Newport Harbor Assn. v. Cuyahoga Cty. Bd. of Revision

2012 Ohio 5291

• Court: Ohio Court of Appeals
• Decided: November 15, 2012
• Docket: 98193
• Status: Published

Opinion

[Cite as Newport Harbor Assn. v. Cuyahoga Cty. Bd. of Revision, 2012-Ohio-5291.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 98193

NEWPORT HARBOR ASSOCIATION PLAINTIFF-APPELLANT

vs.

CUYAHOGA COUNTY BOARD OF REVISION, ET AL. DEFENDANTS-APPELLEES

JUDGMENT: AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-755497

BEFORE: Sweeney, P.J., Cooney, J., and E. Gallagher, J.

RELEASED AND JOURNALIZED: November 15, 2012 ATTORNEYS FOR APPELLANT

Diane A. Calta Joseph W. Diemert, Jr. Joseph W. Diemert, Jr. & Associates 1360 SOM Center Road Cleveland, Ohio 44124

ATTORNEYS FOR APPELLEES

Timothy J. McGinty Cuyahoga County Prosecutor By: Saundra J. Curtis-Patrick Assistant County Prosecutor 1200 Ontario Street, 8th Floor Cleveland, Ohio 44113

Jennifer A. Antoon Robert A. Brindza Susanne M. DeGennaro Daniel M. McIntyre David A. Rose David H. Seed Brindza, McIntyre & Seed, L.L.P. 1111 Superior Avenue Suite 1025 Cleveland, Ohio 44114 JAMES J. SWEENEY, P.J.:

{¶1} Plaintiff-appellant Newport Harbor Association (“NHA”) appeals the court’s

affirming the decision of defendant-appellee Cuyahoga County Board of Revision (“the

Board”), which denied NHA’s complaint to decrease the 2009 tax value of Newport

Harbor, a marina located at 33 Shoreby Drive, Bratenahl, Ohio. After reviewing the

facts of the case and pertinent law, we affirm.

{¶2} Newport Harbor consists of 117 docks and an 800-925 square foot office

building. The harbor is unique, in that all docks are privately owned, and no recent

public records exist documenting the sales or transfers from owner to owner. 1

Additionally, there are limited amenities at the property, and all dock owners must be

members of the nearby Shoreby Club.

{¶3} For the 2009 tax year, the Cuyahoga County Auditor’s office valued the

property at $4,830,000. The land was valued at $4,370,200, and the building was valued

at $459,800. On January 12, 2010, NHA filed a complaint with the Board alleging that

the value of the property should be reduced by 54 percent to $2,608,200. The Board held

a hearing on March 2, 2011, and, on April 27, 2011, issued a decision denying NHA’s

request for a decrease in the 2009 tax year property value.

{¶4} On May 18, 2011, NHA filed an appeal with the Cuyahoga County Court of

According to the record, the last recorded deed regarding a transfer of a 1

Newport Harbor dock was in 1996. Common Pleas pursuant to R.C. 5717.05. The court held a hearing, as well as reviewed

the record from the Board hearing, and on March 13, 2012, issued a decision affirming

the Board’s denial of a revised valuation.

{¶5} Newport appeals and raises six assignments of error for our review.

I.

The lower court erred when it found that an owner’s opinion of value was not competent credible evidence.

II.

The lower court erred when it based its decision on a finding that certain evidence was hearsay when in fact it was not hearsay and neither the county nor the school board objected to the admission of any testimony or evidence at either the Board of Review level or the lower court level.

III.

The lower court erred when it failed to rely upon the best evidence of actual sales in determining Newport Harbor’s market value.

IV.

The lower court erred when it failed to acknowledge the parties’ stipulation to a value for the building of $125,000.

V.

The lower court erred when it failed to consider an opinion of value based in whole or even in part on hearsay. VI.

The lower court erred when it found that Newport Harbor failed to meet its burden and submit competent credible evidence as to the valuation of the subject property.

{¶6} In NHA’s first, second, third, fifth, and sixth assignments of error it argues that the court erred by not considering NHA’s evidence regarding the value of Newport

Harbor credible. Specifically, NHA put forth the testimony of Dr. Kenneth Spano

(“Spano”), who owns one of Newport Harbor’s docks and is NHA’s president, and a list

he prepared titled in part “documentary evidence of recent dock sales.”

