Case Title: Terfloth v. Town of Scarborough

Citation: 

Docket Number: 

State: maine

Court: Maine Supreme Court

Date: 2014-04-08T00:00:00Z

Document:
MAINE SUPREME JUDICIAL COURT 
Reporter of Decisions 
Decision: 
2014 ME 57 
Docket: 
Cum-13-110 
Argued: 
November 20, 2013 
Decided: 
April 8, 2014 
 
Panel: 
SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR, 
JJ. 
 
 
MARC B. TERFLOTH 
 
v. 
 
TOWN OF SCARBOROUGH 
 
SAUFLEY, C.J. 
 
[¶1]  Marc B. Terfloth appeals from a judgment entered in the Superior 
Court (Cumberland County, Mills, J.) affirming a decision of the Scarborough 
Board of Assessment Review denying his tax abatement request for property 
located in the upper Prout’s Neck area of the Town of Scarborough.  See 36 M.R.S. 
§ 841(1) (2013).  Terfloth argues that the Board’s decision was manifestly wrong 
because the Board was compelled on the record before it to find that the Town’s 
assessment substantially overvalued his property.1  We agree that the Town 
substantially overvalued Terfloth’s property and vacate the judgment.  
                                         
1  Terfloth also argues that the Board was required as a matter of law to find that the Town’s system of 
assessment was unjustly discriminatory because it bore no relationship to the actual value of the 
properties in the Prout’s Neck area of the Town, but we do not reach that issue. 
 
2 
I.  BACKGROUND 
[¶2]  In 2009, Terfloth purchased a house on 0.65 acres of land on the corner 
of Sanctuary Lane and Black Point Road in the upper Prout’s Neck area of the 
Town.  Although the ocean is visible from the house, the property has no shore 
frontage and sits outside Prout’s Neck’s gated community.  The Town’s assessor 
had valued Terfloth’s property at approximately $3.5 million in 2005 and did not 
reassess it after the 2008 market downturn.  During the three years before Terfloth 
purchased the property, it was intermittently listed for sale.  Its listing price 
decreased each year as follows:  
June 23, 2006 
$6,200,000 
December 28, 2006 $5,700,000 
June 8, 2007 
$4,700,000 
April 4, 2008 
$4,500,000 
September 2, 2008 
$3,700,000 
June 22, 2009 
$2,900,000 
Terfloth purchased the property on December 23, 2009, for $2,435,000.  Terfloth is 
not related to the sellers and did not purchase the property at an auction or in a 
foreclosure sale. 
[¶3]  On October 8, 2010, after the Town’s assessor valued Terfloth’s 
property for tax year 2010-11 at $3,503,800, the same assessed value as set in 
 
3 
2005, Terfloth paid the assessed property tax of $44,252.99 and filed an 
application for a tax abatement.2  See 36 M.R.S. § 841(1). In his application, 
Terfloth asserted that the property’s purchase price of $2,435,000, not the Town’s 
assessment of $3,503,800, was the true measure of its market value, such that the 
Town’s estate valuation should have been reduced by $1,068,800.  In a letter dated 
January 3, 2011, the Town’s assessor denied Terfloth’s abatement request, stating 
that “[t]here were very few sales in [the Town] for the last year that fell 30% below 
[their] assessed value and most were distressed and[/]or foreclosures;” that the 
Town’s assessment of Terfloth’s property is “fair and equitable” when compared 
with others in the neighborhood; and that the Town will decrease the assessment of 
Terfloth’s property if future sales in his neighborhood reflect a general decrease in 
property prices.  
[¶4]  On March 4, 2011, Terfloth filed an application for assessment review 
with Scarborough’s Board of Assessment Review, arguing that the Town’s 
assessment was manifestly wrong because it substantially and unjustly overvalued 
his property.  The Board held a hearing on May 26, 2011, and on June 1, 2011, 
issued a written decision concluding that Terfloth “did not meet his burden of 
                                         
2  To appeal an assessor’s denial of a request for abatement, a taxpayer must first pay the assessed tax.  
36 M.R.S. § 843(4) (2013).  
 
4 
showing that the property has been substantially overvalued relative to its market 
value.”   
 
