner.” The IAS is the software referred to in the record and the appellate briefs as “CAMA.” See189 C.S.R. § 3–18.8 (“The CAMA system for West Virginia is called the Integrated Assessment System (IAS).”); see also Mountain America, LLC v. Huffman, 224 W.Va. 669, 675, 687 S.E.2d 768, 774 (2009) (“[The Assessor] then entered the neighborhood information into the real estate mass appraisal software (CAMA).... Once all of the information was entered into the CAMA software, the residual property value for the neighborhood was calculated[.]”). The CAMA software contains a replacement cost feature for structures that allows the county assessor to enter data concerning the details of the improvements to the land and then prices the improvements utilizing construction cost data particularized for each county based on current construction costs.
As the Administrative Notice explains,
While the Wrights argue that the Assessor erred by utilizing the CAMA software in valuing their home, the use of the CAMA software is mandated by statute. W.Va.Code § 11–1A–21(b). Further, the Tax Commissioner's Administrative Notice sets forth the data that the Assessor is to enter into the CAMA program, which then prices the improvements utilizing construction cost data particularized for that area of the State.
[t]his software provides for the entry of data by the local Assessor concerning “comparable sales” of land in particular “neighborhoods” in the county and then prices the value of this land on a “price per front foot or square foot” or by acreage.
The Administrative Notice directs county assessors to identify valid arm's length sales, which are then used to generate a price per square foot in the tax neighborhood
that is “applied to each lot or parcel in the neighborhood ... to arrive at an appraised value for the land.... [which] will reflect market value for the subject land.” The Administrative Notice also directs the assessor to identify those sales where the consideration paid for a property may have been influenced by factors, such as foreclosure, so that they may be excluded from the calculations.
See Mountain America, LLC v. Huffman, 224 W.Va. 669, 675 n. 3, 687 S.E.2d 768, 774 n. 3 (2009) (“Pursuant to State Tax Department Administrative Notice 2006–16 (Jan. 31, 2006), a ‘neighborhood’ is defined as a ‘geographical area exhibiting a high degree of homogeneity in residential amenities, land use, economic and social trends, and housing characteristics.’ ”).
Although the Wrights argue that it is unfair for the Assessor to unilaterally determine which sales are to be excluded for purposes of calculating the average sales price of homes during the look-back period, the Administrative Notice discussed herein expressly directs the Assessor to do so.
The Administrative Notice also addresses improvements situated on real estate and expressly states that the “[f]ield data collection is the key to ‘pricing’ an improvement[,]” and that such data is to be recorded for each property, including its dimension, the type and style of the structure, the total number of rooms, bedrooms, family rooms, plumbing, finished basement living area, heating, attic, physical condition, cost and design factor, and its “CDU” (condition, desirability and utility factor).
The Administrative Notice also describes the manner in which this data is to be entered into the IAS, which then generates the depreciated replacement cost value, or market value, of the improvements. The Administrative Notice concludes by stating that
The Procedures Commission's regulations, in particular Title 189, Series 2 of the West Virginia Code of State Regulations, address the statewide procedures for visiting property and collecting data. Regulation § 189–2–4 sets forth recommended residential data collection procedures so as to “achieve maximum production in the data collection of residential properties ... [,]” and Regulation § 189–2–5 contains a data collector's checklist and describes the manner in which a data collector is to investigate and record information concerning the property.
[t]he appraised values for improved real property thus determined are compared to the arms-length selling prices of properties that have recently sold to develop an appraisal/sales ratio for each neighborhood.
Results from the appraisal/sales ratio are analyzed and neighborhood-pricing factors adjusted to bring the ratio in each neighborhood to within 10% plus or minus of average selling price.
[Footnoted added.].
See supra n. 9.
III. The Assessor's Valuation
With the Tax Commissioner's mandated methodology in mind, let us consider the Assessor's evidence in the record before us to determine whether she followed this methodology in valuing the Wrights' home.
