[Cite as Banker's Choice, L.L.C. v. Cincinnati Zoning Bd. of Appeals, 2021-Ohio-1206.]
IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO
BANKER’S CHOICE, LLC, : APPEAL NO. C-200117 TRIAL NO. A-1501964 and :
STOUGH DEVELOPMENT : O P I N I O N. CORPORATION, : Plaintiffs-Appellees, : vs. : ZONING BOARD OF APPEALS OF THE CITY OF CINCINNATI, :
Defendant, :
and :
CITY OF CINCINNATI, :
Defendant-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: April 9, 2021
Barrett & Weber LPA, C. Francis Barrett and Joshua L. Goode, for Plaintiffs- Appellees,
Andrew W. Garth, Interim City Solicitor, Marion E. Haynes, III, and Kevin M. Tidd, Assistant City Solicitors, for Defendant-Appellant. OHIO FIRST DISTRICT COURT OF APPEALS
MYERS, Presiding Judge.
{¶1} Defendant-appellant the city of Cincinnati appeals for the third time
the trial court’s adoption of a magistrate’s decision ordering the issuance of a
certificate of appropriateness to plaintiffs-appellees, Banker’s Choice, LLC, and
Stough Development Corporation (“Banker’s Choice”), to demolish the Davis
Furniture Building,1 a structure designated as historic in downtown Cincinnati.
Because the trial court considered the required factors in Cincinnati Municipal Code
1435-09-2(b), and because its determination that Banker’s Choice had demonstrated
an economic hardship was supported by a preponderance of the evidence, we affirm
the trial court’s judgment.
I. Facts and Procedural History
{¶2} In 2013, Banker’s Choice, a Cincinnati developer of urban properties,
bought the Davis Furniture Building at a sheriff’s sale for $125,000 “to alleviate the
‘eyesore’ * * * the building had become and to protect the economic well-being of
their property across the street.” Banker’s Choice, LLC, v. Zoning Bd. of Appeals of
City of Cincinnati, 2018-Ohio-3030, 106 N.E.3d 1271, ¶ 2 (1st Dist.) (“Banker’s
Choice I”). After acquiring and evaluating the property, Banker’s Choice sought a
certificate of appropriateness for demolition from the Historic Conservation Board
pursuant to the Cincinnati Zoning Code. See Cincinnati Municipal Code 1435-01-C
and 1435-09-01.
{¶3} In 2014, the Historic Conservation Board denied the request by
Banker’s Choice for a certificate of appropriateness for demolition of the Davis
1 We refer to the “building” in the singular, as we did in our prior decisions. The property comprises two buildings located at 1119 and 1123 Main Street.
2 OHIO FIRST DISTRICT COURT OF APPEALS
Furniture Building. It found that three local entities had presented legitimate
purchase offers, each of which, if consummated, would cover and exceed Banker’s
Choice’s purchase price and costs. It determined that Banker’s Choice had failed to
show that all economically viable use of the property would be deprived without
demolition. Banker’s Choice appealed, and in 2015, the Zoning Board of Appeals
(“the Zoning Board”) affirmed the denial of the demolition request. Banker’s Choice
appealed to the Hamilton County Court of Common Pleas.
{¶4} After taking additional evidence, a magistrate of the common pleas
court determined that the Historic Conservation Board violated Banker’s Choice’s
due-process rights, that the Davis Furniture Building was not a “historical asset” or a
“historic structure” as those terms are defined in the code, and that the three offers
to purchase the building were “illusory” and “not bona fide offers.” The magistrate
also held as a matter of law that the standard for determining when the Historic
Conservation Board may issue a certificate of appropriateness, identified in
Cincinnati Municipal Code 1435-09-2, was unconstitutional. The magistrate found
that Banker’s Choice had proven that it was not economically viable to rehabilitate
the property and ordered the Historic Conservation Board to issue a certificate of
appropriateness for demolition to Banker’s Choice. The city filed objections.
