MAINE SUPREME JUDICIAL COURT                                                        Reporter of Decisions
Decision: 2014 ME 57
Docket:   Cum-13-110
Argued:   November 20, 2013
Decided:  April 8, 2014

Panel:        SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, GORMAN, and JABAR,
              JJ.


                                     MARC B. TERFLOTH

                                                   v.

                                 TOWN OF SCARBOROUGH

SAUFLEY, C.J.

         [¶1] Marc B. Terfloth appeals from a judgment entered in the Superior

Court (Cumberland County, Mills, J.) affirming a decision of the Scarborough

Board of Assessment Review denying his tax abatement request for property

located in the upper Prout’s Neck area of the Town of Scarborough. See 36 M.R.S.

§ 841(1) (2013). Terfloth argues that the Board’s decision was manifestly wrong

because the Board was compelled on the record before it to find that the Town’s

assessment substantially overvalued his property.1                     We agree that the Town

substantially overvalued Terfloth’s property and vacate the judgment.




   1
     Terfloth also argues that the Board was required as a matter of law to find that the Town’s system of
assessment was unjustly discriminatory because it bore no relationship to the actual value of the
properties in the Prout’s Neck area of the Town, but we do not reach that issue.
2

                                  I. BACKGROUND

      [¶2] In 2009, Terfloth purchased a house on 0.65 acres of land on the corner

of Sanctuary Lane and Black Point Road in the upper Prout’s Neck area of the

Town. Although the ocean is visible from the house, the property has no shore

frontage and sits outside Prout’s Neck’s gated community. The Town’s assessor

had valued Terfloth’s property at approximately $3.5 million in 2005 and did not

reassess it after the 2008 market downturn. During the three years before Terfloth

purchased the property, it was intermittently listed for sale.   Its listing price

decreased each year as follows:

                    June 23, 2006        $6,200,000

                    December 28, 2006 $5,700,000

                    June 8, 2007         $4,700,000

                    April 4, 2008        $4,500,000

                    September 2, 2008    $3,700,000

                    June 22, 2009        $2,900,000

Terfloth purchased the property on December 23, 2009, for $2,435,000. Terfloth is

not related to the sellers and did not purchase the property at an auction or in a

foreclosure sale.

      [¶3]   On October 8, 2010, after the Town’s assessor valued Terfloth’s

property for tax year 2010-11 at $3,503,800, the same assessed value as set in
                                                                                                        3

2005, Terfloth paid the assessed property tax of $44,252.99 and filed an

application for a tax abatement.2 See 36 M.R.S. § 841(1). In his application,

Terfloth asserted that the property’s purchase price of $2,435,000, not the Town’s

assessment of $3,503,800, was the true measure of its market value, such that the

Town’s estate valuation should have been reduced by $1,068,800. In a letter dated

January 3, 2011, the Town’s assessor denied Terfloth’s abatement request, stating

that “[t]here were very few sales in [the Town] for the last year that fell 30% below

[their] assessed value and most were distressed and[/]or foreclosures;” that the

Town’s assessment of Terfloth’s property is “fair and equitable” when compared

with others in the neighborhood; and that the Town will decrease the assessment of

Terfloth’s property if future sales in his neighborhood reflect a general decrease in

property prices.

        [¶4] On March 4, 2011, Terfloth filed an application for assessment review

with Scarborough’s Board of Assessment Review, arguing that the Town’s

assessment was manifestly wrong because it substantially and unjustly overvalued

his property. The Board held a hearing on May 26, 2011, and on June 1, 2011,

issued a written decision concluding that Terfloth “did not meet his burden of




   2
    To appeal an assessor’s denial of a request for abatement, a taxpayer must first pay the assessed tax.
36 M.R.S. § 843(4) (2013).
4

showing that the property has been substantially overvalued relative to its market

value.”

