MASON CITY SCHOOL DISTRICT BOARD OF EDUCATION, APPELLEE, v. WARREN COUNTY BOARD OF REVISION ET AL., APPELLEES; SQUIRE HILL PROPERTIES II, L.L.C., APPELLANT.
No. 2012-2107
Supreme Court of Ohio
January 21, 2014
138 Ohio St.3d 153, 2014-Ohio-104
KENNEDY, J.
Submitted October 8, 2013
Anthony E. Kendell, Miami County Prosecuting Attorney, and Robert E. Long III, Assistant Prosecuting Attorney, for appellee.
KENNEDY, J.
{11} In this appeal from the Board of Tax Appeals (“BTA“), we consider the motion to dismiss filed by appellee Mason City School District Board of Education and the appeal filed by appellant, Squire Hill Properties II, L.L.C. Squire Hill advances four propositions of law:
- The decision of the Board of Tax Appeals is a nullity because Squire Hill was denied due process in not being provided constitutionally required notice and an opportunity to be heard.
- The decision of the Board of Tax Appeals must be reversed because the Board abused its discretion when it failed to continue the hearing after being informed that Wasserpach no longer owned the property.
- The decision of the Board of Tax Appeals must be reversed because Mason failed to meet its burden of proof to overcome the record established at the Warren County Board of Revision.
The decision of the Board of Tax Appeals must be reversed because the Board lacked authority and had no evidence to support increasing the vаluation of the property without notice to Squire Hill.
{12} Addressing the motion to dismiss first, for the reasons stated below, we conclude that the motion lacks merit, and it is denied. Turning to the issues Squire Hill raises on appeal, we reject the contention that under these circumstances, the BTA was required to give Squire Hill notice of the BTA hearing. We agree with Squire Hill, however, that the BTA erred by not properly considering the finding of the Warren County Board of Revision (“BOR“) that the 2006 sale was not recent in regard to the tax-lien date. We therefore vacate the BTA‘s decision and remand for further proceedings.
PROCEEDINGS
{13} The property at issue is a one-story, multitenant retail structure called the “Shops at Deerfield South” located in the Mason City School District. For tax-year 2008, the county auditor assigned a value of $5,035,790 to the property.
{14} On January 22, 2009, the former owner of the property, Wasserpach IV, L.L.C., filed a valuation complaint for tax-year 2008, seeking a reduction from the auditor‘s valuation to $3,000,000 (an amended complaint filed June 5, 2009, sought further reduction). The stated grounds for the reduction were “decreased profitability resulting from decreased market rents, large vacancies, lower rental income, and increased property expenses.” The school board filed a countercomplaint that pointed to the December 2006 sale price of $5,350,000, but it asked that the auditor‘s valuation, which was slightly lower than the sale price, be retained.
{15} The BOR held a hearing on August 12, 2009, and issued a decision that reduced the value to $3,353,900. That decision relied on a specific finding that the December 2006 sale was not recent, because of the sudden increase in vacated units—from fully leased to 57 percent vacant—between the sale date and the tax-lien date, an event that two members of the BOR, the county auditor and the county treasurer, believed to be linked to market conditions.
{16} The school board then appealed to the BTA, which held a hearing on April 18, 2012. At the hearing, the examiner noted that the county appellees had waived appearance. Counsel for the former property owner Wasserpach had also contacted the examiner and indicated that Wasserpach would not appear, because Wasserpach had surrendered title to the property in lieu of foreclosure. Counsel for the school board did appear and argued in favоr of considering the December 2006 sale price and of reverting to the auditor‘s somewhat lower valuation.
{18} After the BTA issued its decision, Squire Hill appealed to this court. Because Squire Hill had acquired the property after the BTA hearing and before the BTA issued its decision, it had standing to appeal under the second paragraph of
MOTION TO DISMISS
{19} We must first address the motion to dismiss filed by the school board. The school board asserts that the court lacks jurisdiction because Squire Hill failed to serve the notice of appeal on Wasserpach as an appellee according to the requirements of
A. Facts
{110} Wasserpach was a previous owner of the property, and Wasserpach filed the valuation cоmplaint that initiated the proceedings at the BOR. As a result, Wasserpach became a party-appellee at the BTA when the school board appealed the BOR‘s decision. See
{111} The school board and Squire Hill both assert—without any support in the record—that Wasserpach surrendered title to thе property in June 2010, while the BTA proceeding was pending, to an entity called Viking Partners Deerfield, for no consideration. Viking Partners then transferred the property to Squire Hill for $3,200,000 in July 2012—after the BTA hearing but four months before a decision was issued.
