Court Opinion

ID: 5123840
Source: CourtListenerOpinion
Date Created: 2021-11-05 20:15:20.605079+00
Date Added: 2024-06-11T08:22:36.334118
License: Public Domain

11/05/2021
               IN THE COURT OF APPEALS OF TENNESSEE
                          AT KNOXVILLE
                              August 18, 2021 Session

      MICHAEL A. CRESS ET AL. v. TENNESSEE STATE BOARD OF
                     EQUALIZATION ET AL.

                 Appeal from the Chancery Court for Knox County
                  No. 195482-1      John F. Weaver, Chancellor
                     ___________________________________

                          No. E2021-00093-COA-R3-CV
                      ___________________________________

This action involves the valuation of thirty-two unimproved parcels of real property for
taxation purposes. The property owners appealed the values assigned by the Knox
County Assessor of Property to the Knox County Board of Equalization, the Tennessee
State Board of Equalization, and the Tennessee Assessment Appeals Commission before
filing a petition for judicial review in the Knox County Chancery Court (“trial court”).
The trial court affirmed the respective values of the parcels as found by the Tennessee
Assessment Appeals Commission. The property owners have appealed the trial court’s
determination. Discerning no reversible error, we affirm the trial court’s judgment.

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                            Affirmed; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which FRANK G.
CLEMENT, JR., P.J., M.S., and JOHN W. MCCLARTY, J., joined.

Wayne R. Kramer and Bruce E. Fitzgerald, Knoxville, Tennessee, for the appellants,
Michael A. Cress and Park Place Land Holdings, LLC.

Herbert H. Slatery, III, Attorney General and Reporter; Andrée Sophia Blumstein,
Solicitor General; and R. Mitchell Porcello, Senior Assistant Attorney General, for the
appellees, Tennessee State Board of Equalization and Assessment Appeals Commission.

Charles F. Sterchi, III, Chief Deputy Law Director, Knox County, Tennessee, for the
appellees, Knox County, Tennessee, and John R. Whitehead, Knox County Assessor of
Property.
                                         OPINION

                           I. Factual and Procedural Background

       On March 15, 2018, Michael A. Cress and Park Place Land Holdings, LLC
(collectively, “Taxpayers”), filed a petition in the trial court, seeking judicial review of an
action taken by the Tennessee State Board of Equalization (“the State Board”) and the
Tennessee Assessment Appeals Commission (“the AAC”). Petitioners also named as
respondents Knox County, Tennessee (“Knox County”), and John Whitehead, Knox
County Assessor of Property (“Assessor”) (collectively, “Respondents”). In their
petition, Taxpayers alleged that Mr. Cress held title to certain lots in the Park Place of
Farragut Subdivision in Knox County and that Park Place Land Holdings, LLC, held title
to other lots in the same subdivision, with Taxpayers collectively owning thirty-two
unimproved lots. The record demonstrates that Mr. Cress is an owner of Park Place Land
Holdings, LLC.

       Taxpayers averred that they had timely appealed their 2012 tax assessments to the
Knox County Board of Equalization (“the County Board”) and also to the State Board
such that a hearing was conducted before a state administrative law judge on April 3,
2013. According to taxpayers, although the administrative law judge reduced the values
of Taxpayers’ lots from that set by the County Board, he nonetheless established values
for the lots that exceeded their fair market value. Taxpayers stated that they also had
appealed the 2013 assessment values, which were greater than the 2012 values
determined by the administrative law judge. Taxpayers’ appeals were later consolidated
for hearing before the AAC, and an appeal of the 2014 tax assessments subsequently was
added as an amendment.

       According to Taxpayers, their appeals concerning tax years 2012 through 2014
were heard by the AAC on September 11, 2014. The AAC rendered a decision on
November 4, 2014, affirming the earlier valuations and dismissing Taxpayers’ appeals.
Taxpayers then filed a petition for judicial review of the AAC’s determination on March
2, 2015, in the trial court. Following a hearing conducted on February 3, 2016, the trial
court entered a final order on November 18, 2016, with an attached and incorporated
memorandum opinion. In its order, the trial court found that Taxpayers had presented
substantial proof concerning the values of the subdivision lots and that the AAC’s
dismissal of Taxpayers’ appeals was “made upon unlawful procedure” and constituted an
“arbitrary and unwarranted exercise of discretion.” The trial court therefore set aside the
AAC’s order and remanded the matter to the AAC for further hearing.