          [¶5] At the Assessment Review hearing, the Town presented, together with

other evidence, the assessor’s valuation report, which identified Terfloth’s

purchase as an “Arms Length Sale.” During the hearing, the assessor qualified that

statement, indicating that he believed that the sale of Terfloth’s property was not

quite a foreclosure, but “in that range of foreclosure sales.” The assessor provided

no evidence on that point. The assessor also testified that he assessed Terfloth’s

property using a method he called the “square root of the fractional acre.” This

formula—which the Town has used since 1958—yields a valuation for

property-tax purposes based on a zone-specific price for a half acre and the square

root of the acreage of the property being valued. The use of the formula on

Terfloth’s lot resulted in an assessment of $3,503,800, which has remained

unchanged since 2005.                The Town’s own evidence, including the list of

assessment-to-sales ratios for other Prout’s Neck properties, disclosed that the

Town had assessed Terfloth’s property at 144% of its sale price—a substantially

higher ratio than for any other Prout’s Neck property.3 The assessor explained


    3
         The assessor presented the following data showing assessment-to-sales-price ratios over twenty
years:
                                                                                    Assessment
        Year    Lot               Lot Size      Sale Price        Assessment
                                                                                       Ratio
        1991    U019-21               .51 AC    $950,000          $759,600                 80%
                                                                                    5

variation among the assessment ratios by stating that (1) land over one acre is

treated as excess acreage, (2) lots with the same owner are treated as one lot, and

(3) the variance from the baseline valuation is inversely proportional to the size of

the lot.

       [¶6] The Board found, among other things, that properties similarly situated

to Terfloth’s property that sold in the Prout’s Neck area in the five years preceding

Terfloth’s purchase were sold for over three million dollars and that the 144% ratio

between the sale and assessment values of Terfloth’s property “does stick out, but

    1992    U019-19           .69 AC   $841,300      $874,100             104%
    1992    U020-48         1.04 AC    $637,000      $688,800              l08%
    1993    U020-19           .85 AC   $800,000      $695,800               87%
    1994    U019-01           .66 AC   $601,000      $551,800               92%
    1994    U019-12         1.27 AC    $600,000      $678,800              113%
    1994    U020-03          .88 AC    $430,000      $489,900              114%
    1995    U020-18          .51 AC    $750,000      $643,500               86%
    1996    U020-14          2.5 AC    $1,400,000    $1,008,600             72%
    1996    U020-42          .69 AC    $1,500,000    $852,800               57%
    1998    U017-30          .56 AC    $1,850,000    $761,200               41%
    2002    U020-03          .88 AC    $1,700,000    $963,400               57%
    2003    U019-22          .51 AC    $3,000,000    $1,223,700             41%
    2004    U018-08          .80 AC    $3,000,000    $1,629,900             54%
    2005    U019-18          .64 AC    $6,000,000    $3,559,200             59%
    2006    U017-02          .84 AC    $1,499,000    $531,800               35%
    2006    U019-01          .66 AC    $4,000,000    $3,056,100             76%
    2006    U020-44          .11 AC    $1,840,000    $1,269,200             69%
    2007    U018-20404-05   1.06 AC    $3,900,000    $4,163,700            107%
    2007    U018-2403        .46 AC    $3,300,000    $2,551,400             77%
    2008    U019-17          .52 AC    $3,500,000    $3,070,700             88%
    2009    U020-21          .65 AC    $2,435,000    $3,503,800   144% (Terfloth)
    2010    U019-23          .64 AC    $3,975,000    $3,697,200             93%
    2011    U018-2403        .46 AC    $3,300,000    $2,551,400             77%
6

one sale does not make a market.” The Board further stated, “It is just likely he got

a good deal. His purchase price seems under what has been typical.”

        [¶7] On June 7, 2011, Terfloth requested that the Board reconsider its denial

of his appeal.4 The Board held a hearing on June 23, 2011, and voted to deny

Terfloth’s motion for reconsideration. Terfloth appealed the Board’s decision to

the Superior Court, which remanded the case to the Board in a judgment entered on

December 30, 2011, see M.R. Civ. P. 80B; 36 M.R.S. § 843(1) (2013), finding that

the Board had failed to state adequate conclusions and findings of fact.

