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IN TIII^, SUPREM (; COURT OF OHIO

PPI ACQUISITION CO., LLC

Appellants,

V.

CIJYAHOGA COUNTY BOARDOF REVISION ANDFISCAL OFFICER, et al.,

Appellees.

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SUPREME COURTCASE NO.: 12-2087

APPEAL FROM THF OHIOBOAIZI)OF TAX APPEALS

BTA CASF, NUMB2009-Q-3738

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CLERK (;^ COURT' ^{= LL'R T s$F 0 H 10

13RIEF OF APPELLEE13IZOOKLYN CITY SCHOOL DISTRICT BOARI) OF EDIJCATION

J. Kieran Jennings (0065453)Counsel of RecordJason Lindholm (0077776)Deborah Papushak (()016087)Siegel Jennings Co. LPA23425 Commerce Park Drive, Suite 103Cleveland, Ohio 44122(216) 763-1004(216) 763-1016

Counsel for Appellant,PPI Acquisition Co., LLC

Saundra Curtis-Patrick (0027907)Cuyahoga CoLinty Assistant Prosecutor1200 Ontario Street, 8`t' FloorCleveland, OH 44113(216) 443-7790(216) 443-7602

Counsel for Appellees

I3oard of RevisionEnty Fiscal Officer

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David H. Seed (0066033)Counsel of RecordBrindza Melntyre & Seed LLP1 I 1 l Superior Aventie, Suite 1025Cleveland, Obio 44114(216) 621-5900(216) 621-5901

Counsel for Appellee,Brooklyti City School DistrictBoard of Education

Michael DeWine (0009181)Ohio Attorney General30 E. Broad Street, 17`" FloorColumbus, OFI 43215(614) 466-4320

Counsel for AppelleeJoseph W. Testa,'Tax Commissioner of Ohio

TABLE OF CCJN`I'ENTS

TABLE OF AUTHORITIh,S ............................... ..............:..>. ......... .............................. ii

ASSIGNMENT OF ERRORS I'RI:SENTE.D FOR REVIEW ................................ ...........I

STATEMENT OF TH1; CASE AND FACTS ............... ........................................ ...........1

LAW AND ARGU10!IENT ..................................................................................................4

CONCLUSION................ .. ....... .... .... ................................................................... . . . ....... ..... . 9

CERTIFICATE OF SERVIC:E : ....................................... ......... ................... :.................. I i

i

TABLE OF AIJTHORI"TIES

Cases:

American District Telegraph Co. v. I'oYteYfteld (1968), 15 Ohio St. 2d 92........................7

Banburv Village, Inc. v. CuyahogaCty. Bd.of Revision (1990), 53 Ohio St. 3d 51................ ................... .. . .. .... ..... . ... ,.. ._ ... .. . ........ ...... ... ... .. .. ..... .......4

Berea City School Dist. Bd of Edn. v. Cuyahoga C'ty. Bd UfRevision (2005), 106 Ohio St.3d 269 .............................. ..,.................................... ...>...,..9

Budkeye Power, Inc. v. Kosydar (1973), 35 Ohio St. 2d 137.... ......... ...............................4

Columbus O.iI Kealty I, LLC v. Franklin Ctv: Bd of'Revision (Aug. 12, 2008),BT,A, Case No. 2006-R-396/397, citing AlYnondtree Apts. v. Franklin Ctv. Bdof Revision (June 28, 1988), Franklin App. No. 87AP-1216..... . ......... . ........ ................. .. 6, 7

DAK, .PLLv. Franklin Cty. Bd of Revisi.an (2005); 105 Ohio St.3d 84 ..............................4

Fiz°;stCal Industrial 2 Acquisition LLC v. T'rr•anklin C.ty. 13d. qf Revis'ron,125 Ohio St.3d 485 ................................... 5

I-lawthorn Mellody, Inc: v. Lindley (1981), 65 Ohio St. 2d 47 .. ..... ....................................4

Sapina v. Cuyahoga Cry. Bd oflZevision (2013), 2013-Ohio-3028 citing St. Bernczrd 45'elfStorage, LLC. v. Hamilton Cty. Bd qf Revisian (2007), 115 Ohio St.3d 365 . ............ 6, 8, 9

Zazworsky v. Licking Cly. Bd ofRevision, et al. (1991), 61 Ohio St.3d 604 ......................6

ii

I. ASSIGNMENT OF ERRORS PRESENTED FOR REVII;W

Appellant, PPI Acquisition Co. LLC ("PPI"), appealed the November 16, 2012 Decision and

Order of the Board of Tax Appeals ("BTA") regarding an industrial. property situated on

approximately 18 acres of land. PPI contends the BTA erred in accepting the Brooklyn City

School District Board of Education's ("School Board") sale evidence as the best indication of the

subject property's value for tax year 2006. In its brief, PPI set forth the following propositions

of law:

PROPOSITION OF LAW NO. 1:

The complaint filed in the BOR vested jurisdiction with the Board to consider the

valuation of permanent parcel no. 431-09-001 and the Board of 'I ax Appeals properly

overruled "Appellant's motion to dismiss permanent parcel number 431-09-001from

appeal for lack of jurisdiction," after consideration of the evidence presented irl supportof that motion.