[¶5]  At the Assessment Review hearing, the Town presented, together with 
other evidence, the assessor’s valuation report, which identified Terfloth’s 
purchase as an “Arms Length Sale.”  During the hearing, the assessor qualified that 
statement, indicating that he believed that the sale of Terfloth’s property was not 
quite a foreclosure, but “in that range of foreclosure sales.”  The assessor provided 
no evidence on that point.  The assessor also testified that he assessed Terfloth’s 
property using a method he called the “square root of the fractional acre.”  This 
formula—which the Town has used since 1958—yields a valuation for 
property-tax purposes based on a zone-specific price for a half acre and the square 
root of the acreage of the property being valued.  The use of the formula on 
Terfloth’s lot resulted in an assessment of $3,503,800, which has remained 
unchanged since 2005.  The Town’s own evidence, including the list of 
assessment-to-sales ratios for other Prout’s Neck properties, disclosed that the 
Town had assessed Terfloth’s property at 144% of its sale price—a substantially 
higher ratio than for any other Prout’s Neck property.3  The assessor explained 
                                         
3  The assessor presented the following data showing assessment-to-sales-price ratios over twenty 
years:  
Year 
Lot 
Lot Size 
Sale Price 
Assessment 
Assessment 
 Ratio 
1991 
U019-21 
.51 AC 
$950,000 
$759,600 
80% 
 
5 
variation among the assessment ratios by stating that (1) land over one acre is 
treated as excess acreage, (2) lots with the same owner are treated as one lot, and 
(3) the variance from the baseline valuation is inversely proportional to the size of 
the lot.   
 
[¶6]  The Board found, among other things, that properties similarly situated 
to Terfloth’s property that sold in the Prout’s Neck area in the five years preceding 
Terfloth’s purchase were sold for over three million dollars and that the 144% ratio 
between the sale and assessment values of Terfloth’s property “does stick out, but 
                                                                                                                                   
1992 
U019-19 
.69 AC 
$841,300 
$874,100 
104% 
1992 
U020-48 
1.04 AC 
$637,000 
$688,800 
l08% 
1993 
U020-19 
.85 AC 
$800,000 
$695,800 
87% 
1994 
U019-01 
.66 AC 
$601,000 
$551,800 
92% 
1994 
U019-12 
1.27 AC 
$600,000 
$678,800 
113% 
1994 
U020-03 
.88 AC 
$430,000 
$489,900 
114% 
1995 
U020-18 
.51 AC 
$750,000 
$643,500 
86% 
1996 
U020-14 
2.5 AC 
$1,400,000 
$1,008,600 
72% 
1996 
U020-42 
.69 AC 
$1,500,000 
$852,800 
57% 
1998 
U017-30 
.56 AC 
$1,850,000 
$761,200 
41% 
2002 
U020-03 
.88 AC 
$1,700,000 
$963,400 
57% 
2003 
U019-22 
.51 AC 
$3,000,000 
$1,223,700 
41% 
2004 
U018-08 
.80 AC 
$3,000,000 
$1,629,900 
54% 
2005 
U019-18 
.64 AC 
$6,000,000 
$3,559,200 
59% 
2006 
U017-02 
.84 AC 
$1,499,000 
$531,800 
35% 
2006 
U019-01 
.66 AC 
$4,000,000 
$3,056,100 
76% 
2006 
U020-44 
.11 AC 
$1,840,000 
$1,269,200 
69% 
2007 
U018-20404-05 
1.06 AC 
$3,900,000 
$4,163,700 
107% 
2007 
U018-2403 
.46 AC 
$3,300,000 
$2,551,400 
77% 
2008 
U019-17 
.52 AC 
$3,500,000 
$3,070,700 
88% 
2009 
U020-21 
.65 AC 
$2,435,000 
$3,503,800 
144% (Terfloth) 
2010 
U019-23 
.64 AC 
$3,975,000 
$3,697,200 
93% 
2011 
U018-2403 
.46 AC 
$3,300,000 
$2,551,400 
77% 
 