B. Because Squire Hill prosecutes this appeal as the new owner, the failure to serve a former owner is not a jurisdictional defect
1. The Olympic Steel doctrine
{12} Relying on Olympic Steel, 110 Ohio St.3d 1242, 2006-Ohio-4091, 852 N.E.2d 178, the school board asserts that as a jurisdictional prerequisite to pursuing its appeal, Squire Hill ought to have joined and served Wasserpach as an appellee before this court.
{13} In Olympic Steel, the court held that servicе of the notice of appeal on the tax commissioner as an appellee, as prescribed by paragraph six of former
{14} The rationale of Olympic Steel is as follows. Paragraph six of former
{15} For its part,
{16} Reading
{17} In Olympic Steel, we held that the “appellant‘s failure in this case to comply with its statutory obligation to serve the notice of appeal on the Tax
{18} Although most cases in which we have applied Olympic Steel involve a failure to serve the tax commissioner, three involve the failure to serve a later owner. It is a jurisdictional defect if a former property owner who is a party at the BTA fails to serve a later owner, when that later owner had been identified as such in the record of the BTA case. Columbus City School Dist. Bd. of Edn. v. Franklin Cty. Bd. of Revision, 114 Ohio St.3d 1224, 2007-Ohio-4007, 871 N.E.2d 602; accord Cincinnati School Dist. Bd. of Edn. v. Hamilton Cty. Bd. of Revision, 116 Ohio St.3d 1220, 2007-Ohio-6664, 879 N.E.2d 774 (declining to dismiss because Columbus should be applied prospectively). However, a new owner need be served only if the record in the BTA case identifies the new owner. HK New Plan, ¶ 4.
{19} This case reverses the fact pattern just discussed: a current owner who failed to serve a prior owner has appealed. The question is whether the different circumstances of the present case have a different jurisdictional consequence. We hold that they do.
2. Serving a dispensable party under R.C. 5717.04 is not a jurisdictional prerequisite, because it does not run to the core of procedural efficiency
{20} In opposing dismissal, Squire Hill argues that
{21} We agree that the circumstances of this case call for a different conclusion than the previously mentioned cases. We have held that compliance with statutory appeal requirements is jurisdictional only when those requirements “run to the core of procedural efficiency.” Akron Std. Div. of Eagle-Picher Industries, Inc. v. Lindley, 11 Ohio St.3d 10, 12, 462 N.E.2d 419 (1984) (failure to verify a reassessment petition was not jurisdictional because the verification requirement did not run to the core of procedural efficiency); com-
{122} While the Olympic Steel cases have not explicitly referred to the core-of-procedural-efficiency concept, that concept is implicit in the holdings that service of the notice of appeal on all the parties before the BTA is jurisdictional. Procedurally, all interests must be notified so that each may participate in litigating the value of the property—the owner interest in a lower value, the school-district interest in a greater value, the county interest in proper valuation generally, and the statewide-equalization interest represented by the tax commissioner. In the present appeal, however, Squire Hill is presenting the case for a lower valuation, which would have been Wasserpach‘s interest.
{123} The current owner, not a former owner, has the primary and substantial interest in the valuation proceeding. It is the current owner‘s interest in the property that is subject to the tax lien imposed by
{124} Plainly, service of the notice of appeal on the current owner by a former owner is more important than service on the former owner by the current owner. As the court has observed, the procedural safeguards аfforded the property owner by the property-tax statutes “are in essence a codification of the fundamental concepts of due process.” Columbus Apts. Assocs. v. Franklin Cty. Bd. of Revision, 67 Ohio St.2d 85, 89, 423 N.E.2d 147 (1981). The potential deprivation of property through foreclosure of the tax lien directly affects the current titleholder, not the former owner who has transferred the property.
{125} We hold that the requirement that Squire Hill serve the former owner Wasserpach did not run to the core of procedural efficiency, because Wasserpach was dispensable as a party to the appeal. The current owner has the primary
3. Our decision in Waterville is on point
{26} Our holding that serving the notice of appeal on a dispensable party is not a jurisdictional prerequisite is supported by our decision in Waterville v. Spencer Twp., 37 Ohio St.2d 79, 307 N.E.2d 542 (1974). In that case, several political subdivisions dissatisfied with the allocation of local government funds appealed to the BTA. After the BTA adjusted the allocation, two subdivisions appealed to this court. In one of the appeals, the appellant, Waterville, failed to join one of the other subdivisions, at whose expense Waterville had sought a larger allоcation. The court dismissed that subdivision from the Waterville appeal.
