The opinion
[Cite as Inn at the Wickliffe, L.L.C. v. Wickliffe City Bd. of Edn., 2015-Ohio-138.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
INN AT THE WICKLIFFE, LLC, : OPINION
Appellant, :
CASE NO. 2014-L-045
- vs - :
WICKLIFFE CITY BOARD OF :
EDUCATION, et al.,
:
Appellees.
Administrative Appeal from the Ohio Board of Tax Appeals, Case No. 2011-2366.
Judgment: Reversed and vacated.
Jodi Littman Tomaszewski and Joshua J. Strickland, Dworken & Bernstein Co. L.P.A.,
60 South Park Place, Painesville, OH 44077 (For Appellant).
Wayne E. Petkovic, 840 Brittany Drive, Delaware, OH 43015 (For Appellee Wickliffe
City Board of Education).
Charles E. Coulson, Lake County Prosecutor, and Gianine A. Lucci, Assistant
Prosecutor, 105 Main Street, P.O. Box 490, Painesville, OH 44077 (For Appellees
Lake County Auditor and Lake County Board of Revision).
COLLEEN MARY O’TOOLE, J.
{¶1} Inn at the Wickliffe, LLC (“Wickliffe Inn”) appeals from the decision and
order of the Board of Tax Appeals (“BTA”), reversing the decision of the Lake County
Board of Revision (“BOR”) regarding the tax value of a hotel owned by Wickliffe Inn.,
located at 28600 Ridgehills Drive, Wickliffe, Ohio. The Lake County Auditor had
assessed the hotel’s value as $4,800,000, the amount of its most recent sale. On
Wickliffe Inn’s complaint, the BOR reduced the valuation to $2,500,000. On appeal by
the Wickliffe City Board of Education (“Board of Education”), the BTA reinstated the
value assessed by the auditor. Wickliffe Inn contends the BTA ignored changes in the
market and property rendering the most recent sales price improper for establishing the
hotel’s tax value. We agree, and reverse and vacate the decision and order of the BTA.
{¶2} Ghanshyam Patel testified before both the BOR and BTA. Mr. Patel is the
owner of Wickliffe Inn. He is from Buffalo, New York, and has owned and operated
hotels and motels for many years. In May 2008, he and his then partner in Wickliffe Inn
purchased the subject hotel for $4,800,000. Evidently, Mr. Patel was the principal
financier of the deal; his partner, based in Cleveland, ran the business day to day. At
the time of its purchase, the hotel operated as a Holiday Inn, and had revenues of
$4,000,000 per year. The property is older: Wickliffe Inn promised to make certain
improvements to retain the Holiday Inn franchise. Mr. Patel testified before the BTA that
the Holiday Inn name is extremely valuable, as it attracts business clientele.
{¶3} In autumn 2008, the Great Recession commenced. Wickliffe Inn could not
obtain loans to finance the refurbishing required by Holiday Inn. Mr. Patel testified his
partner mismanaged operations at the hotel. Wickliffe Inn lost its Holiday Inn franchise
in 2009. Since then, it has operated under the Ramada name. Mr. Patel testified that
Ramada does not attract any significant business clientele, and that while one can let
Holiday Inn rooms for $100 to $150 per night, the Ramada name limits one to $40 to
$60 per night. Mr. Patel testified that revenues dropped from $4,000,000 in 2007, to
just over $1,000,000 in 2010. Mr. Patel testified that due to the loss in revenues and
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Wickliffe Inn’s inability to obtain loans, the hotel fell into further disrepair, with a leaking
roof, sprinkler system problems, and large numbers of rooms uninhabitable.
{¶4} Wickliffe Inn’s appraiser, Dwight A. Kumler, also testified before both the
BOR and BTA. He performed an appraisal of the hotel, and determined that as of the
tax lien date of January 1, 2010, its value was $2,300,000.
