Cleveland Hts./Univ. Hts. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision. - Ohio Supreme Court Opinion - Ohio Supreme Court Decision

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Cleveland Heights/University Heights Board of Education,
Appellant, v. Cuyahoga County Board of Revision et al.; May
Department Stores Company, Appellee.
[Cite as Cleveland Hts./Univ. Hts. Bd. of Edn. v. Cuyahoga Cty.
Bd. of Revision (1995), Ohio St.3d .]
Taxation -- Real property valuation -- Board of Tax Appeals'
determination of the true value of property will not be
overruled by court when it appears from the record that
the decision is neither unreasonable nor unlawful.
(No. 94-1399 -- Submitted December 9, 1994 -- Decided May
17, 1995.)
Appeal from the Board of Tax Appeals, Nos. 92-A-32 and
92-A-33.
Appellee, May Department Stores Company, owns three
parcels of real property in University Heights, Ohio, which is
in the Cleveland Heights/University Heights Board of Education
("school board") taxing district. The subject property,
located on 15.85 acres, consists of the May Company Department
Store ("May"), containing 351,363 square feet of space, and
adjoining parcels leased for construction of a National City
Bank building, a medical building, and parking lots. For tax
year 1990, the Cuyahoga County Auditor assessed the subject
property at a true value of $6,771,260.
On January 31, 1991, May entered into a sale/leaseback
transaction with ABS Development Company ("ABS"), in which May
sold the property to ABS for $14,000,000 and leased it back at
an annual rental of $1,365,000 to $2,030,000 over a
twenty-five-year period. It is undisputed May did not obtain
an independent appraisal and did not offer the property on the
open market. Rather, May considered it a financing transaction.
The school board filed a complaint with the Cuyahoga
County Board of Revision seeking an increase in the valuation
of the subject property to $14,000,000. May filed a
counterclaim seeking to maintain the auditor's valuation.
After the school board and May presented evidence to the board
of revision, the board affirmed the auditor's valuation. The
school board then appealed to the Board of Tax Appeals ("BTA").
Prior to the BTA hearing, the school board requested that

May provide documents involving the sale/leaseback transaction
and asked for the identity of all expert witnesses and all fact
witnesses which May intended to call at the hearing. May
responded that the witnesses were not yet identified.
The BTA hearing was scheduled for September 28, 1993, and
May did not supplement its response to the school board's
interrogatories by identifying Bruce Johnston as either a fact
or expert witness. When May called Johnston to testify at the
hearing, the school board objected and requested that, for
sanctions, Johnston's testimony be excluded because he had not
been disclosed as a witness. The BTA refused to issue
sanctions and permitted Johnston's testimony.
Sam D. Canitia, the school board's expert appraiser,
expressed the opinion that the fair market value of the subject
property was $15,670,000 based upon the sales-comparison
approach to value. He testified that the uses to which the
subject property were put -- a department store, a bank, and a
medical building -- were its highest and best uses. However,
the BTA questioned Canitia's conclusions because the testimony
of both parties' witnesses indicated that:
(1) "multi-level, freestanding department stores are rare,"
(2) "[t]heir design has become outdated and impractical for
today's facilities,"
(3) " [n]one of said appraiser[s'] 'comparables' included
a freestanding department store,"
(4) Canitia's comparables were "[not] even remotely close
[in size] to the square footage found in the subject
[property]," and
(5) "[t]he largest 'comparable,' measuring 100,991 square
feet[,] is less than one third of the 351,363 square feet of
the subject [property]."
Accordingly, the BTA found Canitia's report "less
reliable," and stated that "the prejudice suffered by the
appellant did not outweigh the need of this Board to obtain
otherwise relevant evidence, which goes to the crux of the
valuation questions * * *." The BTA also found that the
sale/leaseback transaction was made for the purpose of
generating cash, the property was never offered on the open
market, and the $14,000,000 transaction between May and ABS did
not "qualify as the type of sale that would be the best
indication of value," since the sale was not arm's length and
was consummated for financing concerns only. The BTA concluded
that "appellant has failed to prove its right to an increase in
the valuation of the subject property." Thus, the BTA
determined that the true value of the property was $6,671,260,
and affirmed the valuation of the board of revision.
The cause is now before this court upon an appeal as of
right.

Kolick & Kondzer, Daniel J. Kolick and John P. Desimone,
for appellant.
Jones, Day, Reavis & Pogue and Roger F. Day, for appellee.

Per Curiam. We affirm the BTA's decision.
Initially, appellant raises a procedural issue regarding
the propriety of the BTA's admission of the testimony of Bruce
Johnston, whose name was not disclosed by May prior to the BTA

hearing. The school board contends that it was surprised by
the witness, that May's counsel had failed to supplement prior
information given concerning proposed witnesses for trial, and
that Civ. R. 26 and Ohio Adm. Code 5717-1-10 require prior
notification of the names of witnesses. Accordingly, the
school board contends, the testimony of Johnston should not
have been admitted and should now be stricken from the record.
We disagree.
Johnston did not testify as an expert witness, but as a
fact witness regarding the sale/leaseback transaction. Ohio
Adm. Code 5717-1-10, cited by the school board, provides no
support for its argument. The administrative rule contains no
specific obligation, vis-a-vis disclosure of names of
witnesses, expert or fact, to supplement an initial disclosure
of expert witnesses. Under Civ. R. 26(B)(4)(b), a party may
require another party "to identify each person whom the party
expects to call as an expert witness at trial." Moreover, Civ.
R. 26(E), relied upon by the school board, likewise deals only
with expert witnesses. Johnston was a fact witness, making
Civ. R. 26 inapplicable. The BTA's decision admitting his
testimony regarding the sale/leaseback transaction was proper.
As to the substance of the school board's argument, we
agree with the BTA's decision. The January 31, 1991 sale/lease
back transaction was not an arm's-length sale but was, as in
Kroger Co. v. Hamilton Cty. Bd. of Revision (1993), 67 Ohio
St.3d 145, 616 N.E.2d 877, "'* * * borrowing of money subject
to full repayment * * * even though documented in the form of a
sale and leaseback transaction.'"
The primary issue in this appeal is whether the BTA's
decision was reasonable and lawful. Under Cardinal Fed. S.&L.
Assn. v. Cuyahoga Cty. Bd. of Revision (1975), 44 Ohio St.2d
13, 73 O.O. 2d 83, 336 N.E.2d 433, "the determination of [a
question of fact] is primarily within the province of the
taxing authorities and this court will not disturb [such]
decision * * * unless it affirmatively appears from the record
that such decision is unreasonable or unlawful." Id. at
paragraph four of the syllabus.
The BTA made findings of fact that the sale/leaseback was
primarily a financing concern and not an open-market sale, and
that the BTA correctly valued May's property. These were
factual conclusions, and we will not overrule them or disturb
the BTA's valuation because there was sufficient probative
evidence in the record to support the BTA's finding. Federated
Dept. Stores, Inc. v. Lindley (1984), 5 Ohio St.3d 213, 215, 5
OBR 455, 458, 450 N.E.2d 687, 689.
Finally, we find, as did the BTA, that the school board
failed to prove its right to an increase in the true value of
the subject property. Cleveland Bd. of Edn. v. Cuyahoga Cty.
Bd. of Revision (1994), 63 Ohio St.3d 336, 626 N.E.2d 933.
The decision of the BTA was neither unreasonable nor
unlawful, and it is affirmed.
Decision affirmed.
Moyer, C.J., Douglas, Wright, Resnick, F.E. Sweeney,
Pfeifer and Cook, JJ., concur.