Bison Tp. v. Perkins County

• Citation: 607 N.W.2d 589,2000 SD 38
• Decision Date: 15 March 2000
• Docket Number: No. 21048.,21048.
• Parties: BISON TOWNSHIP, Plateau Township, Lincoln Township, Rainbow Township, Lone Tree Township, Scotch Cap Township, Wilson Township, Vickers Township, Strool Township, Maltby Township, Viking Township, and Horsecreek Township, Appellants, v. PERKINS COUNTY, South Dakota, Appellee.
• Court: Supreme Court of South Dakota

607 N.W.2d 589

2000 SD 38

BISON TOWNSHIP, Plateau Township, Lincoln Township, Rainbow Township, Lone Tree Township, Scotch Cap Township, Wilson Township, Vickers Township, Strool Township, Maltby Township, Viking Township, and Horsecreek Township, Appellants, v. PERKINS COUNTY, South Dakota, Appellee.

No. 21048.

Supreme Court of South Dakota.

Considered on Briefs January 10, 2000.

Decided March 15, 2000.

Rehearing Denied April 19, 2000.

Patricia de Hueck, Pierre, for appellants.

Curtis W. Hanks, Perkins County State's Attorney, Lemmon, for appellee.

MILLER, Chief Justice.

[¶ 1.] Eleven townships in Perkins County appeal their 1998 real estate assessments. Because County included non-arms-length transactions in its market analysis and failed to properly re-evaluate the use of assessment zones, we reverse and remand.

FACTS

[¶ 2.] In 1993 Perkins County (County) exercised its statutory right to create "zones" of different assessment areas within the county.¹ Where there existed an identifiable region that deviated more than 10 percent in value from the county average, a separate assessment zone was created. As a result, Perkins County is divided into four zones. Appellants (Townships) own property located in Zones 1 and 3.

[¶ 3.] When assessing property, County relies mainly on two factors: soil samples and market values. It utilizes soil surveys prepared by the U.S. Department of Agriculture, which categorize soil into eight types. The most productive soil is assigned a ratio of 1. For each township, an average soil rating is determined based upon the composition of soils in that particular area. For example, a township may have an average soil rating of .654 (with 1 being ideal), depending upon the capability of the soil to produce.

[¶ 4.] County also conducts a market analysis using recent sales of agricultural land. Sales data is reviewed to determine the "top dollar value" (per acre) for each zone. The top dollar value in each zone is assigned to soil with a ratio of 1, the most productive soil. For the 1998 assessment year, Zones 1 and 3 had an assigned top dollar value of $256.25. Zones 2 and 4 had a top dollar value of $205.00. Zones 1 and 3 have higher top dollar values because County has determined that those areas deviated more than 10 percent in value from the county average.

[¶ 5.] After compiling soil sample and market value information, the average soil rating for each township was multiplied by the top dollar value in that zone. As a result of differing top dollar values, townships that had nearly identical average soil ratings had different assessment values. For example, DeWitt Township, which is located in Zone 1, had an average soil rating of .469. When multiplied by the top dollar value of $256.25, the average assessed value was $120.18 per acre. On the other hand, Wells Township, which is located in Zone 4, had an average soil rating of .468. When this ratio was multiplied by the top dollar value of $205.00, the average assessed value was $95.94 per acre. [¶ 6.] Townships appealed their 1998 assessments based upon these apparently disparate results. They challenged whether the assessment zones utilized by County were accurate, and whether the County used only arms-length transactions in conducting its market analysis of sales in the county. The Office of Hearing Examiners (OHE) found that County did not perform an analysis for 1998 to determine whether the assessment zones were accurate. OHE further found that County did not use arms-length transactions in its market analysis. OHE therefore ordered Townships' assessments be reversed; however, it directed that the top dollar value of Zones 2 and 4 be applied to Zones 1 and 3. County appealed OHE's decision to the circuit court. The court reversed OHE's decision, stating in its findings of fact and conclusions of law:

The court finds as a fact that the Director of Equalization of Perkins County correctly performed his duties pursuant to statute and the rules and regulations of the State of South Dakota Department of Revenue;

The Court finds as a fact that the appellees failed to overcome the presumption that the tax official did his duty in accordance with the law and that his figures were correct;

The Court finds as a fact that the appellees failed to overcome the presumption that the tax official did not act unfairly and arbitrarily regarding the assessment of property in Perkins County;

The Court finds as a fact that the Hearing Examiner was clearly erroneous as a matter of law in her findings and conclusions.

....

The Hearing Examiner was clearly erroneous as a matter of law in light of the entire evidence and record herein[.]

