Walters v. Knox County Bd. of Revision
| Decision Date | 22 November 1989 |
| Docket Number | No. 88-569,88-569 |
| Citation | 546 N.E.2d 932,47 Ohio St.3d 23 |
| Parties | WALTERS et al., Appellees, v. KNOX COUNTY BOARD OF REVISION, Appellant. |
| Court | Ohio Supreme Court |
Syllabus by the Court
An 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.
Wanda L. and Charles M. Walters, appellees, have purchased six vacant lots at Apple Valley Lake, a lake resort and recreational area in Knox County. They first bought one lot from the resort developer for $8,200, and then several months later they bought five more lots at a public auction on May 24, 1986. Property values had been declining for non-lakefront Apple Valley Lake properties such as those involved in this case. The Walterses learned of the auction from an advertisement in The Columbus Dispatch. Sellers paid the Talcon Corporation, which conducted the auction, $400 to offer a lot for sale. After a lot was auctioned off, the seller could refuse to accept the highest bid and withdraw the lot from sale.
Appellant Knox County Board of Revision made final determinations of value for each of the five lots for tax year 1986 that were considerably higher than the Walterses paid for them:
Lot No. Auditor's Value Purchase Price
410 $2,800 $ 600
503 5,400 700
15 $4,740 $ 600
500 5,480 900
239 5,740 4,500
Asserting that the sale prices are the true values for tax assessment purposes of the five lots purchased at auction, the Walterses appealed to the Board of Tax Appeals ("BTA"), contesting the values determined by the board of revision. At the BTA hearing, the Knox County Auditor and an appraiser under contract with the board of revision testified that they had found the task of determining values at Apple Valley Lake very difficult because of the great variation in the prices at which Apple Valley Lake lots were being sold. They further testified that the valuations were based upon private sales in the area in the early 1980s, and reflected the declining market in Apple Valley Lake properties.
At the BTA hearing, the board of revision also submitted a list of purchase prices from private sales of lots located near the five purchased by the Walterses. The list included sales from 1980 through 1987. However, the county auditor stated that the list of sales was not submitted as a list of comparables.
The Board of Tax Appeals held that the prices the Walterses paid for the five lots were the true values for purposes of assessing property taxes for tax year 1986. The BTA also held the $8,200 sale price of the sixth lot, purchased from the developer, to be the true value of the property for property tax purposes.
The cause is now before this court upon an appeal as of right.
Charles M. Walters, pro se.
James M. Ronk, County Prosecutor, and Kim M. Rose, Mount Vernon, for appellant.
Appellant board of revision argues that the BTA acted unreasonably and unlawfully when it accepted the sale prices the Walterses paid for the five Apple Valley Lake lots as the true values of the properties. In its first proposition of law, the board of revision contends that the BTA failed to consider factors other than the purchase prices of the five lots. R.C. 5713.03, which governs taxable valuation of real property, provides in pertinent part:
" * * * In determining the true value of any tract, lot, or parcel of real estate under this section, if such tract, lot, or parcel 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 of such tract, lot, or parcel to be the true value for taxation purposes."
This court held in Ratner v. Stark Cty. Bd. of Revision (1986), 23 Ohio St.3d 59, 23 OBR 192, 491 N.E.2d 680, that "[a]lthough the sale price is the 'best evidence' of true value of real property for tax purposes, it is not the only evidence." Id. at syllabus. In other words, R.C. 5713.03 has not been given an " * * * absolutist interpretation * * *," id. at 61, 23 OBR at 194, 491 N.E.2d at 682; however, we do accept the " * * * presumption that the sale price reflect[s] true value," id. at 61, 23 OBR at 193, 491 N.E.2d at 682. (Emphasis added.)
The board of revision presented evidence at the BTA hearing in an unsuccessful attempt to rebut the presumption that the sale prices of the five properties reflected their true values. The auditor and expert appraiser testified, appellant's exhibits were accepted into evidence, and the hearing examiner took an active part in the proceeding. The BTA was obliged to examine this evidence, but not to hold that it rebutted the presumption that the sale prices were the true values of the five lots. "The Board of Tax Appeals is not required to adopt the valuation fixed by an expert or witness. * * * " (Citations omitted.) Cardinal Federal S. & L. Assn. v. Cuyahoga Cty. Bd. of Revision (1975), 44 Ohio St.2d 13, 73 O.O.2d 83, 336 N.E.2d 433, paragraph two of the syllabus. The appraiser's testimony was quite general, and neither the auditor nor the appraiser explained with any degree of precision how their list of sales or other information was used to arrive at the values assigned the properties by the board of revision. R.R.Z. Associates v. Cuyahoga Cty. Bd. of Revision (1988), 38 Ohio St.3d 198, 201, 527 N.E.2d 874, 877.
The board of revision's second proposition of law concerns a hearsay letter from the President of Talcon Corporation, the company that conducted the 1986 auction. The letter stated that the auction was an arm's-length sale. Appellant objected to the admission of the letter into evidence during the BTA hearing. Appellant now contends that even though hearsay evidence may establish comparable sale prices, admission of hearsay becomes objectionable when a dispute arises over the credibility or condition of the sale.
This contention is not well-taken. The BTA had the benefit of the testimony of Charles Walters, a participant in the auction who was cross-examined by appellant at the hearing. The letter appears to have played no part in the BTA's decision, as it is not mentioned in the BTA opinion. Admission of the letter into evidence hardly amounts to reversible error.
Appellant's final proposition of law is that the sales were not conducted at arm's length, as set forth in R.C. 5713.03, which directs the auditor to consider the sale price of a lot to be its true value if the sale was recent, if the buyer and seller were both willing, and " * * * if such tract, lot, or parcel has been the subject of an arm's length sale * * *."
We have never defined "arm's-length sale." 1 In its opinion below, the BTA defined it as " * * * one which encompasses bidding and negotiation on the open market between a ready, willing and able buyer, and a ready, willing and able seller, both being mentally competent, and neither acting under duress or coercion." According to Black's Law Dictionary (5 Ed.1979) 100, in an arm's-length transaction " * * * each [party] act[s] in his or her own self interest * * *." In sum, an 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. All these elements were present in the auction sales in this case. 2
The board of revision contends that the Talcon auction sales of the five lots were not at arm's length because the Walterses and sellers did not negotiate face to face, the Walterses did not learn the sellers' reasons...
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