Summary
upholding the common pleas court's treatment of apartment complexes as economic units where in most cases, each unit occupied a separate lot
Summary of this case from Sears, Roebuck & Co. v. Franklin Cnty. Bd. of RevisionOpinion
No. 86-681
Decided March 11, 1987.
Taxation — Common pleas court's independent review of board of revision's property valuation — Administrative record should be considered — True value may depend on property's potential use as economic unit — Valuation of property within more than one taxing district.
O.Jur 2d Taxation §§ 363, 397.
1. In reviewing a board of revision's valuation of property, the common pleas court should make its own independent decision but is not required to conduct an independent proceeding. It should reach its own decision without any deference to the administrative finding. However, it should consider the administrative record, giving that record whatever weight the court deems appropriate, even if the court accepts additional evidence. ( Black v. Bd. of Revision, 16 Ohio St.3d 11, 16 OBR 363, 475 N.E.2d 1264, followed.)
2. The true value for real property may well depend on its potential use as an economic unit. That unit may include multiple parcels, or it may be part of a larger parcel, on the auditor's records. The boundaries of that unit may change with time and circumstances. Thus, a separate tract for valuation purposes need not correspond with a numbered parcel. For tax valuation purposes, property with a single owner, for which the highest and best use is a single unit, constitutes a tract, lot, or parcel.
3. When a tract contains property within more than one taxing district, the auditor must determine the value within each district. Otherwise, the auditor can assess property taxes for tracts which include more than one numbered parcel. ( Youngstown Sheet Tube Co. v. Bd. of Revision, 66 Ohio St.2d 398, 20 O.O.3d 349, 422 N.E.2d 846, paragraph three of the syllabus, explained.)
APPEAL from the Court of Appeals for Franklin County.
A corporate property owner contests the appellate court's reversal of tax valuation decisions for its two "apartment rental complexes." The county auditor and two affected school boards support the appellate court's reversal on the ground that the trial court conducted an impermissible trial de novo. They further contend that the trial court erred (a) by valuing multiple parcels collectively for less than their aggregate individual values, and (b) by failing to apportion the resulting aggregate valuations.
The owner, Park Ridge Company, operates a series of apartment rental units in Grove City, and another series in Columbus, both in Franklin County. In Grove City, it rents thirty-four duplex or two-family units, each of which occupies a separate city lot with a separate permanent parcel number. In Columbus, it maintains thirty-five duplex units, plus two townhouses which contain an additional fourteen units. The Columbus structures are mostly on separate city lots with separate parcel numbers, but the townhouses and a few duplexes occupy more than one lot. In each city, the owner's properties are generally contiguous.
The owner originally complained to the county board of revision that the auditor had overvalued its multiple parcels in each city. The board reduced the taxable value for the Columbus parcels, albeit less than the owner requested, but declined to modify the Grove City values. The owner then appealed those valuations to the common pleas court pursuant to R.C. 5717.05.
Over objection by one of the school boards, the trial court granted the owner's motion for a "trial de novo." It then ordered the board of revision to supply its administrative record and referred the matter for hearing by a referee. At that hearing, the parties submitted the administrative record for the referee's consideration and supplemented it with oral testimony. The owner offered testimony from one of its officers and an independent appraiser. The auditor and the school boards supported their position with testimony from two other independent appraisers.
The referee accepted the owner's contention that the highest and best use for the owner's parcels in each city was an apartment rental complex. The owner's appraiser valued each of those complexes, using income valuation techniques, which the referee found persuasive. The auditor's appraiser and the school boards' appraiser each valued every parcel separately, using comparable sales price analyses. Their respective cumulative valuations for the parcels in each city greatly exceeded the value which the owner's appraiser assigned to the complex there.
The owner's appraiser asserted that the sale of either rental complex would depress the market for such facilities below the prices suggested by the other appraisers. On the basis of all the evidence, the referee recommended significant reductions in the fair market value for the rental complex in each city. The common pleas court adopted the referee's findings and entered its judgment accordingly. The auditor and the school boards appealed to the court of appeals.