[¶ 7.] Townships appeal the circuit court's decision, raising the following issues:

1. Whether County violated SDCL 10-11-56 by not using arms-length transactions for comparable sales.

2. Whether County violated SDCL 10-6-33.6 by failing to properly re-evaluate the use of assessment zones.

STANDARD OF REVIEW

[¶ 8.] As we recently stated in Butte County v. Vallery, 1999 SD 142, ¶ 8, 602 N.W.2d 284, 286-87:

This is an appeal of a tax assessment pursuant to SDCL 10-11-43 and thus it is procedurally governed by SDCL ch 1-26. Under SDCL 10-11-42.1, the hearing examiner tries the issues de novo. On appeal both the circuit court and this Court review that decision as set forth in SDCL 1-26-36. This standard of review requires us to accord great weight to the findings and inferences made by the hearing examiner on factual questions. Clarkson & Co. v. Harding County, 1998 SD 74, ¶ 5, 581 N.W.2d 499, 501 (citing Sopko v. C & R Transfer Co., Inc., 1998 SD 8, ¶ 6, 575 N.W.2d 225, 228). "When the issue is a question of fact, we ascertain whether the administrative agency was clearly erroneous." Loyal Order of Moose Lodge v. Pennington County, 1997 SD 80, ¶ 5, 566 N.W.2d 132, 133. (Citations omitted.)

See also West Two Rivers Ranch v. Pennington County, 1996 SD 70, ¶ 6, 549 N.W.2d 683, 685

(quoting Lincoln Township, 1996 SD 13, ¶ 24, 543 N.W.2d at 259). "When the issue is a question of law, the decisions of the administrative agency and the circuit court are fully reviewable." Vallery, 1999 SD 142, ¶ 8,

602 N.W.2d at 287.

DECISION

[¶ 9.] 1. County violated SDCL 10-11-56 by not using arms-length transactions for comparable sales.

[¶ 10.] All property shall be assessed at its true and full value in money. SDCL 10-6-33. However, exact uniformity and mathematical accuracy in valuations are impossible. Kindsfater v. Butte County, 458 N.W.2d 347, 350 (S.D.1990) (citations omitted). Therefore, uniformity and equality of taxation is preferred over the standard of full and true value when both objectives cannot be secured. Id.

[¶ 11.] There is a presumption that tax officials act in accordance with the law and not arbitrarily or unfairly when assessing property. Amert v. Lake County Bd. of Equalization, 1998 SD 66, ¶ 14, 580 N.W.2d 616, 618-19 (citing Richter Enterprises, Inc., v. Sully County, 1997 SD 61, ¶ 7, 563 N.W.2d 841, 843) (other citations omitted). The taxpayer also has the burden of overcoming the presumption that the assessment is correct by producing sufficient evidence to show the assessment was in excess of true and full value, lacked uniformity in the same class, or was discriminatory. Id.

[¶ 12.] OHE found that County used non-arms-length sales in its market analysis, because it included intra-family real estate transfers. In addition, OHE found that County failed to use arms-length sales in its market analysis, even though such data was available. After reviewing the OHE hearing transcript, exhibits, and records, and hearing oral arguments from the parties, the trial court reversed OHE's findings. However, the court's findings only generally state that Townships did not overcome the presumptions of correctness and fairness in the assessment process. Mindful of our standard of review, we hold the trial court erred because there is evidence that County used prohibited non-arms-length transactions in its market analysis.

[¶ 13.] SDCL 10-6-33 concerns the procedure to be utilized in making property valuations:

All property shall be assessed at its true and full value in money. The true and full value is the taxable value of such property upon which the levy shall be made and applied and the taxes computed. In determining the true and full value of property the director of equalization may not adopt a lower or different standard of value because it is to serve as a basis of taxation. The director may not adopt as a criterion of value the price for which the property would sell at a forced sale, or in the aggregate with all the property in the third class municipality or district. The director shall value each article or description by itself and at an amount or price as he believes the property to be fairly worth in money. The true and full value shall be determined by appropriate consideration of the cost approach, the market approach and the income approach to appraisal. The director of equalization shall consider and document all elements of such approaches that are applicable prior to a determination of true and full value.

[¶ 14.] The assessment of agricultural land is guided by SDCL 10-6-33.1:

The true and full value in money of agricultural land, as defined by § 10-6-31, which has been in primarily agricultural use for at least five successive years immediately preceding the tax year for which assessment is to be made shall be the market value as determined for each county through the use of all comparable sales of agricultural land based on consideration of the following factors:

(1) The capacity of the land to produce agricultural products as defined in § 10-6-33.2; and

(2) The soil,² terrain and topographical condition of the property including but not limited to capability, the land's use, climate, accessibility and surface obstructions which can be documented through an analysis of

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