Hin v. Cuyahoga County Bd. Of Revision

• Decision Date: 04 March 2010
• Docket Number: No. 2008-2408.,2008-2408.
• Citation: 124 Ohio St.3d 481,2010 Ohio 687,923 N.E.2d 1144
• Parties: HIN, L.L.C., Appellee, v. CUYAHOGA COUNTY BOARD OF REVISION et al., Appellees; Bedford Board of Education, Appellant.
• Court: Ohio Supreme Court

923 N.E.2d 1144
124 Ohio St.3d 481
2010 Ohio 687

HIN, L.L.C., Appellee,
v.
CUYAHOGA COUNTY BOARD OF REVISION et al., Appellees; Bedford Board of Education, Appellant.

No. 2008-2408.

Supreme Court of Ohio.

Submitted Nov. 18, 2009.
Decided March 4, 2010.

[923 N.E.2d 1145]Syllabus of the Court

1. When a property has been the subject of two arm's-length sales between a willing seller and a willing buyer within a reasonable length of time either before or after the tax-lien date, the sale occurring

[923 N.E.2d 1146]

closer in time to the tax lien date establishes the true value of the property for taxation purposes.

2. In determining the date a sale of property occurs, only for purposes of establishing the true value of property pursuant to R.C. 5713.03, the auditor should use the date that the real property conveyance-fee statement is filed in the auditor's office as the sale date of the property.

Siegel, Siegel, Johnson & Jennings Co., L.P.A., and Jay P. Siegel, Cleveland, for appellee HIN, L.L.C.

Kolick & Kondzer, Thomas A. Kondzer, Westlake, John P. Desimone, Lakewood, and Daniel J. Kolick, Westlake, for appellant.

O'DONNELL, J.

{¶ 1} In this case, two sales of the same property occurred within a few months of the tax-lien date, one prior and one subsequent to it, and we are called upon to provide guidance as to which sale better represents the true value of the property and to clarify when each sale occurred and what date the auditor should use to determine true value. Specifically, we address whether the Board of Tax Appeals ("BTA") correctly determined the true value of the property, consisting of 34.5784 acres improved with a 78, 500-square-foot office building, located at 17500 Rockside Road in Bedford, Ohio, to be $4,790, 000, the amount that the BTA calculated that JBK Cuyahoga Holdings L.L.C. paid for it in December 2003, before the tax-lien date, as opposed to $7,400, 000, the amount that HIN, L.L.C, paid for it in April 2004, several months after the tax-lien date.

{¶ 2} R.C. 5713.03 provides that in determining the true value of a parcel of real estate that has been the subject of an arm's-length sale between a willing seller and a willing buyer within a reasonable length of time either before or after the tax-lien date, the auditor shall consider the sale price to be the true value for taxation purposes. Two specific issues are presented in this case: first, when a property has been the subject of two transfers within a few months of the tax-lien date, which of the two sales should be used by the auditor to establish the property's true value, and second, whether the auditor should consider the date on the purchase agreement, the date the deed was signed, the date of the closing, the date the real property conveyance-fee statement is filed in the auditor's office, or the date of recording the transfer of the property as the date of sale for taxation purposes.

{¶ 3} For purposes of determining the true value of property according to R.C. 5713.03, the auditor should use the date that the real property conveyance-fee statement is filed in the auditor's office as the sale date of the property. In this case, because the December 2003 sale occurred closer in time to the tax-lien date than the April 2004 sale, the BTA reasonably and lawfully determined the true value of the property to be $4,790, 000, and we therefore affirm that decision.

Facts and Procedural History

{¶ 4} Prior to September 8, 2003, Tops Markets, L.L.C. agreed to sell 36 acres, including the property at issue, to U.S. Bank for $4,900, 000. Thereafter, U.S. Bank agreed to assign its interest in the purchase contract to JBK Properties, Inc. At the end of September, Tops Markets and JBK Properties signed a purchase and sale agreement at the agreed price of $4,900, 000; JBK Properties agreed to purchase the property contingent upon U.S. Bank's agreement to lease it and the bank's ability to obtain various incentives from the city of Bedford. The parties

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subsequently amended the agreement to require a closing on or before December 30, 2003.