       The AAC conducted a second hearing on September 13, 2017. Taxpayers claimed
that they presented evidence of the valuation at $13,348 per lot based on a “Discounted
Cash Flow Valuation Analysis.” By contrast, Knox County presented evidence of lot

                                             -2-
values ranging from $15,000 to $70,000 based on the comparable sales method.1
Taxpayers contended that the discounted cash flow method of valuation was required by
applicable law and supported by various treatises as well as prior decisions of the State
Board. The AAC, in a split decision, ultimately adopted the values presented by Knox
County as “more persuasive” despite acknowledging that the discounted cash flow
method was a valid appraisal method.

       In their petition, Taxpayers sought judicial review of the AAC’s second decision,
entered on December 5, 2017, and the resultant Official Assessment Certificate.
Taxpayers alleged that the Official Assessment Certificate was a final agency decision
reviewable by the trial court pursuant to Tennessee Code Annotated § 4-5-322. Knox
County and Assessor subsequently filed an answer, denying that Taxpayers were entitled
to any relief and urging that the AAC’s decision should be affirmed. The State Board
filed the administrative record with the trial court, spanning several volumes of the
appellate record.

       Following the filing of trial briefs by both sides, the trial court conducted a hearing
on November 15, 2019. During the hearing, the court heard testimony from Barry
Mathis, Deputy Assessor for the Knox County Assessor of Property, and also received
various exhibits. The court then considered oral arguments of counsel before taking the
matter under advisement.

       On December 31, 2020, the trial court concomitantly entered both a memorandum
opinion and a final order affirming the AAC’s determination concerning the values of the
subject lots. In its memorandum opinion, the court recognized that the proper standard of
review to be applied during judicial review of the AAC’s determination was “critical.”
The court contrasted the standard of judicial review contained in the statutes applicable to
tax proceedings with the standard of review generally applicable to judicial review of an
administrative decision. Specifically as to tax proceedings, the court considered
Tennessee Code Annotated § 67-5-1511 (2018) and its provision of a “new hearing”
before the trial court based on the administrative record and “additional or supplemental
evidence.” In contrast, Tennessee Code Annotated § 4-5-322 (2021) of the Uniform
Administrative Procedures Act (“UAPA”) precludes the trial court from substituting “its
judgment for that of the agency as to the weight of the evidence on questions of fact.”
See Willamette Indus., Inc. v. Tenn. Assessment Appeals Comm’n, 11 S.W.3d 142 (Tenn.
Ct. App. 1999), perm. app. denied, recommended for publication (Tenn. Feb. 17, 2000);
Dooly v. Tenn. State Bd. of Equalization, No. E2012-01022-COA-R3-CV, 2013 WL
1799962 (Tenn. Ct. App. Apr. 29, 2013).

1
  Taxpayers argue that Knox County actually utilized different valuation methods for the lots at different
times. We note that the appellate record reveals that at the September 2017 hearing, Assessor presented
values for the subject lots ranging from $15,000 to $45,000 each.
                                                  -3-
        In doing so, the trial court noted: “It is unclear as to how a reviewing trial court
could conduct a new hearing and consider ‘any additional or supplemental evidence
which either party wishes to adduce relevant to any issue’ but be limited to reviewing
whether there is substantial and material evidence to support the Board’s decision.” The
court ultimately concluded that “de novo review, as generally known, is not proper for
judicial review of decisions from [the State Board] or [the AAC] and that judicial review
is limited to that permitted by the APA.”

     After describing and analyzing the evidence, the trial court explained in its
memorandum opinion:

                This court is unable to substitute its judgment for that of [the State
        Board]. The question boils down to whether the record furnishes a
        reasonably sound basis for the Board’s decision and whether a reasonable
        mind could accept the Board’s conclusion that the sales comparison
        approach is the appropriate method for valuing the property. Within the
        limited scope of judicial review as set out in the Willamette case, this Court
        has little leeway but to affirm [the State Board].

Taxpayers timely appealed.

                                        II. Issues Presented

        Taxpayers present the following issues for our review, which we have restated
slightly:

        1.      Whether the trial court erred in determining that “neither side
                introduced any additional or supplemental evidence at the hearing”
                before the trial court.