{¶7} A property owner requesting a reduced tax valuation bears the burden of

proving “that the property’s value is different from that determined by the board of

revision * * *.” Cincinnati v. Hamilton Cty. Bd. of Revision, 69 Ohio St.3d 301, 303,

631 N.E.2d 1038 (1994). If the property owner meets this burden, it then shifts to the

Board to rebut the evidence. Id.

{¶8} The Board’s decision may be appealed to the court of common pleas

pursuant to R.C. 5707.05. The court conducts a de novo review “on the record and the

evidence thus submitted, or it may hear and consider additional evidence.” Id. The

court of common pleas should “determine the taxable value through its independent

judgment.” Black v. Bd. of Revision, 16 Ohio St.3d 11, 14, 475 N.E.2d 1264 (1985).

{¶9} The common pleas court judgment may be appealed to an appellate court

under the following standard of review:

The independent judgment of the trial court should not be disturbed absent a showing of abuse of discretion. Specifically, an appeals court should not question the trial court’s judgment, unless such determination is unreasonable, arbitrary, or unconscionable.

Id.

{¶10} Pursuant to R.C. 5713.03, if 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 auditor shall consider the sale price of such tract, lot, or parcel to be the true value for taxation purposes.” An arm’s length sale “is voluntary, i.e., without compulsion or duress; it generally takes place in an open market; and the parties act in their own self-interest.”

Walters v. Knox Cty. Bd. of Revision, 47 Ohio St.3d 23, 25, 546 N.E.2d 932 (1989).

{¶11} If this information is not available, an appraisal becomes necessary “to

determine the amount which such property should bring if sold on the open market.”

State ex rel. Park Invest. Co. v. Bd. of Tax Appeals, 175 Ohio St. 410, 412, 195 N.E.2d

908 (1964). Furthermore, a property owner is “competent to testify as to the market

value of the property.” Smith v. Padgett, 32 Ohio St.3d 344, 347, 513 N.E.2d 737

(1987). The trier of fact may weigh this testimony accordingly. Id. at 348.

Furthermore, although the Rules of Evidence do not strictly apply in administrative

proceedings, “an administrative agency should not act upon evidence which is not

admissible, competent, or probative of the facts which it is to determine.” Haley v. Ohio

State Dental Bd., 7 Ohio App.3d 1, 6, 453 N.E.2d 1262 (2d Dist. 1982).

{¶12} At the March 2, 2011 hearing before the Board, Spano testified that the 54

percent reduction in value NHA requested was “based on the sum value of its individual

docks, [which] has, in fact dramatically declined * * *.” To support this argument,

Spano relied on a document he prepared, in which he compiled the sales price of 21

Newport Harbor docks from May 2006 through February 2011 into a list.

{¶13} Spano testified that in 2005, NHA successfully challenged the tax year

2003 valuation of Newport Harbor using as evidence an appraisal that was prepared on behalf of NHA. Spano allegedly used a similar methodology found in the 2005 appraisal

to arrive at the list he compiled for the case at hand. The Board questioned Spano as to

why the sale prices were “all over the place.” For example, a 46' dock sold for $2,500 in

May 2009, and one month later a different 46' dock sold for $25,000. Two docks sold

for $0, and four docks were transferred to the same party for $500, $500, $3,200, and

$800 respectively. In explaining this “trend,” Spano testified that the sales “represent

people who just want out, they want to get rid of their dock and they can’t so they say I’ll

take anything, and so some people offer nothing.”

{¶14} At the Board hearing, NHA also presented the testimony of an appraiser

who determined that Newport Harbor could not be appraised, because it is “one-of-a-kind

property.” The appraiser questioned the methodology used in the 2005 appraisal and

testified that Spano’s approach of computing the value of the property based on

individual dock sales was Spano’s opinion, rather than an appraisal. After considering

NHA’s evidence, the Board found “no change in value on [Newport Harbor] for the tax

year 2009.”

