Plain Local Schools Board of Education v. Franklin County Board of Revision

[Cite as Plain Local Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 130 Ohio St.3d 230,

2011-Ohio-3362.]

PLAIN LOCAL SCHOOLS BOARD OF EDUCATION, APPELLANT, v. FRANKLIN

COUNTY BOARD OF REVISION ET AL., APPELLEES.

[Cite as Plain Local Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision,

130 Ohio St.3d 230, 2011-Ohio-3362.]

Real property taxation—Appraiser who prepared appraisal report did not

testify—Appraisal report offered opinion of value as of date other than the

tax-lien date—BTA decision affirmed.

(No. 2010-0052—Submitted June 21, 2011—Decided July 12, 2011.)

APPEAL from the Board of Tax Appeals, No. 2007-V-211.

__________________

Per Curiam.

{¶ 1} In this appeal, the Plain Local Schools Board of Education

(“school board”) challenges a decision of the Board of Tax Appeals (“BTA”) in

which the BTA determined the true value of a two-story office building owned by

Huntington National Bank to be $2,000,000, thereby affirming the decision of the

Franklin County Board of Revision (“BOR”) to reduce the value from the

$2,650,000 originally assigned by the auditor. The school board advances three

propositions of law that raise two main issues. First: Did the BOR and the BTA

err by determining the value of real property based in part on factual material set

forth in a written appraisal report when the appraiser who prepared the report did

not testify? Second: Did the BOR and the BTA err by considering evidence

contained in an appraisal report that offered an opinion of value as of a date other

than the tax-lien date?

{¶ 2} With regard to the second issue, AP Hotels of Illinois, Inc. v.

Franklin Cty. Bd. of Revision, 118 Ohio St.3d 343, 2008-Ohio-2565, 889 N.E.2d

115, is dispositive. In that case, an appraisal report was offered that certified an

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opinion of value, but not as of the tax-lien date. Although the BTA could not rely

on the certified opinion of value, we held that the appraisal did furnish evidence

relevant to determining the value on the tax-lien date and that the “BTA properly

conceived and carried out its duty” to determine the value of the property from the

evidence before it. Id., ¶ 16. Our review of the circumstances in the present case

leads us to the same conclusion, and that conclusion resolves the second issue

against the school board.

{¶ 3} With respect to the first issue, the present case differs from AP

Hotels. In that case, the appraiser who prepared the appraisal report did testify,

while in this case, he did not. Although we agree with the school board that the

owner’s failure to offer the appraiser’s testimony is significant and that in some

circumstances, such a failure makes it improper to afford any consideration to the

matters set forth in the appraisal report, we find no reversible error in the record

before us. The school board did not advance a hearsay objection before either the

BOR or the BTA. Moreover, another appraiser did testify concerning the

appraisal report, and the school board did not object to her testimony on the

grounds that she lacked personal knowledge of the matters contained in the report.

By failing to object on those grounds, the school board waived those issues on

appeal.

{¶ 4} Because we reject the school board’s arguments on appeal, we

affirm the decision of the BTA.

Facts

{¶ 5} The property at issue is a two-story office building that contained

9,240 square feet of space finished for office use and approximately 4,000 square

feet of space equipped for branch-bank use. The building was vacant at the time

of the BOR hearing on March 6, 2007, except for one tenant, Lawyers Title

Corporation. As of the tax-lien date, January 1, 2005, there were three tenants at

the site: Lawyers Title, a doctor, and a hair salon.

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{¶ 6} On the tax-lien date, the property was owned by Unizan Bank. As

of March 2006, Unizan was acquired by Huntington National Bank, and through

that acquisition, Huntington obtained title to the property. The hair salon had

vacated by the time of the acquisition in 2006, and the doctor defaulted on his

lease and vacated sometime thereafter.

{¶ 7} Initially, Unizan filed a complaint for the 2005 tax year; after the

acquisition, Huntington filed a second complaint on March 27, 2006. The first

complaint received a case number of 05-832, and the second, 05-1420. The

former was ultimately dismissed by the BOR as a duplicate filing.

