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West Carrollton City Schools Board of Education v. Montgomery County Board of Revision

Court of Appeals of Ohio, Second District, Montgomery

June 15, 2018

WEST CARROLLTON CITY SCHOOLS BOARD OF EDUCATION, Appellee
v.
MONTGOMERY COUNTY BOARD OF REVISION, Appellee; MCDONALD'S USA, LLC, Appellant

          Administrative Appeal from Board of Tax Appeals BTA Case No. 2015-2357

          KAROL C. FOX, Atty. Reg. No. 0041916 and MARK H. GILLIS, Atty. Reg. No. 0066908, 6400 Riverside Drive, Suite D, Dublin, Attorneys for Plaintiff-Appellee, West Carrollton City Schools BOE.

          CHARLES L. BLUESTONE, Atty. Reg. No. 0060897 and PATRICK J. HEERY, Attorneys for Defendant, Appellant, McDonald's USA, LLC.

          OPINION

          HALL, J.

         {¶ 1} McDonald's USA, LLC, appeals from the decision of the Board of Tax Appeals (BTA) that found the taxable value of McDonald's property to be $1, 860, 000 for tax year 2014. We find no error in the BTA's decision, so it is affirmed.

         I. Background

         {¶ 2} The property at issue is a 1.383-acre parcel located at 741 East Dixie Drive in West Carrollton, Ohio. The property is improved with a 4, 470-square foot building, constructed in 2005, that houses a McDonald's restaurant. For tax year 2014 the Montgomery County Auditor valued the property at $1, 308, 710. McDonald's filed a complaint with the Board of Revision (BOR) seeking to reduce the value to $675, 000. The West Carrollton City Schools Board of Education (BOE) filed a countercomplaint, asking the BOR to retain the auditor's original valuation.

         {¶ 3} The BOR held a hearing. Stephen J. Weis, a certified appraiser retained by McDonald's, testified at the hearing and submitted a written appraisal report. He appraised the property at $715, 000 as of January 1, 2014. McDonald's amended its complaint to conform with Weis's appraisal. The BOE cross-examined Weis but did not present any evidence of its own. The BOR reduced the property's value to $715, 000. The BOE appealed to the BTA.

         {¶ 4} At the BTA hearing, the BOE presented the testimony and written appraisal report of Thomas D. Sprout, a certified appraiser. Sprout valued the property at $1, 860, 000. [1] Apparently, the recording device used at the BOR hearing stopped recording during Weis's cross-examination. McDonald's asked the BTA to supplement the record by having Weis recreate the cross-examination portion of his testimony. The BTA agreed and held another hearing at which Weis was cross-examined on his appraisal.

         {¶ 5} The BTA issued a written decision finding Sprout's analysis superior to Weis's, and the BTA adopted the $1, 860, 000 valuation proposed by the BOE.

         {¶ 6} McDonald's appealed.

         II. Analysis

         {¶ 7} McDonald's presents seven assignments of error. Each assignment of error challenges the BTA's assessment of the competing appraisal reports, the specific calculations contained in them, or the relative qualifications of the appraisers.

         First Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, when it failed to find that Appellant's appraisal evidence constituted competent and probative evidence of the market value of the subject property.

         Second Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, when it failed to find that Appellant met its burden of proof, when the record contained reliable and probative evidence to support Appellant's market value of the subject property.

         Third Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by finding the appraisal analysis submitted by Appellee West Carrollton City Schools Board of Education to be more competent and probative evidence of the subject property's market value than the appraisal analysis proffered by Appellant.[2]

Fourth Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by finding the highest and best use analysis advanced by Appellee West Carrollton City Schools Board of Education more appropriate than the analysis proffered by Appellant.

         Fifth Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, in considering the present use of the subject property in determining its market value.

         Sixth Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, in finding the capitalization rate advanced by Appellee West Carrollton City Schools Board of Education, rather than the rate adopted by Appellant, more appropriate to use in calculating the subject property's market value under the income capitalization approach to value.

         Seventh Assignment of Error

The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, in continuing to recognize Appellee West Carrollton City School Board of Education's appraiser as an expert witness in view of the testimony and evidence proffered at the BTA hearing.

         {¶ 8} McDonald's primary argument on appeal is that the BTA should have adopted Weis's valuation. We begin by reviewing the standards that apply to BTA decisions.

         A. Standards of review

         {¶ 9} When a case is appealed to the BTA from a board of revision, the appellant has the burden of proving its right to a decrease or increase in value from the value found by the board of revision. Shinkle v. Ashtabula Cty. Bd. of Revision, 135 Ohio St.3d 227, 2013-Ohio-397, 985 N.E.2d 1243, ¶ 24. This means that the "appellant must come forward and demonstrate that the value it advocates is a correct value. Once competent and probative evidence of value is presented by the appellant, the appellee who opposes that valuation has the opportunity to challenge it through cross-examination or by evidence of another value." (Citation omitted.) 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, ¶ 6.

         {¶ 10} The BTA, itself, as a taxing authority, has an independent duty to weigh evidence and make findings, and the BTA reviews the administrative decisions of boards of revision de novo as to both fact and law. MacDonald v. Shaker Hts. Bd. of Income Tax Rev., 144 Ohio St.3d 105, 2015-Ohio-3290, 41 N.E.3d 376, ¶ 21; Coventry Towers, Inc. v. City of Strongsville, 18 Ohio St.3d 120, 122, 480 N.E.2d 412 (1985). Under R.C. 5717.01, the BTA has "three options when hearing an appeal: the board may confine itself to the record and the evidence certified to it by the board of revision, hear additional evidence from the parties, or may make such other investigation of the property as is deemed proper." Coventry Towers at 122.

         {¶ 11} Under what is called the Bedford rule, " '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, referencing Bedford Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 115 Ohio St.3d 449, 2007-Ohio-5237, 875 N.E.2d 913. (Other citation omitted.) Thus, when the board of revision adopts a new value based on an owner's evidence, the burden of going forward shifts to the board of education on appeal to the BTA. Id. The board of education then has the burden to establish a new value, whether that be the valuation of the auditor or another value. Id. at ¶ 7.

         {¶ 12} With respect to our review of BTA decisions, we note that McDonald's notice of appeal was filed before the effective date of recent amendments to R.C. 5717.04, which became effective on September 29, 2017. See Am. Sub. H.B. 49, 2017 Ohio Laws File 14. Before the amendments, parties had the option of appealing decisions of the BTA to the Supreme Court of Ohio, as well as to the court of appeals for the county in which the taxed property was situated. But the statute was amended to eliminate initial appeals to the Supreme Court of Ohio, and the court of appeals in which a notice of appeal has been filed now has exclusive jurisdiction.[3] See Am. Sub. H.B. 49, 2017 Ohio Laws File 14, Part 15.

         {¶ 13} R.C. 5717.04, as amended, states:

If upon hearing and consideration of such record and evidence the applicable court decides that the decision of the board appealed from is reasonable and lawful it shall affirm the same, but if the court decides that such decision of the board is unreasonable or unlawful, the court shall reverse and vacate the decision ...

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