WCI STEEL, INC., APPELLANT, v. TESTA, TAX COMMR., APPELLEE.
No. 2010-1027
Supreme Court of Ohio
Submitted March 23, 2011—Decided July 7, 2011.
[Citе as WCI Steel, Inc. v. Testa, 129 Ohio St.3d 256, 2011-Ohio-3280.]
{29} Fifth Third‘s remedy by appeal, in the unlikely event it is found in contempt, is not adequate. An adequate legal remedy must be practical and efficient and promptly administer justice. Mid-America Tire, Inc. v. PTZ Trading Ltd., 95 Ohio St.3d 367, 2002-Ohio-2427, 768 N.E.2d 619, ¶ 81. It is illogical to require Fifth Third to appear and defend in a contempt action under these сircumstances, as well as time-consuming and costly to Fifth Third and the judicial system. In the unlikely event that Fifth Third does not prevail in the contempt proceeding, an appeal is not as efficient as a writ of prohibition would be if we granted it now. Thus, I believe that an appeal is an inefficient and inadequate remedy, and I would grant a writ of prohibition to prohibit Judge Russo from proceeding on the contempt hearing.
{30} I respectfully dissent from the resolution of the cross-appeal.
MCGEE BROWN, J., concurs in the foregoing opinion.
Graydon, Head & Ritchey, L.L.P., John C. Greiner, Harry W. Cappel, and Katherine M. Lasher, for appellee and cross-appellant.
William D. Mason, Cuyahoga County Prosecuting Attorney, and Charles E. Hannan, Assistant Prosecuting Attorney, for appellant and cross-apрellee.
{1} In this personal-property-tax case, WCI Steel, Inc. (“WCI“) appeals from a decision of the Board of Tax Appeals (“BTA“), which dismissed WCI‘s appeal on the authority of Ohio Bell Tel. Co. v. Levin, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212. The BTA held that when judged under the standards articulated in Ohio Bell, WCI‘s notice of appeal to the BTA failed to specify any error and thereby failed to vest jurisdiction in the BTA to consider the appeal.
{3} First, we follow our precedents holding that a notice of appeal from an assessment in which the tax commissioner has determined the value of personal property invokes the jurisdiction of the BTA to review that determination if the notice (1) states the appellant‘s objection to the commissioner‘s actions in valuing the property and (2) identifies the treatment that the commissioner should have applied.
{4} Moreover, the BTA‘s jurisdiction in the appeal permitted it to consider the appraisal report and testimony that WCI presented for the first time at the BTA hearing. Our precedents establish that the BTA is statutorily authorized to receive evidence in addition to that considered by the tax commissioner, and we hold that such evidence may include different valuation aрproaches from those presented to the tax commissioner.
{5} In this regard, we hold that our decision in Ohio Bell is inapposite. The different approaches to the valuation of personal property set forth in
{6} Because the BTA applied Ohio Bell to a situation in which it should not have been applied, we reverse and remand with the instruction that the BTA decide this case on the merits.
Factual Background
{7} WCI Steel, Inc. is a steelmaker in northeast Ohio. For tax year 2001, WCI reported thаt its manufacturing machinery and equipment (“M & E“) had a value (in accordance with the tax commissioner‘s prescribed valuation method) of $84 million. For tax year 2002, the reported value of the M & E was just under $90 million.
{8} Testimony at the BTA hearing indicated that 2001 was a terrible year financially for the steel industry generally and was WCI‘s worst financial year: WCI lost $100 million. In 2002, WCI lost $37 million. In September 2003, WCI filed for bankruptcy reorganization.
{9} In connection with its business troubles, WCI decided to seek a lower valuation of its business property—in particular, the M & E used in steel manufacturing. In May 2003, a WCI representative made a presentation to tax
{10} In accordance with the study, WCI valued its M & E for tax year 2003 at just under $30 million. WCI filed applications for final assessment pursuant to
{11} During the proceedings before the commissioner, WCI‘s claim for reduction of the value of M & E was reviewed and analyzed as a claim for an impairment of asset value—indeed, the audit remarks characterized WCI‘s claim as a claim for asset impairment. Correspondence filed on behalf of WCI during the proceedings before the commissioner acknowledged the commissioner‘s interest in whether WCI ought to recognize an impairment on its books for its M & E, given the reduced valuation it sought from the commissioner. An earlier audit by the accounting firm KPMG had indicated that accounting standards did not require WCI to record an impairment for fiscal year 2002.