PROPOSITION OF LAW NO. 2:

The taxpayer's evidence failed to overcome the presumption that the sale price

constituted the best evidence of the value for the subject property. The Board of Tax

Appeals properly fourid the evidence presented by PPI failed to rebut that presumption.

PROPOSITION OF LAW NO. 3:

The appraisal report and testimony of Robert Nejedlik, MAI, failed to constitute

probative and reliable evidence of the value of the subject property as of tax lien dateJanuary 1, 2006 due to the recent arm's length sale of the subject propertv, The Board ofTax Appeals acted reasonably and within the statutory and case law, when it properly

refused to consider the expert appraisal evidence, opinion of value, and testimony of

Robert Nejedlik which supported the taxpayer's arguments as to the fair market value ofthe subject property.

lI. STATI;ML?N"I' OF TI-IE CASE ANI) I`ACTS

On March 30, 2007, the School Board filed a Complaint against theValuation of Real

Property for tax year 2006 with the Cuyahoga County Board of Revision ("BOR") (See BOR

Statutory 1'ranscript, referred hereafter as ("BOR St. Trs.") The School Board's complaint

regarded two parcels of real property located at 9921 Clinton Road in Brooklyn wllich are further

identified by the Cuyahoga County Fiscal Officer as permanent parcel numbers 431-07-004 and

431-09-001 ("subject property") (BOR St. Trs). 'I'he School 13oard's complaint requested an

increase in the subject property's tax year 2006 valuation to $3,000,000 based on a recerit sale

(BOR St. Tr:s).

The complaint relied on a recent, arm's length sale of the subject property on August 9,

2006 for $3,000,000 (BOR St. Trs). The School Board's complaint included a copy of the

Warranty -Deed filed by PPI indicating a total consideration for the subject property of

$3,000,000 (BCJR St. Trs). In conjtuietion with the recent sale, PPI filed a Conveyance Fee

Statement with the Cuyahoga County Auditor on August 9, 2006 (BOR St. 1'rs). On line 7(f) of

the Conveyance Fee Statement, PPI indicated "the consideration paid for real property on which

fee is to be paid" was "$3,000,000" (BOR St. Trs). On line 7(e) of the same form, PPl stated

"portion, if any, of total consideration paid for items other than real property" was "$0" (BOR St.

Trs). PPI's settleinent statement for purchase of the subject property dated July 31, 2006, stated

the "Contract Sales Price" was $3,000,000 (BOR St. Trs). On line 102 of the Settlement

Statement, no consideration was stated for "Personal Property" (BOR St. Trs).

'I'he Purchase Agreernent evidencing the August 9, 2006 sale of the subject property

defines the "Purchase Property" as "then Real Property, together with all buildings,

improvements, fixtures and structures located thereon and all appurtenant rights, privileges and

easements"(BOR St. Trs). The Purchase Agreement also states, the "Real Property Purchase

Agreement" was made "in connection with tr.ansactions underlying the Asset Purchase

Agreement" (BOR St. Trs). 'f'herefore, the Purchase Agreement itself establishes the parties to

the sale entered into a separate agreement titled "Asset Purchase Agreement" for items other tharr

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the real property transferred via the Real Property I'urchase Agreement. PPI never provided said

Asset Purchase Agreement to the School Board or as evidence at any point in these proceec.liizgs

(IIOR St. Trs). 7"he Purchase Agreement also states "the total purchase price for the Purchase

Property shall be "$3 3,000,000" (BOR St. 'I'rs). Again the Purchased Property --- as defined by the

contract -- only included the real property.

Finally, PPI submitted into evidence an Affidavit frozn an employee of "Florida

Production Engineering Inc." - not an enlployee of the owner PPI - stating PPI's purchase

included both the real estate and equipment (Affidavit, BOR St. 1'rs). Even though the Affiant

refers to the inclusion of equipment, no delineation or explanation of equipment is provided.

