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Faulk v. Kenai Board of Equalization (3/28/97), 934 P 2d 750
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NOTICE: This opinion is subject to formal 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; (907) 264-0607, fax (907)
264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
DAVID G. FAULK and )
BONNIE J. FAULK, ) Supreme Court No. S-7276
)
Appellants,) Superior Court No.
) 3KN-94-1201 CI
v. )
) O P I N I O N
BOARD OF EQUALIZATION, )
KENAI PENINSULA BOROUGH, ) [No. 4798 - March 28, 1997]
)
Appellee. )
______________________________)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Kenai
Charles K. Cranston, Judge.
Appearances: Charles G. Evans, Law Offices of Charles G.
Evans, Anchorage, for Appellants. William R. Evans, Deputy
Borough Attorney, and Thomas R. Boedeker, Borough Attorney,
Kenai, for Appellee.
Before: Compton, Chief Justice, Rabinowitz, Matthews, Eastaugh,
and Fabe, Justices.
FABE, Justice.
I. INTRODUCTION
David and Bonnie Faulk appeal a superior court decision
upholding a Kenai Peninsula Borough (Borough) property valuation.
The valuation, calculated for tax purposes, appraised the Faulks'
property at more than twice what the Faulks had paid for the
property approximately thirty days before the appraisal. Both the
Borough Board of Equalization (Board) and the superior court upheld
the valuation. On appeal to this court, the Faulks assert that the
Board denied their appeal without making adequate findings. We
agree and remand the case to the superior court with directions to
remand the matter to the Board for additional findings.
II. FACTS AND PROCEEDINGS
On December 1, 1993, David and Bonnie Faulk purchased the
Harbor Lights Condominium Project (Property) for $495,000. The
Property, located in Seward, consisted of twelve condominium units.
It had been purchased by the previous owner in 1990 for $565,000.
The Faulks apparently attribute the $70,000 difference between the
1990 and the 1993 prices to the previous owner's failure to make
necessary repairs. David Faulk testified at length about the poor
condition of the Property and asserted that repair problems had
stigmatized it. He estimated the total repairs at between $420,000
and $480,000. In contrast, the Borough questioned whether the
Property was truly stigmatized and asserted that the cost of
repairs was approximately $168,000.
On January 1, 1994, the Borough's assessor valued the
Property for tax purposes at $1,055,400. That figure represented
a value of $70,600 for each of the twelve condominium units plus
$208,200 for the land. The parties agree that the Borough's
assessor estimated the value of the Property by the comparable
sales method. (EN1) They also agree that there were no condominium
complexes in Seward other than the Property that the assessor could
have used in the comparable sales analysis. Thus, the assessor
estimated the value of the Property by comparing the selling prices
for five townhouses in the Seward area. Following the valuation,
the Faulks unsuccessfully appealed to the Board and the superior
court.
At the hearing before the Board, the Faulks argued that
the assessment was improper or excessive because (1) the Property
was in poor condition and repairs would be more costly than the
appraiser estimated, (2) the Property was not comparable to any of
the units that the appraiser used in his comparable sales analysis,
and (3) the best way to value the Property was by reference to the
recent arms-length sale in which the Faulks purchased the Property.
After the Faulks stated their case, one Board member moved for a
vote on the Faulks' appeal and stated that the Board should uphold
the appraiser's valuation "for the reason that the appellant, Mr.
Faulk, has not presented sufficient evidence to prove an unequal,
excessive or improper valuation." With no further discussion the
Board voted six to one to deny the Faulks' appeal. This appeal
followed.
III. DISCUSSION (EN2)
We have previously concluded that "[t]he threshold
question in an administrative appeal is whether the record
sufficiently reflects the basis for the [agency's] decision so as
to enable meaningful judicial review." Fields v. Kodiak City
Council, 628 P.2d 927, 932 (Alaska 1981). In answering that
question, "[t]he test of sufficiency is . . . a functional one: do
the [agency's] findings facilitate this court's review, assist the
parties and restrain the agency within proper bounds?" South
Anchorage Concerned Coalition, Inc. v. Coffey, 862 P.2d 168, 175
(Alaska 1993). "[I]n the usual case findings of fact [are]
required even in the absence of a statutory duty . . . ." Mobil
Oil Corp. v. Local Boundary Comm'n, 518 P.2d 92, 97 n.11 (Alaska
1974). However, in certain cases, "the issues [are] such that,
based on the record, detailed findings [are] not necessary for this
court to understand the agency's reasoning process." Fields, 628
P.2d at 932. In one such case, we concluded that an agency did not
need to articulate separate findings because the basis for its
decision was clear from the entire record. Mobil Oil, 518 P.2d at
97. Similarly, in Coffey, 862 P.2d at 175, we determined that a
reviewing court might supplement an agency's otherwise unclear
findings by reading them in the context of comments made on the
record by agency members to conclude that the agency provided a
sufficient statement of the reasons for its decision.
The Borough first points out that under AS 29.45.210(b)
the Faulks bore the burden of proving that the assessment was
erroneous. According to the Borough, therefore, the language of
the Board's motion constitutes an adequate finding because it
indicates that the Faulks did not satisfy their burden. We
disagree. The motion presented to the Board reveals little about
the Board's reason for denying the Faulks' appeal other than
explaining in conclusory fashion that the Board was not persuaded
by the Faulks' arguments and evidence. Because all taxpayers bear
the burden of proof when challenging a Borough asseard to deny a
party's appeal.
