Case Information
*1
[This opinion has been published in
Ohio Official Reports
at
C LEVELAND H EIGHTS /U NIVERSITY H EIGHTS B OARD OF E DUCATION , A PPELLANT , v . C UYAHOGA C OUNTY B OARD OF R EVISION ET AL .; M AY D EPARTMENT TORES OMPANY , A PPELLEE .
[Cite as
Cleveland Hts./Univ. Hts. Bd. of Edn. v. Cuyahoga Cty. Bd. of
Revision
,
true value of property will not be overruled by court when it appears from the record that the decision is neither unreasonable nor unlawful.
(No. 94-1399—Submitted December 9, 1994—Decided May 17, 1995.) A PPEAL from the Board of Tax Appeals, Nos. 92-A-32 and 92-A-33.
Appellee, May Department Stores Company, owns three parcels of real property in University Heights, Ohio, which is in the Cleveland
Heights/University Heights Board of Education ("school board") taxing district.
The subject property, located on 15.85 acres, consists of the May Company
Department Store ("May"), containing 351,363 square feet of space, and adjoining
parcels leased for construction of a National City Bank building, a medical
building, and parking lots. For tax year 1990, the Cuyahoga County Auditor
assessed the subject property at a true value of $6,771,260. On January 31, 1991, May entered into a sale/leaseback transaction
with ABS Development Company ("ABS"), in which May sold the property to ABS
for $14,000,000 and leased it back at an annual rental of $1,365,000 to $2,030,000
over a twenty-five-year period. It is undisputed May did not obtain an independent
appraisal and did not offer the property on the open market. Rather, May
considered it a financing transaction. *2 UPREME OURT OF O HIO The school board filed a complaint with the Cuyahoga County Board
of Revision seeking an increase in the valuation of the subject property to
$14,000,000. May filed a counterclaim seeking to maintain the auditor's valuation.
After the school board and May presented evidence to the board of revision, the
board affirmed the auditor's valuation. The school board then appealed to the Board
of Tax Appeals ("BTA"). Prior to the BTA hearing, the school board requested that May provide
documents involving the sale/leaseback transaction and asked for the identity of all
expert witnesses and all fact witnesses which May intended to call at the hearing.
May responded that the witnesses were not yet identified. The BTA hearing was scheduled for September 28, 1993, and May
did not supplement its response to the school board's interrogatories by identifying
Bruce Johnston as either a fact or expert witness. When May called Johnston to
testify at the hearing, the school board objected and requested that, for sanctions,
Johnston's testimony be excluded because he had not been disclosed as a witness.
The BTA refused to issue sanctions and permitted Johnston's testimony. Sam D. Canitia, the school board's expert appraiser, expressed the
opinion that the fair market value of the subject property was $15,670,000 based
upon the sales-comparison approach to value. He testified that the uses to which
the subject property were put—a department store, a bank, and a medical
building—were its highest and best uses. However, the BTA questioned Canitia's
conclusions because the testimony of both parties' witnesses indicated that:
(1) "multi-level, freestanding department stores are rare," (2) "[t]heir design has become outdated and impractical for today's facilities,"
(3) " [n]one of said appraiser[s'] 'comparables' included a freestanding department store,"
(4) Canitia's comparables were "[not] even remotely close [in size] to the square footage found in the subject [property]," and
January Term, 1995 (5) "[t]he largest 'comparable,' measuring 100,991 square feet[,] is less than one third of the 351,363 square feet of the subject [property]." Accordingly, the BTA found Canitia's report "less reliable," and stated that "the prejudice suffered by the appellant did not outweigh the need of this
Board to obtain otherwise relevant evidence, which goes to the crux of the valuation
questions * * *." The BTA also found that the sale/leaseback transaction was made
for the purpose of generating cash, the property was never offered on the open
market, and the $14,000,000 transaction between May and ABS did not "qualify as
the type of sale that would be the best indication of value," since the sale was not
arm's length and was consummated for financing concerns only. The BTA
concluded that "appellant has failed to prove its right to an increase in the valuation
of the subject property." Thus, the BTA determined that the true value of the
property was $6,671,260, and affirmed the valuation of the board of revision. The cause is now before this court upon an appeal as of right.
__________________ Kolick & Kondzer, Daniel J. Kolick and John P. Desimone , for appellant. Jones, Day, Reavis & Pogue and Roger F. Day , for appellee. Per Curiam. We affirm the BTA's decision. Initially, appellant raises a procedural issue regarding the propriety
of the BTA's admission of the testimony of Bruce Johnston, whose name was not
disclosed by May prior to the BTA hearing. The school board contends that it was
surprised by the witness, that May's counsel had failed to supplement prior
information given concerning proposed witnesses for trial, and that Civ. R. 26 and
Ohio Adm. Code 5717-1-10 require prior notification of the names of witnesses.
Accordingly, the school board contends, the testimony of Johnston should not have
been admitted and should now be stricken from the record. We disagree. *4 UPREME OURT OF O HIO Johnston did not testify as an expert witness, but as a fact witness regarding the sale/leaseback transaction. Ohio Adm. Code 5717-1-10, cited by the
school board, provides no support for its argument. The administrative rule
contains no specific obligation, vis-a-vis disclosure of names of witnesses, expert
or fact, to supplement an initial disclosure of expert witnesses. Under Civ. R.
26(B)(4)(b), a party may require another party "to identify each person whom the
party expects to call as an expert witness at trial." Moreover, Civ. R. 26(E), relied
upon by the school board, likewise deals only with expert witnesses. Johnston was
a fact witness, making Civ. R. 26 inapplicable. The BTA's decision admitting his
testimony regarding the sale/leaseback transaction was proper. As to the substance of the school board's argument, we agree with
the BTA's decision. The January 31, 1991 sale/lease back transaction was not an
arm's-length sale but was, as in Kroger Co. v. Hamilton Cty. Bd. of Revision (1993),
67 Ohio St.3d 145,
repayment * * * even though documented in the form of a sale and leaseback
transaction.'" The primary issue in this appeal is whether the BTA's decision was
reasonable and lawful. Under Cardinal Fed. S.&L. Assn. v. Cuyahoga Cty. Bd. of
Revision (1975), 44 Ohio St.2d 13, 73 O.O. 2d 83, 336 N.E.2d 433, "the
determination of [a question of fact] is primarily within the province of the taxing
authorities and this court will not disturb [such] decision * * * unless it
affirmatively appears from the record that such decision is unreasonable or
unlawful." Id. at paragraph four of the syllabus. The BTA made findings of fact that the sale/leaseback was primarily
a financing concern and not an open-market sale, and that the BTA correctly valued
May's property. These were factual conclusions, and we will not overrule them or
disturb the BTA's valuation because there was sufficient probative evidence in the
January Term, 1995
record to support the BTA's finding. Federated Dept. Stores, Inc. v. Lindley (1984),
its right to an increase in the true value of the subject property. Cleveland Bd. of
Edn. v. Cuyahoga Cty. Bd. of Revision
(1994),
it is affirmed.
Decision affirmed. M OYER , C.J., D OUGLAS , W RIGHT , R ESNICK , F.E. WEENEY , P FEIFER and OOK , JJ., concur.