Apland v. Bd. of Equal. for Butte Cnty.

• Decision Date: 10 April 2013
• Docket Number: No. 26196.,26196.
• Citation: 830 N.W.2d 93,2013 S.D. 33
• Parties: John APLAND, et al., Plaintiff and Appellee, v. BOARD OF EQUALIZATION FOR BUTTE COUNTY, SOUTH DAKOTA, Defendant and Appellant.
• Court: South Dakota Supreme Court

830 N.W.2d 93

2013 S.D. 33

John APLAND, et al., Plaintiff and Appellee,

v.BOARD OF EQUALIZATION FOR BUTTE COUNTY, SOUTH DAKOTA, Defendant and Appellant.

No. 26196.

Supreme Court of South Dakota.

Considered on Briefs on Jan. 8, 2013.

Decided April 10, 2013.

Kenneth E. Barker of Barker Wilson Law Firm, LLP, Belle Fourche, South Dakota, Attorneys for plaintiff and appellee.

Robert L. Morris of Day Morris Law Firm, LLP, Belle Fourche, South Dakota, Attorneys for defendant and appellant.

WILBUR, Justice.

[¶ 1.] This is the second property tax appeal to this Court concerning the Butte County Director of Equalization's (Director) methodology for assessing the value of the rangeland property owned by Apland and other appellees (Apland). We must decide whether Director's recalculation on remand conformed to our decision in Apland I. The trial court held that Director did not comply with the directives in Apland I. We reverse and remand.

FACTS AND PROCEDURAL BACKGROUND

[¶ 2.] Apland and Director have been involved in a dispute over the method Director used to calculate the value of Apland's property for tax purposes in 2002 and 2003. In Apland I,

Apland assert[ed] that the methodology used by Director to determine the assessment value of Apland's rangeland violated the Constitutional requirements of equality and uniformity. Specifically, Apland assert[ed] that it was error for Director to use sales of land with “appurtenant water rights” without any adjustment for the market value of those water rights. Apland assert[ed] that this error led to his rangeland, which does not have appurtenant and nontransferable water rights, being assessed at a substantially higher value than other rangeland of similar kind and quality.

Apland v. Butte Cnty. (Apland I), 2006 S.D. 53, ¶ 17, 716 N.W.2d 787, 792. “Apland's expert, Jerry Kjerstad, stated that ‘sales ... with water rights should not be paired with sales without water rights unless an adjustment for the water rights could be quantified.’ ” Id. ¶ 18 (alteration in original). Thus, the question before this Court in Apland I was “whether it was clearly erroneous for Director to use sales of land with access to [the Belle Fourche Irrigation District (BFID) ] in his formula when determining that under SDCL 10–6–33.6, the median market value per acre in the Southern Neighborhood deviates by more than ten percent from the county median market value per acre, thus allowing Director to establish a separate market value per acre for the land within the Southern Neighborhood.” Id. (internal footnote omitted).¹

[¶ 3.] This Court held that Director “failed to comply with the Constitutional requirements of equality and uniformity.” Id. ¶ 20.SeeS.D. Const. art. VIII, § 15; S.D. Const. art. XI, § 2. In order to comply with these Constitutional requirements, we held that, before Director determines the median market value, Director must adjust for sales of land containing appurtenant and nontransferable rights downward to reflect the value of those rights. Apland I, 2006 S.D. 53, ¶¶ 19–20, 716 N.W.2d at 793. Accordingly, we remanded this case for proceedings consistent with our opinion with direction to Director to re-determine the property values after giving “appropriate consideration and value to appurtenant and nontransferable water rights, specifically BFID water rights.” Id. ¶ 26.

[¶ 4.] On remand, the trial court held a hearing and considered post-trial briefs from the parties. In its first memorandum decision on April 15, 2008, the trial court determined that Director had not complied with the holding of this Court in Apland I and required that Director “make adjustments for sales containing appurtenant water rights and adjust those sales prices ‘downward[ ]’ before calculating the median market values.” The trial court determined that an accurate median market value per acre can only be determined after the value of those water rights is established and considered. Further, the trial court held that the methodology utilized by Director to determine the assessment value of Apland's rangeland continued to be in violation of the Constitutional requirements of equality and uniformity. The trial court instructed Director to: (1) determine the value of land with appurtenant and nontransferable water rights either by adopting Apland's paired sales analysis or performing its own analysis; and (2) after determining the value of the land with appurtenant and nontransferable water rights and the median market value per acre, determine whether the recalculation would affect the 10 percent deviation analysis under SDCL 10–6–33.6.