{¶5} In 2017, the trial court overruled the objections, adopted the
magistrate’s decision, and ordered the issuance of a certificate of appropriateness for
the building’s demolition. In addition, the court determined that Banker’s Choice
was not denied due process, but the court did not decide the constitutionality of the
relevant city ordinance. The court treated the “fact that no one purchased the
building” as “substantial evidence that any real or perceived economic hardship * * *
3 OHIO FIRST DISTRICT COURT OF APPEALS
was not relieved” by the purchase offers. In light of its ruling that the building could
be demolished, the court denied the city’s motion for a preliminary injunction
directing Banker’s Choice to restore the building to comply with the city’s building
code.
Banker’s Choice I
{¶6} In the city’s first appeal, we noted that the trial court had correctly
identified the law governing its approval or denial of Banker’s Choice’s application
for a certificate of appropriateness for demolition. Banker’s Choice I at ¶ 13.
Cincinnati Municipal Code 1435-09-2(b) provides that a certificate of
appropriateness should issue if the property owner has demonstrated by credible
evidence that it would suffer economic hardship if the certificate were not approved.
Id. In reaching a determination of whether Banker’s Choice had demonstrated an
economic hardship, the trial court was required to consider three factors:
(i) Will all economically viable use of the property be deprived
without approval of a Certificate of Appropriateness;
(ii) Will the reasonable investment-backed expectations of the
property owner be maintained without approval of a Certificate of
Appropriateness; and
(iii) Whether the economic hardship was created or exacerbated by
the property owner.
Id., citing Cincinnati Municipal Code 1435-09-2(b).
{¶7} We held that the trial court did not evaluate all three factors of the
economic hardship test prior to ordering the issuance of a certificate of
appropriateness for demolition. Id. at ¶ 15. We held that the trial court’s conflicting
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findings made it impossible for this court to “read together” the magistrate’s decision
and the trial court’s judgment to determine whether the trial court correctly applied
the law. Id. at ¶ 17. We remanded the matter to the trial court for the application of
“the proper standard consistent with law and this opinion.” Id. at ¶ 20. We affirmed
the denial of the city’s motion for a preliminary injunction.
{¶8} On remand, however:
The trial court instead undertook to rerule on the [city’s] objections to
the magistrate’s decision. In a brief subsequent entry, the trial court
overruled all of the objections to the magistrate’s decision and simply
adopted the magistrate’s decision in its entirety—including all of the
factual and legal findings, some of which were previously rejected.
Banker’s Choice, LLC, v. Zoning Board of Appeals of the City of Cincinnati, 1st Dist.
Hamilton No. C-180578, 2019-Ohio-4854, ¶ 11 (“Banker’s Choice II”). The city
appealed again.
Banker’s Choice II
{¶9} In the city’s second appeal, we held that the trial court erred by failing
to follow the mandate of this court on remand, and in doing so violated the law-of-
the-case doctrine. Banker’s Choice II at ¶ 18. We noted that the only basis for
remand had been “the issue of whether Banker’s Choice demonstrated by credible
evidence that it will suffer economic hardship—under the three-factor ‘economic
hardship’ test—if the certificate of appropriateness for demolition of the Davis
Furniture Building is not approved.” Id. at ¶ 15. We said:
However, rather than heed this instruction to address a limited issue
on remand, the trial court chose to adopt the magistrate’s decision in
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its entirety. Effectively, the trial court vacated its previous judgment,
including all of the factual and legal findings that differed from the
magistrate’s decision which had been upheld in Banker’s Choice I. The
trial court’s judgment now holds, inter alia, that the [city] violated
Banker’s Choice’s due-process rights and that part of the Cincinnati
zoning code is unconstitutional.
Id.
{¶10} We reversed the judgment of the trial court, remanded the matter, and
ordered the trial court do the following:
On remand, the trial court must apply the three-factor “economic
hardship” test under Cincinnati Municipal Code 1435-09-2(b) to its
factual findings and decide whether Banker’s Choice demonstrated by
credible evidence that it will suffer economic hardship if the certificate
of appropriateness for demolition of the Davis Furniture Building is
not approved.
Id. at ¶ 20.