        2.      Whether the trial court erred in its application of the proper standard
                of review.

        3.      Whether the trial court erred by affirming the AAC’s determination
                because it was purportedly contrary to applicable law and was not
                supported by substantial and material evidence.

The State Board and the AAC restate the overarching issue as follows:2

2
 We note that Knox County and Assessor did not include a statement of the issues in their joint appellate
brief.
                                                  -4-
      4.     Whether the trial court correctly affirmed the valuation of the real
             property at issue based on the comparable sales method.

                           III. Appellate Standard of Review

       The standard of review of an administrative agency’s decision following a
contested proceeding is the same in the appellate court and the chancery court. See
Terminix Int’l. Co., L.P. v. Tenn. Dept. of Labor, 77 S.W.3d 185, 191 (Tenn. Ct. App.
2001); Dooly, 2013 WL 1799962, at *4; Am. Heritage Apartments, Inc. v. Bennett, No.
M2003-02595-COA-R3-CV, 2005 WL 1996623, at *4 (Tenn. Ct. App. Aug. 18, 2005).
Questions of fact are thus reviewed upon a standard of substantial and material evidence.
See Tenn. Code Ann. § 4-5-322(h)(5)(A); Gluck v. Civil Serv. Comm’n, 15 S.W.3d 486,
490 (Tenn. Ct. App. 1999)). As this Court has previously explained, “what amounts to
‘substantial and material’ evidence provided for in T.C.A. § 4-5-322(h) is not clearly
defined. It is generally understood that ‘it requires something less than a preponderance
of the evidence, but more than a scintilla or glimmer.’” Gluck, 15 S.W.3d at 490
(quoting Wayne Cty. v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d 274, 280
(Tenn. Ct. App. 1988)).

      When the resolution of an issue presented on review of an administrative decision
hinges upon the interpretation of a statute, our standard of review is de novo with no
presumption of correctness of the administrative agency’s statutory interpretation. H & R
Block E. Tax Servs., Inc. v. Tenn. Dep’t. of Commerce & Ins., 267 S.W.3d 848, 855
(Tenn. Ct. App. 2008); Spring Hill, L.P. v. Tenn. State Bd. of Equalization, No. M2001-
02683-COA-R3-CV, 2003 WL 23099679, at *5 (Tenn. Ct. App. Dec. 31, 2003).

      Tax assessments are generally presumed to be valid, and “the burden is on the
taxpayer to prove that they are erroneous.” Edmondson Mgmt. Serv., Inc. v. Woods, 603
S.W.2d 716, 717 (Tenn. 1980) (quoting Howard v. United States, 566 S.W.2d 521, 528
(Tenn. 1978)). However, “[t]axation statutes must be liberally construed in favor of the
taxpayer and strictly construed against the taxing authority.” Covington Pike Toyota, Inc.
v. Cardwell, 829 S.W.2d 132, 135 (Tenn. 1992).

                               IV. Trial Court’s Findings

       Taxpayers initially assert that the trial court erred by stating in its memorandum
opinion that “neither side introduced any additional or supplemental evidence at the
hearing” before the trial court. We agree with this contention inasmuch as the record
reveals that the trial court did hear testimony from Barry Mathis, on behalf of Assessor,
in addition to receiving certain exhibits during the November 2019 hearing.

       Despite the trial court’s erroneous statement in its memorandum opinion that no
additional evidence had been introduced, however, Taxpayers have failed to demonstrate
                                           -5-
how this minor error proved harmful. See, e.g., Gentry v. Walls, No. 01-A-019105-CV-
00190, 1991 WL 254561, at *1 (Tenn. Ct. App. Dec. 4, 1991) (“The test for harmless
error is found in Rule 36, Tenn. R. App. P., which says a judgment should not be set
aside unless, considering the whole record, the error more probably than not affected the
judgment.”). In fact, Taxpayers concede in their appellate brief that the trial court made
various findings in its memorandum opinion that appear to be based, at least in part, on
the evidence presented during the November 2019 hearing. As such, we consider the trial
court’s erroneous statement in its memorandum opinion, quoted above, to be harmless.