They argued there, and later argued here, that the common pleas court abused its discretion (a) by valuing the parcels in each city as a single property and (b) by failing to divide the resulting values among those many parcels. On its own motion, the appellate court ruled that the trial court should not have granted the taxpayer's motion for a "trial de novo." It further concluded that such an improper procedure precluded an appropriate judgment and any review of the assigned errors.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Knepper, White, Arter Hadden, Donald G. Paynter, Jacob I. Rosenbaum and Edward S. Jerse, for appellant Park Ridge Company.
Michael Miller, prosecuting attorney, and James R. Gorry, for appellee Franklin County Auditor.
Teaford, Rich, Belskis, Coffman Wheeler, Jeffrey A. Rich and Steven Celebrezze, for appellees Columbus Board of Education and South-Western City Schools Board of Education.
IThis court recently addressed the scope of a common pleas court's review for property values established by the board of revision. See Black v. Bd. of Revision (1985), 16 Ohio St.3d 11, 16 OBR 363, 475 N.E.2d 1264. The provisions of R.C. 5717.05 require the common pleas court to consider the administrative record from the board of revision. They permit the court to consider additional evidence in its discretion, but do not require it to do so. Black, supra, at paragraph one of the syllabus.
The appellate court cited, and the auditor and the school boards rely on, the following language in the Black opinion at 14, 16 OBR at 365-366, 475 N.E.2d at 1268:
"* * * In effect, R.C. 5717.05 contemplates a decision de novo. It does not, however, provide for an original action or trial de novo. * * *"
That language simply means that the common pleas court should make its own independent decision but is not required to conduct an independent proceeding. It should reach its decision without any deference to the administrative finding. However, it should consider the administrative record, giving that record whatever weight the court deems appropriate, even if the court accepts additional evidence.
In this case, the trial court fully satisfied its obligations by causing its referee to consider the administrative record together with additional evidence. While the court and the parties may have termed the proceedings a trial de novo, the court actually accomplished an appellate function. The court did not begin the evidentiary process anew. It did not disregard administrative hearing evidence. Instead, it exercised its discretion most judiciously by permitting the parties to supplement the administrative record with additional evidence which could assist the valuation process.
The auditor and the school boards also argue that the court should have precluded the owner from presenting additional evidence. They contend that the owner did not show good cause for his failure to provide that information to the board of revision. However, the record does not indicate whether the owner had that information "within his knowledge or possession" at the time of the board's hearing. Hence, the court had no reason to apply the preclusion rule in R.C. 5715.19(G), which applies when a claimant withholds information at the board's hearing.
Additionally, neither the auditor nor the school boards objected when the owner called its two witnesses at the referee's hearing. See Evid. R. 103(A)(1). They had adequate opportunity to discover that prospective evidence before the hearing, and demonstrated their readiness to respond with their own contrary expert evidence. Consequently, they cannot now claim that they were unfairly prejudiced by that testimony.
II
Having concluded that the trial court's action was procedurally proper, we consider the auditor's and school boards' complaints about the trial court's decisions. R.C. 5713.01 requires the auditor to determine the true value in money of "* * * each lot or parcel of real estate * * *." The auditor and the school boards argue that these realty terms refer to permanent parcels defined on the auditor's records with separate parcel numbers. Consequently, they contend that the auditor, the board of revision and the courts must value each of those numbered parcels separately.
Their argument ignores the fact that the real property tax law uses the terms "tract," "lot," and "parcel" interchangeably. For example, R.C. 5713.02 instructs the assessor to prepare a description of "each tract and lot of real property." R.C. 5713.03 directs the auditor to determine the true value of "each separate tract, lot, or parcel of real property." R.C. 5713.04 calls for a valuation of "[e]ach separate parcel." It further provides that the tax-exempt part of a "separate parcel" should be split away and listed as a separate entity. R.C. 5713.18 directs the auditor to replace the valuation for a subdivided "lot or tract of land" with values for each resulting "lot or parcel."
