Summary
In Zazworsky, the taxpayer was required to purchase a parcel of real property containing a warehouse he did not want in order to acquire a sublease on a building he did want. He paid $100,000 for both the building and the sublease.
Summary of this case from Corporate Exchange Buildings IV & V, Ltd. Partnership v. Franklin County Board of RevisionOpinion
No. 90-2098
Submitted June 13, 1991 —
Decided August 28, 1991.
APPEAL from the Board of Tax Appeals, No. 89-D-807.
On March 16, 1989 appellant, Lee Zazworsky, paid $100,000 to purchase a 6.15 acre tract of land and a building which he utilized as a warehouse ("subject property" or "building A") and to acquire a sublease of an adjacent building which likewise was used as warehouse space ("building B"). The value of building B is not in dispute.
For tax year 1988 the appellee Licking County Auditor determined the true value of the subject property to be $613,440. Upon appeal, the appellee Licking County Board of Revision ("board") stated "* * * other factors influenced the sale of this property at such a low figure * * *," and determined the true value to be $184,500.
Zazworsky appealed to the Board of Tax Appeals ("BTA"), contending that the board erred in failing to acknowledge that the purchase price in an arm's-length transaction constituted the best evidence of the true market value of the subject property. Zazworsky and one of his employees testified at the BTA hearing; the board offered no evidence.
Zazworsky testified that building B was suitable for warehousing but that building A was not. Thus, building B was his primary interest; he was not interested in purchasing building A alone. He also testified that the rental for building B was very favorable and that he would have entered into the sublease without purchasing building A, but would not have purchased building A alone for $100,000 because it was not worth that much. The purchase was an arm's-length transaction in an open market with no duress on either party. W.C.I.-Westinghouse, Inc. was the prior owner of building A, and held the lease on building B. W.C.I. sought someone to purchase building A and take over the lease on building B. Its intention was not to "leave any portion of that facility remaining." It had another lower offer for the purchase of building A, but it was not willing to sell building A without the sublease of building B.
The BTA in its decision quoted paragraph two of the syllabus of In re Estate of Sears (1961), 172 Ohio St. 443, 17 O.O.2d 417, 178 N.E.2d 240, as follows: "`Market value is the fair and reasonable cash price which can be obtained in the open market, not at a forced sale or under peculiar circumstances but at voluntary sale between persons who are not under any compulsion or pressure of circumstances and who are free to act; or, in other words, between one who is willing to sell but not compelled to do so and one who is willing to buy but not compelled to do so.'" (Emphasis sic.) It then found: "[c]ertainly, this sale bears the markings of one `under peculiar circumstances.'" The BTA affirmed the board's valuation of $184,500.
The cause is before this court upon an appeal as of right.
Reese, Pyle, Drake Meyer and Thomas H. Barrett II, for appellant.
Robert L. Becker, prosecuting attorney, and Pauline E. O'Neill, for appellees.
There is no apparent dispute between the parties as to the controlling case law: the best evidence of true value for real estate taxation purposes is a recent sale in an arm's-length transaction between a willing seller and a willing buyer. State, ex rel. Park Investment Co., v. Bd. of Tax Appeals (1964), 175 Ohio St. 410, 412, 25 O.O.2d 432, 434, 195 N.E.2d 908, 910.
Zazworsky maintains that the fair market value, and commensurately the true value of the subject property in 1988, was the sale price, $100,000. He says the sublease must have some value and since there is no dispute as to the total price paid for building A and the sublease together, logically neither of them, alone, is worth as much as $100,000.
The board argues that, since Zazworsky acquired the sublease on adjoining building B in addition to the subject property, this constitutes "peculiar circumstances" and warrants a valuation in excess of the sale price. The board urges further that Zazworsky has the burden to prove the "breakdown" of the $100,000 between the subject property and the sublease, and accordingly, the determination of the board that the subject property was worth $184,500 should be upheld. In Ratner v. Stark Cty. Bd. of Revision (1988), 35 Ohio St.3d 26, 28, 517 N.E.2d 915, 917, we held that the presumption that the sale price is the best evidence of true value "may be rebutted by evidence which indicates otherwise."
As set forth in Ratner v. Stark Cty. Bd. of Revision (1986), 23 Ohio St.3d 59, 61, 23 OBR 192, 193-194, 491 N.E.2d 680, 682: "[A]lthough the actual sale price provides strong evidence of market value" other factors can "affect the use of the sale price of property as evidence of its true value." These factors might include the "mode of payment, sale-lease arrangements, abnormal economic conditions * * *," id., none of which is present in this appeal. If there was any evidence that favorable financing caused the $100,000 sale price to be other than the true value, or if some pressure on the seller caused a deflated price, the board failed to introduce that evidence or elicit it from Zazworsky. Therefore, the board should have offered rebuttal evidence.
Accordingly, the decision of the BTA, which is not supported by any evidence, is unreasonable and is, therefore, reversed, and the cause is remanded to the BTA to enter a true valuation in the amount of $100,000. Mentor Exempted Village Bd. of Edn. v. Lake Cty. Bd. of Revision (1988), 37 Ohio St.3d 318, 526 N.E.2d 64.
Decision reversed and cause remanded.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, WRIGHT, H. BROWN and RESNICK, JJ., concur.