As of January 1, 1999, the county valued the lots at $124,000 each. (Ptf's Ex 1 at 1.) Over the following two years, taxpayer sold the lots for prices in the range of $86,800 to $112,000. The *Page 11 Magistrate Division reduced the RMVs of the 10 lots to their ultimate sale prices.1 (Id.) Taxpayer requests this court to further reduce the RMVs to the prices at which they were ultimately sold with a time-trend of 9 percent back to January 1, 1999, resulting in values ranging from $70,681 to $95,570. (Id.) The county's Answer requests affirmation of the magistrate determination. At trial, the county submitted the appraisal report of John Alve, a registered property appraiser, and argued for Alve's opinions of value, which range from $101,600 to $114,500. (Inv's Ex I-A at 1.)
2. Should the court be limited by the pleadings when determining value in property tax cases?
The RMV of land is what in prior years was referred to as "true cash value." If is defined as "the amount in cash that could reasonably be expected to be paid by an informed buyer to an informed seller, each acting without compulsion in an arm's length transaction occurring as of the *Page 12 assessment date for the tax year." ORS 308.205(1). This definition of value should be distinguished from other definitions. It is the value based on market worth rather than investment expectation or insurance value. See Appraisal Institute, The Appraisal of Real Estate, 20-21 (12th ed 2001).
Despite changes in statutory language, the fundamental value definition has been consistent for many years, and the law is clear that if a market exists for property of the kind being assessed, the property must be evaluated by the market data approach. Portland Canning Co. v. TaxCom., 241 Or. 109, 113, 404 P.2d 236 (1965); see also OAR 150-308.205-(A). Unless it is shown that the conditions affecting the value of real property have changed, a recent sale can be persuasive evidence of market value. Ernst Brothers Corp. v. Dept. of Rev., 320 Or. 294, 300- 305,882 P.2d 591 (1994) (citations omitted). However, a sale is not necessarily determinative and will be disregarded if evidence demonstrates the sale is out of line with other market data. Id. at 300 (citations omitted).
Taxpayer's main contention is that the values of the subject properties can be established by taking the ultimate sales3 of the lots in question and arriving at RMV by trending those sale prices back to the assessment date using a 9 percent discount factor.4 Taxpayer argues that it is a requirement that RMV be determined in all cases based uponthe sale price of the property. As discussed above, RMV is the amount in cash for which a property would be expected to sell as of an assessment date. Or Const, Art XI, § 11(11)(a); ORS 308.205. It is essentially an estimate of fair market value. The definition of RMV does not dictate the use of the actual sale prices of properties. The constitutional and statutory provisions state a goal rather than a specific piece of evidence that must be conclusively used in arriving at that goal. *Page 13
Taxpayer is proposing a formulaic approach to valuation that finds no basis in the statutory or case law of this state. Indeed, if taxpayer's suggested approach to valuation had validity, appraisals would have become unnecessary in valuation disputes and would have been replaced by simple projections backwards or forwards from actual sales. Any legal debate would have shifted from consideration of factors such as zoning, location, conditions of sale, and size, to a consideration of what the appropriate discount rate or rates should have been for various time periods. That is not what is reflected in the case law. See generallyWidmer v. Department of Revenue, 4 OTR 361, 366 (1971), aff'd 261 Or. 371,494 P.2d 854 (1972).
Challenging the taxpayer's contention that the discounted sale prices are the RMVs for the subject properties, the county argued that the sales were not arm's length transactions and that a change in the market occurred between the date of assessment and the sale dates. The county reasons that because some of the lots were sold in bulk, such a sale fails to accurately reflect the values of individual lots by asserting that a developer's discount was used to arrive at the sale prices. Such discounts are not representative of market value, but focus on an owner's interest. First Interstate Bank v. Dept. of Rev., 10 OTR 452 (1987),aff'd 306 Or. 450, 760 P.2d 880 (1988).
In defense of its position, the county presented the appraisal report of Alve. (Inv's Ex I-A.) Alve performed a market data appraisal report using 40 comparable sales. Adjustments were made for dissimilarities from the subject properties, such as location, size, date of sale, topography, etc. Focusing on the five properties he found were most directly comparable, Alve developed a value per square foot figure, relying most heavily on the value indicator from the January 25, 1999, sale of a lot in the same subdivision as the subject properties. From this, Alve arrived at his opinion of values. Although taxpayer questioned Alve's appraisal, it did not show or provide any evidence that the appraisal is unreliable.
