South-Western City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision (Slip Opinion)

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as

South-Western City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, Slip Opinion No. 2018-

Ohio-919.]

NOTICE

This slip opinion is subject to formal revision before it is published in an

advance sheet of the Ohio Official Reports. Readers are requested to

promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65

South Front Street, Columbus, Ohio 43215, of any typographical or other

formal errors in the opinion, in order that corrections may be made before

the opinion is published.

SLIP OPINION NO. 2018-OHIO-919

SOUTH-WESTERN CITY SCHOOLS BOARD OF EDUCATION, APPELLANT, v.

FRANKLIN COUNTY BOARD OF REVISION ET AL., APPELLEES.

[Until this opinion appears in the Ohio Official Reports advance sheets, it

may be cited as South-Western City Schools Bd. of Edn. v. Franklin Cty. Bd. of

Revision, Slip Opinion No. 2018-Ohio-919.]

Taxation—Real-property valuation—Board of Tax Appeals erred in remanding

case to county board of revision after determining that there was no

evidence in record to allow independent valuation to be performed—

Decision reversed and county auditor’s valuation reinstated.

(No. 2015-1486—Submitted November 21, 2017—Decided March 13, 2018.)

APPEAL from the Board of Tax Appeals, No. 2014-3101.

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Per Curiam.

{¶ 1} In this real-property-valuation case, the owner of a shopping center

sought a reduction in the county auditor’s valuation of the property for tax year

2012. The Franklin County Board of Revision (“BOR”) partially reduced the value

based on a sheriff’s-sale appraisal. The Board of Tax Appeals (“BTA”), however,

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found this evidence unreliable and further found that the record contained no other

evidence from which a value could be determined. The BTA accordingly vacated

the BOR’s decision, remanded the case, and directed the BOR to determine a value

based on competent and probative evidence.

{¶ 2} Appellant, Board of Education of the South-Western City School

District (“the BOE”), has appealed, asserting that the BTA should have reinstated

the county auditor’s original valuation rather than remanding the case to the BOR.

We agree. We accordingly reverse the BTA’s decision and reinstate the county

auditor’s original valuation.

FACTS AND PROCEDURAL BACKGROUND

{¶ 3} The property at issue is a 1.492-acre parcel located on Broad Street

on the west side of Columbus. The property is improved with a single-story

shopping center divided into seven storefronts, comprising 19,700 square feet. For

tax year 2012, the owner filed a complaint seeking to reduce the property’s value

from $1,300,000 to $700,000. The complaint opined that the property was

overvalued and “[n]eeds [w]ork.” The complaint also referred to a 2013 sheriff’s

sale of the property for $520,100. The BOE filed a countercomplaint, urging

retention of the Franklin County auditor’s original valuation.

BOR proceedings

{¶ 4} Deno J. Duros, a certified appraiser retained by the owner, testified at

the BOR hearing. He appraised the property at $700,000 as of January 1, 2012. He

inspected the property in March 2013, and at that time, there were two vacancies at

the property. These vacancies still existed at the time of the hearing.

{¶ 5} To perform his appraisal, Duros relied on the sales-comparison and

income approaches to value. Duros stated that for the sales-comparison approach,

he could not find improved sales of leased-fee sites within the relevant geographic

market. He did, however, find four sales of fee-simple sites and used those sales

as a basis for his analysis. After making adjustments to the comparable sales, Duros

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derived an adjusted square-footage value of $35.55. He then multiplied this value

by the shopping center’s square footage (19,700) to arrive at a rounded value of

$700,000. On cross-examination by the BOE, Duros explained that he did not view

the interiors of the comparable properties nor did he contact the parties to those

sales to verify that the sales were transacted at arm’s length.

{¶ 6} For the income approach, Duros began by calculating a gross income

of $119,529. He deducted $3,586 to account for vacancy and credit-loss allowances

and $41,835 to account for expenses. These deductions resulted in a net operating

income of $74,108. After applying a capitalization rate of 10.57 percent against

the net operating income, Duros derived a rounded value of $700,000. During

questioning by the BOE, Duros explained that he used actual income (as opposed

to market rent) and actual taxes (as opposed to a tax additur) to perform his

calculations.

{¶ 7} Duros included a copy of a sheriff’s-sale appraisal with his report,

which the BOE questioned him about. This appraisal was certified as of June 13,

2012, and it summarily assigned a value of $780,000. The three individuals who

performed the appraisal did not appear to testify. During the BOE’s cross-

examination, Duros explained that these three individuals would not have inspected

the interior of the property. The property eventually sold at the sheriff’s sale for

$520,100 in 2013.

{¶ 8} The BOR reduced the property’s value to $780,000 for tax years 2012

and 2013. In assigning this value, the BOR noted that the sheriff’s-sale appraisal

also had valued the property at $780,000. The BOR disregarded the sale price from

the sheriff’s sale because, in its view, the transaction was not made at arm’s length.

And it also disregarded Duros’s appraisal because it did not rely on actual rents.

