Zupancic v. WilkinsZupancic v. Wilkins
Bricker & Eckler LLP, and Mark A. Engel, for appellant/cross appellee Benton-Carroll-Salem Local School District Board of Education.
Richard Cordray, Attorney General, Julie E. Brigner and Damion M. Clifford, for appellees/cross-appellants William W. Wilkins, Tax Commissioner of Ohio, and Ohio Department of Taxation.
APPEALS from the Franklin County Court of Common Pleas.
McGRATH, J.
{¶1} Plaintiffs-appellants/cross-appellees, Edward H. Zupancic, Jo Ellen Regal, the Lake County Board of Commissioners, and the Board of Education of the Benton-Carroll-Salem Local School District (collectively “appellants“), appeal from a decision of
{¶2} The instant matter involves the taxation of nuclear fuel rod assemblies. The Perry Nuclear Power Station and the Davis-Besse Nuclear Power Plant are located in Lake and Ottawa counties, respectively. The electric companies that own these power plants are public utilities and use nuclear fuel rod assemblies to generate electricity.
{¶3} The electric companies leased the nuclear fuel rod assemblies until their purchase in 2001. When the electric companies leased the nuclear fuel rod assemblies, they were taxed as general personal property pursuant to
{¶4} On March 25, 2005, appellants filed a declaratory judgment action, coupled with requests for both mandatory and prohibitory injunctions, seeking a determination of the term “cost” as used in
{¶5} The procedural history germane to this appeal is as follows. Appellees filed a motion to dismiss and a motion for judgment on the pleadings, both of which were denied by the trial court. Thereafter, the parties filed cross-motions for summary judgment; the bases of appellees’ motion were that the trial court lacked subject-matter jurisdiction and that the Tax Commissioner‘s apportionment of the nuclear fuel rod assemblies was correct. The trial court granted appellees’ motion but subsequently vacated its decision and reconsidered the parties’ cross-motions for summary judgment. The trial court granted both cross-motions in part and denied them in part. The court found that appellants could maintain their action for declaratory relief but that the Tax Commissioner‘s apportionment methodology was not contrary to law. It is from that decision the parties have appealed.
{¶6} Appellants assert the following assignment of error:
THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF DEFENDANT-APPELLEE CROSS-APPELLANT TAX COMMISSIONER AND SHOULD
HAVE GRANTED SUMMARY JUDGMENT IN FAVOR OF PLAINTIFFS-APPELLANTS CROSS-APPELLEES EDWARD H. ZUPANCIC, JO ELLEN REGAL, THE LAKE COUNTY BOARD OF COMMISSIONERS AND THE BENTON-CARROLL-SALEM LOCAL SCHOOL DISTRICT.
Appellees’ cross-appeal asserts the following assignment of error:
THE TRIAL COURT ERRED IN FINDING THAT IT HAD SUBJECT MATTER JURISDICTION OVER APPELLANTS’ DECLARATORY JUDGMENT ACTION.
The threshold issue before this court is whether the trial court had jurisdiction over appellants’ declaratory action, the resolution of which depends upon whether a declaratory judgment action is the appropriate mechanism by which to contest a determination made by the Tax Commissioner. A motion to dismiss for lack of subject-matter jurisdiction inherently raises questions of law, and our review is de novo. Groza-Vance v. Vance, 162 Ohio App.3d 510, 2005-Ohio-3815, ¶13. Making that determination necessarily requires consideration of the methodology employed by the Tax Commissioner.
Statutory Framework
{¶7} We begin our analysis with the statutory framework involved, as relative to the tax years at issue,1 in order to put the parties’ arguments in context.
{¶8}
(A) Except as otherwise provided in this section, the true value of all taxable property required by division (A)(2) or (3) of section 5727.06 of the Revised Code to be assessed by the tax commissioner shall be determined by a method of valuation using cost as capitalized on the public utility‘s books and records less composite annual allowances as prescribed by the commissioner. If the commissioner finds that application of this method will not result in the determination of true value of the public utility‘s taxable property, the commissioner may use another method of valuation.
* * *
(D)(1) Except as provided in division (D)(2) of this section, the true value of the production equipment of an electric company and the true value of all taxable property of a rural electric company is the equipment‘s or property‘s cost as capitalized on the company‘s books and records less fifty per cent of that cost as an allowance for depreciation and obsolescence.
