Worth. City Sch. Bd. of Edn. v. Frank. Cnty. Bd. of Revision

• Citation: 2009 Ohio 5932,918 N.E.2d 972,124 Ohio St.3d 27
• Decision Date: 17 November 2009
• Docket Number: No. 2008-2365.,2008-2365.
• Parties: WORTHINGTON CITY SCHOOLS BOARD OF EDUCATION, Appellee, v. FRANKLIN COUNTY BOARD OF REVISION et al., Appellees; Bob-O-Link Golf Course, Ltd., n.k.a. Weber Sisters Enterprises, Ltd., Appellant.
• Court: United States State Supreme Court of Ohio

918 N.E.2d 972

124 Ohio St.3d 27

2009-Ohio-5932

WORTHINGTON CITY SCHOOLS BOARD OF EDUCATION, Appellee, v. FRANKLIN COUNTY BOARD OF REVISION et al., Appellees; Bob-O-Link Golf Course, Ltd., n.k.a. Weber Sisters Enterprises, Ltd., Appellant.

No. 2008-2365.

Supreme Court of Ohio.

Submitted August 25, 2009.

Decided November 17, 2009.

Rich & Gillis Law Group, L.L.C., Jeffrey A. Rich, and Mark H. Gillis, Columbus, for appellee Worthington City Schools Board of Education.

Wayne E. Petkovic, for appellant.

PER CURIAM.

{¶ 1} Appellant, Bob-O-Link Golf Course, Ltd., n.k.a. Weber Sisters Enterprises, Ltd. ("Weber Sisters"), appeals from a decision of the Board of Tax Appeals ("BTA") in which the BTA determined that the May 2003 sale price of a four-acre commercial parcel constituted the value of the property for tax years 2004 and 2005. The auditor originally valued the property for tax year 2004 at $2,680,000, and the Board of Education of the Worthington City Schools ("school district") filed a complaint against that valuation on February 18, 2005. The school district presented the May 2003 deed and conveyance-fee statement showing sale of the property for $4,175,000, and urged that the sale price constituted the value of the property. The Franklin County Board of Revision, after hearing the evidence presented by Weber Sisters, rejected the sale price and reverted to the auditor's valuation of the property.

{¶ 2} The school district appealed to the BTA. The owner did not appear at the BTA hearing, but the school board and the county did. The school board presented a purchase contract that it had obtained through discovery to bolster its contention that the BTA should use the sale price to value the property. On November 12, 2008, the BTA issued its decision, which adopted the sale price as the value of the property.

{¶ 3} On appeal, Weber Sisters argues that the school district failed to discharge its burden of proof as the appellant from the BOR's rejection of the sale price, and that the BTA's findings are not supported by the evidence. In one respect, we agree. The BTA failed to give full consideration to whether the sale was "recent" with respect to the lien dates for tax year 2004 and tax year 2005. We therefore vacate and remand.

Facts

{¶ 4} On February 18, 2005, the school board filed its complaint against the valuation of Weber Sisters' property, asking that the BOR adopt the May 2003 sale price of $4,175,000 as the value of the property. Weber Sisters filed a countercomplaint on April 15, 2005, which asked that the auditor's valuation of $2,680,000 be retained because the complaint constituted a second filing within the same triennial period. The parcel consists of four acres and is improved with two buildings.

{¶ 5} On February 22, 2006, the BOR held a hearing. Weber Sisters presented the testimony of Sally Marrell and Jodie Govenar, principals of Weber Sisters, along with exhibits that included a rent roll and an appraisal that was offered not as direct evidence of value, but rather as documentation of Weber Sisters' vain attempt to sell the property.

{¶ 6} The testimony indicated that Weber Sisters' purchase was predicated on the seller's leasing most of the space in the two buildings, each of which comprised 7,500 square feet of commercial space. Ms. Marrell stated that the "price we paid was for totally occupied units," meaning in this case that the sale would occur with leases in place for 11,740 of the 15,000 total square feet. But immediately after the May 2003 sale it became clear that two tenants slated to occupy the largest portions of the buildings—Boston Market and Fiesta Fresh—would not take possession. The former initially honored rent obligations; the latter did not.

{¶ 7} During 2004, Cold Stone Creamery began paying less and less and ultimately vacated its leased premises during 2005 and defaulted on its lease obligations. Another tenant, Mark Pis, experienced financial difficulty and negotiated a rent reduction of approximately one-third. An Indian restaurant stopped paying rent as of November 2005. Another tenant, Robeck's Juice, subleased to Quizno's at a reduced rent while itself continuing to pay full rent. Only one tenant, a Starbucks, retained possession at the stated rent. Marrell stated that Weber Sisters was "operating at a total loss" as of the February 2006 hearing date.