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BTA proceedings

{¶ 9} The BTA heard the case on the record developed before the BOR and

also considered additional argument from the BOE, which urged the BTA to

disregard both Duros’s appraisal and the sheriff’s-sale appraisal.

{¶ 10} In its decision, the BTA criticized Duros’s sales-comparison

approach because he did not verify that the comparable sales were conducted at

arm’s length and did not view the interiors of the comparable properties. The BTA

was similarly critical of Duros’s income approach, stating that his “report contains

no market information relating to income, expenses, and vacancy and credit loss,

nor does it provide an analysis of the derivation of the capitalization rate.” BTA

No. 2014-3101, 2015 WL 4887074, *2 (Aug. 11, 2015). Citing its own precedent,

the BTA determined that it was “clearly improper” for the BOR to rely on the

sheriff’s-sale appraisal. Id. at *3. The BTA noted that the sheriff’s-sale appraisal

contained no supporting documentation or analysis, that the appraisers did not

appear to testify before the BOR or the BTA, and that the valuation date of June

13, 2012, was about six months after the 2012 tax-lien date.

{¶ 11} After reviewing the record, the BTA determined that the BOR

“properly concluded that the property owner sufficiently demonstrated that the

initial assessment of the subject property overstated its value.” Id. at *4. The BTA

nevertheless ruled that the evidence the BOR relied on was neither competent nor

probative and that there was no other evidence in the record from which the BTA

could independently determine value. Accordingly, the BTA vacated the BOR’s

determination of value and remanded the case for the BOR to make a finding of

value based on competent and probative evidence. The BOE appealed.

STANDARD OF REVIEW

{¶ 12} When the BTA “reviews appraisals, [it] is vested with wide

discretion in determining the weight to be given to the evidence and the credibility

of the witnesses that come before it.” EOP-BP Tower, L.L.C. v. Cuyahoga Cty. Bd.

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of Revision, 106 Ohio St.3d 1, 2005-Ohio-3096, 829 N.E.2d 686, ¶ 9. Because the

BOE does not challenge the BTA’s evidentiary determinations in this appeal, we

need not evaluate whether the BTA abused its discretion in weighing the evidence.

But we still must decide a question of law raised by the BOE, which we consider

de novo, Lunn v. Lorain Cty. Bd. of Revision, 149 Ohio St.3d 137, 2016-Ohio-8075,

73 N.E.3d 486, ¶ 13. If the BTA acted reasonably and lawfully, we will affirm.

Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, 856 N.E.2d 954, ¶ 14.

DISCUSSION

{¶ 13} The BOE’s lone proposition of law asserts that the BTA erred by

remanding the case to the BOR after determining that there was no evidence in the

record to perform an independent valuation. According to the BOE, the BTA

should have instead reinstated the county auditor’s original valuation.

The Bedford rule does not control

{¶ 14} The BTA’s decision not to reinstate the county auditor’s original

valuation was apparently informed by the rule articulated in Bedford Bd. of Edn. v.

Cuyahoga Cty. Bd. of Revision, 115 Ohio St.3d 449, 2007-Ohio-5237, 875 N.E.2d

913. Although the BTA did not expressly rely on Bedford, it quoted from decisions

that draw directly from its principles—namely, Worthington City Schools Bd. of

Edn. v. Franklin Cty. Bd. of Revision, 140 Ohio St.3d 248, 2014-Ohio-3620, 17

N.E.3d 537, ¶ 35-41, and Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of

Revision, 139 Ohio St.3d 193, 2013-Ohio-4543, 11 N.E.3d 206, ¶ 17-21.

{¶ 15} The Bedford rule provides that “ ‘when the board of revision has

reduced the value of the property based on the owner’s evidence, that value has

been held to eclipse the auditor’s original valuation,’ and the board of education as

the appellant before the BTA may not rely on the latter as a default valuation.”

Dublin City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 147 Ohio St.3d

38, 2016-Ohio-3025, 59 N.E.3d 1270, ¶ 6, quoting Worthington at ¶ 35. Thus,

when the owner furnishes evidence relied on by a board of revision that is

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“competent and at least minimally plausible,” a board of education cannot simply

fault the owner’s evidence and urge reinstatement of the auditor’s valuation;

instead, the board of education bears the burden to prove its proposed value. Id. at

¶ 7.

{¶ 16} But a board of education need not prove a new value when a board

of revision’s determination of value is infected with legal error. For example, in

Columbus City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 148 Ohio St.3d

700, 2016-Ohio-8375, 72 N.E.3d 637, we concluded that Bedford did not apply

when a board of revision had unlawfully valued the property according to an

economic-unit analysis. Id. at ¶ 17, citing Copley-Fairlawn City School Dist. Bd.

of Edn. v. Summit Cty. Bd. of Revision, 147 Ohio St.3d 503, 2016-Ohio-1485, 68

N.E.3d 723, ¶ 31.

{¶ 17} The BOE asserts here that it was not required to prove a new value

because the BOR committed legal error in assigning controlling significance to the

sheriff’s-sale appraisal. In support, the BOE cites Olmsted Falls Village Assn. v.

