Barrett/Canfield, LLC v. City of Rutland

Barrett/Canfield, LLC v. City of Rutland (98-475); 171 Vt. 196; 762 A.2d 823

[Filed 01-Sep-2000]

  NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
  40 as well as formal revision  before publication in the Vermont Reports. 
  Readers are requested to notify the Reporter of Decisions,  Vermont Supreme
  Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
  order that  corrections may be made before this opinion goes to press.

                                 No. 98-475


Barrett/Canfield, LLC	                         Supreme Court

                                                 On Appeal from
     v.		                                 Rutland Superior Court

City of Rutland	                                 May Term, 2000



Richard W. Norton, J.

John M. Ruggiero of Ruggiero Associates, Rutland, for Plaintiff-Appellant.

Christopher P. Sullivan, City Attorney, and Henry C. Brislin, Assistant City 
  Attorney, Rutland, for Defendant-Appellee.


PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       JOHNSON, J.     Taxpayer Barrett/Canfield, LLC, appeals a decision on
  the tax assessment of  its property in the City of Rutland.  The property
  was formerly owned by Tambrands, Inc., and  consisted of 27.75 acres
  including a 217,000 square-foot industrial building.  On May 30, 1997, 
  taxpayer purchased 9.7 acres including the industrial building for
  $1,763,650.  The City subsequently  assessed the value of taxpayer's
  property at $4,598,000.  The trial court found that, because the  property
  was not adequately exposed to the market, the sale price was not a reliable
  indicator of fair  market value and set the assessment value at $4,000,000. 
  On appeal, taxpayer argues that because  the purchase was between a willing
  buyer and willing seller, was made in good faith, and was 

 

  contemporaneous with the assessment date, it should be dispositive of the
  fair market value.  We  agree and reverse.

       For months preceding the events of this case, local newspapers had
  reported that Tambrands  was considering closing its Rutland manufacturing
  plant.  In September 1996, taxpayer read in the  local newspaper that
  Tambrands had finally decided to close the plant.  Taxpayer contacted a
  real  estate broker, who inquired of Tambrands whether the plant was for
  sale.  These inquiries resulted in  an initial purchase and sale agreement
  for the property on October 18, 1996, for $2,000,000.  After  nine months
  of negotiations, the agreement was amended to reflect a subdivision of the
  property with  taxpayer taking only 9.7 acres, including the building. 
  This agreement was executed on May 30,  1997, for a sale price of
  $1,763,650.  It is undisputed that the sale was made in good faith between 
  two corporations at arms-length.

       The City of Rutland initially assessed the property as of April 7,
  1997, at a value of  $4,598,000.  Taxpayer appealed to the Board of Civil
  Authority which reduced the assessment to  $4,346,800.  Taxpayer next
  appealed to the Rutland Superior Court.

       At trial, both parties presented testimony as to the estimated fair
  market value of the property.  Taxpayer presented evidence of the purchase
  price as well as an independent appraisal  commissioned by the mortgage
  provider.  This appraisal estimated fair market value at $1,900,000, 
  utilizing both the income capitalization approach and the sales comparison
  approach.  This figure is  notably close to the sale price.  The City of
  Rutland presented the results of an appraisal that it had  commissioned
  which estimated fair market value at $4,000,000, utilizing the cost
  approach, the  capitalization approach, and the sales comparison approach. 
  After a hearing on the merits, the trial  court found that the sale price
  was not indicative of the fair market value because the property was  not
  actively 

 

  marketed.  

       The issue before us is whether market exposure is a necessary element
  in establishing a bona  fide sale.  This question is one of law.  Our
  review of conclusions of law is nondeferential and  plenary.  See Thompson
  v. Dewey's South Royalton, Inc., 169 Vt. 274, 276, 733 A.2d 65, 67 (1999). 

       Real property is taxed at its "estimated fair market value," which is
  defined as "the price  which the property will bring in the market when
  offered for sale and purchased by another."  32  V.S.A. § 3481(1).   The
  statute does not mandate any particular method to determine estimates fair 
  market value.  There is no need for any estimation method, however, when a
  recent bona fide sale  exists to illustrate fair market value.  See Royal
  Parke Corp. v. Town of Essex, 145 Vt. 376, 378-79,  488 A.2d 766, 768
  (1985).  

       We must consider, therefore, what makes a sale bona fide.  A bona fide
  sale is one that occurs  between a willing buyer and a willing seller, at
  arms-length, in good faith, and not to "rig" a fair  market value.   Id. 
  An "arms-length" transaction is voluntary, generally takes place in an open 
  market, and one in which the parties act in their own best interest.  See
  Beach Properties, Inc. v.  Town of Ferrisburg, 161 Vt. 368, 375-376, 640 A.2d 50, 54 (1994).  In Royal Parke, where we  considered the fair market
  value of seventy-two identical condominium units, we held that the fair 
  market value was "sufficiently established" when two had sold and seven
  others were under contract  for sale at the same price.  145 Vt. at 379,
  488 A.2d  at 768.  We observed that, beyond the  requirement of a bona fide
  sale, "the tax statute is not concerned about the reasons either buyer or 
  seller attributed the agreed value to the property."  Id.  