(2) The true value of the production equipment of an electric company or rural electric company purchased, transferred, or placed into service after the effective date of this amendment is the purchase price of the equipment as capitalized on the company‘s books and records less composite annual allowances as prescribed by the tax commissioner.
* * *
(G) The cost of property subject to a sale and leaseback transaction is the cost of the property as capitalized on the books and records of the public utility owning the property immediately prior to the sale and leaseback transaction.
The taxable property is then assessed at various percentages of true value.
Parties’ Merit Arguments
{¶10} Appellants’ argument rests upon the premise that the Tax Commissioner misconstrued the term “cost” in
The value of taxable personal property, other than production equipment, shall be apportioned to each taxing district in the proportion that the cost of such other taxable personal property physically located in each taxing district is of the total cost of such other taxable personal property physically located in this state.
{¶11} Naturally, appellees disagree. The Department of Taxation reconsidered its tax treatment of the nuclear fuel rod assemblies after learning that the electric companies had purchased the same. It conducted “extensive research,” and, after consulting with the electric companies, “concluded that nuclear fuel is a commodity that is expended/consumed in its use.” (Appellees’ responsive brief at 7.) Thus, the Tax Commissioner “determined that the ‘cost’ of the nuclear fuel rod assemblies pursuant to
{¶12} Appellees contend that the fundamental flaw with appellants’ argument is that it “ignores the unique characteristics of the assemblies whose value is determined by the amount of nuclear fuel contained within it.” (Appellants’ responsive brief at 9.)2 In that regard, appellees assert that the Supreme Court of Ohio recognized in CC Leasing Corp. v. Limbach (1989), 23 Ohio St.3d 204, 208, that it was reasonable to assign the full cost of the nuclear fuel rod assemblies to the nuclear fuel. With respect to appellants’ argument that the term “cost” used in
Parties’ Jurisdictional Arguments
{¶13} Appellees advance a multifaceted argument that the trial court lacked subject-matter jurisdiction to consider the complaint. Appellees first argue that the instant action is, in reality, a direct appeal of the Tax Commissioner‘s preliminary assessment, which appellants have no statutory right to contest. Appellees also contend that
{¶14} Appellants readily concede that they cannot maintain a direct appeal of the Tax Commissioner‘s preliminary assessment determination but argue that they are not foreclosed from obtaining a judicial construction of the term “cost” by means of a declaratory judgment action. Appellants posit that, although the legislature may have amended
Trial Court‘s Decision
{¶15} The parties advanced the same merit and jurisdictional arguments set forth above before the trial court. The court rejected appellees’ jurisdictional argument, concluding that the Tax Commissioner‘s interpretation of the term “cost” was “adequately ministerial,” as opposed to discretionary, and, as such, it had jurisdiction. (Trial Court‘s Decision, Nov. 27, 2007, at 4.) In reaching that conclusion, the trial court relied upon Raceway Park, Ryland I, and Ryland II. The court also relied upon the tenet that
Analysis
{¶17} In French v. Limbach (1991), 59 Ohio St.3d 153, the Supreme Court of Ohio answered the specific question of whether a county auditor can appeal to the BTA from a preliminary assessment certificate issued by the Tax Commissioner, noting that it was not deciding “the more fundamental questions of whether a county auditor has a right to appeal from any determination of the Tax Commissioner regarding intercounty personal property tax returns, or from any such assessment when it has become final by operation of law.” Id. at 154. It would appear then that this case, in essence, begins where French left off.
{¶18} There is no dispute that the legislature‘s amendment of
{¶19} Actions for declaratory judgment and injunction are inappropriate where special statutory proceedings would be bypassed. State ex rel. Albright v. Court of Common Pleas (1991), 60 Ohio St.3d 40, 42 (citations omitted). One of the cases cited by the court in Albright was State ex rel. Iris Sales Co. v. Voinovich (1975), 43 Ohio App.2d 18, in which the Eighth District Court of Appeals dismissed a declaratory judgment action that concerned an issue of taxation. That court stated:
Although Rule 57 of the Ohio Rules of Civil Procedure permits declaratory relief where appropriate, even when another adequate remedy exists, declaratory relief should not be granted in those situations where a special statutory proceeding has been provided for that purpose. Declaratory relief pursuant to Rule 57 of the Ohio Rules of Civil Procedure is inappropriate where it would result in the by-pass of a special statutory proceeding. The circumvention of these special statutory procedures would nullify the legislative intent to have specialized tax questions initially determined by
boards and agencies specifically designed and created for that purpose.