The Borough also argues that the language of the Board's
motion, when viewed in light of the entire record, "constitutes
sufficient findings to support the Board's decision." As indicated
previously, in Coffey, 862 P.2d at 175, we concluded that otherwise
inadequate findings were acceptable when read in light of the
record as a whole. However, this case is distinguishable from
Coffey. In Coffey the issue was whether the Anchorage Planning and
Zoning Commission (Commission) had correctly applied the ordinance
applicable to its decision to decline to issue to Coffey a natural
resource extraction conditional use permit. Id. at 173-75. That
ordinance empowered the Commission to deny Coffey's request for a
conditional use permit if the Commission found that Coffey's
proposed use would not be "compatible with existing and planned
uses in the surrounding neighborhood." See id. at 173 (quoting
Anchorage Municipal Code (AMC) 21.50.020). In denying Coffey's
request, the Commission made express conclusions of fact and law.
Id. at 171-72. As a part of these findings, the Commission stated
that Coffey's plan "proposed a 'massive commercial natural resource
extraction' which was in 'inherent conflict' with the 'adjoining
residential land uses.'" Id. at 175. Thus, when we clarified the
Commission's findings by referring to comments made by the
commissioners on the record, we had as a starting point express
Commission findings that suggested that the Commission had denied
the conditional use permit due to the impact of Coffey's use on
surrounding neighborhoods -- a reason contemplated by the
controlling ordinance. Id. at 175. Concluding that the Commission
had followed the applicable ordinance required us neither to draw
extensive inferences nor to speculate about the reasons underlying
the Commission's decision.
Unlike the Commission in Coffey, the Board did not make
findings that might provide us with a starting point for evaluating
the Board's decision-making process. Without such guidance, we can
only speculate about why the Board thought that the Faulks'
evidence was insufficient.
In particular, the language of the Board's motion does
not facilitate review of how the Board addressed the assessor's
treatment of the recent price paid by the Faulks for the Property.
In CH Kelly Trust v. Municipality of Anchorage, Bd. of
Equalization, 909 P.2d 1381, 1381-82 (Alaska 1996), we concluded
that it was reversible error for a municipal appraiser to fail to
consider a seven-month-old sale price of a property when the
appraiser valued the property for tax purposes. We noted that
"[b]y failing to consider recent sales of the subject property the
Municipality ignored directly relevant, albeit not conclusive,
evidence of [the property's] value." Id. at 1382. We suggested,
however, that it would be appropriate for the appraiser to discount
or disregard the prior sale price if the appraiser reasonably
concluded that the prior sale price did not reflect "prevailing
market conditions." See id.
In this case, we can only guess how the Board resolved
the conflicts between the Borough's and the Faulks' evidence
relating to the recent sale price. On the one hand, the Faulks
presented uncontradicted evidence that they had purchased the
Property approximately thirty days before the assessment in a bona
fide arm's length transaction in the open market. (EN3) On the
other hand, the appraiser opined that, when valued individually,
the twelve units would have a total value greater than $495,000
because the Faulks probably received a bulk discount for purchasing
all twelve units of the Property at once. Significantly, however,
the appraiser never explained why he stated in his written report
that the alleged bulk discount was twenty-five to thirty-five
percent but testified that the discount was "anywhere from 30 to 50
per cent."(EN4)
The Board neither indicated whether it agreed with the
appraiser's bulk discount theory nor how, if at all, it resolved
the discrepancies between the appraiser's written report and
testimony. It also failed to address the Faulks' contention that
the poor condition of the Property and lack of comparable
condominium complexes demonstrated that the assessed value should
have been closer to $495,000 than to $1,055,400. Thus, we have an
inadequate basis for determining whether the Board reasonably
denied the Faulks' appeal. (EN5)
Where an agency has failed to make adequate findings, we
typically remand the case to the superior court with directions to
remand the matter to the agency for additional proceedings. Kenai
Peninsula Borough v. Ryherd, 628 P.2d 557, 563 (Alaska 1981). We
apply that same remedy here. On remand, the superior court should
instruct the Board to state its reasons for rejecting the Faulks'
appeal. When fulfilling these instructions, the Board in its
discretion may receive additional evidence and adjust the
assessment if it finds that grounds exist for doing so. See AS
29.45.210(b).
IV. CONCLUSION
We REVERSE the decision of the superior court and REMAND
for further proceedings consistent with this opinion.
ENDNOTES:
1. The comparable sales method is a technique for estimating the
value of a specific piece of real property by "comparing, weighing,
and relating"sales of sites similar to the property being
appraised. American Institute of Real Estate Appraisers, The
Appraisal of Real Estate 135 (6th ed. 1974).
2. We give no deference to the decision of the superior court
because that court acted as an intermediate court of appeal. CH
Kelly Trust v. Municipality of Anchorage, Bd. of Equalization, 909
P.2d 1381, 1382 (Alaska 1996).
3. Specifically, David Faulk testified that (1) the Property had
been on the market for "quite a while,"(2) other potential
investors had "walked away from [it] at the same price,"(3) the
Faulks were not related to the prior owner and did not know her or
her family prior to the sale, and (4) the prior owner had been
represented by an independent real estate agent.
4. A twenty-five percent discount suggests a fair market value of
approximately $660,000, well below the $1,055,400 assessed value of
the Property, while a fifty percent discount indicates a fair
market value of approximately $990,000, only slightly less than the
assessed value.
5. Because we conclude that the Board did not provide an adequate
statement of the reasons for its decision, we cannot address the
Faulks' arguments that attack the merits of the Board's decision.
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