       Nowhere in our cases or in 32 V.S.A. § 3481 is there a requirement
  that a property be actively  marketed in order to establish a bona fide
  sale.  The statute requires, and our cases have consistently 

 

  held, that all that is required for a bona fide sale is that it be between
  a willing buyer and seller at  arms length, in good faith and not to "rig"
  a value.  See  Royal Parke, 145 Vt. at 379, 488 A.2d  at  768.  We have, in
  fact, previously rejected an argument based on the length of time a
  property was  marketed.  See Wilde v. Town of Norwich, 152 Vt. 327, 566 A.2d 656 (1989).  In Wilde, the  taxpayer offered proof of a recent sale
  for a value considerably less than the town's assessed value.   See id. 
  The only evidence offered by the city regarding the value was the city's
  appraisal, the fact  that the property had been for sale for some time, and
  the owner was "anxious to sell."  See id.  This  evidence was insufficient
  to satisfy the town's burden in discrediting the sale price as fair market 
  value.  See id. at 330, 566 A.2d  at 657.  We therefore upheld the decision
  granting summary  judgment to the taxpayer and establishing the sale price
  as the fair market value stating that the sale  price "is strong, if not
  conclusive, evidence of fair market value." Id. at 329, 566 A.2d  at 657.	
	
       This approach to fair market value is supported by the decisions of a
  number of our sister  states.  For instance, the New York Court of Appeals
  has held that unless explained as abnormal, an  arms-length sale of "recent
  vintage" is evidence of the "highest rank" in determining the true value of 
  property.  Plaza Hotel Assocs. v. Wellington Assocs., Inc., 333 N.E.2d 346,
  349 (N.Y. 1975).  In  Board of Assessors of Boston v. Diab, 487 N.E.2d 491,
  492-493 (Mass. 1986), the Supreme Judicial  Court of Massachusetts ruled
  that the board of assessors had erroneously disregarded an actual sale 
  price as evidence of fair market value due to a mistake of law.  The
  Supreme Judicial Court of Maine  has stated that a bona fide sale of
  property is most significant evidence of market value.  See Arnold   v.
  Maine State Highway Commission, 283 A.2d 655,  (Me. 1971).

       While an actual sale is strong evidence of fair market value, 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.  See, e.g., Beach
  Properties, 161 Vt. at 376, 640 A.2d  at  54 (holding that while sale was
  voluntary, parties did not act in their own interest but acted instead to 
  protect common family interests, therefore sale price was not fair market
  value).  We have also held  that an auction sale price following a
  foreclosure was a less reliable indicator of fair market value  than the
  foreclosing bank's own appraisal.  See Vermont Nat'l Bank v. Leninski, 166
  Vt.577, 579,  687 A.2d 890, 892 (1996) (mem.). 

       The circumstances in this case, however, provide no reason to
  disregard the sale price.  Here,  both the seller and the buyer are
  sophisticated corporations. Tambrands is an international  corporation with
  eleven manufacturing plants all over the world.  Tambrands agreed to this
  sale only  after consultation with the president of the corporation and
  approval from its board of directors.  Taxpayer Barrett/Canfield is also an
  international corporation employing over 300 employees.  Prior  to making
  an offer to buy the plant, taxpayer first contacted an experienced real
  estate professional  for advice concerning the purchase of the Tambrands
  property.  After nine months of negotiations a  deal was finally reached at
  a price that both sides considered fair.  Finally, the price was approved
  by  taxpayer's mortgage provider pursuant to the provider's own estimate.

       The trial court's factual findings support all of our requirements for
  setting the fair market  value at the sale price.  The court concluded,
  however, that the sale to taxpayer was not bona fide  because the property
  was not "actively marketed."  The court concluded this lack of marketing
  did  not meet the requirements established by the definition of "Market
  Value" in 12 C.F.R. § 34.42(g)  (2000) to be conclusive of fair market
  value.  It was an error of law to import the requirement of  "active
  marketing" into the definition of a bona fide sale.  Our statute neither
  mentions such a  requirement explicitly nor suggests it as an implicit
  element.  Because our statute is unambiguous, 

 

  we apply the provision using the plain meaning of the words chosen by the
  Legislature.  See In Re  P.S., 167 Vt. 63, 70, 702 A.2d 98,102 (1997).

       As 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.  As the City in this case failed to  demonstrate that the sale
  was other than bona fide, the court erred in concluding that the sale price 
  was not the property's fair market value.

       Reversed.



                                       _____________________________
                                       Associate Justice