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1 Katarina & Ivica Sapina, vs. Appellants, FIlEO/RECEIVEU BOARD i^ TAX A P"r'EA(-5 IN THE SUPREME COURT OF OHIO 2NMAY22 FM 3:54 Case No. Cuyahoga County Board of Revision, Cuyahoga County Fiscal Officer, Euclid City Schools Board of Education, and the Tax Commissioner of the State of Ohio, Appellees. Appeal from the Ohio Board of Tax Appeals BTA Case Nos K-667 and 2009-K-816 NOTICE OF APPEAL OF KATERINA & IVICA SAPINA J. Kieran Jennings ( ) Counsel of Record Victor V. Anselmo ( ) Jason P. Lindholm( ) Siegel Siegel Johnson & Jennings Co. LPA Science Park Drive, Suite 210 Cleveland, OH (216) Counsel for Appellant Katarina & Ivica Sapina Saundra Curtis-Patrick ( ) Cuyahoga County Assistant Prosecutor Courts Tower - Eighth Floor 1200 Ontario Street Cleveland, OH (216) Counsel for Appellees Cuyahoga County Board of Revision and Cuyahoga County Fiscal Officer Michael Stinn ( ) Britton, Smith, Peters & Kalail Co. L.P.A. 3 Summit Park Drive, Suite 400 Cleveland, OH (216) Counsel for Appellee Euclid City School District Board of Education Michael DeWine ( ) Ohio Attorney General 30 East Broad Street, 17'' Floor Columbus, OH (614) Counsel for Appellee Joseph Testa, Tax Conunissioner of-ohio ED may 2 2 xoiz CttR@4 (1r COURT SUPREME COURT OF Hf

2 IN THE SUPREME COURT OF OHIO Katarina & Ivica Sapina, Appellants, Case No. vs. Cuyahoga County Board of Revision, ) Appeal from the Ohio Cuyahoga County Fiscal Officer, Euclid ) Board of Tax Appeals City Schools Board of Education, and the Tax Commissioner of the State of Ohio, Appellees. ) BTA Case Nos K-667 and 2009-K-816 NOTICE OF APPEAL OF KATERINA & IVICA SAPINA Appellants, Katarina & Ivica Sapina, hereby give notice of an appeal as of right, pursuant to R.C , to the Supreme Court of Ohio, from a Decision and Order of the Ohio Board of Tax Appeals, journalized in case numbers 2009-K-667 and 2009-K- 816, which was decided on Apri124, A true copy of the Decision and Order of the Ohio Board of Tax Appeals being appealed is attached hereto and incorporated herein by reference as Exhibit A. The appellant complains of the following errors in the Decision and Order of the Ohio Board of Tax Appeals: ASSIGNMENT OF ERROR NO. 1: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, when it improperly found that the Appellees satisfied the initial presumption accorded the conveyance fee statement, a document not in the record. 1

3 ASSIGNMENT OF ERROR NO. 2: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by adopting a valuation based upon a conveyance fee statement which was not in the record, when credible evidence before the Board of Tax Appeals demonstrated that the conveyance fee statement was erroneous. ASSIGNMENT OF ERROR NO. 3: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by neglecting to value the fee simple estate of the real property at issue in the appeal as if unencumbered, in contravention of established case law. ASSIGNMENT OF ERROR NO. 4: The Decision and Order of the Board of Tax Appeals is unreasonable, unlawful, and arbitrary because the Board of Tax Appeals erroneously and unjustifiably relied upon a transfer price to value the subject property when competent and probative evidence was introduced to establish that the transfer price reflected non-real estate items, and not the fair market value of the real property, in contravention of R.C ASSIGNMENT OF ERROR NO. 5: The Decision and Order of the Board of Tax Appeals is unreasonable, unlawful and arbitrary because the Board of Tax Appeals erroneously and unjustifiably placed the burden of proof upon the Property Owner to rebut evidence not properly in the record. ASSIGNMENT OF ERROR NO. 6: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion when it assigned a wholly unreasonable burden of proof to the Appellants to prove which non-real estate items were included in the transfer price. The decision of the Board of Tax Appeals required "unequivocal" proof, contrary to the standard burden of proof in administrative and civil matters. ASSIGNMENT OF ERROR NO. 7: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by manifestly refusing to consider or acknowledge the expert testimony of Mr. Richard Linhart, which supported the Taxpayer's arguments and evidence that rebutted the use of the sale price. 2