{127} But the court declined to dismiss Waterville‘s appeal entirely. The court reasoned that “appellant‘s failure to serve one named appellee diminishes the number of parties before the court but does not affect its jurisdiction.” Id. at 82. In other words, Waterville could recover from the other subdivisions it had served in the appeal while forgoing recovery against the subdivision that it had failed to serve. Likewise, Squire Hill‘s failure to join Wasserpach does not deprive the court of jurisdiction to hear the appeal.
{128} Therefore, we reject the school board‘s jurisdictional challenge. Squire Hill‘s failure to serve the notice of appeal on the former owner Wasserpach did not constitute a jurisdictional defect, because that service did not “run to the core of procedural efficiency” under the case law. The motion to dismiss is denied.
APPEAL OF THE BTA DECISION
{129} We next proceed to consider the four propositions of law advanced by Squire Hill. Propositions 1 and 2 both address due process and the jurisdiction of the BTA to proceed to hear and decide the case before it. We reject Squire Hill‘s argument that the BTA decision is a nullity, because neither the statutes nor due process required the BTA to continue its hearing and affirmatively serve a new owner with notice of the appeal.
A. Facts
{131} There is limited evidеnce of the December 2006 sale in the record. At the hearing before the BOR on August 12, 2009, the county auditor stated on the record that the property record card indicated that the property sold on December 15, 2006, for $5,350,000. That statement refers to an actual notation on the property record card. The parties have never contested the fact or timing of the sale or the amount of the sale price. Accordingly, we accept the stated facts concerning the 2006 sale for purposes of deciding this appeal, despite the absence of the usual еlements of proof, such as the conveyance-fee statement, the deed, and the sale contract.
{132} At the BOR hearing, Wasserpach‘s counsel appeared along with the appraiser, Gene Manion. Counsel for the school board also appeared and cross-examined Manion. Finding the cost and the sales-comparison approaches to be inapplicable, and relying exclusively on an income approach, Manion concluded that the value of the property on January 1, 2008, was $2,942,000. Manion derived his estimation by first determining and then combining separate values, one for the tenant-occupied portion of the premises and one for the unoccupied portion of the premises. Manion testified at the BOR hearing that although the property was 100 percent leased at the time of the December 2006 sale, it was 57 percent vacant on the lien date. No one contested that assertion.
B. The BTA had no obligation to continue the hearing or give notice to the new property owners
1. Squire Hill had no statutory right to receive notice from the BTA
{133} Squire Hill‘s first proposition of law states that the BTA decision “is a nullity because Squire Hill was denied due process in not being provided constitutionally required notice and an opportunity to be heard.” The second proposition appears to be a variant of the first: it asserts that the BTA erred by not continuing the hearing until a new owner could be given notice and an opportunity to participate. Squire Hill is mistaken on both counts.
{34} In deciding this issue, we distinguish due process required by statute from due process required by the United States Constitution. Only one of the
{135} In Columbus Apts. Assocs., 67 Ohio St.2d 85, 423 N.E.2d 147, two boards of education had filed valuation complaints and obtained increases in the values of apartment properties. The owners had been notified of the board-of-revision hearings and had been accorded the opportunity to participate. When, however, the owners appealed the adverse decisions to the BTA, the BTA dismissed because the owners had not filed complaints with respect to the properties.
{136} We reversed. Noting that the statutes providing for notice to the owner prohibited any increase without the owner having the opportunity to be heard, we concluded that “it is the legislative intent to provide every procedural safeguard for the taxpayer.” 67 Ohio St.2d at 89, 423 N.E.2d 147. We observed that the provisions dealing with procedures before boards of revision and in appeals were a codification of the fundamental concepts of due process. Id. We then reasoned that because “it is the owner‘s, not the school board‘s, property which is the subject of the complaint * * * the owner is an indispensable party” and that “the owner [should not] be denied the right to be a party upon an appeal of a determination which materially affects his property interests.” Id. at 89-90.
{137} Quite simply, Squire Hill cites no provision of law that requires the BTA to give notice of its hearing to a new owner.
2. Squire Hill‘s constitutional due-process claim has been “effectively waived”
{38} Squire Hill alludes to, but does not develop, an argument that constitutional due process required that it receive notice from the BTA. Squire Hill cites
{139} It was particularly important to present a developed argument in this case, given that Squire Hill held no interest in the property at the time the BTA held its hearing. Any injury Squire Hill has suffered would have arisen from its own lack of diligence as a purchaser to inquire into the status of tax proceedings. The BOR and BTA proceedings are matters of public record, and Squire Hill could have entered an appearance and even intervened at the BTA had it inquired into the status of the case and elected to make such a filing.
{40} Squire Hill‘s first and second propositions of law are therefore denied.