[¶ 5.] In response to the trial court's first post-remand memorandum decision, Director submitted an affidavit detailing his methodology in reassessing the land. In his affidavit, Director stated:

29. That although your Affiant has concluded that there is no value that you can specifically and solely attribute to the value of water rights or access to water for irrigated sales and therefore there is no need to make a “downward adjustment” of the irrigated sales prior to performing the deviation analysis, your Affiant follows the directive of the Supreme Court and Circuit Court and will do the same as [Apland's] expert by determining value using a small data set which consists only of those sales that are less than 150% of assessed value.

30. That your Affiant undertook a parings analysis for the 2002 and 2003 assessment years using only “good sales”[ ²] which are non-rejected sales that are not sales over 150% of assessed value.

31. Each non-irrigated sale was paired against each irrigated sale.

32. An adjustment for soil quality is made to account for any productivity difference in each pairing and the resulting dollar difference is assumed to be solely attributable to water rights or access to water.

33. A percentage difference in adjusted sale price per acre is calculated for each pairing.

34. The median of these percentage differences is calculated for all of the pairings involving each non-irrigated sale, and for all of the pairings for all the sales.

35. A negative percentage difference is an indication that irrigation had a negative influence on value. A positive difference is an indication that irrigation influenced the sale price positively.

36. In the 2002 assessment year, there were two non-irrigated sales that were paired against thirty irrigated sales. Both of these sales indicated a positive median difference due to irrigation. One sale indicated a percentage difference of forty-five (45) percent and the other fifty-five (55) percent. Only eight (8) of the sixty (60) individual pairings indicated a negative difference for irrigation.

37. Thus, if one used only the small data set of “good sales” for the 2002 assessment year, the value of water rights or access to water (irrigation), if one assumed it was solely [due] to water rights or access to water (irrigation), is forty-eight (48) percent of the sale price of each irrigated sale.

38. That for the 2002 assessment year, a downward adjustment of 48% of the sale price of each irrigated sale is then made.

39. That for the 2002 assessment year, after adjusting the sale price of each irrigated sale, the neighborhood analysis is performed and is as follows:

a. Median Market Value per Acre (Entire County Sales) is $155.00 per acre.

b. Median Market Value per Acre (Northern Sales) is $104.00 per acre.

c. Median Market Value per Acre (Southern Sales) is $219.00 per acre.

40. That for the 2002 assessment year, after adjusting the sale price of each irrigated sale, there is a greater than 10% deviation pursuant to SDCL 10–6–33.6.

...

44. That for the 2003 assessment year[,] there were no “good sales” of non-irrigated land in which to pair with irrigated land to determine the percentage of sale price attributable to water rights. Nonetheless, forty-eight (48) percent value was assigned as the percentage attributable to each sale and a downward adjustment of 48% of the sale price of each irrigated sale is then made.

45. That for the 2003 assessment year, after adjusting the sale price of each irrigated sale, the neighborhood analysis is performed and is as follows:

a. Median Market Value per Acre (Entire County Sales) is $133.00 per acre.

b. Median Market Value per Acre (Northern Sales) is $116.00 per acre.

c. Median Market Value per Acre (Southern Sales) is $179.00 per acre.

46. That for the 2003 assessment year, after adjusting the sale price of each irrigated sale, there is a greater than 10% deviation pursuant to SDCL 10–6–33.6.

...

By stipulation, the parties' briefs and exhibits, including both Director's affidavit and an affidavit and report from Apland's expert, Ronald Ensz, ³ were submitted to the trial court for its consideration.

[¶ 6.] In its March 25, 2011 memorandum decision, the trial court concluded that Director failed to value the appurtenant water rights and make a downward adjustment prior to calculating the median market value. The trial court also held that, until an adjustment is made for appurtenant water rights, a median value comparison for the purpose of “neighborhooding” is meaningless. Accordingly, the trial court determined that Director's methodology was incorrect. The trial court entered a judgment in favor of Apland and instructed Director to make the adjustments as determined by Apland's expertfor all appeals perfected for the years 2002 to 2009. The Board of Equalization, on behalf of Director, appealed.

STANDARD OF REVIEW

[¶ 7.] “An appeal asserting a violation of a constitutional provision is a question of law reviewed under the de novo standard of review.” Stehly v. Davison Cnty., 2011 S.D. 49, ¶ 7, 802 N.W.2d 897, 899. “Statutory construction is also [a question] of law to be reviewed under the de novo standard of review.” Cable v. Union Cnty. Bd. of Cnty. Comm'rs, 2009 S.D. 59, ¶ 19, 769 N.W.2d 817, 825. “This Court [ ] reviews affidavit evidence de novo.” Id....