{¶5} Wickliffe Inn filed its complaint with the BOR March 3, 2011, requesting
the valuation of the hotel be set at $2,100,000. Hearing was held July 26, 2011.
August 11, 2011, the BOR mailed its decision that the value of the property for the tax
year 2010 was $2,500,000. The Board of Education appealed to the BTA, which held
hearing April 8, 2013. The BTA filed its decision and order determining the value of the
hotel to be $4,800,000, as determined by the Lake County Auditor, April 9, 2014. This
appeal timely ensued, Wickliffe Inn assigning a single error: “The Ohio Board of Tax
Appeals erred by reversing the findings of the Lake County Board of Revision via finding
that a recent sale existed and imposing the sale price as the value of the real property
despite the existence of facts that removed the recency of the sale.”
{¶6} Appeals from decisions of the BTA are controlled by R.C. 5717.04. In
Kister v. Ashtabula Cty. Bd. of Revision, 11th Dist. Ashtabula No. 2007-A-0050, 2007-
Ohio-6943, ¶10-12, we held:
{¶7} “‘The applicable standard of review under (R.C. 5717.04) is whether the
Board’s decision is “reasonable and lawful” for affirmance, and “unreasonable and
unlawful” for reversal.’ Gen. Am. Transp. Corp. v. Limbach (Dec. 30, 1983), 11th Dist.
No. 3268, 1983 Ohio App. LEXIS 12463, at *2. These statutory guidelines are
reinforced by case law.
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{¶8} “‘The Ohio Supreme Court has decided that in an appeal from a decision
of the Board of Tax Appeals, the Courts function “is to review the board’s decision to
determine if it is reasonable and lawful. (* * *) As long as there is evidence which
reasonably supports the conclusion reached by the board, the decision must stand.”
Mobile Instrument Serv. and Repair, Inc. v. Tax Commr. of Ohio (Dec. 6, 2000), 3d Dist.
No. 8-2000-20, 2000 Ohio 1757, 2000 Ohio App. LEXIS 5670, at *5, quoting Highlights
for Children, Inc. v. Collins (1977), 50 Ohio St.2d 186, 187-188, * * * (* * *). See also,
PPG Industries, Inc. v. Kosydar (1981), 65 Ohio St. 2d 80, * * * (* * *); American
Steamship Co. v. Limbach (1991), 61 Ohio St. 3d 22, * * * (* * *)[.]’ (Parallel citations
omitted.)
{¶9} “‘The Court of Appeals is bound by the record that was before the Board
of Tax Appeals and may not substitute its judgment for that of the board. Denis Copy
Co. v. Limbach (1992), 76 Ohio App.3d 768, * * * (* * *). Additionally, the Board of Tax
Appeals has wide discretion in determining the weight to be given the evidence and the
credibility of witnesses that come before it. Cardinal Fed. S. & L. Assn. v. Cuyahoga
Cty. Bd. of Revision (1975), 44 Ohio St.2d 13, * * * (* * *). Finally, we note that the
burden of demonstrating that the determination is unlawful and unreasonable falls upon
the appellant (* * *). R.C. 5717.04; Hatchadorian v. Lindley (1986), 21 Ohio St.3d 66, * *
* (* * *).’ Mobile Instrument, supra, at 5-6. (Parallel citations omitted.)”