{¶ 8} Huntington’s evidence at the BOR consisted of the testimony of

Richard Machinski, Huntington’s vice president for corporate real estate, Lynn

Putterbaugh, Huntington’s lease administrator for corporate real estate, and Karen

Blosser, an MAI appraiser with U.S. Realty Consultants. The school board

stipulated to Blosser’s qualifications as an appraiser. Huntington also offered an

appraisal report prepared by James Powers of U.S. Realty Consultants, which

stated an opinion of value as of May 1, 2004. Powers was still with U.S. Realty

Consultants at the time of the BOR hearing, but according to Blosser, he was out

of town. The appraisal had been prepared at the request of Machinski in

connection with Huntington’s acquisition of Unizan.

{¶ 9} Blosser testified that she had reviewed the appraisal report

prepared by Powers and had independently inspected the property. Blosser

testified that the building was currently “predominantly” vacant and appeared to

be in good condition. Lawyers Title Corporation was in possession of a portion

of the property, and its rent had declined from $16.22 per square foot at the time

of the appraisal to $11.50 per square foot at the time of hearing. According to the

lease abstract, that change occurred about six months after the tax-lien date.

Blosser testified that the appraisal report was prepared in compliance with the

Uniform Standards of Professional Appraisal Practice and the Appraisal

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Institute’s professional-practice standards. The report was consistent with

Blosser’s own inspection of the property and analysis of the leases.

{¶ 10} The appraisal relied on income and sales-comparison approaches,

as is typical for an appraisal of income-producing property, and then reconciled

the two approaches. The report looked at the rent from bank leases and office

space in the area and concluded that the bank space could be rented for $25 per

square foot and the office space could be rented for $15 per square foot, for a

blended rate of $18 per square foot. A capitalization rate was extracted, and a 10

percent vacancy and credit loss was allowed, leading to a value per the income

approach of $2,223,300. From three comparable sales, the sales-comparison

approach derived a $130 per square foot figure as falling within the established

value range, for a rounded value of $1,721,300 for the property as a whole. The

income and sales-comparison approaches were reconciled for a final opinion that

the property was worth $2,000,000 as of May 1, 2004.

{¶ 11} Blosser also testified that she had investigated the sale outcomes of

two properties that were set forth as current listings in the May 2004 report, and

she determined that those properties, which the report noted were listed at $125

per square foot, actually sold for $91 per square foot in 2005. Blosser opined that

nothing had occurred between the May 1, 2004 report and the January 1, 2005

tax-lien date that would have made the value of the property fluctuate up or down

substantially. Blosser went on to state that some information indicated that

“perhaps” the value could be lower than the $2,000,000, but she did not find

anything that “would suggest that $2,000,000 was not a reasonable value as of

January 1, 2005.” Upon further prompting, she agreed that the $2,000,000 figure

constituted a “solid valuation” as of the tax-lien date.

{¶ 12} The school board was represented by counsel at the BOR hearing.

Counsel addressed no questions to Blosser, but did object to the admission of the

appraisal report on two grounds: first, the report did not offer an opinion of value

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“as of” the tax-lien date, and second, the report was not prepared for ad valorem

taxation purposes. Notably absent was any objection to the matters set forth in

the appraisal report on the grounds that they constituted hearsay.

{¶ 13} On March 9, 2007, the BOR reached its decision. Acknowledging

the school board’s objection that the appraisal report did not offer a value of the

property as of the tax-lien date, the board nonetheless relied on the report’s

valuation on the grounds that the report did “relate to the tax-lien date,” given that

the property “economically certainly had not improved by 1/1/05.”

{¶ 14} The school board appealed to the BTA, where the parties waived a

hearing and the school board renewed its objections. In its brief to the BTA, the

school board renewed its argument that the appraisal report was inadmissible

because it did not offer an opinion of value as of the tax-lien date, and it also

asserted that Blosser’s testimony was not sufficient evidence of value, because

she had not performed an appraisal herself. However, the school board did not

assert that the matters set forth in the appraisal report were inadmissible on

hearsay grounds.

