Conalco, Inc. v. Monroe County Bd. of Revision

• Citation: 50 Ohio St.2d 129,363 N.E.2d 722,4 O.O.3d 309
• Decision Date: 01 June 1977
• Docket Number: No. 76-871,76-871
• Parties: , 4 O.O.3d 309 CONALCO, INCORPORATED, Appellant, v. MONROE COUNTY BOARD OF REVISION, Appellee.
• Court: United States State Supreme Court of Ohio

Page 129

50 Ohio St.2d 129

363 N.E.2d 722, 4 O.O.3d 309

CONALCO, INCORPORATED, Appellant, v. MONROE COUNTY BOARD OF REVISION, Appellee.

No. 76-871.

Supreme Court of Ohio.

June 1, 1977.

Syllabus by the Court

1. The best evidence of the 'true value in money' of real property is an actual, recent sale of the property in an arm's-length transaction. (State, ex rel. Park Investment Co., v. Bd. of Tax Appeals, 175 Ohio St. 410, 195 N.E.2d 908, approved and followed.)

2. In valuing real property sold within three days of the tax lien date in an arm's-length transaction, the best evidence of 'true value in money' is the proper allocation of the lump-sum purchase price and not an appraisal ignoring the contemporaneous sale.

Olin Corporation, after 16 years of unprofitable aluminum production, decided to sell its aluminum division. On January 3, 1974, after considerable arm's-length negotiations with Conalco, Inc. (appellant), and other prospective purchasers, Olin sold its entire domestic aluminum division to appellant, consisting of the subject facility situated adjacent to State Route No. 7, Hannibal, Monroe County, and seven other facilities with sites foreign to Ohio. Appellant paid a lump-sum purchase price of $122,300,000 for all the aluminum division's assets and agreed further to assume the division's liabilities. The parties did not specify in their agreement the exact amount to be paid for the real estate, personal property, accounts receivable or the other tangible and intangible property.

Subsequent to the lump-sum purchase, appraisers were employed by appellant to appraise the purchased assets and to make an allocation of the purchase price to all the real and personal property at the eight locations, pursuant to Accounting Principles Board Opinion No. 16, Business Combinations, 1970 (APB 16). This allocation of the purchase price was necessary to account for the purchase of the aluminum division on appellant's books.

Appellant's real property located in Monroe County was subject to a mass appraisal by Allied Appraisal Company, at the request of the county auditor of Monroe County for the purpose of tax valuation as of January 1, 1974. The mass appraisal of the subject real property determined a taxable value of $5,306,245. Appellant, on the basis of its allocation of the purchase price, held the conviction that the correct taxable value of the real property was $2,349,305. Therefore, appellant filed a valuation complaint with the Monroe County Board of Revision (appellee). Appellee determined a taxable value consonant with its appraiser's opinion.

This is an appeal from the decision of the Board of Tax Appeals (board), in which the board upheld the decision of the appellee.

Glander, Brant, Ledman & Newman, Charles F. Glander and James H. Ledman, Columbus, for appellant.

Ennis & Roberts and William J. Ennis, Cincinnati, for appellee.

LOCHER, Justice.

Appellant contends that, in valuing property which has been sold within three days of the tax lien date in an arm's-length transaction, it is unreasonable and unlawful to rely solely on a fair market value appraisal when the appraiser testifies that he wholly ignored the contemporaneous sale. We agree.

Section 2, Article XII of the Ohio Constitution, and R.C. 5713.01 require real property to be taxed at is 'true value in money.' The best evidence of true value is the actual sale of the property in an arm's-length transaction. State ex rel. Park Investment Co. v. Bd. of Tax Appeals (1964),175 Ohio St. 410, 195 N.E.2d 908; In re Estate of Sears (1961), 172 Ohio St. 443, 178 N.E.2d 240; Grabler Mfg. Co. v. Kosydar (1975), 43 Ohio St.2d 75, 330 N.E.2d 924.

The present cause must be analyzed in light of this accepted legal principle. The only new factor presented by this case is that an entire aluminum processing division was purchased and the cost of each individual item of real and personal property was not stipulated. Appellant's attempt to allocate the sales price among the eight plants and to further allocate it to each item of real and personal property of the individual plant by using APB 16 was rejected. The record does not show that appellant's allocation resulted in a distorted valuation of the real property. However, the board rejected the accounting principle, stating that its objective was inconsistent with a determination of true value, and hypothesized a factual situation where the application of APB 16 could result in a zero book valuation for real property. The board should have determined, under the specific facts of this case, whether appellant's allocation resulted in a distorted valuation of the real property.

After rejection of appellant's allocation, the board, with the minor unexplained increases of $10 in the true value of the land and $20 in the true value of the buildings, reached the same valuation arrived at by appellee. No explanation of the method used in determining this value was presented by the board. Apparently, the board adopted the fair market value appraisal made by appellee, despite testimony by appellee's appraiser that he ignored the contemporaneous sale of the property.

In the present case, the best evidence of true value of the real property is the sale in an arm's-length transaction within three days of the tax lien date and not appellee's appraisal. See Grabler Mfg. Co. v. Kosydar, supra (43 Ohio St.2d 75, 330 N.E.2d 924). In fact, the Board of Tax Appeals has recently held that the allocated purchase price, not the subsequent appraisals, was determinative of the 'true value' of the items. Indian Head, Inc. v. Collins, BTA No. D-63 (March 11, 1976); Wayne Corp. v. Collins, BTA No. D-204 (March 15, 1976). The facts set forth in these two cases bear a striking resemblance to the facts of the instant case. Of particular interest is the situation in Indian Head, supra. The case involved the acquisition of a plastics division for a total purchase price without any separation as to...