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CH Kelly Trust v. Anchorage Board of Equalization (1/26/96), 909 P 2d 1381
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, telephone (907) 264-0607, fax (907) 276-
THE SUPREME COURT OF THE STATE OF ALASKA
CH KELLY TRUST; CHARLES W. )
COE; and CAROLYN M. COE; ) Supreme Court No. S-6237
Appellants, )Superior Court No.
) 3AN-92-9318 Civil
MUNICIPALITY OF ANCHORAGE, ) O P I N I O N
BOARD OF EQUALIZATION, )
) [No. 4315 - January 26, 1996]
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Mark C. Rowland, Judge.
Appearances: Charles W. Coe, Anchorage, for
Appellants. George M. Newsham, Assistant
Municipal Attorney, and Ann Waller Resch,
Acting Municipal Attorney, for Appellee.
Before: Moore, Chief Justice, Rabinowitz,
Matthews, Compton and Eastaugh, Justices.
Property owners argue that the superior court erred in
affirming a denial of their property tax appraisal appeal.
The property owners purchased four vacant residential
lots in one subdivision at a Federal Deposit Insurance
Corporation (FDIC) land liquidation auction in 1991. They paid
$7,200 per lot. Seven months later the Municipality of Anchorage
appraised the four lots at substantially higher values.1 The
property owners appealed the appraisals to the Municipality's
Board of Equalization (Board), which affirmed. The superior
court affirmed the Board's decision.
The property owners argue here that the municipal
appraiser erroneously failed to consider the FDIC auction
purchase prices paid for these properties, and also failed to
adjust for topography and groundwater problems. The property
owners also argue that the Board impermissibly shifted the burden
of proof to them to show property value.
We give no deference to the decision of the superior
court because it acted as an intermediate court of appeal.
Handley v. State, Dep't of Revenue, 838 P.2d 1231, 1233 (Alaska
1992). Because the Board's decision involves questions of fact
and law that involve agency expertise, we will apply a reasonable
basis standard of review. North Star Alaska Housing Corp. v.
Fairbanks N. Star Borough Bd. of Equalization, 778 P.2d 1140,
1144 n.7 (Alaska 1989). This court has specifically held that
taxing authorities are to be given broad discretion in selecting
valuation methods, and we are "concerned with nothing less than
fraud or the clear adoption of a fundamentally wrong principle of
valuation." Id. at 1143-44 (quoting Twentieth Century Inv. Co.
v. City of Juneau, 359 P.2d 783, 788 (Alaska 1961) (emphasis
The 1992 appraisals of the four lots adopted "a
fundamentally wrong principle of valuation" because they did not
consider the 1991 subject sales. The objective of an appraisal
is the determination of the property's market value.2 By failing
to consider recent sales of the subject property the Municipality
ignored directly relevant, albeit not conclusive, evidence of
To arrive at a reliable indication of value, appraisers
must evaluate a whole range of factors that influence value. See
American Institute of Real Estate Appraisers, The Appraisal of
Real Estate 167, 370 (10th ed. 1992). An important part of this
evaluation is an analysis of the motivations of the buyers and
sellers of the properties utilized as sales comparables. Id. at
405 ("An adjustment for conditions of sale is used to reflect the
motivations of buyers or sellers in sales that are not arm's-
length transactions due to duress or special relationships. Such
an adjustment may also be required in transactions influenced by
unusual tax considerations or a lack of market exposure.").
Thorough analysis of the subject sales might well
indicate that the auction prices paid did not represent true
market value, but the appraiser's total failure even to consider
the subject properties' prior sales was arbitrary. Consequently,
we reverse the superior court's decision and remand to the Board
with instructions to order new appraisals that consider the 1991
We caution that if FDIC was concerned primarily or
solely with recouping specific losses or liquidating its stock of
properties rather than with receiving full market value,3 then
these auction sales would not necessarily indicate "prevailing
market conditions." AS 29.45.110(a), supra note 2.
Because we find that the Municipality did consider
topography and groundwater and adjusted for their effect on
value, we affirm the superior court's decision with respect to
those claims of error.
Finally, we hold that the Board did not improperly
shift the burden of proof to the appellants, as the burden is
properly placed on the property owners in an assessment
challenge. AS 29.45.210(b); AMC 12.05.050(F)(4) (1994).4
We REVERSE the decision of the superior court and
REMAND for further proceedings consistent with this opinion.
1 The Municipality appraised two lots at $18,400, one at
$22,500, and one at $30,400. The appraisals did not consider the
2 Anchorage Municipal Code (AMC) 12.15.030(A) (1995)
dictates that "assessor[s] shall assess real property at its full
and true value." This value is defined by AS 29.45.110(a):
The full and true value is the estimated
price that the property would bring in an
open market and under the then prevailing
market conditions in a sale between a willing
seller and a willing buyer both conversant
with the property and with prevailing general
3 We note that the parties' arguments regarding the
procedures and practices of the FDIC are either unsupported or
supported only by their own testimony. For example, there is no
evidence in the record to support the property owners' contention
that FDIC sets minimum bids; on the contrary, the written terms
and conditions of FDIC Public Real Estate Auctions state that
"[a]ll properties . . . are being offered at no minimum starting
bid; however [FDIC] reserves the right to accept or reject any
and all bids." (Emphasis added.) This reservation of the right
to reject bids does not support the property owners' contention
that FDIC has determined fair market value and will only sell for
that amount; it merely indicates that FDIC may make a decision
not to accept some bids. Additionally, the property owners'
quotation of the FDIC definition of market value does not prove
that FDIC only sells properties for market value at auction
4 AS 29.45.210(b) states:
The appellant bears the burden of proof. The
only grounds for adjustment of assessment are
proof of unequal, excessive, improper, or
under valuation based on facts that are
stated in a valid written appeal or proven at
the appeal hearing. If a valuation is found
to be too low, the board of equalization may
raise the assessment.
AMC 12.05.050(F)(4) (1994) states:
The burden of proof rests with the appellant.
The only grounds for adjustment of an
assessment are unequal, excessive, improper
or under valuation based on the facts that
are stated in a valid written appeal or
provided at the appeal hearing. . . . If the
valuation is found to be too low, the Board
of Equalization may raise the assessment.