Remington Clean Fill, L.L.C. v. Milford Exempted Village Schools Bd. of Edn.

Citation: 2021 Ohio 3779Docket: CA2020-12-074

Court: Ohio Court of Appeals; October 25, 2021; Ohio; State Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Remington Clean Fill LLC appealed a decision from the Clermont Board of Tax Appeals, which valued two adjoining parcels in Loveland, Ohio, at $2,184,004 for the 2018 tax year. The Clermont County Auditor had assessed the parcels at $690,900. The property was involved in two successive sales: first, McDump, LLC sold it to Decker Building Group LLC for $2,184,000, allocating $1,684,000 to real property and $500,000 to personalty. Subsequently, Decker Building sold it to Remington for $2,500,000, allocating $900,000 to real property and $1,600,000 to personalty. Both companies were owned by Jeffrey Decker, which raised questions about the arm's length nature of the transactions.

The Milford Exempted Village School District Board of Education challenged the auditor's valuation, asserting the first sale should reflect the property’s true value due to its non-arm's length nature. They argued that the second sale did not accurately represent the value. In contrast, Remington contended that the property included significant personalty, such as stockpiles of gravel, dirt, and equipment, warranting the valuation from the second sale. Testimony from Jeffrey and Chase Decker supported Remington’s claim, with Jeffrey asserting McDump's valuation was influenced by tax considerations.

Jeffrey testified about the addendum to the closing statement for the second sale, which detailed the valuation of personal property included in the sale, totaling approximately $1.5 million. This included $50,000 for two overhead cranes, $50,000 for two earthmovers, $50,000 for scrap metal, $10,000 for a dump truck, $200,000 for blacktop grindings, $1 million for dirt, $200,000 for mixed gravel, $25,000 for an industrial sandblaster, and $15,000 for an industrial arc welder. Jeffrey indicated he was unsure of the addendum's preparer but noted it was based on market analysis. He stated the $1 million valuation for dirt was a third of its actual value per industry standards and claimed all items were undervalued. Chase, another witness with extensive experience, supported this, stating the dirt and other materials' valuations were conservative based on his company's previous sales. He indicated that valuations for items like cranes and earthmovers were determined through Internet research and third-party opinions, although the third parties were not identified or called to testify. Commercial appraiser Theresa Mahon testified about her lack of knowledge regarding the arm's length nature of the sales and supported the auditor's valuation of $690,900, which had been reviewed for accuracy. The Board of Revision (BOR) accepted this valuation, and the school board appealed to the Board of Tax Appeals (BTA), arguing that the first sale's $500,000 personalty allocation lacked evidence and that the first sale's total purchase price of $2,184,000 should be considered the true property value. The appeal was based on the BOR's records, which included various sale documents.

The Board of Tax Appeals (BTA) issued its decision on November 30, 2020, determining that the second sale between Decker Building and Remington was not an arm's length transaction, as it was conducted solely for tax purposes without genuine market conditions. The BTA rejected Remington's evidence for its personal property valuation, finding it lacked confirmable evidence and that the sole witness was not an appraiser. Conversely, the first sale between McDump and Decker Building was deemed an arm's length transaction due to its occurrence in a competitive market without economic duress. However, the BTA determined that the allocation of $500,000 to personalty was unsupported, as Remington acknowledged inaccuracies in the earlier allocation. Consequently, the property was valued at its full purchase price of $2,184,004, with no allocation to personalty. Remington appealed, raising three assignments of error, which will be discussed out of order. The BTA has the responsibility to independently evaluate evidence to determine property value for tax purposes, and its findings must be supported by evidence. A BTA decision can only be reversed if it is proven to be unreasonable or unlawful, and the burden falls on the appealing party to demonstrate such issues. Additionally, proceedings before the board are not strictly governed by the Rules of Evidence, although those rules can serve as guidance. The third assignment of error claims that the BTA inappropriately shifted the burden of production to the taxpayer, who did not challenge the auditor's or board's valuation in earlier proceedings.

Remington contends that the Board of Tax Appeals (BTA) incorrectly required it to carry the burden of production regarding the allocation of personal property value, asserting that this burden should rest with the school board, which challenged the auditor's valuation. Citing a 2001 Columbus decision, Remington claims that the appellant must prove entitlement to a valuation change. However, the Columbus case did not involve a bulk sale, which the Ohio Supreme Court defines as the sale of all business assets or multiple real estate parcels as part of a single transaction. In bulk-sale cases, the burden of proof differs; for example, a school board making a prima facie case must submit basic sale documentation, which creates a rebuttable presumption of true value. If the taxpayer disputes this value, they must demonstrate that it does not accurately reflect the property's worth.

