Health Care Reit, Inc. v. Cuyahoga Cnty. Bd. of Revision

• Citation: 2014 Ohio 2574,14 N.E.3d 1009,140 Ohio St.3d 30
• Decision Date: 18 June 2014
• Docket Number: No. 2013–0278.,2013–0278.
• Parties: HEALTH CARE REIT, Inc. v. CUYAHOGA CTY. BD. OF REVISION.
• Court: Ohio Supreme Court

140 Ohio St.3d 30

14 N.E.3d 1009

2014 Ohio 2574

HEALTH CARE REIT, Inc.

v.CUYAHOGA CTY. BD. OF REVISION.

No. 2013–0278.

Supreme Court of Ohio.

Submitted Feb. 4, 2014.

Decided June 18, 2014.

Sleggs, Danzinger & Gill Co., L.P.A., and Todd W. Sleggs, Cleveland, for appellee Health Care REIT, Inc.

Kadish, Hinkel & Weibel, Kevin M. Hinkel, and Rita M. Jarrett, Cleveland, for appellant.

PER CURIAM.

{¶ 1} This case involves a dispute over the tax–year–2007 value of an improved 6.415–acre parcel in Cuyahoga County. The property is located in an area zoned as a "Senior Residence/Life Care District," and it is operating as an assisted-living facility.

{¶ 2} In tax year 2007, the county fiscal officer valued the subject property at $8,740,000, consistent with its 2004 sale price. The property's owner, appellee Health Care REIT, Inc., sought a reduction to $3,100,000, but appellee Cuyahoga County Board of Revision ("BOR") retained the fiscal officer's valuation.

{¶ 3} The owner and the appellant, Berea City School District Board of Education ("school board"), both appealed to the Board of Tax Appeals ("BTA"), where they presented competing appraisals. The owner's appraiser relied on data about apartment buildings as a starting point for valuation and opined a value of $3,100,000. By contrast, the school board's appraiser considered only data about assisted-living facilities and opined a value of $5,400,000. The BTA found the owner's appraisal more persuasive and assigned a value of $3,100,000.

{¶ 4} The school board now appeals, arguing that the BTA's decision was unlawful and unreasonable because, among other things, it relied on an appraisal that disregarded city zoning laws. For the reasons explained below, we affirm the BTA's decision.

Facts

1. The subject property

{¶ 5} The subject property, parcel No. 373–26–018, is a 6.415–acre tract of land located in the city of Middleburg Heights and in the Berea City School District.

The property is located in an area zoned as a "Senior Residence/Life Care District," which was established for the housing and living-assistance needs of persons 60 years and older. Middleburg Heights Codified Ordinances 1134.01 and 1134.02. In keeping with that restriction, the parcel was improved in 1998 with a 48,648–square–foot structure that operates as an assisted-living facility, Brookside Estates.

{¶ 6} In October 2004, Health Care REIT, Inc., purchased the property for $8,740,000. The property was leased to and managed by Emeritus Corporation both before and after the 2004 sale.

2. Board of revision proceedings

{¶ 7} In tax year 2006, the first year of Cuyahoga County's triennium, the school board filed a complaint with the BOR, seeking an increase in property value. Health Care REIT did not file a counter-complaint. The BOR increased the property's tax value to $8,740,000 for tax year 2006, consistent with the 2004 sale price.

{¶ 8} The county fiscal officer assigned the same value for tax year 2007.¹ Health Care REIT filed a complaint requesting a reduction to $5,400,000, and it later filed an amended complaint seeking a reduction to $3,100,000. The school board filed a counter-complaint, supporting the fiscal officer's valuation.

{¶ 9} At the BOR hearing, Health Care REIT presented the testimony and report of appraiser Richard Racek Jr. Racek used the sales-comparison and income approaches to valuation, relying on data about apartment complexes as a starting point for his analysis. Ultimately, he opined a value of $3,100,000 for tax year 2007. An employee of Emeritus, Scott Marshall, also testified.

{¶ 10} In response, the school board pointed to the BOR's decision accepting the 2004 sale price as the best evidence of the property's value for tax year 2006 and presented evidence of the 2004 sale and lease to Emeritus and the property's $50,000,000 mortgage.

{¶ 11} On July 6, 2009, the BOR issued a decision retaining the fiscal officer's valuation of the property—$8,740,000.

3. BTA proceedings

{¶ 12} Both parties appealed the BOR decision to the BTA, and the cases were consolidated.

{¶ 13} At the BTA hearing, Health Care REIT presented a supplemented appraisal report from Racek and his testimony. Racek again used the sales-comparison and income approaches to valuation, but he supplemented his analysis with additional apartment comparables. He also developed a cost-approach analysis. As in his initial report, Racek opined a value of $3,100,000.