{¶ 15} In its December 15, 2009 decision, the BTA found that “Blosser

ha[d] provided her testimonial opinion of the property’s worth on [the] tax lien

date” and that she had “supported that opinion with appraisal evidence of

another’s written report.” Plain Local Schools Bd. of Edn. v. Franklin Cty. Bd. of

Revision (Dec. 15, 2009), BTA No. 2007-V-211, 2009 WL 4894214, *4. Noting

its duty to “ ‘make its own independent judgment based on its weighing of the

evidence contained in [the BOR] transcript,’ ” id., quoting Columbus Bd. of Edn.

v. Franklin Cty. Bd. of Revision (1996), 76 Ohio St.3d 13, 15, 665 N.E.2d 1098,

the BTA defined the task before it as considering “whether the record as a whole

has sufficient competent and probative evidence of value for us to conclude that

the [owner] carried its burden of proving the auditor’s overvaluation before the

BOR.” Id. Although the BTA noted the significance of the fact that the appraiser

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who prepared the appraisal report did not testify and found that it could not “place

reliance on his ultimate opinion of value,” id. at *5, the board considered the

matters set forth in the appraisal report together with the testimony offered at the

BOR and concluded that the preponderance of competent and probative evidence

indicated that the value of the property was $2,000,000 as of the tax-lien date, id.1

{¶ 16} On appeal to this court, the school board for the first time advances

a hearsay objection to the contents of the appraisal report, and it renews its

argument that the appraisal report did not constitute evidence of the value of the

property on the tax-lien date, since it valued the property as of a different date.

Analysis

{¶ 17} R.C. 5713.03 states the general rule that when a “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 * * * to be the true value for taxation

purposes.” Accord State ex rel. Park Invest. Co. v. Bd. of Tax Appeals (1964),

175 Ohio St. 410, 412, 25 O.O.2d 432, 195 N.E.2d 908 (“when such information

is available,” an “actual sale of [the] property between one who is willing to sell

but not compelled to do so and one who is willing to buy but not compelled to do

so” will “usually determine the monetary value of the property”). We have

acknowledged, however, that “such information is not usually available, and thus

an appraisal becomes necessary,” the goal of which is to “determine the amount

which such property should bring if sold on the open market.” Id. In reviewing

appraisal evidence, the BTA “ ‘has wide discretion to determine the weight given

to evidence and the credibility of witnesses before it.’ ” Walters v. Knox Cty. Bd.

1. Two members of the BTA concurred in the board’s decision, but one member dissented.

Citing several earlier BTA decisions, the dissent expressed the view that an appraisal report that

certifies an opinion of value as of a date other than the tax-lien date does not constitute reliable

and probative evidence of value absent the testimony of the person who prepared the report. Plain

Local Schools Bd. of Edn., BTA No. 2007-V-211, 2009 WL 4894214, at *5-6.

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of Revision (1989), 47 Ohio St.3d 23, 25, 546 N.E.2d 932, quoting R.R.Z. Assoc.

v. Cuyahoga Cty. Bd. of Revision (1988), 38 Ohio St.3d 198, 201, 527 N.E.2d

874, 877. “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, and 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.” 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, ¶ 17,

quoting Cuyahoga Cty. Bd. of Revision v. Fodor (1968), 15 Ohio St.2d 52, 44

O.O.2d 30, 239 N.E.2d 25, syllabus.

The school board waived its hearsay and its appraisal-practice objections by

failing to advance them at either the BOR or the BTA

{¶ 18} Under its first proposition of law, the school board argues that the

appraisal report was itself inadmissible and, thus, Blosser’s opinion of value was

unsupported and did not furnish reliable and probative evidence of value. The

school board rests its claim that the report was inadmissible on the fact that the

appraiser who had prepared it did not testify, which, according to the school

board, means that the report is hearsay.

