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North Canton City School District Board of Education v. Stark County Board of Revision

Supreme Court of Ohio

January 2, 2018

North Canton City School District Board of Education, Appellee,
v.
Stark County Board of Revision et al., Appellees; LFG Properties, L.L.C., Appellant.

          Submitted September 12, 2017

         Appeal from the Board of Tax Appeals, Nos. 2013-6181 and 2013-6222.

          Lane, Alton & Horst, L.L.C., and Robert M. Morrow; and Mary Jo Shannon Slick, for appellee North Canton City School District Board of Education.

          Vorys, Sater, Seymour & Pease, L.L.P., and Karen H. Bauernschmidt, for appellant.

          DeWine, J.

         {¶ 1} This appeal concerns the valuation for tax purposes of a property that was sold following a foreclosure proceeding. The primary issue before us involves the application of the "forced sale" provision of R.C. 5713.04. As we have applied the provision, a forced sale gives rise to a presumption that the sale price is not the property's true value. See Olentangy Local Schools Bd. of Edn. v. Delaware Cty. Bd. of Revision, 141 Ohio St.3d 243, 2014-Ohio-4723, 23 N.E.3d 1086, ¶ 40. That presumption can be rebutted, however, by evidence that an arm' s-length transaction occurred. Id. at ¶ 43. When the presumption is overcome, the sale price is used as the property's value. Id. at ¶ 24.

         {¶ 2} In this case, the Board of Tax Appeals ("BTA") applied the presumption, despite uncontradicted evidence demonstrating that the transaction was at arm's length. We reverse the decision of the BTA and remand the case with the instruction that the $1, 200, 000 sale price be used as the property's true value for tax purposes.

         I. The Property Is Marketed and Sold Following Foreclosure

         {¶ 3} The property is a 36-unit apartment complex in North Canton. After the complex went into foreclosure, the common pleas court appointed a receiver over the property, and Huntington National Bank obtained a judgment of about $1, 700, 000 against its borrower. The property was set for sheriffs sale with a minimum bid of $1, 400, 000. There were no bids, and the property did not sell.

         {¶ 4} The receiver then marketed the property through a national real estate brokerage firm, Hendricks & Partners. The firm sent out marketing materials to many developers, including a mass-mailing flyer that showed a list price of $1, 325, 000 and a pro forma statement of income and expenses for operating the apartment complex. In addition, the property was advertised on two national commercial-real-estate websites. The marketing materials made no mention of the sheriffs sale that failed to sell the subject property.

         {¶ 5} Ultimately, Hendricks & Partners received 17 inquiries from potential buyers, and at least a half-dozen offers to purchase were submitted, ranging from $820, 000 to $1, 200, 000. The highest and best offer was $1, 200, 000, submitted by LFG Properties, L.L.C. There was no relationship between LFG Properties and the receiver or the former property owner. The receiver presented the offer to the court, and the court approved the sale, finding that it was "commercially reasonable." The property was transferred to LFG Properties in June 2011.

         {¶ 6} LFG Properties filed a valuation complaint with appellee Stark County Board of Revision ("BOR") seeking to reduce the property's tax-year-2012 valuation from $1, 841, 300 to $1, 200, 000. North Canton City School District Board of Education ("school board") filed a countercomplaint seeking to retain the auditor's valuation. At the BOR hearing, LFG Properties was the only party to present evidence. After considering the evidence, the BOR noted that there was evidence in the record that a distress sale occurred. It found, however, that the presumption of involuntariness was rebutted with "strong testimony" by LFG Properties, and "good evidence [was] presented" showing that the property was marketed over time. The BOR found that the June 2011 sale represented the property's fair market value at the time of the sale. It then adjusted that sale price by $101, 500 to account for repairs that were made by LFG Properties after the sale, thereby establishing a total value of $1, 301, 500.

         {¶ 7} LFG Properties and the school board both appealed to the BTA. The BTA rejected the BOR's reliance on the 2011 sale price as an indicator of value, found that the sale was a forced sale, and reinstated the auditor's valuation. LFG Properties appealed to this court.

         II. The BTA Erred in Failing to ...


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