The county's pleading would not have been an issue between 1977 and September 1, 1997. During that period, ORS 305.435 made clear that this court was not limited by the pleadings in property valuation cases. However, former ORS 305.435 was repealed, effective September 1, 1997. Or. Laws 1995, ch 650, § 114.5 This places the current statutory treatment of pleadings in the status held prior to the 1977 amendment of ORS 305.435. See Or. Laws 1977, ch 670, § 30. Prior to that amendment, this court held that it would not claim jurisdiction to find values outside the limits set by the pleadings. Bauman et al v. Dept. ofRev., 6 OTR 426, 438-40 (1976).
The analysis in Bauman deals with the authority of this court under the former statute, which provided that this court could "affirm, reverse, modify or remand orders of the department."6 ORS 305.435 (1975). This court may well have the authority to find values outside of the pleadings; however, avoiding unfair surprise, as recognized in Bauman, and other reasons weigh in favor of limiting a party to its pleadings. Indeed, the notice of position contained in the county's pleadings in this case also served to notify the department of the position for which the county was contending.7 If a county *Page 15 or other party can change its position as to relief requested without seeking to amend its pleadings, the department's ability to perform its statutorily mandated supervisory function, through, perhaps, more active intervention in the case, could well be impaired. See generally ORS306.115. For these reasons, this court will not find values outside the limits of the pleadings of the parties in the case.8
What is required in Oregon is "relative" uniformity, that is, uniform operation of law, not uniformity of consequences. Robinson et ux v. StateTax Com. 216 Or. 532, 536, 339 P.2d 432 (1959). For example, a successful uniformity claim resulted where a taxpayer established the similarity of its property with neighboring properties and showed that the taxing authority had a practice of creating a separate classification and methodology when assessing its land in comparison to the similar properties. Penn Phillips Lands v. Tax Com., 247 Or. 380, 384-86,430 P.2d 349 (1967). In this case, taxpayer has not shown that the properties it used for uniformity comparison were, in all material respects, comparable to its properties or that the county used a different methodology in valuing those properties. *Page 16
January 1, 1999, are in accordance with the Decision of the Magistrate Division as follows:
Account No. Current RMV Adjudicated Value
R2081715 (lot 1) $115,000 $112,000 R2081717 (lot 3) $115,000 $100,000 R2081718 (lot 4) $115,000 $100,000 R2081719 (lot 5) $115,000 $105,000 R2081720 (lot 6) $110,000 $ 97,500 R2081721 (lot 7) $104,000 $100,000 R2081722 (lot 8) $104,000 $ 98,500 R2081723 (lot 9) $104,000 $ 98,500 R2081724 (lot 10) $104,000 $ 98,500 R2081725 (lot 11) $ 98,500 $ 98,500
Judgment will be entered consistent with this Opinion. Costs to neither party.
1 At that point in time, all but two of the lots had been sold. For the unsold lots, the magistrate set RMVs of their unadjusted list prices. (Ptf's Ex 1 at 1.)
2 Unless otherwise noted, all references to the Oregon Revised Statutes are to 1999.
3 The sales occurred between February 2000 and January 2001.
4 Taxpayer suggests a 9 percent discount factor because that rate was used by the assessor to adjust the assessed values for that area to the relevant appraisal date. Trend factors are derived from ratio studies that annually analyze the relationship between the sale prices of properties.
ORS 309.200. Because trend factors are used generally for properties located in specific areas, they do not take into account features of individual properties as do appraisals.
5 A comparable provision for income tax cases has been left undisturbed. See generally ORS 305.575.
6 The role of the department in hearing appeals was supplanted by the creation of the Magistrate Division and appeals from those decisions are heard as original, independent, and de novo proceedings. See ORS 305.425;see generally Or. Laws 1995, ch 650.
7 While this was seemingly no surprise to the department in this case because the department had earlier filed an Answer with the same prayer for relief as that of the county, it is important that the department be apprised of the position taken by a county or other party.
8 Absent action from the legislature, attention to pleadings and amendments of pleading to conform with proof is critical. *Page 17