Id. at 28.
{¶20} Here, there is no special statutory proceeding that appellants could avail themselves of, but that is because the legislature amended
{¶21} There is legal authority that supports the above finding. An instructive case not cited by either party is Carney v. School Employees Retirement System Bd.(1987), 39 Ohio App.3d 71, in which this court held that a declaratory judgment action was not the proper vehicle by which to challenge the determination of an agency where the legislature had foreclosed the avenue of a direct appeal. In that case, the plaintiff filed a declaratory judgment action seeking to have a decision of the School Employees Retirement System reviewed. In affirming the trial court‘s dismissal of plaintiff‘s complaint, this court explained:
R.C. 3309.39 states that the determination by SERS of whether a person is entitled to disability retirement benefits is final. Therefore, there is no statutory procedure by which the decision of SERS may be appealed.Appellant filed an action for declaratory judgment in order to have the SERS decision reviewed. An action for declaratory judgment was not the proper vehicle to use to have the SERS determination reviewed since an action for declaratory judgment cannot be used as a substitute for an appeal and, pursuant to
R.C. 3309.39 , there is no right to appeal a SERS determination.* * *
Since
R.C. 3309.39 denied appellant an adequate remedy at law, a cause of action in mandamus is available to her since she has exhausted all administrative remedies from which she has no right to appeal. In addition, mandamus is available in that it may be utilized to correct any abuse of discretion in the administrative proceedings. A cause of action in mandamus will lie to permit a private individual to compel a public officer to perform an official act where such officer is under a clear legal duty to do so, and where relator has an interest or is being denied a right or benefit by reason of the public officer‘s failure to perform the act which he is under the clear legal duty to perform.
Id. at 72 (citations omitted). Accord State ex rel. Swartzlander v. State Teachers Retirement Bd. (1996), 117 Ohio App.3d 131 (declaratory judgment could not be used as a substitute appeal where statute did not give the plaintiff a right to appeal the board‘s determination); State ex rel. Shumway v. State Teachers Retirement Bd. (1996), 114 Ohio App.3d 280; cf. Perez v. Cleveland, 78 Ohio St.3d 376, 377, 1997-Ohio-33 (because statute “delimits the procedure for challenging a coroner‘s verdict, use of declaratory judgment to resolve those same issues is inappropriate.“); Heartland Jockey Club, Ltd. v. Ohio State Racing Comm. (Aug. 3, 1999), 10th Dist. No. 98AP-1456; Providence Hosp. v. McBee (Mar. 17, 1983), 10th Dist. No. 82AP-383.
{¶23} For several reasons, however, we do not find Ryland I3 to be of precedential value. First, upon reflection, it becomes apparent that the analysis in that case was incomplete; there is no citation to authority, save for quoting statutory language, and there is no analysis in support of the court‘s decision. For example, Ryland I does not explain how the county auditors satisfied the requirements for declaratory relief; specifically, the
{¶24} Another basis exists for finding that appellants are not entitled to declaratory relief. In Ohio Academy of Nursing Homes, the Supreme Court of Ohio held that “[w]hen a state agency‘s decision is discretionary, and by statute, not subject to appeal, an action in mandamus is the sole avenue of relief available to a party challenging the agency‘s decision.” Id. at syllabus. While the Tax Commissioner‘s duty to apportion taxes pursuant to
{¶25} Based on the foregoing, we conclude that appellants’ action for declaratory judgment is not the proper vehicle by which to challenge the Tax Commissioner‘s decision. As such, we sustain appellees’ cross-assignment of error, and overrule appellants’ assignment of error. Cross-appellees’ motion to strike cross-appellants’ reply brief appendix and portions of cross-appellants’ reply brief relying on the appendix is granted as such was not part of the trial court record. The judgment of the Franklin County Court of Common Pleas is reversed, and the case is remanded to that court with instructions to dismiss the complaint.
Motion to strike granted; judgment reversed and cause remanded with instructions.
BROWN and SADLER, JJ., concur.
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