                      V. Standard of Review Applicable in Trial Court

       Taxpayers seek a determination from this Court that the trial court applied an
incorrect standard of review in this cause. The State Board and the AAC agree that an
incorrect standard was applied although they further contend that this error was harmless
because the trial court reached the correct result. These parties urge that the standard of
judicial review outlined in the statutory scheme applicable to tax proceedings before the
State Board, specifically Tennessee Code Annotated § 67-5-1511, is controlling in this
matter. This statutory section provides that when reviewing a final decision of the State
Board or the AAC, the chancery court should conduct a “new hearing” based on the
administrative record and “additional or supplemental evidence which any party wishes
to adduce relevant to any issue.” Some decisions from this Court have applied this
statutory section to judicial review of tax proceedings rather than the UAPA’s narrower
standard of review. See Richardson v. Tenn. Assessment Appeals Comm’n, 828 S.W.2d
403, 406 (Tenn. Ct. App. 1991); see also Maury Cty. ex rel. Maury Reg’l Hosp. v. Tenn.
State Bd. of Equalization, 117 S.W.3d 779, 782 (Tenn. Ct. App. 2003).3

       Notably, however, in 1999, this Court released an opinion, which was
subsequently recommended for publication by our Supreme Court, specifying that the
proper standard for judicial review of a decision of the AAC was provided in Tennessee
Code Annotated § 4-5-322 of the UAPA. See Willamette Indus., 11 S.W.3d at 147-48.
Thereafter, several other decisions from this Court have clarified that the standard of
review to be applied by the trial court when reviewing a final decision of the State Board
or the AAC is that generally applicable to judicial review of an administrative decision
under Tennessee Code Annotated § 4-5-322 of the UAPA while also incorporating
Tennessee Code Annotated § 67-5-1511’s provision of a “new hearing” before the trial
court based on the administrative record and the introduction of “additional or
supplemental evidence.” See Vanderbilt Univ. v. Tenn. State Bd. of Equalization, No.
M2014-01386-COA-R3-CV, 2015 WL 1870194, at *5 (Tenn. Ct. App. Apr. 22, 2015);
3
  At the time of the Richardson decision, Tennessee Code Annotated § 67-5-1511(b) provided for a “de
novo appeal to the chancery court” rather than a “new hearing in the chancery court based upon the
administrative record and any additional or supplemental evidence which either party wishes to adduce
relevant to any issue.” See 828 S.W.2d 405. Tennessee Code Annotated § 67-5-1511(b) was amended in
1992 to substitute the current language. See 1992 Tenn. Pub. Acts, Ch. 1024, § 7 (S.B. 2501).
                                                -6-
Dooly, 2013 WL 1799962, at *4; Am. Heritage Apartments, 2005 WL 1996623, at *4;
Spring Hill, 2003 WL 23099679, at *5.

      As this Court explained in Spring Hill:

             Tenn. Code Ann. § 67-5-1511 provides in pertinent part:

             (a)    The action of the State Board of Equalization shall be
                    final and conclusive as to all matters passed upon by
                    the board, subject to judicial review, and taxes shall be
                    collected upon the assessment determined and fixed by
                    the board.

             (b)    The judicial review provided in subsection (a) shall
                    consist of a new hearing in the chancery court based
                    upon the administrative record and any additional or
                    supplemental evidence which either party wishes to
                    adduce relevant to any issue. . . .

             Although the possibility of presenting additional evidence in the trial
      court differentiates this type of case from most reviews of administrative
      decisions, judicial review of a Board of Equalization decision clearly falls
      under the Uniform Administrative Procedures Act (“UAPA”). Willamette
      Industries, Inc. v. Tenn. Assessment Appeals Comm’n, 11 S.W.3d 142, 147
      (Tenn. Ct. App. 1999). Accordingly, courts are to apply “the narrow,
      statutorily defined standard contained in [Tenn. Code Ann.] § 4-5-322(h)
      rather than the broad standard of review used in other civil appeals.”
      Wayne County v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d 274,
      279 (Tenn. Ct. App. 1988).

             In accordance with Tenn. Code Ann. § 4-5-322(h), a reviewing court
      may reverse or modify the administrative agency decision if the rights of
      the petitioner have been prejudiced because the administrative findings,
      inferences, conclusions or decisions are:

             (1)    In violation of constitutional or statutory provisions;

             (2)    In excess of the statutory authority of the agency;

             (3)    Made upon unlawful procedure;

                                           -7-
               (4)     Arbitrary or capricious or characterized by abuse of
                       discretion or clearly unwarranted exercise of
                       discretion; or

               (5)     Unsupported by evidence that is both substantial and
                       material in the light of the entire record.[4]

       In determining the substantiality of evidence, the court shall take into
       account whatever in the record fairly detracts from its weight, but the court
       shall not substitute its judgment for that of the agency as to the weight of
       the evidence on questions of fact.