{¶10} As the Tenth District recently noted, “‘In an appeal to the BTA, the party
challenging the BOR’s decision has the burden of proof to establish the party’s
proposed value as the value of the property.’” Bd. of Edn. of the Columbus City Schools
v. Franklin Cty. Bd. of Revision, 10th Dist. Franklin No. 14AP-167, 2014-Ohio-4360,
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¶19, quoting Piepho v. Franklin Cty. Bd. of Revision, 10th Dist. Franklin No. 13AP-818,
2014-Ohio-2908, ¶6, citing Sapina v. Cuyahoga Cty. Bd. of Revision, 136 Ohio St.3d
188, 2013-Ohio-3028, ¶26; Colonial Village Ltd. v. Washington Cty. Bd. of Revision, 123
Ohio St.3d 268, 2009-Ohio-4975, ¶23. Further, “‘when a taxpayer presents evidence
contrary to the auditor's valuation and no evidence is offered to support the auditor’s
valuation, the BTA may not simply reinstate the auditor’s determination.’ [Dublin City
Schools Bd. of Edn v. Franklin Cty. Bd. of Revision, 139 Ohio St.3d 193, 2013-Ohio-
4543, ¶17], citing Dayton-Montgomery [Cty. Port Auth.v. Montgomery Cty. Bd. of
Revision, 113 Ohio St.3d 281, 2007-Ohio-1948] at ¶27; Bedford Bd. of Edn. v.
Cuyahoga Cty. Bd. of Revision, 115 Ohio St.3d 449, 2007-Ohio-5237, ¶11-12, * * *.”
(Parallel citation omitted.) Columbus City Schools at ¶28.
{¶11} R.C. 5713.03 controls the taxable valuation of real property. Regarding
the version of that statute current when the Lake County Auditor valued the hotel in this
case, the Supreme Court of Ohio has stated:
{¶12} “Former R.C. 5713.03 stated that a county auditor (or in this case fiscal
officer) ‘shall consider the sale price (* * *) to be the true value for taxation purposes’
when the property ‘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.’ (Emphasis added.) * * * ‘The 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 v. Monroe Cty. Bd. of Revision, 50 Ohio St.2d 129, * * * (1977), paragraph one
of the syllabus, citing State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 175 Ohio St.
410, * * * (1964).” (Emphasis sic.) (Footnote omitted.) (Parallel citations omitted.)
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Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, 139 Ohio St.3d 92,
2014-Ohio-1588, ¶12.
{¶13} In this case, there is no dispute that Wickliffe Inn acquired the subject
hotel in an arm’s length transaction as a willing buyer from a willing seller in May 2008,
less than two years prior to the tax lien date of January 1, 2010. Thus, the sale was
within 24 months of the lien date, and is presumptively a “recent” sale, evidencing the
true tax value of the hotel. Akron City School Dist. Bd. of Edn., supra, at ¶26. Thus, to
show that the sale for $4,800,000 did not establish the tax value of the hotel, Wickliffe
Inn was required to introduce evidence of market changes or changes in the property
between the time of the sale, and the lien date. See, e.g., Worthington City Schools Bd.
of Edn. v. Franklin Cty. Bd. of Revision, 129 Ohio St.3d 3, 2011-Ohio-2316, ¶21 and fn.
1.
{¶14} Before both the BOR and the BTA, Mr. Patel testified that the Great
Recession made it impossible to obtain loans to refurbish the hotel; that loss of the
Holiday Inn franchise destroyed the hotel’s business clientele; and that the hotel had
seriously declined in condition. The changes in lending opportunities available to
businesses and individuals caused by the Great Recession is obviously a market
change, and the deterioration of the hotel’s physical condition is obviously a change in
the property. Further, the loss of the Holiday Inn franchise appears to us a market
change. The dictionary definition of “market” includes: “A subdivision of a population
considered as buyers < the college market >.” (Emphasis sic.) Webster’s II New
College Dictionary 670 (1999). Mr. Patel’s testimony established that the balance of the
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hotel’s revenue had come from business travelers when it was a Holiday Inn, and that
Wickliffe Inn could not get any business travelers as a Ramada.
