Opinion ID: 4553950
Heading Depth: 1
Heading Rank: 1

Heading: Legal Significance of Arms-Length Sale Price

Text: ¶ 11. The property taxation statute requires real property to be listed at its estimated fair market value. 32 V.S.A. § 3481(1)(A). Fair market value is defined as “the price that the property will bring in the market when offered for sale and purchased by another.” Id. The statute provides that “[i]n determining estimated fair market value, the sale price of the property in question is one element to consider, but is not solely determinative.” Id. 4 ¶ 12. “Consistent with this provision, we have held that, while sale price may represent a persuasive and favored method of determining fair market value, ‘there may be situations where a court must look beyond a sale.’ ” Great Bay Hydro Corp., 2007 VT 10, ¶ 6 (quoting Barrett/Canfield, LLC v. City of Rutland, 171 Vt. 196, 199, 762 A.2d 823, 825 (2000)). Taxpayer argues that such an inquiry is appropriate only when there is evidence that the sale was not bona fide. He claims that when it is undisputed that the transaction was arms-length—as in this case— the hearing officer is precluded from relying on other evidence to determine fair market value. Taxpayer argues that the hearing officer in this case misinterpreted the final sentence of 32 V.S.A. § 3481(1)(A) to permit a recent bona fide sale price to be treated as merely one factor among others, rather than as conclusively establishing fair market value. As set forth more fully below, taxpayer’s interpretation is not supported by the plain language of the statute nor by our case law. ¶ 13. When interpreting a statute, “[w]e look first to the plain meaning of the statutory language, and if it is clear and unambiguous, we will apply it, without resorting to statutory construction or additional determination of legislative intent.” Hopkinton Scout Leaders Ass’n v. Town of Guilford, 2004 VT 2, ¶ 6, 176 Vt. 577, 844 A.2d 753 (mem.). The language of § 3481(1)(A) is clear and unambiguous: in determining fair market value, the sale price of the subject property is “not solely determinative.” The provision expressly and without qualification allows the factfinder to consider other factors beyond the recent, arms-length sale price. See Sondergeld v. Town of Hubbardton, 150 Vt. 565, 567, 556 A.2d 64, 66 (1988) (noting that while bona fide sale is most persuasive method of establishing fair market value, § 3481 does not mandate particular method for determining value or limit type of evidence that may be presented to PVR). We find nothing in the language of § 3481(1)(A) to support taxpayer’s interpretation. ¶ 14. Although our case law emphasizes that a recent arms-length sale establishes a strong presumption as to the fair market value of the property, we have never held that the existence of a bona fide sale price conclusively establishes fair market value or precludes the hearing officer 5 from considering competing evidence of fair market value. Taxpayer’s arguments are grounded in a line of decisions beginning with Royal Parke Corporation v. Town of Essex, 145 Vt. 376, 488 A.2d 766 (1985). In Royal Parke, we explained that because fair market value “is usually a value estimated in the absence of actual, relatively concurrent, sale, of necessity many elements must go into the valuation to permit the value to closely approximate the potential return to the seller and cost to the buyer in free and open sale.” Id. at 378, 488 A.2d at 768. We went on to state: When, however, fair market value can be established by the operation of bona fide sale transactions themselves, a market value is perforce established for appraisal purposes. There is then no need to consider factors useful in trying to estimate market value. So long as the sales evidence proves a transaction between a willing buyer and willing seller at arms length, entered into in good faith, and not to “rig” a value, the tax statute is not concerned about the reasons either buyer or seller attributed the agreed value to the property. Id. at 378-79, 488 A.2d at 768. ¶ 15. In the subsequent case of Wilde v. Town of Norwich, 152 Vt. 327, 566 A.2d 656 (1989), we reaffirmed the principle that the recent sale price of the subject property in a bona fide transaction was the best evidence of fair market value, but left open the question of whether other evidence could ever overcome the sale price. The taxpayers in Wilde appealed the 1985 grand list value of their property, which the town had determined to be $187,210. The taxpayers presented evidence that they had purchased the property that March for $152,500. In response, the town presented an affidavit of a lister stating that the sale price did not represent fair market value because the property had been for sale for a long time and the former owner was anxious to sell. The trial court granted summary judgment in favor of the taxpayers and the town appealed. We affirmed, explaining that the “plaintiffs[’] showing of an actual sale price pursuant to a contract signed within days of the listing date is strong, if not conclusive, evidence of fair market value.” Id. at 329, 566 A.2d at 657. Although the town argued that it could show that the sale price was an inadequate reflection of fair market value under the circumstances, we held that we “d[id] not 6 have to determine whether such evidence would ever be acceptable under Royal Parke” because the town presented no specific evidence to support such a claim. Id. We explained that the conclusory statements in the lister’s affidavit did not satisfy the town’s burden “to support its appraisal by demonstrating that its valuation method complied with the law or that there was independent evidence of valuation.” Id. at 330, 566 A.2d at 657. ¶ 16. Similarly, in Barrett/Canfield, LLC v. City of Rutland, we held that the bona fide contemporaneous sale price of a property was dispositive of its fair market value. 