Cuyahoga Cty. Bd. of Revision, 75 Ohio St.3d 552, 664 N.E.2d 922 (1996), in

which we 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,” id.

at 555. Indeed, “the first day of January of the tax year in question is the crucial

valuation date for tax assessment purposes.” Freshwater v. Belmont Cty. Bd. of

Revision, 80 Ohio St.3d 26, 29-30, 684 N.E.2d 304 (1997).

{¶ 18} In this case, the BOR valued the property for tax years 2012 and

2013 based on a sheriff’s-sale appraisal that opined a value as of June 13, 2012. In

valuing the property in direct reliance on an opinion of value that did not correspond

to the tax-lien date, the BOR committed legal error in contravention of Olmsted

Falls.1 To be sure, even when an appraisal opines a value that does not coincide

1

As additional grounds for its assertion that the BOR erred by relying on the sheriff’s-sale appraisal,

the BOE argues that the appraisal constitutes hearsay and that it was performed in connection with

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with the tax-lien date, factual information contained in that appraisal may still be

regarded as furnishing potentially relevant evidence of a property’s value as of the

tax-lien date. See AP Hotels of Illinois, Inc. v. Franklin Cty. Bd. of Revision, 118

Ohio St.3d 343, 2008-Ohio-2565, 889 N.E.2d 115, ¶ 16-17; Plain Local Schools

Bd. of Edn. v. Franklin Cty. Bd. of Revision, 130 Ohio St.3d 230, 2011-Ohio-3362,

957 N.E.2d 268, ¶ 26-29. But here, the sheriff’s-sale appraisal credited by the BOR

contains no factual information that could furnish a basis for valuing the subject

property as of the tax-lien date—it simply opines a value without any supporting

facts or analysis. Nor was testimony offered to show how the appraisal’s opinion

of value could be applied to the tax-lien date.

{¶ 19} Given the legal error in the BOR’s determination, this case is not

controlled by the Bedford rule.

The county auditor’s original valuation should be reinstated

{¶ 20} As noted above, the BTA disregarded both Duros’s appraisal and the

sheriff’s-sale appraisal and further concluded that there was no other evidence in

the record from which an independent valuation could be performed. The BTA

therefore vacated the BOR’s decision and remanded the case to the BOR to conduct

“further proceedings, as necessary, to determine the subject’s reduced valuation, as

of January 1, 2012 and January 1, 2013, based upon competent, probative

evidence.” 2015 WL 4887074 at *4. In the BOE’s view, the BTA should have

simply reinstated the county auditor’s original valuation after concluding that the

record lacked probative evidence from which a value could be determined.

{¶ 21} We have explained that “[e]ven if some evidence tends to negate the

auditor’s original valuation, it is proper to revert to that valuation when the BTA

finds that the owner has not proved a lower value and there is otherwise ‘no

evidence from which the BTA can independently determine value.’ ” (Emphasis

a forced sale as contemplated by R.C. 5713.04. Given the error arising from the BOR’s violation

of Olmsted Falls, we need not address these other grounds for the BOE’s assertion of error.

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added in Vandalia-Butler.) Vandalia-Butler City Schools Bd. of Edn. v.

Montgomery Cty. Bd. of Revision, 130 Ohio St.3d 291, 2011-Ohio-5078, 958

N.E.2d 131, ¶ 24, quoting Simmons v. Cuyahoga Cty. Bd. of Revision, 81 Ohio St.3d

47, 49, 689 N.E.2d 22 (1998); see also Colonial Village, Ltd. v. Washington Cty.

Bd. of Revision, 123 Ohio St.3d 268, 2009-Ohio-4975, 915 N.E.2d 1196, ¶ 31.

{¶ 22} It follows that the BTA erred in remanding the case to the BOR.

Here, the BTA found that the owner demonstrated that the property had been

overvalued, that the owner’s evidence of value did not establish the owner’s

proposed value, and that there was not enough evidence to independently value the

property. After making these findings, the BTA should have reinstated the county

auditor’s original valuation rather than remanding the case to the BOR. See

Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision, 127 Ohio

St.3d 63, 2010-Ohio-4907, 936 N.E.2d 489, ¶ 35 (reinstating county auditor’s

original valuation when “the record did not contain sufficient evidence for the BTA

to perform an independent valuation of the property”). This disposition accords

with the BTA’s statutory duty to “determine the taxable value of the property” as

directed by R.C. 5717.03(B). Although R.C. 5717.03(F) empowers the BTA to

order a remand, as the case law discussed above instructs, the BTA’s exercise of

that power under the circumstances was unwarranted.

CONCLUSION

{¶ 23} For the foregoing reasons, we reverse the BTA’s decision and

reinstate the county auditor’s original valuation.

Decision reversed.

O’CONNOR, C.J., and O’DONNELL, KENNEDY, FRENCH, FISCHER, and

DEWINE, JJ., concur.

DEGENARO, J., not participating.

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Rich & Gillis Law Group, L.L.C., Mark H. Gillis, and Richelle L. Thoburn,

for appellant.

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