{¶15} Consequently, Wickliffe Inn carried its burden before the BOR of showing
the hotel’s value was below that determined by the auditor. The decision of the BOR
reflects this. Kister, supra, at ¶15. The Board of Education did not respond with any
evidence to rebut this showing on appeal to the BTA. A reading of the BTA’s decision
and order indicates it relied on the decision in Worthington City Schools Bd. of Edn.,
supra, and that in Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 132 Ohio St.3d
371, 2012-Ohio-2844, for the proposition that the loss of tenants to a commercial
property does not necessarily impugn a recent sales price as the proper standard for
setting the tax value of the property. We respectfully agree with Wickliffe Inn that both
cases are distinguishable. They involved properties renting space to commercial
tenants, not a hotel seeking guests. Most significantly, neither involved a change in
market conditions: the properties involved remained in the business of letting space to
small businesses. In this case, the evidence establishes that Wickliffe Inn’s loss of the
Holiday Inn franchise changed its market, from letting rooms principally to business
travelers, to letting rooms to travelers in general. Mr. Patel’s testimony established that
the business travelers market is significantly different, and more profitable, than the
latter.
{¶16} The BTA simply reinstated the auditor’s valuation, without the Board of
Education presenting evidence the BOR’s valuation of the property was wrong. This
has been forbidden by the Supreme Court of Ohio. Dublin City Schools, supra, at ¶17.
Consequently, the decision and order of the BTA was unlawful and unreasonable.
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{¶17} The assignment of error has merit. The decision and order of the Board of
Tax Appeals is reversed and vacated.
DIANE V. GRENDELL, J., concurs with a Concurring Opinion,
CYNTHIA WESTCOTT RICE, J., dissents with a Dissenting Opinion.
______________________
DIANE V. GRENDELL, J., concurs, with a Concurring Opinion.
{¶18} I concur in the majority’s judgment and analysis in this case. I write
separately solely to address the dissenting opinion.
{¶19} The dissent concludes that the value of the property at the time it was sold
to appellant should be applied for tax purposes. The logic of such an argument must be
questioned, given that the dissent essentially concedes that the value of the property
has decreased since the time of purchase, yet still advocates that a higher value should
be used. It would be unjust and improper to order appellant to pay greater taxes on the
property than are supported by the evidence of the property’s present value, which is
clearly less than it was at the time of its purchase.
{¶20} While the dissent asserts that the appellant had the burden to prove that
the character of the property or the market changed, this burden was met. The change
of the property from a Holiday Inn to a Ramada Inn franchise drastically altered the
property’s operations and its character as a whole. Further, the evidence of the
appellant’s inability to obtain a loan, consistent with the rapidly shifting economy during
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the recession at that time, also met the burden as to the change in market. As
explained in the opinion, the appellees’ failure to rebut the valuation evidence provided
by appellant warrants reversal. Supra at ¶15.
{¶21} Given the foregoing, and for the reasons outlined in the opinion, I concur
in the majority’s judgment.
______________________
CYNTHIA WESTCOTT RICE, J., dissents with a Dissenting Opinion.
{¶22} Because I disagree with the majority’s statement of the facts, analysis,
and disposition, I respectfully dissent.
{¶23} Appellant purchased the subject hotel, which was then operated as a
Holiday Inn, in May 2008 for $4,800,000. The first tax-lien date after the sale occurred
18 months later on January 1, 2010, at which time the Lake County Auditor assessed
the value of the property at $4,800,000, based on the 2008 sale price.
{¶24} Thereafter, appellant filed a complaint with the Lake County Board of
Revision, seeking a reduction of the auditor’s valuation of more than 50% to
$2,100,000. Appellee filed a countercomplaint, seeking to maintain the auditor’s
valuation. The Board of Revision reduced the value of the hotel to $2,500,000.
Appellee subsequently appealed the Board of Revision’s valuation to the Ohio Board of
Tax Appeals, seeking reinstatement of the auditor’s valuation of $4,800,000.