{¶ 14} The school board introduced testimony and an appraisal report from Charles M. Ritley. Ritley used all three valuation methods. Unlike Racek, however, he did not rely on any data about apartment complexes; Ritley used only assisted-living facilities as comparables. He also placed significant reliance on financial data about the subject property and data from the Marshall Swift Valuation Service for Homes for the Elderly. Ultimately, Ritley opined a value of $5,400,000.

{¶ 15} On January 15, 2013, the BTA issued an opinion assigning a value of $3,100,000 for the January 1, 2007 tax-lien date. The BTA rejected the October 2004 sale price as the best evidence of the property's value in tax year 2007, citing the sale's remoteness and insufficient record evidence about the circumstances of the sale. The BTA then stated that it found Racek's opinion more persuasive than Ritley's.

{¶ 16} The school board appealed to this court. Oral argument was held before a master commissioner on December 17, 2013.

Analysis

{¶ 17} On appeal, the school board advances five propositions of law, each arguing that the BTA's decision was unreasonable and unlawful. At oral argument before the master commissioner, the school board clarified that it is asking this court "to reverse" the BTA "because there was not sufficient evidence to warrant a reduction" in value.

{¶ 18} Health Care REIT defends the BTA's decision and asks this court to award attorney fees because the school board's appeal is frivolous.

1. Standard of review

{¶ 19} "The fair market value of property for tax purposes is a question of fact, the determination of which is primarily within the province of the taxing authorities * * *." Cuyahoga Cty. Bd. of Revision v. Fodor, 15 Ohio St.2d 52, 239 N.E.2d 25 (1968)

, at syllabus. When parties present competing appraisals to the BTA, "the BTA is vested with wide discretion in determining the weight to be given to the evidence and the credibility of the witnesses that come before it." EOP–BP Tower, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, ¶ 9. As a result, "this court will not disturb a decision of the Board of Tax Appeals with respect to such valuation unless it affirmatively appears from the record that such decision is unreasonable or unlawful." Fodor at syllabus; Hilliard City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 128 Ohio St.3d 565, 2011-Ohio-2258, 949 N.E.2d 1, ¶ 19

.

2. 2004 sale price is not the best evidence of true value

{¶ 20} In proposition of law No. IV, the school board argues that the BTA acted unreasonably and unlawfully by failing to accept the property's 2004 sale price as the best evidence of its true value for tax year 2007.² The school board contends that the 2004 sale is recent and that other evidence supports its position that the 2004 sale price accurately reflects the value for tax year 2007.

{¶ 21} We have long held that when determining value, "[t]he 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." Conalco, Inc. v. Monroe Cty. Bd. of Revision, 50 Ohio St.2d 129, 363 N.E.2d 722 (1977)

, paragraph one of the syllabus; see also

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. If there has been a recent arm's-length transaction, " ‘the auditor shall consider the sale price * * * to be the true value for taxation purposes.’ " Hilliard City Schools Bd. of Edn. at ¶ 18, quoting former R.C. 5713.03, Am.Sub.H.B. No. 260, 140 Ohio Laws, Part II, 2665, 2722.³ A party can rebut this presumption of value only by "challenging whether the elements of recency and arm's-length character between a willing seller and a willing buyer are genuinely present for that particular sale." Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 117 Ohio St.3d 516, 2008-Ohio-1473, 885 N.E.2d 222, ¶ 13.

{¶ 22} As to recency, the sale must have been within a reasonable length of time of the tax-lien date. Id. at ¶ 35. And this court has explained that "[t]he reasonableness of the length of time * * * encompasses all factors that would, by changing with the passage of time, affect the value of the property." Id. One component of recency is the period of time that has elapsed between the sale date and the tax-lien date. We have refrained from setting a limit on the amount of time that can pass between the two dates before the sale no longer qualifies as recent; the length of time a sale remains "recent" "will vary from case to case." New Winchester Gardens, Ltd. v. Franklin Cty. Bd. of Revision, 80 Ohio St.3d 36, 44, 684 N.E.2d 312 (1997)

, overruled in part on other grounds,

Cummins .⁴ When determining recency in a particular case, the BTA should also consider "general developments in the market between the date of sale and the tax-lien date." Cummins at ¶ 35.

{¶ 23} Here, the BTA's determination that the 2004 sale of the property was "too remote from the tax lien date in this matter" is reasonable because the BTA relied on affirmative evidence indicating that the sale should not be regarded as recent. BTA Nos. 2009–Q–1547, 2009–Q–1615, and 2009–Q–1616, 2013 WL 314191, at *2 (Jan. 15, 2013)

. Compare

Zell v. Hamilton Cty. Bd. of Revision, BTA No. 94–N–27, 1996 WL 154479, at *3–5 (Mar. 29, 1996), affirmed, 78 Ohio St.3d 330, 677 N.E.2d 1201 (1997) (determining that a sale that occurred 28 months after the tax-lien date qualified as recent based on affirmative...