The Trial Court’s Judgment
{¶11} On remand, the trial court applied the three-factor economic hardship
test to its factual findings and concluded that Banker’s Choice demonstrated that it
would suffer economic hardship if the certificate of appropriateness for demolition
was not approved. The court adopted the magistrate’s decision ordering the issuance
of a certificate of appropriateness to Banker’s Choice to demolish the building. The
city now appeals.
6 OHIO FIRST DISTRICT COURT OF APPEALS
The City’s Third Appeal
{¶12} In a single assignment of error, the city argues that the trial court’s
determination that Banker’s Choice demonstrated it will suffer economic hardship is
not supported by a preponderance of the substantial, reliable, and probative
evidence on the whole record as a matter of law.
{¶13} In administrative appeals under R.C. 2506.04, common pleas courts
and courts of appeals apply differing standards of review. Henley v. Youngstown Bd.
of Zoning Appeals, 90 Ohio St.3d 142, 147, 735 N.E.2d 433 (2000). The common
pleas court is required to weigh the evidence in “the whole record” and to determine
whether the administrative order or decision at issue is “unconstitutional, illegal,
arbitrary, capricious, unreasonable, or unsupported by the preponderance of
substantial, reliable, and probative evidence.” R.C. 2506.04; Henley at 147.
{¶14} An appeal to the court of appeals is more limited in scope than an
appeal to the common pleas court and is more deferential to the lower court’s
decision. Shelly Materials, Inc. v. City of Streetsboro Planning and Zoning Comm.,
158 Ohio St.3d 476, 2019-Ohio-4499, 145 N.E.3d 246, ¶ 17, citing Kisil v. Sandusky,
12 Ohio St.3d 30, 34, 465 N.E.2d 848 (1984); Cleveland Clinic Found. v. Cleveland
Bd. of Zoning Appeals, 141 Ohio St.3d 318, 2014-Ohio-4809, 23 N.E.3d 1161, ¶ 25.
Under R.C. 2506.04, the appellate court’s authority is limited to reviewing the
common pleas court’s decision on “questions of law,” and does not encompass the
common pleas court’s power to weigh the evidence. Banker’s Choice I at ¶ 12, citing
Cleveland Clinic at ¶ 25.
Apart from deciding purely legal issues, the court of appeals can
determine whether the court of common pleas abused its discretion,
7 OHIO FIRST DISTRICT COURT OF APPEALS
which in this context means reviewing whether the lower court abused
its discretion in deciding that an administrative order was or was not
supported by reliable, probative, and substantial evidence.
Shelly Materials at ¶ 17. Under R.C. 2506.04, a court of appeals must affirm unless
it finds, as a matter of law, that the decision of the common pleas court is not
supported by the required evidence. Cleveland Clinic at ¶ 27-28.
{¶15} Banker’s Choice contends that the city should not be allowed to argue
that the trial court’s decision is unsupported by the evidence because the city did not
raise this assignment of error in either of its prior appeals. However, in the city’s
first appeal, it challenged the trial court’s finding that a certificate of appropriateness
for demolition should issue. Banker’s Choice I at ¶ 10. But because the trial court
did not properly analyze the question in the first instance or on our initial remand,
we did not reach the issue in either of the prior appeals.
{¶16} Banker’s Choice also argues that under the doctrine of the law of the
case, the city should not be allowed to argue in this appeal that the trial court
impermissibly substituted its judgment for that of the Zoning Board of Appeals.
Under the law-of-the-case doctrine, “legal questions resolved by a reviewing court in
a prior appeal remain the law of that case for any subsequent proceedings at both the
trial and appellate levels.” Farmers State Bank v. Sponaugle, 157 Ohio St.3d 151,
2019-Ohio-2518, 133 N.E.3d 470, ¶ 22. The law-of-the-case doctrine “ ‘comes into
play only with respect to issues previously determined.’ ” Giancola v. Azem, 153
Ohio St.3d 594, 2018-Ohio-1694, 109 N.E.3d 1194, ¶ 16, quoting Quern v. Jordan,
440 U.S. 332, 347, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979), fn. 18.
{¶17} In Banker’s Choice I, we stated that the city’s principal argument was
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that the trial court substituted its judgment for that of the Zoning Board of Appeals.