{12} After WCI‘s bankruptcy filing, WCI commissioned an appraisal of its assets from Nationwide Consulting Company, Inc. As a result of that appraisal, WCI did record an impairment. The tax commissioner‘s agent reviewed a portion of that appraisal, and the tax commissioner‘s witness at the BTA hearing stated, “[W]e saw parts of it and then did not agree with the method.” The tax agent apparently asked for, but was denied, access to a portion of the analysis supporting the claim of impairment. On the other hand, the commissioner‘s agent did note in an addendum to the audit that the Nationwide Consulting appraisal of “fair market value in continued use” did consider a combination of cost approach, market-comparison approach, and income approach—with emphasis on the market-comparison approach “when sufficient data was available“—to arrive at a value of $83,316,000.
{13} Although the commissioner suggests that the Nationwide Consulting appraisal relied exclusively on a sales-comparison approach and that the appraisal found income and cost approaches inapplicable, the page that the commissioner cites appears to address the value of the realty, not the M & E.
{14} The present case involves not one but three tax years: 2001, 2002, and 2003. WCI was a fiscal-year taxpayer: it listed its personal property value as of the last day of its preceding fiscal year, which is October 31, rather than as of December 31 of the preceding calendar year. See
{15} The commissioner denied the relief WCI sought for 2001, 2002, and 2003. In doing so, the commissioner issued final-assessment certificates pursuant to
{16} (1) identified the categories of personal property at issue,
{17} (2) reiterated that the value previously asserted by the taxpayer was correct,
{18} (3) stated that the commissioner‘s determination “reflects property being valued as a percentage of its original cost using the Tax Commissioner‘s composite annual allowance procedure” and contended that the true value of its property did not exceed the values requested by WCI, and
{19} (4) cited the pertinent statutes and administrative rules.
{20} WCI presented testimony and exhibits at an evidentiary hearing before the BTA. Most prominently, WCI presented the appraisal prepared by AccuVal Associatеs, Inc., which the commissioner has characterized as primarily a “replacement cost new” study.
{21} The AccuVal appraisal expressed an opinion of the value of WCI‘s M & E for 2003, 2002, and 2001 by determining its replacement cost and then making adjustments to that figure. First, AccuVal computed and subtracted depreciation by both physical deterioration and functional obsolescence. Second, AccuVal subtracted a large amount for economic obsolescence based on a computation of business-enterprise value. Third, AccuVal made an adjustment derived from a sales-comparison approach and thereby arrived at its estimate of true value. The primary focus was the 2003 tаx year (value as of October 31, 2002), and the study then trended backward to determine values for the previous two years.
{22} After this court issued its decision in Ohio Bell, the BTA solicited briefs from the parties on the issue whether the decision affected the BTA‘s jurisdiction
Analysis
{23} Because the “law of Ohio requires that personal property used in business be taxed at its true value,” and because “it is impractical for the Department of Taxation to personally value all such personal property in the state,” we have held that it is reasonаble and lawful for the commissioner to develop a method of “depreciating the cost of the personal property in accordance with its useful life.” W.L. Harper Co. v. Peck (1954), 161 Ohio St. 300, 303, 53 O.O. 178, 118 N.E.2d 643. The commissioner‘s method, known as the “302 computation,” consists of industry-specific composite annual allowances by which categories of business assets are depreciated from cost, and this court has approved the 302 computation “as a practical, reasonable and lawful method and device to achieve uniform valuation of plant equipment in Ohio by prescribing annual depreciation rates in lieu of book depreciation for Ohio personal property tax purposes.” PPG Industries, Inc. v. Kosydar (1981), 65 Ohio St.2d 80, 83, 19 O.O.3d 268, 417 N.E.2d 1385; see
{24} WCI sought a drastic reduction in the value of its M & E for tax years 2001, 2002, and 2003 from the value determined under the 302 computation. Before the tax commissioner, WCI placed primary reliance on a study of sales of comparable plants. Before the BTA, WCI presented the AccuVal appraisal. But the BTA dismissed WCI‘s appeal on the authority of Ohio Bell Tel. Co. v. Levin, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212.
