2195 Riverside Drive, LLC v. Franklin Cnty. Bd. of Revision

• Decision Date: 27 January 2015
• Docket Number: Nos. 14AP–297,14AP–301.,14AP–300,s. 14AP–297
• Citation: 27 N.E.3d 963
• Parties: 2195 RIVERSIDE DRIVE, LLC, Appellant–Appellant, v. FRANKLIN COUNTY BOARD OF REVISION, et al., Appellees–Appellees.
• Court: Ohio Court of Appeals

27 N.E.3d 963

2195 RIVERSIDE DRIVE, LLC, Appellant–Appellant

v.FRANKLIN COUNTY BOARD OF REVISION, et al., Appellees–Appellees.

Nos. 14AP–297

14AP–300

14AP–301.

Court of Appeals of Ohio, Tenth District, Franklin County.

Jan. 27, 2015.

Lane, Alton & Horst, LLC, and Timothy J. Owens, Columbus, for appellant.

Carlile Patchen & Murphy LLP, and Jackie Lynn Hager, Columbus, for appellee, Upper Arlington City School District Board of Education.

Opinion

BRUNNER

, J.

{¶ 1} Appellant, 2195 Riverside Drive, LLC, appeals the order of the Ohio Board of Tax Appeals determining the true and taxable values of appellant's property for tax years 2009, 2010, and 2011. For the following reasons, we affirm.

I. Facts and Procedural History

{¶ 2} The property includes two parcels comprising 1.443 acres in Upper Arlington, Ohio and is the site of the El Vaquero restaurant, which appellant's principals have operated since 1993, originally under long-term leases with its landlord, Sugar Investments. On September 2, 2009, appellant purchased the subject property from Sugar Investments for $2,000,000. On February 25, 2010, appellee Upper Arlington City School District Board of Education (“BOE”) filed a complaint with the Franklin County Board of Revision (“BOR”) to increase the valuation of the combined parcels from $668,600 to $2,000,000 for tax year 2009. Appellant filed a counter-complaint to retain the then existing Franklin County Auditor's value. For 2010, appellant filed an original complaint asserting that the combined true value remained at $668,600, and the BOE filed a counter-complaint to retain the auditor's values in pro forma fashion, apparently disregarding its complaint for the prior year that appeared to be based on the $2,000,000 sale of the parcels in 2009. Following a combined hearing for both tax years, the BOR adopted the sale price as the total true value for the property in tax years 2009 and 2010, and for 2011 retained the auditor's initial assessment based on the sexennial reappraisal in that same year.

{¶ 3} Appellant filed notices of appeal to the Board of Tax Appeals (“BTA”) on one of the two parcels, 070–03535, for 2009 and 2010, and on the other, unimproved parcel, 070–011802, for 2011. The BTA found that the September 2009 sale was a recent, arm's-length transaction and the best indicator of value for 2009, 2010, and 2011. Apportioning the $2,000,000 valuation between the two parcels in the percentages reflected in the auditor's original assessments for each year, the BTA determined the true and taxable values of the parcels on appeal as follows:

January 1, 2009:  PARCEL NUMBERTRUE VALUETAXABLE VALUE  070–003535$1,645,230$575,830    January 1, 2010:   PARCEL NUMBERTRUE VALUETAXABLE VALUE  070–003535$1,628,700$570,040    January 1, 2011:   PARCEL NUMBERTRUE VALUETAXABLE VALUE  070–011802$399,840$139,940 

(Board of Tax Appeals Decision and Order, 4.)

II. Assignments of Error

{¶ 4} Appellant makes the following assignments of error for our review:

[I.] The Board of Tax Appeals Erred and Made an Unreasonable and Unlawful Decision that the 2009 Sales Price for the Subject Property was the true value of the property for tax purposes for tax years 2009 and 2010.

[II.] The Board of Tax Appeals Erred and Made an Unreasonable and Unlawful Decision regarding the True and Tax Value of Parcel Number 070–011802 for tax year 2011.

III. Discussion

A. Standard of Review:

{¶ 5} R.C. 5717.04

provides the standard of our review of the BTA's decision:

If upon hearing and consideration of such record and evidence the court decides that the decision of the board appealed from is reasonable and lawful it shall affirm the same, but if the court decides that such decision of the board is unreasonable or unlawful, the court shall reverse and vacate the decision or modify it and enter final judgment in accordance with such modification.

