Spirit Master Funding IX, L.L.C. v. Cuyahoga Cty. Bd. of Revision
2022 Ohio 610
| Ohio Ct. App. | 2022Background
- Subject property: a Red Lobster restaurant (7,534 sq. ft.) in Beachwood, Ohio; sold Aug 2014 (allocated $2,925,880) and again Dec 2014 to Spirit Master for $3,439,029—appellant later became successor in interest.
- Appraiser Richard Racek valued the unencumbered fee-simple estate at $1,535,000 (Jan 1, 2014), opining the Dec 2014 sale reflected a leased‑fee (above‑market lease) not an unencumbered fee simple.
- For tax year 2014 the BOR/BTA relied on the Aug 2014 sale; Ohio Supreme Court held Racek’s appraisal was relevant and remanded for the BTA to weigh it.
- For tax year 2015 the BOR and initial BTA decision again adopted the Dec 2014 sale price; the BTA discounted Racek’s appraisal as hearsay (no lease document or witnesses) and treated the sale as the best evidence of value.
- This court previously vacated the BTA’s 2015 decision and remanded for the BTA to weigh Racek’s appraisal per Ohio Supreme Court precedent; on remand the BTA again afforded the sale greater weight and rejected the appraisal as insufficiently supported.
- The appellate court (this opinion) holds the BTA abused its discretion by summarily discounting the appraisal/hearsay without the full consideration Terraza and its progeny require, reverses, and remands for proper weighing of the appraisal evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the BTA complied with mandate to weigh Racek’s appraisal that the Dec 2014 sale was a leased‑fee and thus not evidence of unencumbered value | Racek’s appraisal and testimony show the sale was encumbered by an above‑market lease so the sale price does not reflect unencumbered fee‑simple value | The sale is presumptive best evidence; appellant failed to prove the sale was encumbered (no lease in record, no witnesses); appraisal is hearsay | Reversed and remanded: BTA failed to fully consider and weigh the appraisal as required by Terraza and related authority; summary discount as hearsay was improper |
| Whether the BTA properly excluded or discounted expert opinion based on hearsay and required production of the lease document | An expert may rely on hearsay under Evidence Rule 703 and may testify about lease terms and market rent; requiring the lease or excluding the opinion was improper | Expert relied on unproven facts; without lease or direct evidence the opinion should be disregarded | Court found the BTA’s summary rejection inconsistent with precedent; appraisal evidence must be evaluated, not summarily excluded as hearsay |
| BOE cross‑appeal asking the court to adopt Aug 2014 sale value if BTA reversed | (n/a) | If court reverses, adopt Aug 2014 sale as alternative valuation | Cross‑appeal held premature and not considered on this remand; overruled |
Key Cases Cited
- Terraza, 83 N.E.3d 916 (Ohio 2017) (sale price is presumptive but factfinder must weigh appraisal evidence showing encumbrances affect unencumbered fee‑simple value)
- Bronx Park, 108 N.E.3d 1079 (Ohio 2018) (same principle: sale price not conclusive; appraisal and other evidence must be considered)
- Westerville City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 114 N.E.3d 162 (Ohio 2018) (appraisal evidence admissible alongside sale price and must be considered)
- GC Net Lease v. Franklin Cty. Bd. of Revision, 111 N.E.3d 1170 (Ohio 2018) (summary discounting of lease evidence is inadequate; appraisal must be fully considered)
- Rancho Cincinnati Rivers, L.L.C. v. Warren Cty. Bd. of Revision, 177 N.E.3d 256 (Ohio 2021) (emphasizes statutory requirement to value the fee simple as if unencumbered)
- Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision, 677 N.E.2d 1197 (Ohio 1997) (sale price has strong presumption as evidence of true value)
- Olmsted Falls Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 909 N.E.2d 597 (Ohio 2009) (appellate deference to board findings on weight of evidence when supported)
- First Baptist Church of Milford, Inc. v. Wilkins, 854 N.E.2d 494 (Ohio 2006) (same principle of deference to board’s evidentiary weight determinations)
- Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of Revision, 9 N.E.3d 1004 (Ohio 2014) (legal issues reviewed de novo; factual weight-of-evidence findings entitled to deference)