        [¶8] On February 9, 2012, the Board issued fifteen factual findings and two

conclusions after reconvening in an executive session to comply with the court’s

decision.      The Board found, among other things, that the Town’s assessment

formula is reasonable as applied to Terfloth’s property; that the price Terfloth paid

for his property, although significantly below the assessed value, does not justify

deviation from the assessor’s methodology; that the price Terfloth paid for his

property “was an aberration in light of other sales” in Prout’s Neck; that Terfloth

failed to present “sufficient credible evidence” as to why his purchase price was

lower than general sale prices in Prout’s Neck; and that “it was not clear . . . that


    4
      Specifically, Terfloth urged the Board to reconsider its conclusion that “[a]lmost all of the properties
sold at Prout’s Neck since 2005 have sold for over three million dollars” to the extent that it derived the
conclusion from the sale value of lot U018-2403, a lot Terfloth asserted was never publicly listed for sale,
but was sold privately in a non-arm’s-length transaction. The Board declined to accept that argument
after hearing on the motion for reconsideration.
                                                                                 7

the sale was an arm’s-length transaction because of the length of time the

[p]roperty was on the market.”     The Board concluded that Terfloth failed to

demonstrate, first, that the Town’s valuation was manifestly wrong or so irrational

or unreasonable that the property was overvalued and, second, that the Town’s

“valuation was the result of unjust discrimination and that the Assessor used

systematic and intentional methods to create a disparity,” or that the assessor’s

method or assumptions were unfounded or arbitrary.

      [¶9] On March 7, 2012, Terfloth again appealed the Board’s decision,

alleging that the Town’s assessment is unjustly discriminatory and that the Board

erred when it concluded that the sale to Terfloth was not an arm’s-length

transaction.   See M.R. Civ. P. 80B. On January 31, 2012, the court, referencing

the very high burden that a taxpayer must overcome on appeal, affirmed the

Board’s denial. Terfloth timely appealed pursuant to 14 M.R.S. § 1851 (2013) and

M.R. App. P. 2.

                          II. STANDARD OF REVIEW

      [¶10] “When a party appeals a decision of the Superior Court in an action

seeking review of a [tax assessment], we review the Board’s decision directly for

abuse of discretion, errors of law, and sufficient evidence.”         UAH-Hydro

Kennebec, L.P. v. Town of Winslow, 2007 ME 36, ¶ 10, 921 A.2d 146. “That the

record contains evidence inconsistent with the result, or that inconsistent
8

conclusions could be drawn from the evidence, does not render the [Board’s]

findings invalid if a reasonable mind might accept the relevant evidence as

adequate to support the [Board’s] conclusion.” Town of Vienna v. Kokernak, 612

A.2d 870, 872 (Me. 1992).

                                         III. DISCUSSION

A.       Burden of Proof and Standard of Review of the Assessment

         [¶11]    The Maine Constitution provides that “[a]ll taxes upon real and

personal estate, assessed by authority of this State, shall be apportioned and

assessed equally according to the just value thereof.” Me. Const. art. IX, § 8; see

Weekley v. Town of Scarborough, 676 A.2d 932, 934 (Me. 1996) (“‘Just value’

means market value.”). Accordingly, an assessment must be supported by two

factual findings. Chase v. Town of Machiasport, 1998 ME 260, ¶ 11, 721 A.2d

636. “[F]irst, the property must be assessed at its fair market value.”5 Id. (citing


     5
      Black’s Law Dictionary defines “fair market value” as “[t]he price that a seller is willing to accept
and a buyer is willing to pay on the open market and in an arm’s-length transaction; the point at which
supply and demand intersect.” Black’s Law Dictionary 1691 (9th ed. 2009). Several state courts have
held that sale price is probative, but not dispositive, of fair market value. See, e.g., Donlon v. Bd. of
Assessors of Holliston, 453 N.E.2d 395, 402 (Mass. 1983) (stating that sale prices are “very strong
evidence of fair market value, [because] they represent what a buyer has been willing to pay to a seller for
a particular property” (alteration in original)); Appeal of Lakeshore Estates, 543 A.2d 412, 415 (N.H.
1988) (“[T]he sale price of a piece of property is evidence of its value unless the court finds on evidence
that there was not a fair market.”); Plaza Hotel Assoc. v. Wellington Assoc., Inc., 333 N.E.2d 346, 349
(N.Y. 1975) (stating that the property’s sale price “should be accorded significance of the highest rank as
a determiner of the value of the property, unless explained away as abnormal in some fashion”); Sahalee
Country Club, Inc. v. State Bd. of Tax Appeals, 735 P.2d 1320, 1324 (Wash. 1987) (stating that one of
three general methods of determining fair market value is “appraising property by analyzing sale prices of
similar property”).
                                                                                                             9