{¶ 5} On November 1, 2003, U.S. Bank agreed to a 15-year, four-month lease of the property from JBK Cuyahoga Holdings L.L.C. ending on January 31, 2019, with an option to extend the lease for two additional five-year terms. The lease provided that U.S. Bank would be responsible to pay the real estate taxes, insurance, maintenance, and utilities for the property, but it also obligated JBK Cuyahoga to make an upfront, lump-sum payment of $739,470 to the bank for improvements to the premises and relocation expenses. U.S. Bank subsequently agreed to pay more rent for the office building in exchange for JBK Cuyahoga's consent to terminate a separate lease for the warehouse on a 2.3911-acre parcel, which JBK Cuyahoga had agreed to build.

{¶ 6} On December 24, 2003, Thomas M. Fitzgerald, an officer of Tops Markets, signed deeds to the 34.5784-acre and 2.3911-acre parcels. JBK Cuyahoga presented the deeds and the real property conveyance-fee statement to the auditor on December 30, 2003, two days prior to the January 1, 2004 tax-lien date, and recorded the deeds the same day.

{¶ 7} Thereafter, in January 2004, in an unrelated situation, Scott Revolinski, a broker with RFP Commercial, contacted JBK Cuyahoga on behalf of HIN, L.L.C, a corporation interested in purchasing property with a triple-net lease¹ to complete a likekind exchange pursuant to Section 1031, Title 26, U.S.Code ("1031 Exchange").² On February 26, 2004, as amended on March 25, 2004, JBK Cuyahoga accepted an offer from HIN to purchase the 34.5784-acre parcel for $7,400, 000, and on April 1, 2004, JBK Cuyahoga accepted an offer from HIN to purchase the 2.3911-acre parcel for $110,000. On April 29, 2004, John Kuhn, principal of JBK Cuyahoga, signed deeds conveying both parcels to HIN. The next day, HIN presented the deeds and the real property conveyance-fee statement to the auditor and recorded the deeds.

{¶ 8} The auditor of Cuyahoga County, Frank Russo, assessed the true value of the 34.5784-acre parcel for tax year 2004 as $7,848, 400. HIN objected and filed an original complaint challenging the valuation of the property with the Cuyahoga County Board of Revision. Subsequently, the Bedford Board of Education filed a countercomplaint seeking to retain the assessed value. After considering the evidence, the Cuyahoga County Board of Revision found the true value to be $7,848, 400. HIN then appealed that decision to the BTA.

{¶ 9} The BTA found that two sales of the property had occurred. The transfers in the first sale, to JBK Cuyahoga, were recorded on December 30, 2003, and in the second sale, to HIN, on April 30, 2004.

[923 N.E.2d 1148]

HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision (Nov. 18, 2008), BTA No. 2006-A-712, at 5. Because the December 30, 2003, transfer occurred closer in time to January 1, 2004, the tax-lien date, the BTA considered it the better indicator of the true value of the property for taxation purposes. Id. at 6. The BTA therefore ordered the auditor to assess the true value of the property at $4,790, 000, which reflected the $4,900, 000 sale price minus $110,000 paid for the 2.3911-acre parcel in April 2004. Id. at 10, fn. 4.

{¶ 10} The Bedford Board of Education appealed the BTA's decision to this court, contending first that the December 2003 sale price does not establish the true value of the property because it does not reflect any property value increase attributable to the long-term lease to U.S. Bank that encumbered the property on the tax-lien date. Second, Bedford argues that the BTA improperly relied on the recording dates of the deeds, rather than the dates the parties actually negotiated the sale prices, when it determined that the December 2003 sale occurred closer in time to the tax-lien date than the April 2004 sale; thus, Bedford asserts that the "sale price which was closer in time to the tax lien date was the sale in 2004." Third, Bedford maintains that the BTA's decision is internally inconsistent because it relied on the December 2003 sale price to value the 34.5784-acre parcel but used the April 2004 sale price to value the 2.3911-acre parcel. Lastly, Bedford claims that the BTA has jurisdiction to use the April 2004 sales price of $7,400, 000 to determine the...