{¶ 19} Huntington responds in part by pointing out that the school board

lodged “no objection to Ms. Blosser’s testimony or the factual information

contained in the appraisal.” That is correct. Although the school board did argue

that the appraisal report was not relevant because it did not offer an opinion as of

the tax-lien date and was not prepared for tax purposes, the school board did not

object to the report as hearsay. Nor did the school board object to Blosser’s

testimony on the grounds that the witness lacked personal knowledge of the

matters asserted in the appraisal report.

{¶ 20} We hold that the school board’s failure to raise a hearsay objection

to the report disposes of its first proposition of law. At the outset, we observe that

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the Ohio Rules of Evidence do not directly apply in administrative proceedings,

Evid.R. 101(A), but that an administrative tribunal such as the BOR or the BTA is

justified in consulting the rules for guidance, see Orange City School Dist. Bd. of

Edn. v. Cuyahoga Cty. Bd. of Revision (1996), 74 Ohio St.3d 415, 417, 659

N.E.2d 1223. Moreover, when it comes to the admissibility of evidence, the

general rule is that “[h]earsay challenges are waived, absent plain error, if not

objected to during the subject proceedings.” Felice’s Main Street, Inc. v. Ohio

Liquor Control Comm., Franklin App. No. 01AP-1405, 2002-Ohio-5962, ¶ 14 (in

R.C. Chapter 119 appeal from the decision of the Liquor Control Commission,

failure of license holder to appear and object to admission of hearsay documents

waived the objection); Enitnel, Inc. v. Ohio Liquor Control Comm., Franklin App.

No. 02AP-583, 2002-Ohio-7034, ¶ 20 (same), citing Felice’s Main Street and D.

Michael Smith Ents., Inc. v. Ohio Liquor Control Comm. (Oct. 29, 1997), Summit

App. No. 18332, 1997 WL 775658; Stanger v. Worthington (Sept. 23, 1997),

Franklin App. No. 96APE12-1622, 1997 WL 596280, at *4 (failure to object to

hearsay constituted a waiver in the context of an administrative appeal pursuant to

R.C. Chapter 2506).

{¶ 21} The present case does not present a situation where considering the

appraisal report constituted “plain error.” That is so because the record contains

indicia of reliability for the content of the appraisal report. Specifically, the

testimony offered to the BOR shows that the appraisal report was prepared by an

established and certified appraiser for a specific business purpose of Huntington

National Bank and was used for that business purpose. Moreover, the contents of

the report are certified by the appraiser who prepared the report. Because the

consideration of the evidence contained within the appraisal report was not plain

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error, the school board’s failure to advance a hearsay objection waived the issue

on appeal.2

{¶ 22} The school board does cite a case in support of its argument. In

Almondtree Apts. of Columbus, Ltd. v. Franklin Cty. Bd. of Revision (June 28,

1988), Franklin App. No. 87AP-1216, 1988 WL 70505, the owner’s appraiser had

testified that a sale of the property had not been an arm’s-length sale for various

reasons, and then offered an appraisal report with an opinion of value, which the

BTA ultimately found to be the value of the property. The Tenth District

reversed, characterizing the “entire testimony of the appraiser, relating to the key

issue of whether the recent sale was an arm’s-length transaction,” as being “based

upon the rankest type of hearsay.” Id. at *3. Specifically, the appraiser

apparently based his testimony on the arm’s-length issue on “statements of

employees of the taxpayer and the evaluation of documents not placed into

evidence.” Id.

{¶ 23} The school board’s citation of Almondtree Apts. is not persuasive.