Numbered permanent parcels facilitate conveyancing and may serve other valuable purposes. However, there is no valid reason why their relatively arbitrary boundaries must always limit valuation practices for real property taxes. The true value for real property may well depend on its potential use as an economic unit. That unit may include multiple parcels, or it may be part of a larger parcel, on the auditor's records. The boundaries of that unit may change with time and circumstances. Thus, a separate tract for valuation purposes need not correspond with a numbered parcel.
This court has previously approved aggregate valuations for economic land units which contain multiple permanent parcels. Columbus Bd. of Edn. v. Fountain Square Assoc., Ltd. (1984), 9 Ohio St.3d 218, 9 OBR 528, 459 N.E.2d 894; Youngstown Sheet Tube Co. v. Bd. of Revision (1981), 66 Ohio St.2d 398, 20 O.O.3d 349, 422 N.E.2d 846. So have appellate courts. Parsler v. Bd. of Revision (Mar. 15, 1984), Franklin App. Nos. 83AP-126 83AP-127, unreported; Trebmal Constr., Inc. v. Cuyahoga Cty. Bd. of Revision (1986), 29 Ohio App.3d 312, 29 OBR 411, 505 N.E.2d 290.
For tax valuation purposes, property with a single owner, for which the highest and best use is a single unit, constitutes a tract, lot, or parcel. Procedurally, a single complaint can challenge tax valuations for multiple parcels "in actual physical contact with each other and with identical ownership and located in the same taxing district * * *." See D.T.E. Form No. 1; cf. Ohio Adm. Code 5717-1-09(B)(3). In that situation, the Department of Taxation exercises its authority under R.C. 5703.16 by permitting the complainant to state aggregate amounts for the current valuation, the complainant's valuation, and the proposed increase or decrease. Id.
The decision whether the property serves its highest and best use as a single unit or as multiple units is generally a factual issue. Like other factual valuation questions, the answer to this issue rests within the sound discretion of the common pleas court that reviews the decision of the board of revision. Black v. Bd. of Revision, supra, at 14, 16 OBR at 365-366, 475 N.E.2d at 1268; Youngstown Sheet Tube Co. v. Bd. of Revision, supra, at 401-403, 22 O.O.3d at 351-353, 422 N.E.2d at 848-849. An appellate court should not disturb the trial court's decision on those matters, unless the trial court abuses that discretion. Id.
In this case, the trial court accepted its referee's finding that the highest and best use for each of the two apartment complexes was as a single unit. It also accepted its referee's valuations for each of those complexes, which the taxpayer's expert supported and the appellees' experts contested. Adequate evidence supported those factual findings, so we cannot say that the trial court abused its discretion.
Finally, the auditor and the school boards urge that the trial court erred by failing to apportion its total valuations among the individual parcels. Here again, they presume that the tax law requires ultimate valuations for tracts identified by an auditor's parcel number. When the tract contains property within more than one taxing district, the auditor must determine the value within each district. Cf. Youngstown Sheet Tube Co. v. Bd. of Revision, supra, at 405, 20 O.O. 3d at 354, 422 N.E.2d at 851. Otherwise, the auditor can assess property taxes for tracts which include more than one numbered parcel.
These two apartment complexes are each within single taxing districts, so the trial court's judgment was proper without apportioning its valuations among individually numbered parcels. The trial court did not abuse its discretion. We reverse the appellate court's decision and reinstate the trial court's judgment.
Judgment reversed.
SWEENEY, Acting C.J., MILLIGAN, COOK, DOUGLAS, WRIGHT and H. BROWN, JJ., concur.
SWEENEY, J., sitting for MOYER, C.J.
MILLIGAN, J., of the Fifth Appellate District, sitting for SWEENEY, J.
COOK, J., of the Eleventh Appellate District, sitting for LOCHER, J.
MARKUS, J., of the Eighth Appellate District, sitting for HOLMES, J.