{¶15} NHA appealed and, at the common pleas court hearing, submitted a copy

of the 2005 appraisal of Newport Harbor. This appraisal was not used substantively;

rather, it was admitted into evidence

to determine * * * whether * * * in 2005 the [Board] * * * relied upon the historical dock-sales approach * * * urged by [NHA] to decrease the 2003 taxable value of the property so as to give that approach * * * credence, particularly given [the appraiser’s] testimony before the [Board] that the property could not be appraised. {¶16} Spano again testified that he used the same methodology as the 2005

appraisal to present the 21 dock sales in his 2011 report. Spano testified that he gathered

information regarding the docks’ selling prices by asking the buyers and sellers. He also

testified that Land Title Agency kept records of the sales, and that in the past, buyers

and/or sellers have provided affidavits or cancelled checks to NHA regarding dock

transfers. However, none of these alleged documents were submitted into evidence.

Spano also testified that NHA is “not in the business of buying and selling docks.”

Spano testified that he is a retired surgeon, and he does not have an appraisal license nor

has he taken any appraisal classes.

{¶17} In its March 12, 2012 opinion, the court found that it was not required to

accept Spano’s testimony and “documentary evidence of recent dock sales” as the true

value of the property for the following reasons.

{¶18} The evidence Newport presented was inconsistent. The appraiser who

testified at the Board hearing believed that the property could not be appraised.

However, at the common pleas court hearing, Newport introduced evidence of an old

appraisal of the property. The appraiser who authored this 2005 appraisal did not testify

in the case at hand, and the record from the 2005 Board hearing was not presented.

Thus, it was unclear how the appraiser gathered the sales prices, particularly given that

there are no official records of Newport Harbor docks sales.

{¶19} Furthermore, the appraiser who testified at the 2011 Board hearing

determined that the dock sales information was Spano’s opinion and could be considered as a guideline, but it was not an appraisal. Spano testified that, as president of NHA, he

consented to all dock sales. However, this consent was focused mainly on assuring that

the buyer was a member of the Shoreby Club and did not include approving the sale price.

Therefore, Spano’s role as “custodian of all official records” did not apply to the sale

price of the docks.

{¶20} The court ruled that Spano’s testimony “relating to the key issues of the

dock sales and whether or not they were arm’s length transactions was based upon

hearsay.” Spano was competent to testify as to his opinion of the value of the dock he

owned. However, Spano does not own the docks that he testified about and included in

his report; therefore, the owner-opinion rule does not apply to the instant case.

Furthermore, although Spano is clearly knowledgeable about NHA’s operations, he is not

an appraiser.

{¶21} Additionally, NHA’s exhibit contained no evidence of arm’s length sales.

In fact, Spano testified that many of the “nominal” sales in his list were not conducted at

arm’s length in an open market, because the sellers “wanted out.” This is not the type of

sale the auditor may consider as “the true value for taxation purposes” under R.C.

5713.03. See Cummins Prop. Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 117 Ohio

St.3d 516, 526, 2008-Ohio-1473, 885 N.E.2d 222 (“[t]he initial burden on a party

presenting evidence of a sale is not a heavy one, where the sale on its face appears to be

recent and at arm’s length”).

{¶22} Accordingly, we cannot say that the court abused its discretion by determining that Spano’s testimony and NHA’s documentary evidence lacked credibility.

NHA’s first, second, third, fifth, and sixth assignments of error are overruled.

{¶23} We turn to whether the court erred by failing to acknowledge that the

parties stipulated to a $125,000 value of Newport Harbor’s building.

{¶24} Upon review, we find no official stipulation in the record. Spano testified

that the “insurance value” of the building was $125,000. A commercial appraiser analyst

for the Board testified at the common pleas court hearing that he appraised Newport

Harbor for tax year 2009. In his opinion, $125,000 was a reasonable value for the

building, and the land and improvements had a $4,944,366 value, for a total tax value of

$5,069,366. However, the court found that because NHA “did not meet * * * its burden

of providing evidence supporting a change in valuation, there is no need for this Court to

consider * * * the testimony and report of [the Board’s appraiser].”

{¶25} We cannot say that the court abused its discretion by determining that

NHA’s evidence “does not contain the necessary indicia of reliability which would allow

or require this court to consider it * * *.” Accordingly, NHA’s fourth assignment of

error is overruled.

{¶26} Judgment affirmed.

It is ordered that appellees recover from appellant its costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate be sent to said court to carry this judgment into

execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of

the Rules of Appellate Procedure.

JAMES J. SWEENEY, PRESIDING JUDGE

COLLEEN CONWAY COONEY, J., and EILEEN A. GALLAGHER, J., CONCUR