June Bowers, the Assessor's senior tax appraiser with more than twenty-five years of experience, testified before the Board concerning the appraisal of the Wrights' home. Ms. Bowers explained that the Assessor considered ten home sales in the Wrights' tax neighborhood during the look-back period.
.West Virginia Code § 11–1–6 (2013) provides, in pertinent part, as follows:
The Tax Commissioner shall also, by letter or printed circular, give such instructions to the assessors respecting their duties as may seem to him judicious; and if any assessor fail to obey such instructions, so far as they are not contrary to law, he shall forfeit not less than one hundred dollars nor more than five hundred dollars, and, upon being convicted, shall be removed from office.
Three of those sales, which were foreclosures and, therefore, not arm's length transactions, were excluded from the Assessor's comparable sales calculations per the directive in the Administrative Notice. Regarding the seven sales in the Wrights' tax neighborhood during the look-back period, which were included in the Assessor's calculations, Ms. Bowers explained that those sales were all “pricing” around the same value with a low of $210,000 for a home containing 2,650 square feet to a high of $350,000 for a home containing 4,296 square feet. This larger home approximates the size of the Wrights' home and was built the same year.
For the 2011 tax year, the look-back period is July 1, 2009, to June 30, 2010.
Ms. Bowers further explained to the Board that the Wrights' purchase price approximated the pricing in three foreclosure-related sales during the look-back period. Notwithstanding the majority's contrary finding, the Assessor obviously considered the Wrights' purchase price—otherwise, she would not have been able to determine that it approximated the foreclosure pricing and, therefore, was not indicative of the property's true and actual value. In fact, as the Assessor explains, had she based her valuation solely on the Wrights' sales price, it would have resulted in an undervaluation in comparison with other properties that sold in their tax neighborhood during the look-back period,
which is another clear indication that their purchase price was considered by the Assessor. Moreover, according to Ms. Bowers's testimony, if the Wrights' purchase price had been used in valuing the tax neighborhood, the sales ratio would have been beyond the requisite plus or minus ten percent set by the Tax Commissioner because homes similar to the Wrights' home sold for $350,000 during the look-back period.
The Assessor explains that had she used only the purchase price to establish value, the average price per square foot for the Wrights' home would be $50.64, whereas the 2,650 square foot home that sold for $210,000 would have an average price per square foot of $79.24. Such a result would clearly defeat the constitutional and legislative mandate of equal and fair taxation amongst all property owners. It further serves to demonstrate why county assessors must follow the Tax Commissioner's methodology and why the purchase price may, but not always, reflect a property's true and actual value.
This is a reference to the home containing 4,296 square feet located in the Wrights' subdivision.
[w]e (the Assessor's Office) cannot chase sales. We measure and list the homes based on their age, their quality construction material, the amenities, the size, and then we have to make overall adjustments to try to bring these properties between 90 and 110 percent of the sales. Mr. Wright ... was one of the model homes. And I personally have not been in Mr. Wright's home. I offered to come out and actually review it, but in my experience every model home that I've been in does have the higher quality amenities in it. It's got the extras and the bells and whistles that other places wouldn't.
We do have a house ... that sold for 350[,000] which is not a model and so forth but as far as size and so forth[,] it's similar to Mr. Wright's. So we feel that our appraisal is correct using the sales that we've utilized.
Unlike the majority, I place little, if any, significance on the fact that Ms. Bowers did not go into the Wrights' home, whether because they refused her entrance or otherwise. I suspect that more often than not, property owners decline such offers made by an assessor's office. Moreover, Mr. Wright never disputed the fact that his home is a model home or that it has the “extras and the bells and whistles that other places wouldn't.”
Ms. Bowers further explained that
Ms. Bowers explained during her testimony that most of the sales she used were homes built in either 2009 or 2010.
[i]f we would have adjusted overall these values down to match Mr. Wright's sale, every one of these houses, these open market sales, would have been below 90%. So we would have been below market. One sale cannot drive market within a subdivision.