Spring Hill, 2003 WL 23099679, at *4-5.                 Moreover, as this Court observed in
Willamette:

       [W]e will not substitute our judgment regarding the weight of the evidence
       for that of the agency, even where the evidence could support a different
       result. Wayne County, 756 S.W.2d at 279 (citing Humana of Tennessee v.
       Tennessee Health Facilities Comm’n, 551 S.W.2d 664, 667 (Tenn. 1977));
       Grubb v. Tennessee Civil Serv. Comm’n, 731 S.W.2d 919, 922 (Tenn. App.
       1987); Hughes v. Board of Commissioners, 204 Tenn. 298, 319 S.W.2d
       481, 484 (1958)). Stated another way,

               [a]n agency’s factual determination should be upheld if there
               exists “such relevant evidence as a reasonable mind might
               accept to support a rational conclusion and such as to furnish
               a reasonably sound basis for the action under consideration.”

       Wayne County, 756 S.W.2d at 279 (quoting Southern Ry. v. State Bd. of
       Equalization, 682 S.W.2d 196, 199 (Tenn. 1984); Sweet v. State Technical
       Inst., 617 S.W.2d 158, 161 (Tenn. App. 1981)). As further explained in
       Wayne County,

               [t]he general rules governing judicial review of an agency’s
               factual decisions apply with even greater force when the
               issues require scientific or technical proof. Appellate courts
               have neither the expertise nor the resources to evaluate
               complex scientific issues de novo. When very technical areas
               of expertise are involved, they generally defer to agency

4
 We note that although subsection (5) has since been amended to add an additional subpart, its wording
and meaning as relevant here remain the same.
                                                -8-
             decisions, and will not substitute their judgment for that of the
             agency on highly technical matters.

                    However, the court’s deference to an agency’s
             expertise is no excuse for judicial inertia. Even in cases
             involving scientific or technical evidence, the “substantial and
             material evidence standard” in [T.C.A.] § 4-5-322(h)(5)
             requires a searching and careful inquiry that subjects the
             agency’s decision to close scrutiny.

      Wayne County, 756 S.W.2d at 280 (citations omitted).

Willamette Indus., 11 S.W.3d at 147-48. See Dooly, 2013 WL 1799962, at *4.

       Based on the above precedent, we conclude that in the case at bar the trial court
applied the correct standard when performing judicial review of the AAC’s final
decision. Pursuant to Tennessee Code Annotated § 67-5-1511, the trial court conducted a
hearing and afforded the parties the opportunity to present additional evidence. The trial
court then considered that evidence, along with the administrative record, in determining
whether the AAC’s decision was supported by substantial and material evidence and
whether it otherwise ran afoul of the requirements of Tennessee Code Annotated § 4-5-
322. We therefore affirm the trial court’s determination relative to the appropriate
standard for its judicial review of the AAC’s decision.

                          VI. Merits of Value Determinations

       Finally, Taxpayers posit that the trial court erred by affirming the AAC’s value
determinations for the lots at issue, which they contend were contrary to applicable law
and unsupported by substantial and material evidence. Respondents counter that the
court correctly affirmed the valuation of the lots predicated on the comparable sales
method. Upon our thorough review of this issue, we agree with Respondents.

      Our statutory scheme concerning taxation of property provides in relevant part:

      (a)    The value of all property shall be ascertained from the evidence of
             its sound, intrinsic and immediate value, for purposes of sale
             between a willing seller and a willing buyer without consideration of
             speculative values, and when appropriate, subject to the Agricultural,
             Forest and Open Space Land Act of 1976, compiled in part 10 of this
             chapter.

      (b)    It is the legislative intent that no appraisal under this part shall be
             influenced by inflated values resulting from speculative purchases in
                                            -9-
            particular areas in anticipation of uncertain future real estate
            markets; but all property of every kind shall be appraised according
            to its sound, intrinsic and immediate economic value, which shall be
            ascertained in accordance with such official assessment manuals as
            may be promulgated and issued by the state division of property
            assessments and approved by the state board of equalization
            pursuant to law.