Affiant also states an appraisal was done on March 21, 2006 prior to the sale; however said

appraisal was commissioned by PNC Bank for financing purposes (Affidavit, BOR St. ". Crs).

All of the facts in this case are clear. PPI had numerous opportunities in the Purchase

Agreement, Settlement Statement and Conveyance Fee Statement to allocate a portion of the

purchase price to any personal property included in the sale yet failed to do so. liurther, PPI had

the opportunity to present additional documentation from the purchase or testimony of the parties

to the transaction, yet chose not to do so. Instead, PPI relied solely on an appraisal prepared by

(Zobert E. Nejedli(c, iVIAI> PPI asked the BOR, BTA and now this Court, to conclude Mr.

Nejedlik's appraisal nullified the arm's length nature of the transaction. PPI further introduced

Mr. Nejedlik's testimony to testify of the nature of thetransaction, however Mr. Neijedelik was

not a party to the sale - instead he merely provided his personal opinion regarding the transaction

based on hearsay irzform.ation.

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Il- LAW AND ARGUMENrI,

A. Standard of Review

(n an appeal from the BTA, the Court does not reevaluate the facts, but looks merely to

the issue of whether the BTA's decision was unreasonable or unlawful. "This court does not sit

either as a super BTA or as a trier of fact de novo. DAK, PLL v. Franklin Cty. Bd. o f Revision

(2005), 105 Ohio St.3d 84. In this case, the BTA evatuated the facts and made a reasonable and

lawfiil conelusion in light of those facts. This Court restated the standard of review of BTA

decisions in Banbuiy Village, Inc. v. Cuyahoga Cty. Bd of Revision (1990), 53 Ohio St. 3d 251,

"[w]e will not substitute our judgment for that of the BTA on factual issues, and we will not

overrule its findings of fact if based upon sufficient probative zvidence." citing 13udkeye Power,

Inc. v.Kosydar (1973), 35 Ohio St. 2d 137, and Hawthorn A^ledlodv, Inc. v. Lindley (1981), 65

Ohio St. 2d 47.

l. The complaint filed in the BOR vested jurisdiction with the Board to consider the

valuation of perixlanent parcel no. 431-09-001 and the Board of Tax Appeals properly

overruled "Appellant's motion to dismiss permanent parcel number 431-09-001 from

appeal for lack of jttrisdict:ion;" after consideration of the evidence presented insupport of that motion.

PPI inaccurately asserts the BTA did not consider its motion to dislniss parcel 431-09-

001. In fact, the I3TA's decision specifically addresses said motion to dismiss. In overruling

PPI's rnotion, the .C3'1 A held "based on the record before us, we find insufficient evidence that the

BOR lacked jurisdiction as to parcel number 431-09-001."See BTA Decision, p. 4. The B'I'A

went on to state "all of the recorded doctiments bear the fiscal officer's stamp indicating that

both parcels were included in the transfer. We therefore overrule the motion to dismiss and

proceed to consider the valuation of both parcels on appeal." See BTA Decision, pp. 4-5. As the

BTA properly stated, all of the documents in the record related to the sale indicate both parcels

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transferred on August 9, 2006. All of thesedocuments, recorded with Cuyahoga County,

evidence the transfer of both parcels. Nonetheless, PPI requested this Court, as well as the BOR

and the BTA, to ignore the public record documents recorded by PPI itself. "Fhe School Board

justifiably included both parcels in its complaint for tax year 2006.

2. The taxpayer's evidence failed to overcome the presumption that the sale price

constituted the best evidence of the value for the subject property. The Board of Tax

Appeals properly found the evidence presented by I-'1'I failed to rebut thatpresumption.

In all of these proceedings, the School Board relied on a Warranty Deed, Settlement

Statement, Conveyance Fee Statement and Purchase Agreement, all of which established an

August 9, 2006 sale of the subject property to PPI for $3,000,000. The recent arm's length sale

price is the best indicator of the property's value for tax year 2006. In FirstCal Industrial 2

Acquisition LLC v, Frcrnklifz Cly. Bd. o.f'Revision, 125 Ohio St.3d 485, the Ohio Supretne Court

held "our cases acknowledge that the proponent of using a sale price to value real property,

typically makes a prima facie case when it presents a recent conveyance-fee statement along with

a deed to evidence the sale and the price." The Court went on to state "the basic documentation

of a sale invokes a`rebuttable presumption' that `the sale has met all the requirements that

characterize true value."' Id. I-lere, through the production of a conveyance fee staternent and

deed - the School Board met its burdeii of establishing a recent arzn's length transaction. The

docurnen.tation recluired the party disagreeing with the sale price - PPI --- to rebut such evidence

with other evidence indicating that the consideration paid is not reflective of the property's true

value. Zrczvvorsky v. Licking Cty. Bc1. of Revision, et al. (1991), 61 Ohio St.3d 604. I'PI failed to

produce competent, eredibleand probative evidence to support any contention that the August 9,

2006 sale price was not indicative of the subject property's tax year 2006 value.