Banker’s Choice I at ¶ 10. In our analysis of the city’s argument, we explained the
limited nature of an appellate court’s review under R.C. 2506.04, compared to that of
a common pleas court under the statute. Id. at ¶ 11-12. Our articulation of our
standard of review did not resolve a legal question, however; it simply set forth the
standard that we would use to resolve the legal question in the case.
Trial Court’s Application of the Three-Factor Test
{¶18} In our remand of the case, we instructed the trial court to apply the
three-factor test of Cincinnati Municipal Code 1435-09-2(b) and determine whether
under that test Banker’s Choice had established economic hardship. The trial court
did so, but the city claims the court’s analysis was unsupported by reliable evidence.
{¶19} The city argues that the trial court failed to explain its rationale or
conduct a meaningful analysis in its application of the three factors of the economic
hardship test. But with respect to a trial court’s failure to explain its rationale or
failure to identify supporting evidence in its decision, the Supreme Court of Ohio has
held: “[w]hile these may or may not be flaws in the trial court’s opinion, they are not
fatal.” Cleveland Clinic, 141 Ohio St.3d 318, 2014-Ohio-4809, 23 N.E.3d 1161, at ¶
28. An appellate court has a duty to affirm unless it finds, as a matter of law, that the
trial court’s decision is unsupported by substantial, reliable, and probative evidence.
1. Denial of All Economically Viable Use
{¶20} The city argues that the trial court’s determination under the first
factor, Cincinnati Municipal Code 1435-09-2(b)(i)—that the property will be
deprived of all economically viable use without approval of a certificate of
9 OHIO FIRST DISTRICT COURT OF APPEALS
appropriateness—is not supported by the evidence.
{¶21} In analyzing what it means to be deprived of all economically viable
use, we find zoning cases instructive. Courts consider the question of deprivation of
a property’s economic value in challenges to zoning regulations under the Fifth
Amendment. In determining whether a regulation has deprived a property owner of
all economic value, a court’s concern is “not whether [a] property is capable of being
used, but whether it is capable of being used in an ‘economically beneficial or
productive’ manner.” State ex rel. AWMS Water Solutions, L.L.C. v. Mertz, Slip
Opinion No. 2020-Ohio-5482, ¶ 47, quoting Lucas v. South Carolina Coastal
Council, 505 U.S. 1003, 1015, 1017, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). A
regulation denies an owner all economically viable use of the owner’s land if it
restricts the use of the land so as to “ ‘render it valueless, the permitted uses are not
economically feasible, or the regulation permits only uses which are highly
improbable or practically impossible under the circumstances.’ ” State ex rel. Ridge
Club v. Amberley Village, 1st Dist. Hamilton No. C-070012, 2007-Ohio-6089, ¶ 13,
quoting Valley Auto Lease v. Auburn Twp. Bd. of Zoning Appeals, 38 Ohio St.3d
184, 186, 527 N.E.2d 825 (1988).
{¶22} The city argues that the trial court was required to consider whether
Banker’s Choice could have realized a profit had it accepted one of the offers it
received to purchase the building. However, an owner’s ability to sell an affected
property does not constitute an economically beneficial use; “[t]ypical economic uses
enable a landowner to derive benefits from land ownership rather than requiring a
landowner to sell the affected parcel.” Mertz at ¶ 48, quoting Lost Tree Village Corp.
v. United States, 787 F.3d 1111, 1117 (Fed.Cir.2015).
10 OHIO FIRST DISTRICT COURT OF APPEALS
{¶23} In its discussion of economically viable use of the property, the trial
court noted that the building was “crumbling,” “dangerous,” and “not in good shape
whatsoever,” and that even the city had referred to it as “vacant, unsafe, unsanitary
and deteriorating.” The court noted the building’s “major structure and damage
issues,” and that it had, earlier in the proceedings, ordered Banker’s Choice to
undertake certain safety repairs to alleviate a clear and present danger to first
responders.