Quoddy Realty Corp. v. City of Eastport, 1998 ME 14, ¶ 9, 704 A.2d 407); see

McCullough v. Town of Sanford, 687 A.2d 629, 631 (Me. 1996) (“The sale price of

property is probative of its market value.”). “[S]econd, the assessed value must be

equitable, that is, the property must be assessed at a relatively uniform rate with

comparable property in the district.” Chase, 1998 ME 260, ¶ 11, 721 A.2d 636.

        [¶12] A taxpayer who seeks a tax abatement must prove that the assessed

valuation is “manifestly wrong.”                  Id. ¶ 12 (quotation marks omitted).                     An

assessment is manifestly wrong if the taxpayer can demonstrate

        (1) that [the taxpayer’s] property was substantially overvalued and an
            injustice resulted from the overvaluation;
        (2) that there was unjust discrimination in the valuation of the
            property; or
        (3) that the assessment was fraudulent, dishonest, or illegal.

Town of Bristol Taxpayers’ Ass’n v. Bd. of Selectmen/Assessors for the Town of

Bristol, 2008 ME 159, ¶ 8, 957 A.2d 977.

        [¶13] We focus here on whether the taxpayer’s property was substantially

overvalued. “We will vacate the [Board’s] decision that a taxpayer failed to meet

his burden to show one of these three circumstances ‘only if the record compels a



    In some states, the sale price in a bona fide purchase is dispositive of fair market value. See, e.g., Pine
Pointe Hous., L.P. v. Lowndes Cnty. Bd. of Tax Assessors, 561 S.E.2d 860, 863 (Ga. Ct. App. 2002)
(stating that fair market value is “the amount a knowledgeable buyer would pay for the property and a
willing seller would accept for the property at an arm’s length, bona fide sale”); Wilde v. Town of
Norwich, 566 A.2d 656, 657 (Vt. 1989) (“[O]ur statutory definition of fair market value is the price which
the property will bring in the market when offered for sale and purchased by another.” (quotation marks
omitted)).
10

contrary conclusion to the exclusion of any other inference.’” Id. ¶ 9 (quoting

Weekley, 676 A.2d at 934).

B.         Substantial Overvaluation

           [¶14] Terfloth argues that the Board erred in concluding that he did not

purchase his property in an arm’s-length transaction, leading it to accept the

Town’s assessment, rather than the sale price, as an accurate representation of his

property’s fair market value. Terfloth contends that the evidence compels the

conclusion that he purchased his property in an arm’s-length transaction, such that

the sale price of his property provides competent evidence of his property’s fair

market value.            In so arguing, Terfloth points to the assessment ratio for his

property of 144%, the highest assessment ratio for a Prout’s Neck property since at

least 1991,6 and argues that it compels the conclusion that the assessed valuation of

his property is manifestly wrong in relation to its just value. See Weekley, 676

A.2d at 934.

           [¶15] The Town responds that the Board did not err because a property’s

sale price, although important, is not dispositive in determining its fair market

value. At the abatement hearing, where Board members sought to determine the

fair market value for Terfloth’s property, the assessor testified that there were too

few recent sales of comparable properties in the Prout’s Neck area for him to take

     6
         The record contains no evidence of the assessment ratios of Prout’s Neck properties before 1991.
                                                                                11

the property’s sale price as a statement of its fair market value. The assessor

insisted that one sale does not make a market, and indicated that he would not

reassess Terfloth’s property unless more sales in the Prout’s Neck area indicate

that the property’s sale price was, in fact, its fair market value. Based on the

assessor’s testimony and the length of time the property was on the market before

Terfloth purchased it, the Board found that Terfloth had not proved that he had

purchased his property in an arm’s-length transaction and concluded that Terfloth’s

property was not substantially overvalued.

