Citizens Financial Corp. v. Porterfield

• Decision Date: 10 February 1971
• Docket Number: No. 70-170,70-170
• Citation: 25 Ohio St.2d 53,54 O.O.2d 191,266 N.E.2d 828
• Parties: , 54 O.O.2d 191 CITIZENS FINANCIAL CORP., Appellant, v. PORTERFIELD, Tax Commr., Appellee.
• Court: Ohio Supreme Court

Page 53

25 Ohio St.2d 53

266 N.E.2d 828, 54 O.O.2d 191

CITIZENS FINANCIAL CORP., Appellant, v. PORTERFIELD, Tax Commr., Appellee.

No. 70-170.

Supreme Court of Ohio.

Feb. 10, 1971.

Syllabus by the Court

1. The Supreme Court reviews decisions of the Board of Tax Appeals on questions of law. It is not the function of this court to substitute its judgment for that of the Board of Tax Appeals on factual issues, but only to determine from the record whether the decision rendered by the board is unreasonable or unlawful. (Paragraph two of the syllabus in Board of Ed. of Cleveland Hts. City School Dist. v. Evatt, 136 Ohio St. 283, 25 N.E.2d 453, approved and followed; Brennan v. Bd. of Tax Appeals, 175 Ohio St. 263, 193 N.E.2d 700, followed.)

2. Where a material portion of a Board of Tax Appeals decision is not supported by any probative evidence of record, the decision is unreasonable and unlawful.

The appellant, Citizens Financial Corporation, filed a dealer in intangibles tax return for the year 1965 pursuant to R.C. 5725.13, listing the value of its shares to the extent represented by capital in this state as $542,300.52. ¹

Upon audit, the Tax Commissioner determined that the appellant's book value as reported did not reflect the fair value of its shares, in that appellant had understated its investment in one of its subsidiaries, The Citizens Savings and Loan Company. ² The Tax Commissioner issued an assessment increasing the appellant's taxable value by $2,075,684. The appellant filed an application for review and redetermination. The Tax Commissioner, finding no error, affirmed the assessment. Further facts are set forth in the relevant part of the Board of Tax Appeals' entry, as follows:

'The appellant, Citizens Financial Corporation, was not in existence as a corporate name at the beginning of 1964. At that time, there were four separate corporations known as Almour Securities, Inc., The Citizens Savings and Loan Company, Almour Mortgages, Inc., and Ohio Escrow Services, Inc. These corporations all had independent existence and were not a part of a related corporate structure; the stock in each corporation was owned by individuals. In mid-1964, a reorganization occurred which resulted in the creation of a parent-subsidiary relationship and cast the appellant into the role of a financial holding company. The mechanics of this reorganization can be summarized as follows: Almour Mortgages, Inc.'s Articles of Incorporation were amended to change its name to Citizens Financial Corporation; the authorized number of shares of Citizens was increased; Citizens exchanged its shares of common stock with the individuals who owned all or substantially all of the common stock of Almour Securities, Inc., The Citizens Savings and Loan Company, and Ohio Escrow Services, Inc.; and Citizens thereby acquired these three corporations which became its subsidiaries.'

The cause is before this court upon an appeal as of right.

James F. Hadley, Columbus, for appellant.

Paul W. Brown, Atty. Gen., and C. Luther Heckman, Columbus, for appellee.

HERBERT, Justice.

The appellant's first contention is that the decision of the Board of Tax Appeals in unreasonable and unlawful because the appellant's business activities as of the tax listing day, December 31, 1964 (R.C. 5725.14), did not constitute it a dealer in intangibles within the meaning of paragraph (B) of R.C. 5725.01. ³ Upon an examination of the record, which reveals that Citizens Financial extended loans to its clients and that it served in the capacity of an agent in seeking adequate financing for its clients, we conclude that he appellant was a dealer in intangibles within the meaning of paragraph (B) of R.C. 5725.01.

The taxpayer's second argument is that the Board of Tax Appeals' decision is unreasonable and unlawful, insofar as the board affirmed the Tax Commissioner's determination of the fair value of the Citizens Savings and Loan Company stock owned by the appellant. ⁴

In support of this position, the appellant asserts first that the board failed to give effect to the case of Opdyke v Security Savings & Loan Co. (1952), 157 Ohio St. 121, 105 N.E.2d 9. In Opdyke, the plaintiffs, minority shareholders of a building and loan association which was to be converted into a federal savings and loan association, challenged the fairness of the plan of conversion under which they were to receive $135 per share in exchange for their shares which had a book value of $372.95. The Opdyke opinion discussed matters similar to factors presented below in the instant cause by the appellant, regarding the valuation of shares of a building and loan company, such as the effect of federal reserve requirements upon dividend policy and the difficulties in realizing, upon liquidation, the face value of mortgages held by a savings and loan company.

Although Opdyke appears to be the only case in which this court has discussed the problem of valuation of savings and loan company shares, we believe the opinion reveals that the question of value there turned upon evidence of sale prices of the shares rather than upon the reserve and liquidation factors mentioned above.

Appellant asserts also that the Board of Tax Appeals decision on the question of valuation was based solely upon incompetent evidence. In the record before us, the Board of Tax Appeals gave as its only reason for affirming the Tax Commissioner's valuation of the appellant's investment in its subsidiary (at $9.374 per share) the fact that 'the only evidence of sale price of shares was given by appellant's own witness and placed a range of $9 to $15 as sale prices within his knowledge.' (Emphasis added.)

It has been repeatedly held that it is not the function of this court to substitute its judgment on factual issues for that of the Board of Tax Appeals. We are limited to a determination from the record whether the decision reached by the board is unreasonable or unlawful. See Brennan v. Board of Tax Appeals (1963), 175 Ohio St. 263, 193 N.E.2d 700; Neil House Hotel Co. v. Board of Revision (1946), 147 Ohio St. 231, 70 N.E.2d 646; Columbus v. Budget Commission of Franklin County (1945), 144 Ohio St. 437, 59 N.E.2d 367; Stritch v. Budget Commission of Clark County (1942), 140 Ohio St. 495, 45 N.E.2d 601; Board of Ed. of Cleveland Hts. City School Dist, v. Evatt (1940), 136 Ohio St. 283, 25 N.E.2d 453. The scope of review of decisions of the Board of Tax Appeals is circumscribed in this...