4 ASSIGNMENT OF ERROR NO. 8: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by refusing to place the appropriate weight on the testimony of Ms. Katarina Sapina, which rebutted the use of the sale price, and which the Board of Tax Appeals found to be credible. ASSIGNMENT OF ERROR NO. 9: The Board of Tax Appeals acted unreasonably and unlawfully, and abused its discretion, by utilizing a total transfer price as the true value of the real estate, when the entirety of the credible and probative evidence in the record demonstrated that the recorded transfer price included the sale of a business and other non-real estate items. Appellants request that the Court reverse the unreasonable and unlawful decision of the Board of Tax Appeals. Respectfully submitted, ngs ( ) Counsel of Record VVor V. nselmo ( ) J son P. indholm ( ) Siegel, Siegel, Johnson & Jennings Co., LPA Science Park Drive, Suite 210 Cleveland, OH (216) COUNSEL FOR APPELLANTS KATARINA & IVICA SAPINA 3

5 PROOF OF SERVICE UPON OHIO BOARD OF TAX APPEALS This is to certify that the Notice of Appeal of Katarina & Ivica Sapina was filed with the Ohio Board of Tax Appeals, State Office Tower, 24th Floor, 30 East Broad Street, Columbus, Ohio as evidenced by its date stamp as set forth hereon. J. ran ings ( ) Counsel of Record V ^ tor V nselmo ( ) J son P. indholm ( ) iegel, Siegel, Johnson & Jennings Co., LPA Science Park Drive, Suite 210 Cleveland, OH (216) COUNSEL FOR APPELLANTS KATARINA & IVICA SAPINA 4

6 CERTIFICAT OF SERVICE This is to certify that on this c-v day of May 2012, a copy of the Notice of Appeal and a copy of the Demand to Certify Transcript were sent via certified mail to: Michael E. Stinn, Esq., Britton, Smith Peters & Kalail Co., L.P.A. 3 Summit Park Drive, Suite 400, Cleveland, Ohio , Counsel for the Euclid City School District Board of Education; Saundra Curtis-Patrick, Esq. Cuyahoga County Assistant Prosecutor, Courts Tower, 8th Floor, 1200 Ontario Street, Cleveland, Ohio 44113, Counsel for the Cuyahoga County Board of Revision and Cuyahoga County Fiscal Officer; and Michael DeWine, Esq. Ohio Attorney General, 30 East Broad Street, 17th Floor, Columbus, OH , Counsel for the Ohio Tax Commissioner. J. K^ an J gs ( ) Counsel of Record Vi r V. elmo ( ) J on P. L^ dholm ( ) Siegel, Siegel, Johnson & Jennings Co., LPA Science Park Drive, Suite 210 Cleveland, OH (216) COUNSEL FOR APPELLANTS KATARINA & IVICA SAPINA 5

7 OHIO BOARD OF TAX APPEALS Katarina & Ivica Sapina and Euclid City ) CASE NOS K-667 and 2009-K-816 School District Board of Education, ) ) (REAL PROPERTY TAX) Appellants/Appellees, vs. ) ) Cuyahoga County Board of Revision and the ) Cuyahoga County Fiscal Officer, ) ) Appellees. ) APPEARANCES: ) ) DECISION AND ORDER For the Property - Siegel, Seigel, Johnson & Jennings Co., L.P.A. Owners VictorAnselmo Suite 210, Landmark Centre Science Park Drive Cleveland, Ohio For the County - William D. Mason Appellees Cuyahoga County Prosecuting Attorney Saundra Curtis-Patrick Assistant Prosecuting Attorney Courts Tower, 8t1i Floor 1200 Ontario Street Cleveland, Ohio For the Board of - Britton, Smith, Peters & Kalail Co., LPA Education Michael E. Stinn Three Summit Park Drive, Suite 400 Cleveland, Ohio Entered Ap R Ms. Margulies, Mr. Johrendt, and Mr. Williamson concur. Both the property owners, Katarina & Ivica Sapina, and the affected board of education, Euclid City School District Board of Education ("BOE"), have filed appeals with this board challenging a decision issued by the Cuyahoga County Board of Revision ("BOR") in which it adjusted the value originally assigned the subject property, i.e., parcel number