(Emphasis added.).
A disparity among taxpayers would be created if only the purchase price were used to determine appraised values. As the Assessor explains, the 2,610 square foot home that sold for $210,000 would yield an average of $79.24 per square foot and the 4,296 square foot home that sold for $350,000 would yield an average of $81.47 per square foot. However, the Wrights' 4,260 square foot home purchased for $234,000 yields an average of only $54.92 per square foot, which demonstrates why the purchase price may be used as evidence, but is not conclusive as to value. See Mountain America, infra.
As the majority points out, our prior law provides that the purchase price of property “ ‘ may be a very important element of proof where there has been an open transaction between competent parties dealing at arm's length....’ ” Mountain America, LLC v. Huffman, 224 W.Va. 669, 687, 687 S.E.2d 768, 786 (2009) (quoting Kline, 174 W.Va. 369, 326 S.E.2d 715 (emphasis added)).
Indeed, I believe that these prior decisions highlight this Court's recognition that there may be instances, such as the case sub judice, where a purchase price in a purportedly arm's length transaction is not reflective of the property's true and actual value. Accord Southern Westchester Associates v. Assessor of City of Yonkers, 122 A.D.2d 212, 504 N.Y.S.2d 745 (1986) (recent arm's length sale is best evidence of value for tax assessment purposes if not explained away as extraordinary ). In fact, “[e]ven if property is sold on tax day (the day on which it is appraised for tax purposes), there is no guarantee that the sale price equals market value.” Powell on Real Property, § 10B.06[4][c][ii] (Michael Allan Wolf, ed., Matthew Bender).
Many states agree that purchase price is not conclusive for determining market value. See Tuthill v. Arkansas Cnty. Equalization Bd., 303 Ark. 387, 797 S.W.2d 439, 441 (1990) (“the current purchase price is an important criterion of market value, but it alone does not conclusively determine the market value ... a real bargain hunter might purchase a piece of property solely because he is getting it for less than market value, and one such isolated sale does not establish market value.”); Dennis v. Cnty. of Santa Clara, 215 Cal.App.3d 1019, 263 Cal.Rptr. 887 (1989) (purchase price may be significant but it is only the beginning and not necessarily the end of the inquiry); O'Brien v. Bd. of Tax Review, 169 Conn. 129, 362 A.2d 914, 918 (1975) (sale price of land shortly after assessment date was competent evidence to show its fair market value, but was not controlling in determining such value); Walker v. Trump, 549 So.2d 1098 (Fla.Dist.Ct.App. 4th Dist.1989) (purchase price one of eight factors considered); Park Esplanade Ltd. Partnership v. Williams, 577 So.2d 1028, 1030 (La.App. 4 Cir.1991) (“The purchase price is not the exclusive or sole basis on which to establish a value for assessment purposes.”); Arath III, Inc. v. City of Grand Rapids, No. 233682, 2003 WL 327622 (Mich.App. Feb. 11, 2003) (purchase price not presumptive true cash value of property transferred); Schleiff v. Cnty. of Freeborn, 231 Minn. 389, 43 N.W.2d 265 (1950) (evidence of recent purchase price not conclusive as to its market value but an important element in determining such value under relevant tax valuation statutes); Bottorf v. Clay Cnty. Bd. of Equalization, 7 Neb.App. 162, 580 N.W.2d 561 (1998) (sale price for property sold close to time of tax assessment is not conclusive as to value); Venture 17, LLC v. Hasbrouck Heights, 27 N.J.Tax 108 (Ct.2013) (sale of property not dispositive on issue of value); Smith v. Newberry Cnty. Assessor, 350 S.C. 572, 567 S.E.2d 501 (2002) (purchase price of property not conclusive evidence of fair market value); West Creek Associates, LLC v. Cnty. of Goochland, 276 Va. 393, 665 S.E.2d 834 (2008) (sale price is accorded substantial weight but is not conclusive evidence of fair market value); City of Harrisonburg v. Taubman, 212 Va. 28, 181 S.E.2d 654 (1971) (sale price was not conclusive evidence of fair market value).