 
6 
one sale does not make a market.”  The Board further stated, “It is just likely he got 
a good deal.  His purchase price seems under what has been typical.”   
[¶7]  On June 7, 2011, Terfloth requested that the Board reconsider its denial 
of his appeal.4  The Board held a hearing on June 23, 2011, and voted to deny 
Terfloth’s motion for reconsideration.  Terfloth appealed the Board’s decision to 
the Superior Court, which remanded the case to the Board in a judgment entered on 
December 30, 2011, see M.R. Civ. P. 80B; 36 M.R.S. § 843(1) (2013), finding that 
the Board had failed to state adequate conclusions and findings of fact.  
[¶8]  On February 9, 2012, the Board issued fifteen factual findings and two 
conclusions after reconvening in an executive session to comply with the court’s 
decision.  The Board found, among other things, that the Town’s assessment 
formula is reasonable as applied to Terfloth’s property; that the price Terfloth paid 
for his property, although significantly below the assessed value, does not justify 
deviation from the assessor’s methodology; that the price Terfloth paid for his 
property “was an aberration in light of other sales” in Prout’s Neck; that Terfloth 
failed to present “sufficient credible evidence” as to why his purchase price was 
lower than general sale prices in Prout’s Neck; and that “it was not clear . . . that 
                                         
4  Specifically, Terfloth urged the Board to reconsider its conclusion that “[a]lmost all of the properties 
sold at Prout’s Neck since 2005 have sold for over three million dollars” to the extent that it derived the 
conclusion from the sale value of lot U018-2403, a lot Terfloth asserted was never publicly listed for sale, 
but was sold privately in a non-arm’s-length transaction.  The Board declined to accept that argument 
after hearing on the motion for reconsideration. 
 
7 
the sale was an arm’s-length transaction because of the length of time the 
[p]roperty was on the market.”  The Board concluded that Terfloth failed to 
demonstrate, first, that the Town’s valuation was manifestly wrong or so irrational 
or unreasonable that the property was overvalued and, second, that the Town’s 
“valuation was the result of unjust discrimination and that the Assessor used 
systematic and intentional methods to create a disparity,” or that the assessor’s 
method or assumptions were unfounded or arbitrary.  
[¶9]  On March 7, 2012, Terfloth again appealed the Board’s decision, 
alleging that the Town’s assessment is unjustly discriminatory and that the Board 
erred when it concluded that the sale to Terfloth was not an arm’s-length 
transaction.   See M.R. Civ. P. 80B.  On January 31, 2012, the court, referencing 
the very high burden that a taxpayer must overcome on appeal, affirmed the 
Board’s denial.  Terfloth timely appealed pursuant to 14 M.R.S. § 1851 (2013) and 
M.R. App. P. 2.   
II.  STANDARD OF REVIEW 
[¶10]  “When a party appeals a decision of the Superior Court in an action 
seeking review of a [tax assessment], we review the Board’s decision directly for 
abuse of discretion, errors of law, and sufficient evidence.”  UAH-Hydro 
Kennebec, L.P. v. Town of Winslow, 2007 ME 36, ¶ 10, 921 A.2d 146.  “That the 
record contains evidence inconsistent with the result, or that inconsistent 
 
8 
conclusions could be drawn from the evidence, does not render the [Board’s] 
findings invalid if a reasonable mind might accept the relevant evidence as 
adequate to support the [Board’s] conclusion.”  Town of Vienna v. Kokernak, 612 
A.2d 870, 872 (Me. 1992).  
III.  DISCUSSION 
A. 
Burden of Proof and Standard of Review of the Assessment  
[¶11]  The Maine Constitution provides that “[a]ll taxes upon real and 
personal estate, assessed by authority of this State, shall be apportioned and 
assessed equally according to the just value thereof.”  Me. Const. art. IX, § 8; see 
Weekley v. Town of Scarborough, 676 A.2d 932, 934 (Me. 1996) (“‘Just value’ 
means market value.”).  Accordingly, an assessment must be supported by two 
factual findings.  Chase v. Town of Machiasport, 1998 ME 260, ¶ 11, 721 A.2d 
636.  “[F]irst, the property must be assessed at its fair market value.”5  Id. (citing 
                                         
5  Black’s Law Dictionary defines “fair market value” as “[t]he price that a seller is willing to accept 
and a buyer is willing to pay on the open market and in an arm’s-length transaction; the point at which 
supply and demand intersect.”  Black’s Law Dictionary 1691 (9th ed. 2009).  Several state courts have 
held that sale price is probative, but not dispositive, of fair market value.  See, e.g., Donlon v. Bd. of 
Assessors of Holliston, 453 N.E.2d 395, 402 (Mass. 1983) (stating that sale prices are “very strong 
evidence of fair market value, [because] they represent what a buyer has been willing to pay to a seller for 
a particular property” (alteration in original)); Appeal of Lakeshore Estates, 543 A.2d 412, 415 (N.H. 
1988) (“[T]he sale price of a piece of property is evidence of its value unless the court finds on evidence 
that there was not a fair market.”); Plaza Hotel Assoc. v. Wellington Assoc., Inc., 333 N.E.2d 346, 349 
(N.Y. 1975) (stating that the property’s sale price “should be accorded significance of the highest rank as 
a determiner of the value of the property, unless explained away as abnormal in some fashion”); Sahalee 
Country Club, Inc. v. State Bd. of Tax Appeals, 735 P.2d 1320, 1324 (Wash. 1987) (stating that one of 
three general methods of determining fair market value is “appraising property by analyzing sale prices of 
similar property”). 
 