{¶ 8} The testimony also confirmed that Weber Sisters acquired the property as part of a like-kind exchange pursuant to Section 1031, Title 25, U.S.Code. "The concept behind a 1031 exchange is that, when a property owner sells a property and reinvests its proceeds into another property, any economic gain has not been realized in a way that generates funds to pay any tax." Hilliard City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision (Jan. 13, 2009), BTA No. 2006-T-1804, at 7. Accordingly, the Internal Revenue Code defers the taxation of any gain from the sale of the property in this situation. Id. at 6. In the present case the consideration for the property acquired by Weber Sisters was a golf course worth approximately $2.4 million. Weber Sisters borrowed the difference between the value of the golf course and the $4,175,000 sale price.

{¶ 9} In 2005, Weber Sisters attempted to sell the property at issue. It received an offer of $3.9 million but after the purchaser's appraisal indicated a value of only $3 to $3.2 million, the purchaser backed out of the deal. At that point, Weber Sisters obtained a written appraisal from Koenig & Associates that opined a value of $3,200,000 as of September 12, 2005. That appraisal was performed before problems emerged with the Indian restaurant and Cold Stone Creamery and Mark Pi's rent reduction.

{¶ 10} The testimony also indicated that the principals of Weber Sisters had no knowledge and received poor advice concerning commercial property development in central Ohio.

{¶ 11} In making its decision, the BOR first disposed of a jurisdictional objection raised by Weber Sisters. The owner contended that the school board's complaint violated R.C. 5715.19(A)(2) because the complaint was the second within a three-year period. The BOR noted that the May 2003 sale occurred after the lien date for tax year 2003, which was the subject of the first complaint, and held that the timing brought the current case within a statutory exception. On the merits, the BOR stated that the principals of Weber Sisters were "not necessarily knowledgeable buyers" and "not familiar with the Franklin County commercial market." Additionally, the BOR noted a "significant loss of tenants in calendar year 2003," and the owner's subsequent inability to sell the property. Based on these findings, the BOR rejected use of the May 2003 sale price as constituting the value of the property for tax year 2004 and 2005. The BOR adopted the value of $2,680,000 that had been assigned by the auditor.

{¶ 12} The school board appealed to the BTA. The school board served a written discovery request that, after the BTA issued an order compelling discovery, led to production of the purchase contract. On July 11, 2007, the BTA held a hearing at which the school board and the county appeared but the property owner did not. The purchase contract obtained through discovery was made an evidentiary exhibit.

{¶ 13} The BTA issued a decision on November 21, 2007. In that decision, the BTA ordered that the sale price be adopted as the value of the property. Weber Sisters filed a motion for reconsideration that reasserted its jurisdictional objection: Weber Sisters reiterated its argument that the BOR had lacked jurisdiction because the tax-year-2004 complaint was the second complaint that the school board had filed within the triennium. On December 10, 2007, the BTA issued an order vacating the November 21 decision and requiring the school board to show cause why the matter should not be remanded to the BOR with the instruction that the case should be dismissed on jurisdictional grounds. The school board filed a response, and on May 20, 2008, the BTA issued an order finding that the school board's complaint for tax year 2004 was not barred by R.C. 5715.19(A)(2), because the auditor changed the value from tax year 2003 to tax year 2004. The BTA also scheduled a second merits hearing in the case, which the parties waived.

{¶ 14} On November 12, 2008, the BTA issued its decision. The BTA found that Weber Sisters "presented no competent or probative evidence challenging the arm's-length nature of the May 2003 sale * * * to rebut the presumption that the sale price is the best evidence of value." Worthington City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision (Nov. 12, 2008), BTA No. 2006-H-381, at 5. As for the recency of the sale, the BTA confined itself to stating in a footnote that a sale eight months before the lien date for tax year 2004 qualified as recent. Accordingly, the BTA adopted the $4,175,000 sale price as the value of the property for tax years 2004 and 2005. Weber Sisters appealed to this court.

Analysis

{¶ 15} Under our cases, the BTA is responsible for determining factual issues, but this court "`will not hesitate to reverse a BTA decision that is based on an incorrect legal conclusion.'" Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 14, quoting Gahanna-Jefferson Local School Dist. Bd. of Edn. v. Zaino (2001), 93 Ohio St.3d 231, 232, 754 N.E.2d 789. Weber Sisters presents several legal issues, and we consider each in turn.

R.C. 5715.19(A)(2) does not bar the school board's complaint for tax year 2004

{¶ 16} In its notice of appeal, Weber Sisters characterizes the present case as a "second filing within the same triennium and therefore prohibited by section 5715.19 O.R.C." In Weber Sisters' brief, however, the second-filing issue is mentioned at most in passing, is not specifically argued, and is not the subject of a proposition of law. Under these...