B. Appellant's First Assignment of Error:

{¶ 6} Upon considering appellant's first assignment of error, that the board of tax appeals erred and made an unreasonable and unlawful decision that the 2009 sales price for the subject property was the true value of the property for tax purposes for tax years 2009 and 2010, we first consider Berea City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269, 2005-Ohio-4979, 834 N.E.2d 782

. In the Berea case, the Supreme Court of Ohio mandated that “when the property has been the subject of a recent arm's-length sale between a willing seller and a willing buyer, the sale price of the property shall be ‘the true value for taxation purposes.’ ” Id. at ¶ 13, quoting former R.C. 5713.03, Am.Sub.H.B. No. 260.¹ As the Supreme Court further expounded in Cleveland Mun. School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 107 Ohio St.3d 250, 2005-Ohio-6434, 838 N.E.2d 647, ¶ 13–14 :

Although the presumption exists that the sale price is the best evidence of true value, that presumption may be rebutted where the sale is not an arm's-length sale. Lakeside Ave. Ltd. Partnership v. Cuyahoga Cty. Bd. of Revision (1996), 75 Ohio St.3d 540, 544, 664 N.E.2d 913

. If the presumption that the sale price was the result of an arm's-length transaction is successfully rebutted, then the sale price may not be the best evidence of true value, and a review of independent appraisals based upon other factors may become appropriate. Pingue v. Franklin Cty. Bd. of Revision (1999), 87 Ohio St.3d 62, 64, 717 N.E.2d 293.

* * * In Walters v. Knox Cty. Bd. of Revision (1989), 47 Ohio St.3d 23, 546 N.E.2d 932, syllabus, we held that “[a]n arm's-length sale is characterized by these elements: it is voluntary, i.e., without compulsion or duress; it generally takes place in an open market; and the parties act in their own self-interest.”

Appellant bears the “burden to rebut the presumption that the sale price represented true value.” Id. at ¶ 15. Appellant must “ ‘produce evidence of a nature that counterbalances the presumption or leaves the case in equipoise. Only upon the production of sufficient rebutting evidence does the presumption disappear.’ ” Id., quoting Myocare Nursing Home, Inc. v. Fifth Third Bank, 98 Ohio St.3d 545, 2003-Ohio-2287, 787 N.E.2d 1217, ¶ 35

.

{¶ 7} Appellant maintains that its purchase was economically coerced and, therefore, was not an arm's-length transaction. A member of the appellant company, Sergio Morales, testified at the BOR and BTA hearings that it attempted many times to purchase the property from Sugar Investments, but its efforts had been rebuffed due to the owner's desire to maintain its investment in rental property generating income from the restaurant lease. When appellant finally bought the property in September 2009, five years remained on the lease. In the months before the sale at issue, through a separate entity, El Vaquero had contracted to purchase the adjoining property at 2185 Riverside Drive. Sugar Investments contested the plan and variances required for the proposed new restaurant. Although the Upper Arlington City Council approved the final development plan and variances on June 23, 2009, appellant's principals abandoned their plan to move and build a new restaurant next door. With the threat of further appeal by Sugar Investments to the Franklin County Court of Common Pleas, they did not seek to extend the contract to buy the adjoining property, but, instead, entered into discussions to purchase the subject property from Sugar Investments. According to appellant, Sugar Investments offered to sell the property for $2,200,000. Appellant counter-offered at $1,800,000 and the parties reached agreement for a sale price of $2,000,000.

{¶ 8} Appellant argues that it was coerced to buy the property after Sugar Investments obstructed its efforts to acquire and develop the property next door, and would compare its purchase with that in Columbus Bd. of Edn. v. Franklin Cty. Bd. of Revision, 10th Dist. No. 92AP–281, 1992 WL 249883 (Sept. 29, 1992)

(“Karl Road ”). Karl Road operated a nursing home and purchased property on a take-it-or-leave-it basis in order to open a curb cut required for a new pediatric wing and parking lot. This court reversed the decision of the BTA insofar as the BTA did not analyze the matter in accordance with its earlier holding in Columbus Bd. of Edn. v. Grange Mut. Cas. Co., 10th Dist. No. 90AP–317, 1992 WL 15246 (Jan. 28, 1992) (“Grange ”), that the subjective motives of the buyer and seller may be used to demonstrate that the sale was the result of compulsion or duress.

{¶ 9} Unlike Karl Road, appellant did not purchase the subject property on a take-it-or-leave-it basis, and appellant did not own adjacent property on which development depended on acquisition of all or a part of the subject property. Also, in Grange the record reflected “evidence that Grange did not have a choice in whether to purchase this property or some other property to meet its needs. * * * Grange had no alternative but to buy the subject property if it were to achieve its goal to complete the acquisition of the entire block.” Id. We thus observe that prior to Lakeside Ave. L.P. v. Cuyahoga Cty. Bd. of Revision, 75 Ohio St.3d 540, 664 N.E.2d 913 (1996)

, this court was circumspect in considering purchases of property as part of expanded development by a contiguous owner to qualify as arm's-length transactions. These circumstances are not present here.

{¶ 10} In Lakeside, the BTA crystallized the conflict between its decisions and this court's decisions in Grange and Karl Road “regarding the proper standard to apply in determining whether a sale of property [is] an arm's-length transaction and the best evidence of true value,” and, specifically, what is economic duress. Id. at 547, 664 N.E.2d 913

. The sale in Lakeside was for a stated, non-negotiable price, and the Supreme Court recognized that compelling business circumstances of that type “are clearly sufficient to establish that a recent sale of property was neither arm's-length in nature nor...