 
9 
Quoddy Realty Corp. v. City of Eastport, 1998 ME 14, ¶ 9, 704 A.2d 407); see 
McCullough v. Town of Sanford, 687 A.2d 629, 631 (Me. 1996) (“The sale price of 
property is probative of its market value.”).  “[S]econd, the assessed value must be 
equitable, that is, the property must be assessed at a relatively uniform rate with 
comparable property in the district.”  Chase, 1998 ME 260, ¶ 11, 721 A.2d 636.  
 
[¶12]  A taxpayer who seeks a tax abatement must prove that the assessed 
valuation is “manifestly wrong.”  Id. ¶ 12 (quotation marks omitted).  An 
assessment is manifestly wrong if the taxpayer can demonstrate  
(1) that [the taxpayer’s] property was substantially overvalued and an 
injustice resulted from the overvaluation;  
(2) that there was unjust discrimination in the valuation of the 
property; or 
(3) that the assessment was fraudulent, dishonest, or illegal. 
 
Town of Bristol Taxpayers’ Ass’n v. Bd. of Selectmen/Assessors for the Town of 
Bristol, 2008 ME 159, ¶ 8, 957 A.2d 977.  
 
[¶13]  We focus here on whether the taxpayer’s property was substantially 
overvalued.  “We will vacate the [Board’s] decision that a taxpayer failed to meet 
his burden to show one of these three circumstances ‘only if the record compels a 
                                                                                                                                   
In some states, the sale price in a bona fide purchase is dispositive of fair market value.  See, e.g., Pine 
Pointe Hous., L.P. v. Lowndes Cnty. Bd. of Tax Assessors, 561 S.E.2d 860, 863 (Ga. Ct. App. 2002) 
(stating that fair market value is “the amount a knowledgeable buyer would pay for the property and a 
willing seller would accept for the property at an arm’s length, bona fide sale”); Wilde v. Town of 
Norwich, 566 A.2d 656, 657 (Vt. 1989) (“[O]ur statutory definition of fair market value is the price which 
the property will bring in the market when offered for sale and purchased by another.” (quotation marks 
omitted)). 
 
10 
contrary conclusion to the exclusion of any other inference.’”  Id. ¶ 9 (quoting 
Weekley, 676 A.2d at 934). 
B. 
Substantial Overvaluation 
[¶14]  Terfloth argues that the Board erred in concluding that he did not 
purchase his property in an arm’s-length transaction, leading it to accept the 
Town’s assessment, rather than the sale price, as an accurate representation of his 
property’s fair market value.  Terfloth contends that the evidence compels the 
conclusion that he purchased his property in an arm’s-length transaction, such that 
the sale price of his property provides competent evidence of his property’s fair 
market value.  In so arguing, Terfloth points to the assessment ratio for his 
property of 144%, the highest assessment ratio for a Prout’s Neck property since at 
least 1991,6 and argues that it compels the conclusion that the assessed valuation of 
his property is manifestly wrong in relation to its just value.  See Weekley, 676 
A.2d at 934.   
[¶15]  The Town responds that the Board did not err because a property’s 
sale price, although important, is not dispositive in determining its fair market 
value.  At the abatement hearing, where Board members sought to determine the 
fair market value for Terfloth’s property, the assessor testified that there were too 
few recent sales of comparable properties in the Prout’s Neck area for him to take 
                                         