{¶25} At the hearing held by the Board of Tax Appeals in 2013, appellant’s
owner, Ghanshyam K. Patel, testified that he and his business partner purchased the
hotel in May 2008. Mr. Patel lived in New York at the time and provided the capital for
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the purchase, while his partner operated the hotel. Mr. Patel said that when they
bought the hotel, the seller disclosed the property was in need of extensive repairs. He
said the purchase agreement recites that 30 of the hotel’s 213 suites were uninhabitable
because they were water-damaged. Mr. Patel said this was due to the deteriorated roof
which had many leaks. The contract provided that appellant was purchasing the
property “as-is,” and gave appellant 60 days from execution of the agreement to inspect
the hotel and to cancel the contract, if it chose to do so. The purchase agreement also
indicates that the seller gave appellant an inspection report, dated October 1, 2007,
showing the hotel was in violation of multiple building code requirements. Mr. Patel
inspected the hotel and found that 70 suites were uninhabitable due to water damage.
Mr. Patel said he bought the property knowing that “everything was deteriorated.”
{¶26} Mr. Patel said the hotel had been operating under a Holiday Inn franchise
for some time. He notified Holiday Inn of the pending sale and asked that the franchise
be transferred to appellant. Holiday Inn officials conducted an inspection and identified
all areas requiring renovation. In order to retain the Holiday Inn franchise, Mr. Patel
agreed to make the listed renovations, which he understood would cost $2 million.
{¶27} During the summer of 2009, Mr. Patel learned that his partner had not
paid numerous vendors, employee wages, real estate taxes, the hotel’s utilities, the
mortgage, or Holiday Inn’s franchise fees, in the combined amount of $1.5 million. Mr.
Patel said that as a result of his partner’s “mismanagement” of the hotel, appellant lost
its Holiday Inn franchise in early 2009. He said that, due to the loss of the franchise,
appellant lost its corporate customers and its business declined. Mr. Patel’s partner
then purchased a Ramada Inn franchise for the hotel, but, according to Mr. Patel, this
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franchise was not as valuable as the Holiday Inn franchise because Ramada Inn caters
to all types of guests, while Holiday Inn focuses on corporate customers.
{¶28} Mr. Patel said that sometime after his partner lost the Holiday Inn
franchise, he, Mr. Patel, moved to Cleveland to operate the hotel in September 2009.
He admitted that as of the date of the hearing in 2013, he still had not replaced the roof.
He said he owes Lake County more than $500,000 in delinquent real estate taxes. He
also stopped paying the mortgage. Mr. Patel is also delinquent on his franchise fees
owed to Ramada Inn, and that company has threatened to cancel appellant’s franchise.
{¶29} Mr. Patel said he bought the property planning to renovate the entire hotel
if they were able to obtain a loan. However, he did not undertake any renovations. He
said that in 2008, the year he bought the hotel, “there was a crunch in the economy,”
and he was unable to obtain a loan to make the necessary repairs. However, he said
that as of the date of the Board of Tax Appeals hearing in 2013, long after the recovery
of the economy, he still could not get a loan to make the repairs.
{¶30} Appellant presented an appraisal of the property to the Board in the
amount of $2,300,000. However, his appraiser testified this appraisal was based in part
on his inspection of the property in 2011 that revealed about 60 suites remained
uninhabitable.
{¶31} Appellant argued that, due to the foregoing circumstances, the sale in
2008 was too remote to be considered the best evidence of the property’s true value.
The Board of Tax Appeals disagreed, holding that the foregoing evidence was
insufficient to show that the 2008 sale of the hotel was not the best evidence of the
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property’s value as of the tax-lien date. The Board held the true value of the hotel was
$4,800,000.
{¶32} The determination of the value of real property is within the province of
Board of Tax Appeals, and an appellate court cannot disturb the Board’s decision
unless it is unlawful and unreasonable. Cuyahoga Cty. Bd. of Revision v. Fodor, 15
Ohio St.2d 52 (1968), syllabus. Further, as long as there is evidence that supports the
Board’s conclusion, its decision must stand. Mobile Instrument, supra. The Board of
Tax Appeals has wide discretion in determining the weight to be given to the evidence
and the credibility of the witnesses who testify before it. Cardinal Fed., supra. Finally,
the appellant has the burden of demonstrating that the decision of the Board of Tax
Appeals is unlawful and unreasonable. Mobile Instrument, supra.