The decision in that case does not address whether or not a hearsay objection was

raised below. As a result, the case furnishes no authority on the issue whether an

objection is necessary to prevent waiver. Moreover, Almondtree Apts. involved

the owner’s claim that a sale was not at arm’s length, and the owner did not offer

the testimony of the witnesses who had talked to the appraiser or the documents

2. The lay testimony of Huntington’s vice president for corporate real estate, Machinski, who laid

a foundation for the appraisal report, along with the expert testimony of Blosser concerning the

report, decisively distinguish this case from the earlier BTA decisions cited by the dissenting

member of the BTA. In those cases, the proponent of the written appraisal reports offered the

reports themselves, but did not offer any testimony that would authenticate or corroborate the

written reports. See, e.g., Speca v. Montgomery Cty. Bd. of Revision (Mar. 25, 2008), BTA No.

2006-K-2144, 2008 WL 902389, at *5-6 (disregarding written appraisal reports presented by an

owner where there was apparently no lay or expert testimony corroborating the matters set forth in

the report); Evenson v. Erie Cty. Bd. of Revision (Apr. 12, 2002), BTA No. 2001-V-770, 2002 WL

595179, at *1-2 (same). Additionally, in Northridge Local Schools Bd. of Edn. v. Montgomery

Cty. Bd. of Revision (Jan. 28, 2005), BTA No. 2004-B-35, 2005 WL 273500, at *1, the board of

education specifically objected before the BOR to any consideration of the appraisal reports on the

ground that the appraisers had not testified—the very objection that is notably absent in this case.

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upon which the appraiser had relied, but merely offered its appraiser’s testimony

setting forth his opinion based on that underlying evidence. By contrast, the

appraiser’s report in the present case contains standard market data that appraisers

regularly compile, and as already discussed, the record in the present case

contains additional indicia of the reliability of the appraisal information.

{¶ 24} Finally, the school board argues in its reply brief that Blosser’s

testimony in connection with the appraisal report should not have been

considered, because Blosser’s testimony allegedly violates appraisal-practice

standards. Specifically, the school board asserts that “[n]o appraiser can offer the

BOR or the BTA an opinion of value when the appraiser has not appraised the

property” and charges that Blosser violated appraisal-practice standards by

offering testimony on the basis of an appraisal report that she herself did not

prepare. The school board relies on Standards Rule 1-4 of the Uniform Standards

of Professional Appraisal Practice (“USPAP”), which states, “In developing a real

property appraisal, an appraiser must collect, verify, and analyze all information

necessary for credible assignment results.” http://www.uspap.org/USPAP/

stds/sr1_4.htm. The school board contends that because Blosser herself did not

perform these tasks with respect to the appraisal report, USPAP Standards Rule 1-

4 did not permit her to offer an opinion of value—the result being that the BOR

and the BTA ought to have disallowed or disregarded her testimony.

{¶ 25} We conclude that this argument is not properly before us. The

school board failed to raise the issue of the alleged violation of the appraisal-

practice standards until it filed its reply brief in this court. We see no reason why

an alleged violation of appraisal-practice standards, if it affects the admissibility

of testimony, should not be made the subject of a timely objection. Because no

such objection was advanced below, the claim that a violation of practice

standards made proffered evidence inadmissible has been waived, along with the

hearsay objection.

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The “as of” date on the appraisal report does not justify reversing the BTA’s

decision, because the decision is supported by reliable and probative evidence

{¶ 26} At the BOR, the school board did raise the issue that the appraisal

report expressed an opinion of value as of May 1, 2004, which was not the tax-

lien date. We have held that “ ‘the BTA must base its decision on an opinion of

true value that expresses a value for the property as of the tax lien date of the year

in question.’ ” (Emphasis deleted.) AP Hotels, 118 Ohio St.3d 343, 2008-Ohio-

2565, 889 N.E.2d 115, ¶ 9, quoting Olmsted Falls Village Assn. v. Cuyahoga Cty.

Bd. of Revision (1996), 75 Ohio St.3d 552, 555, 664 N.E.2d 922; see also

Freshwater v. Belmont Cty. Bd. of Revision (1997), 80 Ohio St.3d 26, 30, 684

N.E.2d 304. It would therefore have been error for the BTA to rely on the

appraisal report’s certification of value as of May 1, 2004, as a determination of

value for tax year 2005.