      [¶16] We conclude that the Board committed a factual error in finding that

Terfloth failed to prove that he had purchased his property in an arm’s-length

transaction and thereby inferentially finding that Terfloth did not purchase his

property in an arm’s-length transaction.     This factual error, together with the

assessor’s insistence that there be more local sales, even in a sluggish market,

before reconsidering the value of Terfloth’s property, led the Board to disregard

the importance of the sale price of Terfloth’s property in determining its fair

market value and to conclude that Terfloth’s property was not substantially

overvalued. Thus, contrary to the Board’s conclusion, the evidence compels the

conclusion that Terfloth’s property was substantially overvalued. See McCullough,

687 A.2d at 631.
12

      [¶17] Although evidence presented in an abatement hearing is within the

Board’s authority to believe or disbelieve, the Board’s finding that Terfloth did not

purchase his property in an arm’s-length transaction is unsupported by any

evidence in the record. See Arnold v. Me. State Highway Comm’n, 283 A.2d 655,

658 (1971) (“An actual sale very near to the time at which the value is to be fixed

is of ‘great weight’ as contrasted with mere opinion evidence.”). Specifically, the

assessor’s statement that the sale price for Terfloth’s purchase was “in that range of

foreclosure sales” is unsupported in the record. See id. Read in context, the

evidence does not support the finding that Terfloth bought the property at a distress

or foreclosure sale, from his own family, at an auction, or in another

non-arm’s-length transaction.       Rather, the assessor’s statement appears to

constitute a tautology: the assessed value is the fair market value; the sale price is

lower than the assessed value; therefore the sale price does not represent fair

market value. Ultimately, it appears that the Town’s assessor declined to give any

weight to the sale price of Terfloth’s property for two reasons: (1) the assessor

believed he needed more comparable sales in order to determine fair market value;

and (2) if he reassessed Terfloth’s property, he would have to reassess other

properties. Neither of those reasons provides a basis for completely disregarding

the sale price of a property sold at arm’s length.
                                                                                     13

      [¶18] Moreover, contrary to the Town’s argument, the property’s presence

on the market for three years before Terfloth purchased it—including for six

months at a price lower than its assessed value—further indicates that its sale price

is more representative of its market value and that the Board erred in finding the

contrary. An additional indication that the Board committed a factual error is that

in his evaluation report, the assessor himself described Terfloth’s purchase as an

“Arms Length Sale.”

      [¶19] Although we have not held, and do not hold today, that the price from

an arm’s-length sale is dispositive of a property’s fair market value, the Board’s

factual error regarding the arm’s-length nature of Terfloth’s purchase caused it to

give too little weight to the sale price as representative of the property’s fair market

value. Town of Sw. Harbor v. Harwood, 2000 ME 213, ¶ 19, 763 A.2d 115 (“The

arms length sale price of property provides the best evidence of market value.”).

Considered along with the fact that the Town had not reassessed Terfloth’s

property since 2005—despite the market downturn in 2008—the evidence compels

the conclusion that “the property is substantially overvalued and an injustice” has

resulted. See McCullough, 687 A.2d at 630. We therefore vacate the Board’s

determination and remand for a reevaluation of Terfloth’s property.
14

        The entry is:

                           Judgment vacated and remanded to the Superior
                           Court for remand to the Scarborough Board of
                           Assessment Review for further proceedings
                           consistent with the opinion herein.



On the briefs:

        John C. Bannon, Esq., and John B. Shumadine, Esq., Murray,
        Plumb & Murray, Portland, for appellant Marc B. Terfloth

        James N. Katsiaficas, Esq., Perkins Thompson, P.A., Portland,
        for appellee Town of Scarborough


At oral argument:

        John B. Shumadine, Esq. for appellant Marc B. Terfloth

        James N. Katsiaficas, Esq., for appellee Town of Scarborough



Cumberland County Superior Court docket number AP-2012-19
FOR CLERK REFERENCE ONLY