5

First, PPI contests the arm's length nature of the sale based on the testimony of their

appraiser, Mr. Nejedlik. Mr. Nejedlik testified that for purposes ofhis appraisal of thesubjeet

property, he determined the sale was not arm's length. His determination, according to his own

testimony was based on a conversation he had with the tenant and his belief that goodwill or

personal property was also transferred. Elowever, Mr. Nejedlik did not know what, if any,

personal property was transferred, if it was part of a separate sale transaction, and did not testify

as to any specifics. Mr. Nejedlik further testified he was not a party to the sale transaction and

had no personal knowledge of the terms other than what was relayed to him by the teriant at the

time of the first appraisal and the current owner at the time of the last appraisal. See BTA

Hearing Transcript, p. 37, In. 9-11. In a similar case involving a recent sale and appraisal

evidence, this Court recently held "allowing the appraisal. as the principal or sole means of

allocating the aggregate purchase price violates the precept that an appraisal of realty should not

substitute for the artxi's-length sale price." S'apina v. Cuvahoga Cty. I3d of Revision (2013),

2013-Qhio-3028, slip opinion. Here, the I3TA followed both this Court's and its own precedent

in finding the appraisal evidence failed to negate the arrn's length sale as the best evidence of

value. The BTA has routinely found "the opinion of an appraiser who was not involved in the

sale amounts to nothing more than hearsay." Colutnbus OH Really I, .LLC v. Franklin Cty: Bd, of

Revision (Aug. 12, 2008), BTA Case No. 2006-R-396/397, citing Alinoncltree Apts: v. Franklin

Cty. BcI ofRevision (June 28, 1988), Franklin App. No. 87AP-1216.

Similar to the instant case, in Columbus OH Really I,LLC., supra, the property owner

presented the testimony of an appraiser wlio stated the sale included more than a sale of fee

simple interest. Despite the appraiser's testimony, the BTA stated, "there was no testimony by

any inclividual with personal knowledge of the sale to dispute the arm's-length nature of the

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sale." Columbr,es t)II Realty I, LLC, supra. The BTA's decision in the present case falls in lizle

with its prior rulings as we11as this Court's precedent. PPI inacctira.telyrelied on Mr. Nejedlik's

testimony as evidence to negate the sale, when in fact, iVlr. Nejedlik admittedly has zlo personal

knowledge of the circumstances of the sale, or what in fact was included in the transaction.

Second, PPl relied on an affidavit frotn an employee of a separate company - not an

employee of PPI--- as to the inclusion of ""equipment" in the sale. I-lowever, the affidavit does not

include the specific items included in the transaction, an agreed upon sale price for any such

items, or if in fact those items were part of the $3,000,000 sale price or a separate transaction, the

Asset Purchase Agreement, as specifically stated in the Purchase Agreement, Furthermore, the

Affiant did not testify at either the 13OR or I3TA. hearings and was not subject to cross-

examination by the School .13oard.. This C:ourt held in American District Telegraph Co. v.

PoytEr field (1968), 15 Ohio St. 2d 92, "that it is neither unreasonable nor unlawful for the Board

of Tax Appeals to exclude affidavits, where there is no opportunity to cross-examine the affiant."

PPI had ample opportunity to present witness testimony regarding the nature and circumstances

of the August 9, 2006 sale, however, failed to provide sucll testimony. As such, the School

Board respectfully subxnits the Affidavit provided by PPI failed to reach the level of credible,

probative evidence to dispute the ann's length nature of the sale.

Finally, I'P1 argued the mere possibility that personal property may have been included in

the sale negated the sale price as the best evidence of value. llowever, PPl failed to provide p.ny

evidence of what personal property, if any, was in fact included in the sale or the amoul7t of the

sale price attributable to such personal property. "This Court established "the applicable standard

is whether the record contains `corroborating indicia' or `best available evidence' that supports

allocation of the aggregate purchase price." Sapina v. Cuy. Cty. 13c1 of'Revzsion (2013), 2013-

7

Ohio-3028, slip opinion, citing St. Bernard Sel,f-Storage, v. Hainilton Ciy. $d..of RevisiorzLLC.