171 Vt. at 200, 762 A.2d at 826. In that case, the taxpayer learned that a manufacturer was planning to close its local plant and contacted the manufacturer through a realtor to see if the plant was for sale. These inquiries resulted in the taxpayer’s purchasing the property for $1.764 million. The city subsequently assessed the value of the property at $4.598 million. The trial court determined that the sale price did not reflect fair market value because the property was inadequately exposed to the market, and set the value at $4 million. ¶ 17. We reversed, holding that there was no requirement that a property be actively marketed to establish a bona fide sale and that it was an error of law to import such a requirement. Id. at 199-200, 762 A.2d at 825-26. We acknowledged that “there may be situations where a court must look beyond a sale. For instance, where some evidence undermines the bona fide nature of the sale, the court may extend its inquiry.” Id. at 199, 762 A.2d at 825. As examples, we cited a case where the evidence suggested that the parties were not acting in their own self-interest, see Beach Props., Inc. v. Town of Ferrisburg, 161 Vt. 368, 375-76, 640 A.2d 50, 54 (1994), and a case where a foreclosure auction sale price was significantly lower than the estimate of value by the bank’s appraiser, Vt. Nat’l Bank v. Leninski, 166 Vt. 577, 579, 687 A.2d 890, 892 (1996) (mem.). Barrett/Canfield, 171 Vt. at 199-200, 762 A.2d at 825. However, we held that there was no reason to doubt the validity of the sale in Barrett/Canfield, noting that both the buyer and the seller were sophisticated corporations, the deal was concluded after nine months of negotiations, and the price 7 was approved by the taxpayer’s mortgage provider based on the provider’s own appraisal. Id. at 200, 762 A.2d at 826. Under these circumstances, there was “no reason to disregard the sale price.” Id. at 200, 762 A.2d at 825-26. ¶ 18. In these decisions, we have consistently recognized the presumed strength of recent, arms-length sales evidence, but have not treated the presumption as conclusive. See Wilde, 152 Vt. at 329-30, 566 A.2d at 657 (expressly declining to decide whether other evidence could overcome evidence of recent bona fide sale price because town did not present such evidence); see also Sondergeld, 150 Vt. at 567, 556 A.2d at 66 (“[O]ur statute does not prescribe the method nor limit the manner in which evidence of fair market value may be presented to the Board.”). Challenging the bona fide nature of the sale may be the most obvious way to overcome evidence of a recent sale price. But it is not necessarily the only way; other evidence may be sufficient to demonstrate that the sale price is not reflective of fair market value. ¶ 19. In support of his claim to the contrary, taxpayer points to our statement in Barrett/Canfield that “[a]s long as a bona fide contemporaneous sale is shown, a presumptive fair market value for the property is established, and no further inquiry is required.” 171 Vt. at 200, 762 A.2d at 826. Properly viewed within the context of that opinion, which turned on whether a property had to have been actively marketed for a sale to be considered bona fide, this is not as sweeping a statement as taxpayer suggests. We held in Barrett/Canfield that because the transaction in question was voluntary and took place in an open market between parties acting in their own self-interest, it met the test for an arms-length transaction, and the trial court ought not to further question the conduct of the sale. Id.; see Beach Props., Inc., 161 Vt. at 375-76, 640 A.2d at 54 (“An arm’s-length sale is characterized by these elements: it is voluntary, i.e., without compulsion or duress; it generally takes place in an open market; and the parties act in their own self-interest.” (quotation and alteration omitted)). The opinion did not purport to address a situation like the one here, where it was undisputed that the sale was bona fide but other evidence 8 showed that the sale price did not represent fair market value. To the contrary, we stated that a bona fide sale price established a “presumptive” value, expressly leaving open the possibility that it could be rebutted by independent evidence of valuation. Barrett/Canfield, 171 Vt. at 200, 762 A.2d at 826. Barrett/Canfield therefore does not support taxpayer’s position. For the above reasons, we conclude that the hearing officer acted consistently with the law in considering alternative evidence of the property’s fair market value notwithstanding his finding that the recent sale of the property was arms-length.