{¶ 27} But that is not what the BTA did. Instead, the BTA placed its

reliance on the testimony of Blosser, an appraiser who expressed her opinion that

the $2,000,000 figure, which originally expressed an opinion of value as of May

1, 2004, constituted a “solid valuation” as of January 1, 2005, the tax-lien date.

According to the BTA, “Blosser has provided her testimonial opinion of the

property’s worth on [the] tax lien date,” and she “supported that opinion with

appraisal evidence of another’s written report.” Plain Local Schools Bd. of Edn.,

BTA No. 2007-V-211, at 7.

{¶ 28} With regard to the as-of-date issue, the circumstances of the

present case parallel those of AP Hotels, 118 Ohio St.3d 343, 2008-Ohio-2565,

889 N.E.2d 115. In that case, the BTA considered an appraisal report that

expressed an opinion that as of January 1, 2003, the value of the property was

$1,600,000, along with the oral testimony of the appraiser who had prepared the

report. Among other things, the appraiser answered the question whether in his

opinion, the value of the property as of January 1, 2002, would be higher or lower

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than its value as of January 1, 2003, by saying: “I think the number would be the

same.” Id. at ¶ 6 - 7. The BTA regarded that testimony in light of the information

contained within the appraisal report and determined that the matters set forth in

the written report supported the oral testimony and justified the conclusion that

the value as of January 1, 2002, was $1,600,000 as well. In affirming, we

emphasized the BTA’s duty to perform an independent valuation and concluded

that it had reached a reasonable and lawful decision, given the record before it.

Accord Colonial Village, Ltd. v. Washington Cty. Bd. of Revision, 123 Ohio St.3d

268, 2009-Ohio-4975, 915 N.E.2d 1196, ¶ 24-25 (when evidence in the record

negates the auditor’s valuation and the record contains sufficient evidence to

permit the BTA to conduct an independent valuation of the property, the BTA

should do so).

{¶ 29} Our review of the BTA’s decision in this case leads us to reach the

same conclusion. Once again, the BTA has regarded the content of the written

appraisal report as evidence that is potentially relevant to the value of the property

as of the tax-lien date at issue, even though the report itself uses that data to arrive

at an opinion of value for a different date. In AP Hotels at ¶ 16, we stated that

“[a]lthough the appraiser did not certify his ultimate opinion of value as of the

2002 tax-lien date, his certification that the ‘statements of fact contained in this

report are true and accurate’ did permit the BTA to use the factual information set

forth in the report.” The written appraisal report in the present case contains a

similar certification, and its content was therefore available to the BTA as a body

of evidence in support of its determination of value.

{¶ 30} The standard for reviewing the BTA’s determination as to the

credibility of witnesses and the weight to be given their testimony is highly

deferential: we will not reverse unless the appellant demonstrates an abuse of

discretion. EOP-BP Tower, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686,

¶ 14, citing Witt Co. v. Hamilton Cty. Bd. of Revision (1991), 61 Ohio St.3d 155,

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157, 573 N.E.2d 661. The school board has not established that the BTA’s

determination involves an abuse of its discretion as the finder of fact.3

Conclusion

{¶ 31} For the reasons set forth, we reject the school board’s contentions

and hold that the BTA acted reasonably and lawfully in determining that the value

of the property was $2,000,000 as of January 1, 2005. We therefore affirm the

decision of the BTA.

Decision affirmed.

O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL,

LANZINGER, CUPP, and MCGEE BROWN, JJ., concur.

__________________

Rich & Gillis Law Group, L.L.C., Mark H. Gillis, and Karol C. Fox, for

appellant.

Means, Bichimer, Burkholder & Baker, L.P.A., and Robert M. Morrow,

for appellee Huntington National Bank.

______________________

3. The school board’s second proposition of law is rendered moot by our foregoing

determinations. It asserts that an opinion of value unsupported by evidence is not competent to

establish value. Because the data in the appraisal report was evidence available to the BTA,

Blosser’s opinion of value did not lack an evidentiary basis.

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