(2007), 115 Ohio St.3d 365. :Elere, PPI failed to provide czny evidence to establish an allocation

to the purported personal property included in the sale. Further, all the docunlentation of the sale

presented as evidence in this case t°ails to include any reference to personal property or any

allocation of the purchase price to anything other than the real property. The BTA. properly

determined PPI failed to provide evidence to corroborate any allocation of the purchase price to

personal property.

I-lere, PPI asserts the nlere inference of the inclusion of personal property along with Mr.

Nejedlik's appraisal, negates the validity of the sale price. I-lowever, all the documentation

conternporaneous to the sale indicates the $3,000,000 purchase price was attributed to the real

property. The puirchase agreement for the subject property indicates a parallel Asset Purchase

Agreement was entered into as to unspecified assets other than the subject property. At no time

did PPI provide said Asset Purchase Agreement, the terms of the A.sset Purchase Agreement, the

consideration for the Assets or what was included in the Asset Purchase Agreement. It is

possible said Asset Purchase Agreement outlined a separate transaction for any business or

personal property transferred between the parties - however we will not know as PPI failed to

provide the Asset Purchase Agreement. Instead, PPI requested the BOIZ, BTA and now this

Court to find the sale included personal property based solely on inferences of personal property

tlirough an Affidavit not supported by testilnoriy and M. Nejedlik's conclusions based on

hearsay.

PPI failed to provide substantive, probative, credible evidence to negate the validity of

the well-establislted August 9, 2006 purchase price of $3,000,000.

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3. The appraisal report and testimony of Robert Nejedlik, MAI, failed to constituteprobative and reliable evidetice of the value of the subject property as of tax lien date

January 1, 2006 due to the recent arm's length sale of the subject property. The

Board of Tax Appeals acted reasonably and within the statutory arid case law, when it

properly refused to consider the expert appraisal evidence, opinion of value, and

testimony of Robert Nejedlik which supported the taxpayer's arguments as to the fairmarket value of the subject property.

As the School Board presented a recent arnn's length transaction - and PPI failed to rebut

the presumption of validity --- the appraisal evidence and testimony was riglltfully rejected by the

BTA in determining the valuation of the Subject Property. Upon the demonstration of an arm's-

length sale, appraisal evidence may not be considered to refute the sale. Ber°eca City Sch. Dist. Bd.

of Ecln., et al. and Manlaw Investment Co., Ltd. v. Cuyahoga Cty. Bd of Revision, et al. (2005),

106 Ohio St.3d 269. As previously stated, this Court recently held "allowing the appraisal as the

principal or sole means of allocating the aggregate purchase price violates the precept that an

appraisal of realty should not substitute for the arm's-length sale price." Sapina, sulaYa. As such,

in the event of an allegation of the inclusion of personal property in a purchase price set forth on

a conveyance fee statement, deed, settlenlent statement, and purchase agreement, and the

absence of the delineation in the purchase agreement (or at a later time) as to the nature and

value of the personal property, appraisal evidence is irrelevant to establish a value other than that

set forth in the docunients setting forth the consideration for the real property. The B'I'A

rightfiilly rejected Mr. Nejedlik's appraisal and testimony as the recent-arm's length sale was

established as the best evidence of the subject property's va:lue.

III. CONCLUSION

For the reasons provided herein, Appellee Brooklyn City Scliool District Board of Education

respectfully requests this Court to affirm the Ohio Board of Tax Appeals Decision.

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Respectfully submitted,

`u` --- -- - --- --------- ^-------)^a i 1. Seed (0066033) (Counsel of Record)

ni. ' A. Atitoon (0083222)13RINDZA MCTNTYRE & SEED LLP1111 Superior Avenue, Suite 1025Cleveland, QH 44114Telephozte No. (216) 621-5900£'acsirnile No. (216) 621-5900

Attorneys for AppelleeBrooklyn City School District Board of Education

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CERTTFICA'I'E OF SERVICE

A true copy of the foregoing Appellee Brooklyn City School District Board of

Education's Brief has been served via regular U.S. mail upon Deborah Papushak, Siegel

Jennings Co. LPA, 23425 Cornrnerce Park Drive, Suite 103, Cleveland, Ohio 44122, and

Saundra Curtis-Patrick, Assistant Prosecuting Attorney, Cuyahoga County Prosecutor's Office,

1200 Ontario Street, 8`h Floor, Cleveland Ohio 44113, and Michael DeWine, Ohio Attorney

G^-,General, 30 East Broad Street, 17t^' Floor, Columbus, 01-1 43215-3428 on this r^ i'tpG day of

August, 2013.

1 R

J' n -e A. Antoon (0083222)

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