8 012, by the Cuyahoga County Auditor ("auditor") for ad valorem tax purposes for tax year We proceed to consider this matter upon the notices of appeal, the transcripts certified by the BOR, the record of this board's hearing, and the written argument submitted on behalf of the Sapinas and the BOE. The subject property is comprised of approximately.20 acres of land and is improved with a two-story brick building. The first floor houses two retail storefronts, one of which serves as an operating carryout restaurant, while the upper floor has two apartment units. For tax year 2007, the auditor assessed the subject property consistent with the following values: TRUE VALUE TAXABLE VALUE Land $ 34,900 Land $ 12,200 Building Building $ 101,500 Total $325,000 Total $113,700 These proceedings were initiated by the property owners when they filed a complaint with the BOR pursuant to R.C (A), requesting that the subject's value be reduced to $125,000. The Sapinas acknowledged their purchase of the property ten months prior to tax lien date, i.e., February 2006, for $325,000, but asserted that the purchase price included not only the real estate, but the acquisition of a business and associated equipment. The BOE filed a countercomplaint, as provided for by R.C (B), requesting that the auditor's value be retained. Ms. Sapina appeared before the BOR and testified regarding the sale of the subject property, referring to the purchase agreement which disclosed the sale of both the realty and assets of the former owners used in the operation of their food and restaurant business. She also testified regarding a mortgage secured on the property for $160,000. Ms. Sapina submitted a written appraisal, in the absence of the author, which expressed an opinion of value, as of January 27, 2009, of $120,000. Despite one member's comment that the value of personal 2

9 property should have been declared at the time of the sale, with personal property tax paid on the value of acquired assets, the BOR reduced the subject's value as follows: TRUE VALUE TAXABLE VALUE Land $ 34,900 Land $12,200 Building $ Building $49,500 Total $175,000 Total $61,700 Both the property owners and the BOE were dissatisfied with the BOR's adjustment and appeals were filed with this board. While the owners initially sought a value of $120,000, relying upon the testimony of Ms. Sapina, and the testimony and written appraisal report of Richard Linhart, they have asserted the subject property had a value of $100,000` as of January 1, 2007, claiming the remainder of the purchase price was attributable to personal property and/or other intangible assets. Although the BOE was not in attendance at hearing, it submitted written argument in support of its position that the best evidence of the subject's value was its sale price, i.e., $325,000. "When cases are appealed from a board of revision to the BTA, the burden of proof is on the appellant, whether it be a taxpayer or a board of education, to prove its right to an increase [in] or decrease from the value determined by the board of revision." Columbus City School Dist. Bd ofedn. v. Franklin Cty. Bd. ofrevision (2001), 90 Ohio St.3d 564, 566. Given the sale of the subject property which took place only ten months prior to the pertinent tax lien date, we refer to R.C , wherein the General Assembly statutorily recognized the utility of a sale in establishing the value of real property for purposes of ad valorem taxation: ' While the property owner advocated the acceptance of different values throughout these proceedings, we recognize that a party is not necessarily restricted to the values set forth in its pleadings. See, e.g., Jones & Laughlin Steel Corp. v. Lucas Cty. Bd of Revision (1974), 40 Ohio St.2d 61. See, also, Cleveland Elec. Illum. Co. v. Lake Cty. Bd. of Revision (1998), 80 Ohio St.3d

10 "In determining the true value of any tract, lot, or parcel of real estate under this section, if such tract, lot or parcel has been the subject of an arm's length sale between a willing seller and a willing buyer within a reasonable length of time, either before or after the tax lien date, the auditor shall consider the sale price of such tract, lot, or parcel to be the true value for taxation purposes." This statute is consistent with the Supreme Court of Ohio's decision in State ex rel. Park Invest. Co. v. Bd. of Tax Appeals (1964), 175 Ohio St. 410, 412, where it held that "[t]he best method of determining value, when such information is available, is an actual sale of such property 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. This, without question, will usually determine the monetary value of the property." The preceding has been reiterated on numerous occasions by the court. See, e.g., Conalco Inc. v. Monroe Cty. Bd. ofrevision (1977), 50 Ohio St.2d 129, paragraph one of the syllabus ("The best evidence of the `true value in money' of real property is an actual, recent sale of the property in an arm's-length transaction."); Berea City School Dist. Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269, 2005-Ohio-4979, at 16 ("Pursuant to R.C , the sale price in a recent arm's-length transaction between a willing seller and a willing buyer shall be considered the true value of the property for taxation purposes."). In Worthington City Schools Bd. of Edn. v. Franklin Cty. Bd. ofrevision, 124 Ohio St.3d 27, 2009-Ohio-5932, the Supreme Court held that this board is justified in viewing evidence of a sale such as tfiat presented in this case as constituting a prima facie showing of value. Id. at 28 (citing Columbus Bd. of Edn. v. Franklin Cty. Bd of Revision (1996), 76 Ohio St.3d 13). No one has suggested that the February 2006 sale constituted a "sham transaction," 4