I agree with the majority that “[t]he price paid for property in an arm's length transaction, while not conclusive, is relevant evidence of its true and actual value[.]”
Syl. Pt. 2, in part, Kline v. McCloud, 174 W.Va. 369, 326 S.E.2d 715 (1984). However, I strongly disagree with the majority's unsupportable conclusion that neither the Assessor, the Board, nor the circuit court “considered” or gave evidentiary value to the Wrights' purchase price. As discussed above, the record discredits such a conclusion and, in fact, demonstrates that the Assessor, the Board, and the circuit court each considered the Wrights' purchase price in their respective analyses.
I observe that Rule 401 of the West Virginia Rules of Evidence defines relevant evidence as “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” [Emphasis added.]. Here, the Wrights' purchase price simply made it less probable that said price was reflective of their home's true and actual value, particularly where the Assessor determined that their purchase price was in line with the foreclosure sales in their tax neighborhood during the look-back period.
IV. Burden of Proof
In addition to the majority's erroneous conclusion regarding the consideration and evidentiary value given to the Wrights' purchase price, the majority also focuses on evidence which they say the Assessor should have presented before the Board. In doing so, the majority completely and utterly disregards the fact that the burden of proof was on the Wrights— not the Assessor—to show that the assessment of their property was erroneous.
“ ‘As a general rule, there is a presumption that valuations for taxation purposes fixed by an assessor are correct.... The burden is on the taxpayer challenging the assessments to demonstrate by clear and convincing evidence that the tax assessment is erroneous.’ Syllabus point 2, in part, Western Pocahontas Properties Ltd. v. County Commission of Wetzel County, 189 W.Va. 322, 431 S.E.2d 661 (1993).” Syllabus Point 8, Bayer MaterialScience, LLC v. State Tax Commissioner, 223 W.Va. 38, 672 S.E.2d 174 (2008).
Mountain America, 224 W.Va. at 687, 687 S.E.2d at 772, syl. pt. 9 (emphasis added). As this Court has emphasized, “[c]lear ... and convincing proof ... is the highest possible standard of civil proof defined as ‘that measure or degree of proof which will produce in the mind of the trier of facts a firm belief or conviction as to the allegations sought to be established.’ ” Webb v. WV Bd. of Medicine, 212 W.Va. 149, 156, 569 S.E.2d 225, 232 (2002) (internal citations omitted).
We have previously addressed taxpayers' complaints concerning this heavy evidentiary burden and, in doing so, have reaffirmed that the taxpayer at all times bears the burden of proof in seeking relief from an allegedly erroneous tax assessment.
See also Maxwell v. Carl Bierbaum, Inc., 48 Ark.App. 159, 893 S.W.2d 346, 348 (1995) (“Clear and convincing evidence has been defined as proof so clear, direct, weighty, and convincing as to enable the fact finder to come to a clear conviction, without hesitation, of the matter asserted (internal citation omitted); it is that degree of proof that will produce in the trier of fact a firm conviction as to the allegation sought to be established.”); Slomowitz v. Walker, 429 So.2d 797, 800 (Fla.Ct.App.1983) (“[C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.”).
In In re Tax Assessment of Foster Foundation's Woodlands Retirement, 223 W.Va. 14, 672 S.E.2d 150 (2008), the taxpayer challenged the clear and convincing evidentiary burden, as well as its corresponding burden of persuasion insofar as it complained that “neither the Assessor nor the [County] Commission was required to present evidence of a specific type to prove the correctness of their assessments.” Id. at 29, 672 S.E.2d at 165. As we explained,
Requiring the party bringing a claim for relief to bear the burden of persuasion ... is consistent with our jurisprudence. “It is a well-established rule of law that in civil actions the party seeking relief must prove his right thereto[.]” Boury v. Hamm, 156 W.Va. 44, 52, 190 S.E.2d 13, 18 (1972). Therefore,
when a plaintiff comes into court in a civil action he must, to justify a verdict in his favor, establish his case.... The burden of proof, meaning the duty to establish the truth of the claim ..., rests upon him from the beginning, and does not shift, as does the duty of presenting all the evidence bearing on the issue as the case progresses.