{¶24} The trial court stated, “To make the building economically viable for
anyone would be very difficult and expensive.” The court stated that it “found and
specifically stated in prior decisions that Banker’s Choice presented credible evidence
from experts in the field of property restoration and the financial aspect of property
restoration that the Davis Furniture Building would be economically not viable.”
{¶25} In its 2017 decision, the court found that three entities, two of which
were nonprofit organizations, “all made ‘offers,’ ” but “[n]o contract to purchase the
property was ever consummated.” The court also found that Banker’s Choice had
marketed the property “in various ways including the hiring of a professional and
experienced commercial real estate broker, i.e., David Cawdrey.” The court noted
Cawdrey’s testimony that he vigorously marketed the buildings using various
marketing and commercial real estate techniques. And, although Banker’s Choice
was not required to do so, the court concluded that Banker’s Choice had “engaged in
legal and appropriate efforts to sell the property.”
{¶26} In the trial court’s 2017 decision, it specifically found that the $3.34
million estimate for rehabilitation costs submitted by HGC Construction, which it
found to be “a reputable construction company with much experience in restoring
11 OHIO FIRST DISTRICT COURT OF APPEALS
buildings in the [Over-the-Rhine neighborhood],” along with Banker’s Choice’s
investment-return calculations, “indicates restoration creates an economical
hardship.” The court noted that William Stough, vice president of the Stough Group,
testified that it was not economically feasible to restore the building. The court noted
that Michael Stough, the CEO of Stough Development Corporation, testified that it
was not economically feasible to restore the building, that the cost and financing put
the monthly debt service far above any potential rental income, and that he was
aware of no scenario where a net operating income could be achieved.
{¶27} Following our review of the record, we hold that there was evidence, if
believed, to support the trial court’s determination that the property would be
deprived of all economically viable use without approval of a certificate of
appropriateness.
{¶28} Michael Stough provided the Historic Conservation Board and the
Urban Conservator, Larry Harris, an estimate for construction costs of
approximately $2.5 million. As the Urban Conservator, Harris’s duty is to
administer the city’s historic preservation regulations and to review the
appropriateness of demolitions of properties located within historic districts. See
Cincinnati Municipal Code 1435-05-2. Because Harris believed the estimate’s
numbers were inflated, Stough hired HGC Construction to do an independent cost
assessment, as Stough explained, “to develop a cost for putting the building back into
service.” Harris admitted that HGC Construction was one of the most reputable
contractors in Cincinnati and that its estimate of $3.34 million, though substantially
greater than that provided by Stough, was “credible.”
{¶29} Michael Paul, a registered architect and chief operating officer for
12 OHIO FIRST DISTRICT COURT OF APPEALS
Stough Development Corporation, testified that major structural components of the
building needed to be rectified before they could move forward with any type of
project. Paul generated a pro forma and determined that “the building was not
performing under most any standard at that point in time. Financially, it didn’t
make sense.” Paul testified that he performed “a life cycle analysis on what the
building would cost versus what the building is capable of generating in terms of
revenue.” According to Paul, his market value analysis indicated that a “return on
investment wasn’t there. It has actually a negative cash flow over it without some
type of subsidies that this project wasn’t viable.” With respect to the potential return
on investment, his analysis reflected “that the property is nonperforming” and that,
under no scenario, would it realize a reasonable rate of return on the investment.
{¶30} Paul hired structural engineers to review the building for structural
stability. Richard Meyer of the Shell & Meyer firm in Dayton, Ohio, performed an
inspection of the building and prepared a report detailing “serious structural issues
some of which [he] consider[ed] to be dangerous.” Meyer concluded that “[t]he
conditions observed are structurally unsafe and will require extensive reinforcing
and reconstruction.” Michael Frank of GOP Limited performed an inspection of the
property and prepared a report detailing the condition of the building and problems
with potential reuse of the building. Frank testified that it would be easier and more
cost effective to “start over” and build a new building because so much of the existing
building would have to be modified.
