Natl. Distillers & Chem. Corp. v. Limbach - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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OPINIONS OF THE SUPREME COURT OF OHIO

**** SUBJECT TO FURTHER EDITING ****

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National Distillers & Chemical Corporation, n.k.a. Henkel
Corporation, Appellee v. Limbach, Tax Commr., Appellant.
[Cite as Natl. Distillers & Chem. Corp. v. Limbach (1994),
Ohio St.3d .]
Taxation -- Machine drawings capitalized as part of machinery
are exempt from personal property tax -- R.C. 5701.03,
applied.
(No. 93-671 -- Submitted October 25, 1994 -- Decided
December 20, 1994.)
Appeal from the Board of Tax Appeals, No. 90-X-552.
The Tax Commissioner, appellant, contends that the
position National Distillers & Chemical Corporation, appellee,
argued concerning sales tax on machine drawings in Emery
Industries, Inc. v. Limbach (1989), 43 Ohio St.3d 134, 539 N.E.
2d 608, precludes it from arguing what she views to be a
contrary position in this case. She also maintains that
National Distillers did not prove a different value for the
drawings than she had found in her order.
National Distillers operated what is now the Emery Group
Division of the Henkel Corporation, a producer of chemicals.
It expanded its chemical plant from 1981 through 1983. Its
company engineers designed the basic process, but it hired
outside engineering firms to prepare the final drawings. It
included these drawings in bid packages, which were the subject
of the Emery decision. National Distillers retained the
drawings after expanding the plant.
The drawings were drafted on Mylar plastic. Mylar, a more
permanent material than paper, is transparent, and, thus,
blueprints can easily be reproduced from them.
National Distillers continually refers to the drawings and
updates them when it modifies the plant. Its maintenance
personnel also review the drawings when repairing the
machinery. National Distillers would transfer the drawings if
it sold the equipment.
For tax years 1984 and 1985, National Distillers claimed

an exemption from personal property tax for these drawings,
under R.C. 5701.03, at seventy-eight percent of the charges
paid for outside engineering services. The commissioner, on
review, determined that only thirty percent of the costs
represented the cost of the drawings. National Distillers
appealed this order to the Board of Tax Appeals ("BTA").
National Distillers' director of engineering services
testified at the BTA's hearing. During the plant expansion,
the witness was a group leader of chemical engineering and
supervised several of the expansion projects. He managed and
reviewed the work of the outside engineers.
The witness testified that, overall, seventy-eight percent
of the costs charged by the outside engineers was for actual
engineering drawings. He readily admitted that this number was
his best estimate based on his personal experience in
engineering and managing these projects.
The BTA found the witness to be credible and agreed that
seventy-eight percent of the costs were for the drawings. The
remainder of the costs, the BTA determined, was for
construction supervision, developing operating manuals, and
administration.
After the BTA hearing, the commissioner submitted exhibits
entered into the record in Emery Industries, Inc. v. Limbach,
supra, to establish that National Distillers had taken a
contrary position in the Emery case. However, the BTA refused
to take judicial notice of these exhibits. The BTA ruled that
these exhibits were not facts generally known within its
territorial jurisdiction or capable of accurate and ready
determination by resort to sources whose accuracy cannot
reasonably be questioned.
The cause is now before this court upon an appeal as of
right.

Taft, Stettinius & Hollister, Stephen M. Nechemias and
Patrick J. Mitchell, for appellee.
Lee Fisher, Attorney General, and James C. Sauer,
Assistant Attorney General, for appellant.

Per Curiam. The commissioner's first argument is in two
parts. First, the commissioner argues that we may take
judicial notice of exhibits admitted into evidence in the
earlier case between her and National Distillers. Second, she
argues that the facts presented in these exhibits tend to prove
that the value of the drawings was inconsequential and that
National Distillers is collaterally estopped from asserting
that the value of the drawings was greater than set forth in
these exhibits. We disagree.
Evid. R. 201(B) states:
"A judicially noticed fact must be one not subject to
reasonable dispute in that it is either (1) generally known
within the territorial jurisdiction of the trial court or (2)
capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonabl[y] be questioned."
The exhibits submitted by the commissioner fail to fit
into either category. The percentage of time outside engineers
devoted to preparing drawings is not generally known within the
territory of this court nor is the accuracy of the sources, the