{¶33} Former R.C. 5713.03 (which applies to this case) provided that a county
auditor “shall consider the sale price * * * to be the true value for taxation purposes”
when the property “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 Supreme Court of Ohio has stated that the best evidence of the value of real
property is an actual, recent sale of the property in an arm's-length transaction.
Conalco, supra. Further, the Supreme Court has said that “the only rebuttal lies in
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, ¶13. Appellant admits it was a willing buyer, and does not challenge the arm’s-
length nature of the sale, but only disputes its recency.
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{¶34} Former R.C. 5713.03 conditioned the use of the sale price to determine
value on the sale having occurred “within a reasonable length of time, either before or
after the tax lien date. The Supreme Court has held that such sale is presumed to be
recent and the price is presumed to be the property’s true value. Cummins, supra, at
¶41. The Supreme Court recently adopted a bright-line test for determining when this
presumption should apply. The Court in Akron City Sch. Dist. Bd. of Educ. v. Summit
County Bd. of Revision, 139 Ohio St.3d 92, 2014-Ohio-1588, held that a sale which
occurred within 24 months before the tax-lien date is presumed to be recent, and the
proponent of the sale price is not required to come forward with evidence showing that
market conditions or the character of the property has not changed between the sale
date and the tax-lien date. Id. at ¶26. Rather, the appellant has the burden to
demonstrate a change in the market or the character of the property. Id.
{¶35} Here, appellant bought the hotel in an arm’s-length transaction less than
24 months before the January 1, 2010 tax-lien date, and, as the majority correctly notes,
the sale is thus presumed to be recent and to evidence the true value of the hotel. As a
result, appellant had the burden to prove that market conditions or the character of the
property changed between the sale date and the tax-lien date so that $4,800,000 is no
longer the true value of the hotel.
{¶36} The majority holds that appellant’s reduced lending opportunities caused
by the general economic downturn and appellant’s loss of the Holiday Inn franchise
“appear to be” market changes. However, the majority does not cite any case law
supporting this conclusion. Moreover, appellant bought the hotel in May 2008 in the
midst of the economic downturn. Thus, any reduction in appellant’s lending
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opportunities did not begin after the sale and thus did not constitute a market change.
Significantly, Mr. Patel said that even after the economic downturn, he still cannot get a
loan to renovate the hotel. Thus, it was not any market change that prevented appellant
from getting a loan, but, rather, other factors, such as the poor condition of the property
and/or appellant’s lack of creditworthiness,.
{¶37} Next, the majority virtually ignores the undisputed evidence that the
mismanagement of the hotel by its current owners caused the loss of the hotel’s Holiday
Inn franchise, resulting in the erosion of the hotel’s customer base. Mr. Patel said that
appellant lost its Holiday Inn franchise due to his partner’s mismanagement. However,
appellant chose his partner and left him in charge. For months, Mr. Patel and/or his
partner ran the business into the ground, failing to pay the hotel’s bills or employees, its
utilities, real estate taxes, and mortgage, which led to the loss of the hotel’s Holiday Inn
franchise. As the Board of Tax Appeals astutely noted, reduced occupancy does not
establish a change in market conditions where it may have resulted “from a number of
factors, including the current owner’s management practices.” See Worthington, supra.
Here, appellant’s loss of the Holiday Inn franchise (and the resulting decline of its
business) was caused by appellant’s management practices, not any downturn in the
economy.
{¶38} Further, the majority states the character of the property changed between
the sale date and the tax-lien date. However, the property was in deplorable condition
before the sale, and Mr. Patel was aware of its condition before he bought it. Thus,
there was no change to the character of the hotel between the sale and tax-lien dates.
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{¶39} As a result, the decision of the Board of Tax Appeals upholding the Lake
County Auditor’s valuation was reasonable and lawful and I would affirm.
{¶40} I therefore respectfully dissent.
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