Remington opposes the allocation from the first sale, arguing it does not reflect the true value of the personal property, while claiming the second sale's conveyance-fee statement is more accurate. However, the second sale was a related-party transaction, negating the presumption that its allocation reflects true value. Consequently, Remington is tasked with proving the allocation's validity in the second sale, and the BTA was correct in placing the burden on Remington. Therefore, Remington's third assignment of error is overruled.

In its first assignment of error, Remington argues the BTA failed to consider evidence of personal property value, specifically contesting the BTA's valuation of the Property at the full purchase price from the first sale and discounting the Deckers' testimony on the personal property value from the second sale, which Remington believes should have been accepted under the owner-opinion rule.

Remington, opposing the first sale's allocation of value and supporting the second sale's allocation, is required to prove the propriety of the latter. This burden is not overly stringent; Remington must provide "corroborating indicia" from the record to support the allocation, as established in prior case law. For bulk sales, the best evidence of true value is the appropriate allocation of the lump-sum purchase price to individual parcels. Unlike single-parcel sales, bulk sales necessitate scrutiny of whether the allocation reflects the true value for tax purposes. Although the allocation agreed upon in an asset purchase agreement is relevant, it is insufficient alone to establish its propriety; motivations behind the allocation must also be considered. Thus, without additional evidence or context, the agreed allocation does not determine the property's value. If the allocation is deemed improper, the Board of Tax Appeals (BTA) must evaluate all competent evidence to ascertain the property's true value, choosing between the full purchase price or other valuation methods, like appraisals.

In this case, the school board contended that the property's value should be set at $1,684,000, based on the first sale's allocation, while Remington challenged the first sale's personal property allocation of $500,000, asserting it was incorrectly set for tax purposes. Remington argued that the second sale's personal property allocation more accurately reflected true value, supported by the Deckers' testimony. On appeal, the BTA, favoring the school board's position, deemed the first sale as the only arm's-length transaction, discounted the Deckers' testimony regarding the second sale's personal property allocation, and found no substantiation for the $500,000 figure from the first sale. Remington contends that the BTA improperly disregarded the Deckers' testimony about the $1,600,000 personal property allocation in the second sale, asserting their competence under the owner-opinion rule.

Testimony regarding property value typically requires expert opinion; however, property owners can testify about their own property's market value under the owner-opinion rule, even without expert qualifications (Tokles, Son, Inc. v. Midwestern Indem. Co.; Smith v. Padgett). This rule allows owners to act as fact witnesses but limits them to their own property, excluding testimony about comparable properties due to hearsay concerns. The Board of Tax Appeals (BTA) determined that Chase's valuation testimony was hearsay, as it relied on research and third-party opinions, and held that Chase lacked the qualifications of an appraiser. Despite this, Chase argued that his valuation was based on his ownership and extensive industry experience, which should qualify him to express an opinion on the value of the Materials. Conversely, Chase's testimony on the Equipment valuation was deemed insufficient as he provided no personal valuation for two items, and his assessments for others were based on unverifiable sources, leading the BTA to reject his testimony. Remington's first assignment of error was partially sustained and partially overruled. In the second assignment, Remington contended that the BTA erred by ignoring testimony regarding a seller's low allocation of personal property for tax reasons while also asserting that a previous sale was the best valuation guide, resulting in a contradictory stance by the BTA.

Parties involved in the sale of real property can allocate values for legitimate purposes related to the properties' true value or for purposes that may distort it, such as tax considerations. The Ohio Supreme Court has noted that allocations could be manipulated to reduce property taxes, as evidenced in cases like Dublin Bd. of Edn. v. Franklin Cty. Bd. of Revision, where artificially inflated allocations were rejected. Complexities surrounding a sale may warrant reliance on appraisal evidence rather than the sale price to determine property value if the propriety of the allocation is unclear. The Board of Tax Appeals (BTA) failed to consider relevant testimony regarding the auditor's appraisal and tax implications of the sale's allocation, resulting in an unreasonable valuation of the property at the full purchase price. The decision is vacated, and the case is remanded for the BTA to reassess the valuation based on credible evidence, including testimony on the value of personal property included in the sale and the legitimacy of the allocation method used. The BTA has the discretion to hear additional evidence as necessary.