The BTA misread the holding of Ohio Bell
{25} When a notice of appeal fails to set forth any error with the required specificity, an appeal may properly be dismissed—the action that the BTA took in the present case.1 Brown v. Levin, 119 Ohio St.3d 335, 2008-Ohio-4081, 894 N.E.2d 35, ¶ 17. Alternatively, if the notice does specify one or more errors, the BTA may be called upon to rule that a particular claim was not among those errors sрecified and therefore lies outside the BTA‘s jurisdiction. Id. Ohio Bell, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212, exemplifies the latter principle: the court held that the notice of appeal did not permit the introduction
{26} In Ohio Bell, the notice of appeal contained two claims of error that were pertinent to the court‘s analysis. First, the notice stated that the commissioner‘s determination “overstates both costs and service lives” of Ohio Bell‘s property; second, the notice stated that the assessment “utilizes a method that does not reasonably reflect true value.” Id. at ¶ 20. The court considered whether either of these assertions conferred jurisdiction on the BTA to grant Ohio Bell relief based on a unit appraisal, given that Ohio Bell had not presented such an appraisal below but had presented only a valuation study that called for different cost figures and depreciation rates. Id. at ¶ 6.
{27} As for the statement that the commissioner “overstates costs and service lives,” that phrase referred to the type of valuation study Ohio Bell had previously presented to the commissioner, and it did not relate to a unit appraisal. We next considered whether the assertion that the assessment “utilizes a method that does not reasonably reflect true value” extended jurisdiction to encompass a unit appraisal. We decided that it did not, because, while it purported to open the door to an alternative method, it “did not narrow the issues in this case in any way.” (Emphasis sic.) Id. at ¶ 27. In this context, the court observed that “[s]uch a ‘specification’ is so broad that it specifies nothing at all.” Id. But because we did not address whether the notice of appeal failed to specify any error, that statement is obiter dictum.
{28} Moreover, reading Ohio Bell as foreclosing the jurisdiction of the BTA in this case contravenes the principles we have applied in other cases. We have held that a notice of appeal is sufficient to give notice of a particular error when it has “specified the commissioner‘s action that it questioned, cited the statute under which it objected, and asserted the treatment that it believed the commissioner should have applied.” Gen. Motors Corp. v. Wilkins, 102 Ohio St.3d 33, 2004-Ohio-1869, 806 N.E.2d 517, ¶ 75, citing Goodyear Tire & Rubber Co. v. Limbach (1991), 61 Ohio St.3d 381, 383, 575 N.E.2d 146, citing Abex Corp. v. Kosydar (1973), 35 Ohio St.2d 13, 64 O.O.2d 8, 298 N.E.2d 584. Abex Corp. is particularly significant in this regard because it involved a decision by the BTA to dismiss a challenge to the valuation of personal property. Like the notice of appeal in Abex Corp., WCI‘s second assignment of error meets the criteria by
{29} Therefore, consistent with Abex Corp., 35 Ohio St.2d at 17, we hold that the jurisdiction of the BTA is invoked to review an assessment in which the tax commissioner has determined the value of personal property if the notice of appeal from that determination (1) states the appellant‘s objection to the commissioner‘s actions in valuing the property and (2) identifies thе treatment that the commissioner should have applied. Because WCI‘s notice of appeal complied with these criteria, it invoked the BTA‘s jurisdiction.
{30} For all these reasons, the BTA erred by reading Ohio Bell as establishing that the notice of appeal in the present case fails to invoke any jurisdiction in the BTA. Indeed, we left no doubt of the narrow compass of our holding when we stated that the “jurisdictional issue * * * stems from Ohio Bell‘s failure to present a case based on a unit appraisal to the commissioner, not from an unfortunate choice of words [in the notice of appeal].” Ohio Bell, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212, at ¶ 32. The holding of Ohio Bell does not, therefore, dictate that a notice of appeal must set forth valuation theories with particularity. Instead, the case merely prеvents the presentation of an “alternate valuation method” that has not previously been presented to the tax commissioner.