exhibits, reasonably beyond question. We cannot be sure of
their context since no one testified to explain them.
Moreover, the cases the commissioner cites allows us to
take "judicial notice" of our docket records; the cases do not
state that we may take judicial notice of evidence contained in
the transcripts. In State ex rel. Galloway v. Indus. Comm.
(1926), 115 St. 490, 154 N.E. 736, we reviewed our record to
determine that the same questions raised in a mandamus petition
had been presented and disposed of in an earlier case. In
Klick v. Snavely (1928), 119 Ohio St. 308, 164. N.E. 233, we
reviewed our orders to determine that an allegation in a
petition was not true. Finally, in Hughes v. Butler Cty. Bd.
of Revision (1944), 143 Ohio St. 559, 28 O.O. 477, 56 N.E. 2d
63, we took judicial notice of the record in a case previously
before us to determine that we had already answered a principal
question in the earlier case. These cases sound more like
collateral estoppel cases; in none of these cases did we take
judicial notice of the adjudicative facts contained in earlier
cases.
In truth, the commissioner's argument actually is a
collateral estoppel, or issue preclusion, argument. In Krahn
v. Kinney (1989), 43 Ohio St.3d 103, 107, 538 N.E. 2d 1058,
1062, we stated:
"Collateral estoppel precludes the relitigation of an
issue that has been 'actually and necessarily litigated and
determined in a prior action.'"
In Krahn, we determined that the issue decided in an
earlier action did not resolve the issue then before the
court. The earlier action decided whether a guilty plea was
knowingly, voluntarily, and intelligently entered; the issue
before us in Krahn was whether an attorney committed
malpractice by failing to transmit a plea bargain offer.
Turning to this case, we decided, in Emery, that the bid
package, which included the drawings, was an inconsequential
element of the transaction with the engineering companies. We
determined that the overriding purpose in the Emery
transactions was the receipt of professional, engineering
services, not the bid package. Deciding this question did not
decide, contrary to the commissioner's argument, that the
personal property had insignificant value. Instead, we
determined the objective of the purchaser in contracting with
the engineering firms.
The issue in the instant case is the value of the
drawings. This issue is different from the issue in Emery and
its determination is not barred by collateral estoppel.
Next, as to the value of the drawings, the commissioner
argues that the BTA should have included the costs of the
drawings in the valuation of the machinery under
full-cost-absorption principles, in which all costs associated
with a machine are capitalized on the owner's books. She
maintains that the BTA erred in believing the estimate of the
witness.
Nevertheless, R.C. 5701.03 exempts drawings from the
personal property tax. In Goodyear Aircraft Corp. v. Peck
(1954), 162 Ohio St. 200, 55 O.O. 101, 122 N.E. 2d 700, we
ruled that the language of R.C. 5701.03 is unambiguous and
concluded that the costs of the drawings should not be included

in the cost of the machinery. Furthermore, in Youngstown Sheet
& Tube Co. v. Bowers (1957), 166 Ohio St.122, 1 O.O. 2d 345,
140 N.E. 2d 313, paragraph four of the syllabus, we held that
the commissioner cannot avoid the exemption in R.C. 5701.03 for
drawings by arguing that he is only taxing the construction
projects and that the books of the taxpayer show everything
that the commissioner taxed as allocated to the cost of those
projects. Thus, contrary to the commissioner's argument here,
drawings capitalized as part of machinery are exempt from the
personal property tax.
Moreover, we may not reverse a determination of the BTA to
grant credibility and weight to a witness absent a showing that
the BTA abused its discretion in doing so. Witt Co. v.
Hamilton Cty. Bd. of Revision (1991), 61 Ohio St.3d 155, 157,
573 N.E. 2d 661, 663. The commissioner has not asserted that
the BTA abused its discretion in believing the witness; she
simply argues that the BTA erred in its decision. Under Witt,
however, we affirm the BTA's decision to believe the witness.
Accordingly, we affirm the BTA's decision.
Decision affirmed.
Moyer, C.J., A.W. Sweeney, Douglas, Wright, Resnick, F.E.
Sweeney and Pfeifer, JJ., concur.