Burk v. Huntington Dev. & Gas Co., 133 W.Va. 817, 830, 58 S.E.2d 574, 581 (1950), modified on other grounds, Foster v. City of Keyser, 202 W.Va. 1, 501 S.E.2d 165 (1997). Moreover,
[a]s a general matter, the burden of proof consists of two components: burden of production and burden of persuasion. The burden of persuasion requires the party upon whom it is placed, to convince the trier of fact ... on a given issue. When a party has the burden of persuasion on an issue, that burden does not shift....
Mayhew v. Mayhew, 205 W.Va. 490, 497 n. 15, 519 S.E.2d 188, 195 n. 15 (1999) (citations omitted)....
Thus, as the party seeking relief from the allegedly erroneous tax assessment ... bears the burden of proving its entitlement to relief. See Boury, 156 W.Va. at 52, 190 S.E.2d at 18. To sustain this burden, the Foundation must present clear and convincing evidence. The burden of persuasion rests with the Foundation to prove that its tax assessment was erroneous; it does not lie with the Assessor or the Commission nor does it shift thereto.
Foster Foundation, 223 W.Va. at 29, 672 S.E.2d at 165 (emphasis added). Thus, while the majority seems to imply that the burden of proof shifted to the Assessor once the Wrights presented their purchase price to the Board, the majority is flat out wrong. Id.
V. The Wrights' Evidence
Because the evidentiary burden was on the Wrights at all times, instead of focusing upon what evidence the Assessor did not present, as the majority has done, let us examine, instead, the Wrights' evidence to see why, as I believe, they failed to meet their heavy evidentiary burden.
The Wrights offered two pieces of evidence before the Board: (1) a spreadsheet they prepared averaging the prices of ten sales in their subdivision during the look-back period and (2) a copy of the real estate appraisal prepared in conjunction with the purchase of their home. As the circuit court correctly pointed out in its order upholding the Assessor's valuation, the spreadsheet “sheds no real light on the issue[ ]” because it does not “differentiate as to which properties were sold as a result of foreclosures or what the square footage[s] of the homes were sufficient to determine a different value,” nor did it reflect the size, age, or condition of the homes. As Ms. Bowers explained to the Board,
This is a reappraisal to equalize property values based on the value of each individual property, considering the size of the lot, the size of the square footage of the home, the amenities in the home. If you took an average, I mean actually it would make my job a lot easier if I could just take an average price and then punch in those numbers. But we have to physically measure and list each one of these houses. We use these sales as guidelines to make overall adjustments in the [tax] neighborhood based on the individual home because of the differences in the individual homes. So there's no way that we could just take an average.
....
I worked with the State Tax Department and I've never been told to do an average. Like I say we can't actually set individual values. We have to measure and list the house according to the amenities of the house and make overall adjustments to that neighborhood based on those sales.