By explicitly challenging the commissioner‘s valuation, a notice of appeal preserves the claim for reduced value and allows new evidence at the BTA
{31} Determining that Ohio Bell does not support the BTA‘s dismissal of this case does not end our inquiry. That is so because the BTA‘s error is jurisdictional in nature, and we must determine whether the BTA will have jurisdiction to entertain WCI‘s claim for reduced value on remand.3
{32} Even if a notice of appeal does specify one or more errors, the BTA may be called upon to rule that a particular claim was not among those errors specified and therefore lies outside the BTA‘s jurisdiction. Brown, 119 Ohio St.3d 335, 2008-Ohio-4081, 894 N.E.2d 35, at ¶ 17. As noted, our decision in Ohio Bell exemplifies that principle: the court held that the notice of appeal did not
{33} In the present case, the tax commissioner does not confine himself to defending the BTA‘s determination that WCI‘s notice failed to specify any error at all; the commissioner also contends that in this case, “just like in Ohio Bell, the language used by WCI in its notice of appeal to the BTA provides no notice to the Commissioner or the BTA of the particular valuation methodology(ies), analysis, assumptions, and evidence that WCI would present at the BTA.” We therefore consider whether WCI‘s notice of appeal encompassed the AccuVal appraisal that WCI presented for the first time at the BTA.
{34} For two reasons, we hold that the BTA did possess jurisdiction to consider the AccuVal appraisal. First, the commissioner‘s argument cannot be reconciled with the statutes and the case law concerning the BTA‘s authority to hear evidence.
{35} Moreover, we have held that the “BTA hearing is de novo” and that the board is “statutorily authorized to conduct full administrative appeals in which the parties are entitled to produce evidence in addition to that considered by the Tax Commissioner.” Key Servs. Corp. v. Zaino (2002), 95 Ohio St.3d 11, 16, 764 N.E.2d 1015, citing Higbee Co. v. Evatt (1942), 140 Ohio St. 325, 332, 23 O.O. 543, 43 N.E.2d 273; Bloch v. Glander (1949), 151 Ohio St. 381, 387, 39 O.O. 216, 86 N.E.2d 318. Imposing the jurisdictional prerequisite of specifying evidence would severely limit if not overrule our precedent concerning the scope of the BTA‘s authority in this regard—indeed, in Ohio Bell itself, we expressly acknowledged that a party “need not specify the evidence on which it intends to rely [at the BTA].” Ohio Bell, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212, at ¶ 30.
{36} Second, our decisions have not judged the sufficiency of assignments of error in a notice of appeal merely by their form of words. Instead, the words of the notice of appeal must be read in the context of the particular case in which those words are used. An assertion in a notice of appeal should therefore be read in light of the objections and evidence that were presented to the commissioner, with the result that a taxpayer‘s explicit objection to the commissioner‘s valuation of personal property will usually suffice to permit the taxpayer to preserve its valuation challenge and present new evidence to the BTA.
{37} One of thе most dramatic illustrations of the importance of context is Brown, 119 Ohio St.3d 335, 2008-Ohio-4081, 894 N.E.2d 35. In Brown, the notice
{38} But we did not hold that the BTA should have dismissed the appeal. Instead, we looked at the context as infusing the notice of appeal with a particular meaning: because the commissioner‘s determination relied on the BTA‘s decision in Knust v. Wilkins (Oct. 14, 2005), BTA No. 2004-M-533, 2005 WL 2699284, affirmed, 111 Ohio St.3d 331, 2006-Ohio-5791, 856 N.E.2d 243, and because the Knust appeal was рending before this court at the time the tax commissioner issued his final determination, we held: “[T]he BTA could have construed the Browns’ notice of appeal as a request that if this court reversed the BTA‘s decision in Knust, the Browns should enjoy the benefit of that legal ruling. Indeed, to construe the notice of appeal in that way would comport with the fact that this case is one of a large number of cases that were pending before the BTA in anticipation of our decision in the Knust appeal.” Brown at ¶ 14. Our ultimate disposition in Brown reflects the reading of the notice of appeal in context: we did not find that the BTA lacked jurisdiction, but instead affirmed the BTA‘s summary affirmance of the commissioner‘s determination based on the court‘s decision in Knust.
{39} Additionally, reading the notice оf appeal in context comports with the basic purpose of the specification requirement: notice. See Gen. Mills, Inc. v. Limbach (1992), 63 Ohio St.3d 273, 275, 586 N.E.2d 1074 (”
{40} In the present case, WCI‘s notice invokes the BTA‘s jurisdiction to consider a claim for reduced value, at least to the extent of the evidence, arguments, and considerations that formed a part of the tax commissioner‘s review of that claim.
The AccuVal appraisal presented at the BTA did not exceed the scope of the claim for reduced value specified in the notice of appeal
{41} The commissioner emphasizes that WCI presented a comparable-sales study to the commissioner and placed primary reliance on that study, and
{42} The commissioner‘s theory is mistaken for two reasons. First, unlike the utility tax at issue in Ohio Bell, the general personal property tax is subject to administrative rules that address the valuation of personal property.