Tenn. Code Ann. § 67-5-601 (2018). In addition, Tennessee Code Annotated § 67-5-602
(2018) provides in pertinent part:

      [I]n determining the value of all property of every kind, the assessor shall
      be guided by, and follow the instructions of, the appropriate assessment
      manuals issued by the division of property assessments and approved by
      the state board of equalization. In the preparation of the manual, the
      division of property assessments and the state board of equalization shall
      consult with the United States forest service and the state forester in
      establishing the guidelines to be used in determining the value of
      forestland.

      (b)   For determining the value of real property, such manuals shall
            provide for consideration of the following factors:

            (1)    Location;

            (2)    Current use;

            (3)    Whether income bearing or non-income bearing;

            (4)    Zoning restrictions on use;

            (5)    Legal restrictions on use;

            (6)    Availability of water, electricity, gas, sewers, street lighting,
                   and other municipal services;

            (7)    Inundated wetlands;

            (8)    Natural productivity of the soil, except that the value of
                   growing crops shall not be added to the value of the land. As
                   used in this subdivision (b)(8), “crops” includes trees; and

                                         - 10 -
             (9)    All other factors and evidence of value generally recognized
                    by appraisers as bearing on the sound, intrinsic and
                    immediate economic value at the time of assessment.

      In this matter, the AAC and the trial court were presented with conflicting
evidence concerning the values of the lots in question. The main difference in the values
as found by Assessor and the values set forth by Taxpayers was the valuation
methodology employed. The values established by Assessor were based upon the
comparable sales method while the values assigned by Taxpayers’ expert, Mr. Broome,
were predicated on the discounted cash flow method. As the AAC explained in its
“Second Final Decision and Order” following the September 2017 hearing:

             The DCF [discounted cash flow] valuation method is a valid
      appraisal method where property is valued according to its future value.
      DCF calculates the present value of future income, by estimating future
      benefits and then discounting them by an appropriate rate.

             The sales comparison approach is an equally valid and highly used
      method of valuing property for ad valorem taxing purposes. The general
      premise of the sale comparison approach is that like property should be
      valued similarly and uses comparable sales of similarly situated properties
      to value property.

        As the trial court noted in its memorandum opinion, the base retail values assigned
to the lots by Assessor and Mr. Broome were “very close” with Mr. Broome’s retail
values actually being slightly higher. The main difference in the values assigned by the
parties, as found by the trial court, was that Mr. Broome then applied certain discounts in
order to account for the “false assumption that those 32 lots would be sold on that day.”
Mr. Broome explained that the discounted cash flow method took into account the time
necessary to sell the lots along with the maintenance and other expenses involved. As the
trial court further elucidated, although Mr. Broome testified that the discounted cash flow
method was not the only way to value these lots, he opined that it was the best method in
this situation because multiple lots were for sale in the same subdivision. Mr. Broome
ultimately valued the lots at $13,348 each.

       Mr. Mathis, testifying on behalf of Assessor, disagreed, stating that he had never
used the discounted cash flow method when valuing residential property and highlighting
various problems that he perceived with its utilization to value the lots in question. Mr.
Mathis instead utilized sales of other unimproved lots within subdivisions in West Knox
County in determining what he believed to be fair market values for the lots, which
ranged from $15,000 to $45,000 per lot for tax years 2012 and 2013 and, with a couple of
exceptions, $45,000 each for tax year 2014. As the trial court further noted in its
memorandum opinion, Mr. Mathis’s values, determined by using the sales comparison
                                          - 11 -
approach, were in some measure buttressed by the fact that Mr. Broome found higher
retail base values for the subject lots ($47,813 each) before applying discounts. In
addition, the trial court found that two of the lots had sold in December 2013 for $45,000
each, also supporting Mr. Mathis’s values for tax year 2014.

       In its memorandum opinion, the trial court further explained that the AAC had, in
a two-one decision, chosen to adopt Assessor’s values for the subject lots. As the trial
court found, one commissioner voting in favor of adopting Assessor’s values expressed
concern regarding Taxpayers’ use of the discounted cash flow method in valuing the lots,
stating that although it represented a valid valuation method, its use was problematic
given the facts of this case. The other commissioner who voted in favor of adopting
Assessor’s values articulated that he felt the bulk sale of lots to Mr. Cress in December
2011 was not a good indicator of the lots’ values and that the comparable sales approach
was the best valuation method even when utilizing the values of similar lots outside the
subdivision. Notably, the third commissioner, deciding in favor of Taxpayers,
acknowledged that the sales comparison approach was “the ideal approach to use,”
although stating that he felt the properties compared were not sufficiently similar.