{¶31} The trial court was in the best position to evaluate the evidence and
assess the credibility of the witnesses. See Ridge Club, 1st Dist. Hamilton No. C-
070012, 2007-Ohio-6089, at ¶ 37. The court recognized and considered the
13 OHIO FIRST DISTRICT COURT OF APPEALS
countervailing evidence, including the offers to purchase. The court was free to
accept the testimony of the Stoughs and of Michael Paul, and the evidence from the
outside experts. The fact that the Stoughs and Paul were “insiders” goes to the
weight and credibility of their testimony. That testimony, along with the other
evidence, if believed, supported the finding that all economically viable use of the
property would be deprived without a certificate of appropriateness.
2. Reasonable Investment-Backed Expectations
{¶32} In considering the second factor of the economic hardship test in
Cincinnati Municipal Code 1435-09-2(b)(ii), the trial court found that Banker’s
Choice’s reasonable investment-backed expectations would not be maintained
without approval of a certificate of appropriateness. Specifically, the court found
that Banker’s Choice “bought the building with restoration and financial investment
among other things in mind.” The court found, however, that due to the costliness of
restoration, those “reasonable investment-backed expectations could not be made to
come to fruition” without a certificate of appropriateness for demolition.
{¶33} Here, the trial court took into consideration that Banker’s Choice
bought the building for $125,000 at a sheriff’s sale and that the building was
designated as a historic structure. The court noted that the Cincinnati Municipal
Code allows for a certificate of appropriateness for demolition, even for a building
that is a historic structure, so long as certain conditions in the code are met. The
court noted the expertise of Banker’s Choice as an experienced developer of urban
properties in the Over-the-Rhine historic district in Cincinnati. In its 2017 decision,
the court found that Banker’s Choice has “a history of contributing not subtracting
from the viability and history of Over-the[-]Rhine.” The court found that restoration
14 OHIO FIRST DISTRICT COURT OF APPEALS
of the building “would be extremely costly for anyone to have it sustain economic
viability if it could in fact ever be capable of economic viability.”
{¶34} As a developer of properties in the area, Banker’s Choice was aware of
the historic-preservation provisions of the zoning code at the time it purchased the
building. It was the expectation of Banker’s Choice to restore the property if
economically feasible, and if not, to obtain a certificate of appropriateness for
demolition. The record supports the trial court’s determination that, due to the
economic infeasibility of restoration, Banker’s Choice’s reasonable investment-
backed expectations would not be maintained without approval of a certificate of
appropriateness for demolition.
3. Was the Hardship Created or Exacerbated by the Property Owner
{¶35} In applying the third factor set forth in Cincinnati Municipal Code
1435-09-2(b)(iii) to its factual findings, the trial court determined that Banker’s
Choice neither created nor exacerbated the economic hardship that it would suffer if
the certificate of appropriateness was not approved. The court found that even
before Banker’s Choice bought the building, it had been deteriorating and unsafe and
that the city had had problems with the building. The court rejected any argument
that Banker’s Choice exacerbated its economic hardship by “its tactics regarding the
offers made to buy the building, marketing techniques, etc.” The court found that
the record was devoid of credible evidence showing that Banker’s Choice did
anything to exacerbate the economic hardship. The trial court’s determination that
Banker’s Choice neither created nor exacerbated the economic hardship that it would
suffer is supported by the record.
15 OHIO FIRST DISTRICT COURT OF APPEALS
Conclusion
{¶36} The trial court properly examined and applied each of the three
mandatory factors of the economic hardship test in Cincinnati Municipal Code 1435-
09-2(b) to its factual findings, as required by our remand in Banker’s Choice II, and
concluded that Banker’s Choice demonstrated that it would suffer economic hardship
if the certificate of appropriateness was not approved. Because the trial court’s
determination was supported by a preponderance of the evidence, we hold that the
court did not abuse its discretion in vacating the Zoning Board’s decision denying a
certificate of appropriateness. Therefore, we overrule the assignment of error and
affirm the trial court’s judgment.
Judgment affirmed.
BERGERON and WINKLER, JJ., concur.
Please note: The court has recorded its own entry this date.