{43} When a taxpayer challenges the valuation in accordance with the 302 computation,
{44} Second, the concept of an “alternate valuation method” found in Ohio Bell is specific to the utility tax and usually does not apply to the general personal property tax. Ohio Bell was itself a utility-tax case in which the tax commissioner valued Ohio Bell‘s property by applying “composite annual allowances” for depreciation and obsolescence to the historical cost of the utility‘s operating assets. See
{45} Unit-appraisal valuation is different—in Ohio Bell, we referred to its “fundamental dissimilarity” to the cost-less-depreciation approach—because a unit appraisal is an “appraisal of an integrated property as a whole, without
{46} Namely, the unit appraisal became an alternate valuation method in the utility tax after the enactment of
{47} By contrast with Ohio Bell, the present case presents no such “fundamental dissimilarity” because the AccuVal appraisal that WCI presented at the BTA integrates a mix of approaches into a replacement-cost study, and such an
WCI was not obligated to present the AccuVal appraisal to the commissioner in order to be permitted to present it to the BTA
{48} The commissioner also argues that the BTA lacked jurisdiction because WCI did not present the AccuVal appraisal to the commissioner first. This argument relies on the asserted rule that “a failure to present an issue to the commissioner precludes the BTA from taking jurisdiction over that issue—even if the issue is specified in the notice of appeаl.” (Emphasis sic.) Ohio Bell, 124 Ohio St.3d 211, 2009-Ohio-6189, 921 N.E.2d 212, at ¶ 33, citing CNG Dev. Co. v. Limbach (1992), 63 Ohio St.3d 28, 32, 584 N.E.2d 1180, and DeWeese v. Zaino, 100 Ohio St.3d 324, 2003-Ohio-6502, 800 N.E.2d 1, ¶ 19-22.
{49} The commissioner cites no specific statutory authority to support his second and third propositions of law. That is odd because the language of the statutes is almost certainly relevant to whether a taxpayer is or is not obligated to set forth its objections and arguments before the commissioner. See CNG, 63 Ohio St.3d at 31, quoting
{50} Despite the commissioner‘s lack of reference to a specific statute, for purposes of our analysis we will assume without deciding that the requirement that objections be raised before the commissioner applies to all three tax years at issue in this case. By asserting that requirement as he does in the present case,
{51} The preceding discussion establishes that the commissioner‘s argument must fail. Under
{52} Consistent with the reasoning of Key Servs. Corp., we hold that in an appeal from an assessment in which the tax commissioner has determined the value of personal property, the BTA is statutorily authorized to receive evidence in addition to that considered by the tax commissioner and that evidence may include valuation approaches different from those presented to the tax commissioner.
{53} As for the commissioner‘s citation of Hatchadorian v. Lindley (1986), 21 Ohio St.3d 66, 21 OBR 365, 488 N.E.2d 145, that case does state that the commissioner‘s findings are “presumptively valid, absent a demonstration that those findings are clearly unreasonable or unlawful.” Id. at paragraph one of the syllabus. But the BTA‘s standard of review in an appeal from a determination of the tax commissioner is not before us, and we do not think it is relevant to the jurisdictional issue we do confront.
{54} The commissioner additionally claims that he possesses the exclusive power to value and assess property and argues on that basis that the BTA cannot consider an appraisal that was not first presented to the commissioner. Although our case law at one point acknowledged the commissioner‘s “exclusive power”
Conclusion
{55} For all the foregoing reasons, we distinguish our decision in Ohio Bell and hold that the different approaches to valuing personal property set forth in
{56} The analysis of Ohio Bell is inapplicable to the situation of this case. The BTA acted unlawfully when it dismissed WCI‘s appeal for lack of jurisdiction. We therefore reverse and remand for a determination of WCI‘s appeal on the merits.
Decision reversed and cause remanded.
O‘CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O‘DONNELL, LANZINGER, and MCGEE BROWN, JJ., concur.
Buckingham, Doolittle & Burroughs, L.L.P., David W. Hilkert, and Stevеn A. Dimengo, for appellant.
Michael DeWine, Attorney General, and Barton A. Hubbard, Assistant Attorney General, for appellee.
Eugene P. Whetzel, urging reversal for amicus curiae Ohio State Bar Association.
Linda S. Woggon, urging reversal for amicus curiae Ohio Chamber of Commerce.