       In its written decision, the AAC concluded:

               After weighing the evidence and hearing the arguments presented by
       the parties, the Commission finds that the Assessor’s proposed values
       accurately represent the fair market value of the Subject Lots. Although the
       Commission acknowledges the DCF method is a valid appraisal method,
       the Commission finds the Assessor’s proposed values more persuasive.
       The DCF valuation method is not suitable for valuing the Subject Lots, as
       the practice of buying, building, and selling lots for purposes of residential
       development is not typically viewed as a practice with irregular income
       streams. Although the Commission is sympathetic to the argument of the
       Taxpayer[s] in light of the evolving marketplace of residential property
       sales, the Commission finds that the Taxpayer[s’] valuation methodology
       does not accurately represent the market value.

(Footnotes omitted.)

       The trial court ultimately affirmed the AAC’s decision, determining that “a
reasonable mind could accept the Board’s conclusion that the sales comparison approach
is the appropriate method for valuing the property.” We agree. As explained in
Willamette, “courts typically will defer to an agency decision where the agency is acting
within its area of knowledge and expertise, and this is particularly true where technical or
scientific matters are involved.” 11 S.W.3d at 149-150.

                                           - 12 -
       As in the instant case, Willamette involved a question concerning the appropriate
valuation methodology to be utilized based on conflicting expert testimony. See id. The
Willamette Court noted that “agencies are accorded ‘wide discretion in determining the
weight or probative value to be given the testimony of the expert witness,’” explaining
that “when conflicts in expert testimony arise, it is the agency’s prerogative to resolve
them, not the court’s.” Id. at 149 (quoting Wayne Cty., 756 S.W.2d at 281). As the Court
further elucidated:

       Admittedly, the record contains evidence regarding both advantages and
       disadvantages of each appraisal method, as well as evidence that the
       residual method could, in certain instances, be the preferable means of
       valuation. On the other hand, it also contains credible evidence indicating
       that, under the circumstances of this case, the direct comparable sales
       method represented the appropriate choice.

11 S.W.3d at 149-50 (internal citations omitted). The Willamette Court proceeded to
explain that inasmuch as the use of the comparable sales method satisfied the
requirements of Tennessee Code Annotated § 67-5-601, it constituted an appropriate
method for valuing the subject property. Id.

       Similarly, here, the AAC was presented with conflicting expert testimony with
regard to the appropriate valuation methodology to be applied to the lots in question. The
AAC resolved that conflict in favor of Assessor’s use of the comparable sales method, a
method which satisfies the requirements of Tennessee Code Annotated § 67-5-601. See
id. We therefore conclude that the AAC’s determination, as subsequently affirmed by the
trial court, that the comparable sales method constituted an appropriate method for
valuing the subject real property is supported by substantial and material evidence in the
record and does not otherwise violate the requirements of Tennessee Code Annotated §
4-5-322.

        The trial court also determined that the facts in the record furnished “a reasonably
sound basis for the Board’s decision” concerning the ultimate values of the subject lots.
Again, we agree with the trial court. The AAC’s decision as to the values of the subject
lots is supported by substantial and material evidence in the record, as outlined above.
We reiterate that the AAC’s factual determination should be upheld if there exists “such
relevant evidence as a reasonable mind might accept to support a rational conclusion and
such as to furnish a reasonably sound basis for the action under consideration.”
Willamette, 11 S.W.3d at 147 (quoting Wayne Cty., 756 S.W.2d at 279). See Am.
Heritage Apartments, 2005 WL 1996623, at *4; Spring Hill, 2003 WL 23099679, at *5.
Taxpayers bore the burden of proving that Assessor’s values were erroneous, and they
simply failed to do so in this case. Spring Hill, 2003 WL 23099679, at *5. We therefore
affirm the trial court’s judgment.

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                                    VII. Conclusion

       For the foregoing reasons, the judgment of the trial court is affirmed. Costs on
appeal are taxed to the appellants, Michael A. Cress and Park Place Land Holdings, LLC.
This case is remanded to the trial court for enforcement of the judgment and collection of
costs assessed below.

                                                   s/Thomas R. Frierson, II
                                                   _________________________________
                                                   THOMAS R. FRIERSON, II, JUDGE

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