C. The BTA erred by ignoring the BOR‘s recency finding and by failing to independently weigh the evidence
{41} Squire Hill‘s third and fourth propositions of law address the merits of its claim: Did the BTA err by adopting the December 2006 sale price as the value of the property for tax year 2008? The third proposition of law focuses on the school board‘s failure to present evidence of the sale at the BTA, so that the BTA had an insufficient basis for concluding that there was a December 2006 sale for a price of $5,350,000. Three arguments are advanced under the fourth proposition of law; the third focuses on the lack of evidence regarding the recency of the sale.
1. The property record, together with the auditor‘s statement at the BOR hearing, evidence the date and price of the sale
{42} As Squire Hill asserts, the school board had the burden of proof at thе BTA, and it presented no proof of the December 2006 sale. “Without evidence [of the sale], [the school board] did not fulfill its burden to reverse the decision of the BOR.”
{43} The school board‘s failure to present evidence of the sale at the BTA does not mean that there is not sufficient evidence of the sale in the record. The property record card contains a notation referring to the sale (as property record cards typically do), and although that notation is somewhat ambiguous, the
{144} Under these circumstances, we conclude that the BTA had a sufficient evidentiary basis for determining that there was a December 2006 sale to Wasserpach for $5,350,000.
2. Tax tribunals have authority to determine a new value that is unrestricted by the values claimed by the parties
{45} We also reject Squire Hill‘s argument that the BTA had no authority to adopt the sale price as the property value, because the school board had requested reinstatement of thе auditor‘s original value instead of relying on the sale price. We have held that “when performing an independent valuation, the BTA is not bound by the values advocated by the parties.” Sapina v. Cuyahoga Cty. Bd. of Revision, 136 Ohio St.3d 188, 2013-Ohio-3028, 992 N.E.2d 1117, ¶ 28. The taxpayer‘s valuation complaint “places neither minimum nor maximum limitations on the [common pleas] court‘s determination of value, and there are none save the judicial requirement that the determination be supported by the evidence.” Jones & Laughlin Steel Corp. v. Lucas Cty. Bd. of Revision, 40 Ohio St.2d 61, 63, 320 N.E.2d 658 (1974); see Cleveland Elec. Illum. Co. v. Lake Cty. Bd. of Revision, 80 Ohio St.3d 591, 595, 687 N.E.2d 723 (1998) (rule stated in Jones & Laughlin Steel is applicable to BTA appeals).
3. The BTA failed to evaluate the BOR‘s finding that the sale was not recent
{146} Finally, Squire Hill faults the BTA for deeming the December 2006 sale recent to the January 1, 2008 valuation basеd on mere temporal proximity and for not weighing the evidence contained in the BOR transcript. We conclude that Squire Hill has stated grounds for vacating the decision of the BTA and remanding for a proper review of the evidence regarding the recency of the sale.
{147} Unlike in most similar board-of-revision appeals, this case presents an explicit finding that the presumption of recency of the sale had been rebutted by facts. Both the auditor and the treasurer (the two members of the BOR present) stated on the record that the sudden vacating of 57 percent of the premises aftеr the sale made the sale not indicative of the market on January 1, 2008. Yet the BTA treated recency as a mere question of how close the sale was in time to the lien date as if no special attention had been given to the issue at the BOR.
{148} In the past, when the BTA has not given the requisite attention to a recency issue discussed by a board of revision, the court has vacated and remanded. Worthington City Schools, 124 Ohio St.3d 27, 2009-Ohio-5932, 918 N.E.2d 972, ¶ 34. We conclude that the same disposition is warranted in this case.
{150} Accordingly, the BTA on remand shall make Squire Hill a party-appellee and shall take additional evidence regarding the recency of the December 2006 sale if Squire Hill requests it to do so. If Squire Hill does offer evidence relating to recency, the school board shall have the opportunity to offer evidence in rebuttal.
CONCLUSION
{151} For the foregoing reasons, we deny thе school board‘s motion to dismiss and reject the jurisdictional and due-process arguments advanced by Squire Hill. Because the BTA failed to properly consider the BOR‘s finding and weigh the evidence regarding recency of the sale, however, we vacate the BTA‘s decision and remand for further proceedings consistent with this opinion.
Decision vacated and cause remanded.
O‘CONNOR, C.J., and PFEIFER, O‘DONNELL, LANZINGER, and O‘NEILL, JJ., concur.
FRENCH, J., concurs in judgment only.
David C. DiMuzio, Inc., and Jennifer B. Antaki, for appellee Mason City School District Board of Education.
David P. Fornshell, Warren County Prosecuting Attorney, and Michael Greer and Christopher A. Watkins, Assistant Prosecuting Attorneys, for appellees Warren County Board of Revision and Warren County Auditor.