The only other evidence offered by the Wrights was the residential appraisal of their home prepared at the behest of their mortgage lender. As the circuit court aptly observed, the Wrights' appraiser had to go outside the Wrights' tax neighborhood in order to find similar sale prices for comparably sized homes, while simultaneously ignoring the similarly sized home in the Wrights' subdivision that sold for $350,000. Because the Wrights did not offer the testimony of their appraiser, the Board did not have the opportunity to question the appraiser and seek an explanation in this regard, thus leaving the Board with a “hearsay document,” as the circuit court observed. See Killen, 170 W.Va. at 604, 295 S.E.2d at 691, syl. pt. 8, in part (“An objection to any assessment may be sustained only upon the presentation of competent evidence, such as that equivalent to testimony of qualified appraisers, that the property has been ... wrongly assessed.”) (emphasis added). Consistent with the pertinent statutes, regulations, and Administrative Notice discussed herein, the circuit court deftly explained that
[u]nlike appraisals based upon “comparable sales” done in a real estate context where only ... properties of similar style and size are considered ... for tax purposes all arms length sales are considered and converted into an average square-foot value for residential space. Such a computation allows an averaging of values of new homes and older homes, of one bedroom homes with five bedroom homes, well maintained homes and homes in disrepair, all based on their square-foot value. The determinations made regarding grade, age, condition, etc., of a particular property in question are then used to bring the appraisal of that property within 10% more or less of the range of the determined average residential square foot value.
Had the Wrights' appraiser used comparable sales of similarly sized homes in the Wrights' tax neighborhood during the look-back period, I believe that such an appraisal would have had significant evidentiary value. However, their appraiser did not do so.
Lastly and contrary to the majority's reasoning, it was the Wrights who bore the burden of presenting evidence to the Board explaining their “good deal.” Perhaps they could have obtained an affidavit from their sellers explaining why the sale of their home to the Wrights was a valid arm's length transaction even though the purchase price was so clearly below market value. Or, perhaps the Wrights could have offered the testimony of a real estate appraiser to explain why their purchase price was indicative of their home's true and actual value when other sales in the tax neighborhood during the look-back period demonstrated to the contrary. The Wrights did none of these things.
As this Court has previously held, “[o]nce an assessor has made an assessment, the valuation placed upon the property by the assessor is accorded great deference and is presumed to be correct.” Foster Foundation, 223 W.Va. at 33, 672 S.E.2d at 170 (emphasis added). Indeed, “[a]n assessment made by a board of review and equalization and approved by the circuit court will not be reversed when supported by substantial evidence unless plainly wrong.” Syl. Pt. 3, Western Pocahontas Properties Ltd. v. Cnty. Comm'n of Wetzel Cnty., 189 W.Va. 322, 431 S.E.2d 661 (1993) (internal quotations and citations omitted). Here, the circuit court correctly concluded that
[b]ecause the [Wrights] did not offer ... the clear and convincing evidence it would be their burden to provide, the Court must assume
THAT THIS APPRAISED Value is in line with the state tax department mandated range of plus or minus 10% of [the] current tax year's average, arm's length, fair market sales for the tax neighborhood when construed through the lens of valuation based upon the square foot.
See Foster Foundation, 223 W.Va. 14, 33, 672 S.E.2d 150, 170 (“the valuation placed upon the property by the assessor is accorded great deference and is presumed to be correct.” (Emphasis added.)).
VI. Conclusion
It is abundantly clear from the record that the Wrights have simply failed to sustain their heavy burden of proof in this matter. Based on the evidence in the record and in contemplation of the Tax Commissioner's mandated methodology for valuing residential real property for ad valorem tax purposes in this State, I am compelled to conclude, under the facts and circumstances of this case, that the circuit court did not abuse its discretion
in affirming the Board's decision to uphold the Assessor's valuation of the Wrights' home, which is not “plainly wrong.” Id. Moreover, nothing in this dissent should be interpreted as discouraging taxpayers from challenging their ad valorem tax assessments. Rather, I am compelled to dissent because I believe the majority has misinterpreted the evidence, has disregarded the Tax Commissioner's directives concerning the methodology for appraising real property for tax assessment purposes, and has wrongfully shifted the burden of proof to the Assessor. Therefore, I respectfully dissent from the majority's decision in this case.
“This Court reviews the circuit court's final order and ultimate disposition under an abuse of discretion standard.” Syl. Pt. 1, in part, Foster Foundation, 223 W.Va. 14, 672 S.E.2d 150.