6  The record contains no evidence of the assessment ratios of Prout’s Neck properties before 1991.  
 
11 
the property’s sale price as a statement of its fair market value.  The assessor 
insisted that one sale does not make a market, and indicated that he would not 
reassess Terfloth’s property unless more sales in the Prout’s Neck area indicate 
that the property’s sale price was, in fact, its fair market value.  Based on the 
assessor’s testimony and the length of time the property was on the market before 
Terfloth purchased it, the Board found that Terfloth had not proved that he had 
purchased his property in an arm’s-length transaction and concluded that Terfloth’s 
property was not substantially overvalued.   
[¶16]  We conclude that the Board committed a factual error in finding that 
Terfloth failed to prove that he had purchased his property in an arm’s-length 
transaction and thereby inferentially finding that Terfloth did not purchase his 
property in an arm’s-length transaction.  This factual error, together with the 
assessor’s insistence that there be more local sales, even in a sluggish market, 
before reconsidering the value of Terfloth’s property, led the Board to disregard 
the importance of the sale price of Terfloth’s property in determining its fair 
market value and to conclude that Terfloth’s property was not substantially 
overvalued.  Thus, contrary to the Board’s conclusion, the evidence compels the 
conclusion that Terfloth’s property was substantially overvalued.  See McCullough, 
687 A.2d at 631.   
 
12 
[¶17]  Although evidence presented in an abatement hearing is within the 
Board’s authority to believe or disbelieve, the Board’s finding that Terfloth did not 
purchase his property in an arm’s-length transaction is unsupported by any 
evidence in the record.  See Arnold v. Me. State Highway Comm’n, 283 A.2d 655, 
658 (1971) (“An actual sale very near to the time at which the value is to be fixed 
is of ‘great weight’ as contrasted with mere opinion evidence.”).  Specifically, the 
assessor’s statement that the sale price for Terfloth’s purchase was “in that range of 
foreclosure sales” is unsupported in the record.  See id.  Read in context, the 
evidence does not support the finding that Terfloth bought the property at a distress 
or foreclosure sale, from his own family, at an auction, or in another 
non-arm’s-length transaction.  Rather, the assessor’s statement appears to 
constitute a tautology: the assessed value is the fair market value; the sale price is 
lower than the assessed value; therefore the sale price does not represent fair 
market value.  Ultimately, it appears that the Town’s assessor declined to give any 
weight to the sale price of Terfloth’s property for two reasons: (1) the assessor 
believed he needed more comparable sales in order to determine fair market value; 
and (2) if he reassessed Terfloth’s property, he would have to reassess other 
properties.  Neither of those reasons provides a basis for completely disregarding 
the sale price of a property sold at arm’s length.  
 
13 
[¶18]  Moreover, contrary to the Town’s argument, the property’s presence 
on the market for three years before Terfloth purchased it—including for six 
months at a price lower than its assessed value—further indicates that its sale price 
is more representative of its market value and that the Board erred in finding the 
contrary.  An additional indication that the Board committed a factual error is that 
in his evaluation report, the assessor himself described Terfloth’s purchase as an 
“Arms Length Sale.” 
[¶19]  Although we have not held, and do not hold today, that the price from 
an arm’s-length sale is dispositive of a property’s fair market value, the Board’s 
factual error regarding the arm’s-length nature of Terfloth’s purchase caused it to 
give too little weight to the sale price as representative of the property’s fair market 
value.  Town of Sw. Harbor v. Harwood, 2000 ME 213, ¶ 19, 763 A.2d 115 (“The 
arms length sale price of property provides the best evidence of market value.”).  
Considered along with the fact that the Town had not reassessed Terfloth’s 
property since 2005—despite the market downturn in 2008—the evidence compels 
the conclusion that “the property is substantially overvalued and an injustice” has 
resulted.  See McCullough, 687 A.2d at 630.  We therefore vacate the Board’s 
determination and remand for a reevaluation of Terfloth’s property.   
 
14 
 
The entry is: 
Judgment vacated and remanded to the Superior 
Court for remand to the Scarborough Board of 
Assessment Review for further proceedings 
consistent with the opinion herein. 
 
 
 
 
 
 
 
 
On the briefs: 
 
John C. Bannon, Esq., and John B. Shumadine, Esq., Murray, 
Plumb & Murray, Portland, for appellant Marc B. Terfloth 
 
James N. Katsiaficas, Esq., Perkins Thompson, P.A., Portland, 
for appellee Town of Scarborough 
 
 
At oral argument: 
 
John B. Shumadine, Esq. for appellant Marc B. Terfloth  
 
James N. Katsiaficas, Esq., for appellee Town of Scarborough  
 
 
 
Cumberland County Superior Court docket number AP-2012-19  
FOR CLERK REFERENCE ONLY