11 involved related parties, was a situation in which either party to the sale was acting under duress, or that the sale is remote from tax lien date? Although it was reported to county officials at the time of the sale that the property transferred for $325,000, the Sapinas now argue this was an erroneous disclosure. In HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 124 Ohio St.3d 481, 2010-Ohio-687, the court discussed the significance of the reporting to county officials of the sale of real estate and the utility of a conveyance fee statement: "R.C provides that `[n]o deed of absolute conveyance of land * * * shall be recorded by the county recorder until * * * [t]he conveyance presented to the recorder bears the stamp of the county auditor *** [and s]uch conveyance has been presented to the county auditor, and by the county auditor indorsed "transferred" or "transfer not necessary."' Before the deed may be endorsed by the auditor, however, R.C requires the new owner to submit a real property conveyance fee statement to the auditor declaring the value of the real property, and pursuant to R.C , the auditor must transfer the parcel into the new owner's name on the tax list. The purpose of this statutory scheme is to provide the auditor the necessary information to determine the true value of property based on a property sale in accordance with R.C "' Id. at There exists no bright line test as to whether a sale is "recent" to or "remote" from a tax lien date for purposes of serving as the "best evidence" of value, but the Supreme Court has held that such determination is not made based exclusively upon temporal proximity. Worthington City Schools Bd. of Edn., at 32. However, it remains the burden of a party contesting the utility of a sale to rebut the presumptions to be accorded it. See, e.g., Cincinnati Bd of Edn. v. Hamilton Cty. Bd. of Revision (1997), 78 Ohio St.3d 325. We find no basis in this instance for rejecting the sale as remote. See, generally, HK New Plan Exchange Property Owner II, L.L.C. v. Hamilton Cty. Bd. of Revision, 122 Ohio St.3d 438, 2009-Ohio (value based upon sale occurring twentyfour months prior to tax lien date); Lakota Local School Dist. Bd ofedn. v. Butler Cty. Bd of Revision, 108 Ohio St.3d 310, 2006-Ohio-1059 (reversing this board's decision and ordering that the property's taxable value as of January 1, 2002 be based upon its sale which occurred in October 2003, twenty-two months after tax lien date). ' We note that the record does not contain a copy of a conveyance fee statement relating to the February 2006 sale of the subject property. However, no one disputes the reporting of the February sale for $325,000. Consistent with the several affirmations required by R.C , the conveyance fee statement prescribed by the Tax Commissioner requires the grantee or its representative to make the following attestation: "I declare under penalties of perjury that this statement has been examined by me and to the best of my knowledge and belief is a true, correct and complete statement." See DTE Form 100. See, generally, Harvard Refirse, Inc. v. Cuyahoga Cty. Bd of Revision (Feb. 5, 1987), Cuyahoga App. Nos through 51677, unreported 5

12 See; also, FirstCal Industrial 2 Acquisition LLC v. Franklin Cty. Bd of Revision, 125 Ohio St.3d 485, 2010-Ohio However, the court has acknowledged that amounts attributable to items other than realty, when proven by competent and probative evidence, are appropriately deducted from a sale price in order to accurately determine the value of realty for ad valorem tax purposes: "When a board of revision's decision is appealed to the BTA, the BTA's duty is to `determine the taxable value of the property whose valuation or assessment by the county board of revision is complained of.' R.C (B). In making that determination, the BTA must decide not only whether a proffered sale price satisfies the criteria of recency and arm's-length character, but also what amount of the stated sale price pertains to the realty. Thus, if the record clearly establishes that a portion of a sale price pertains to personal property, the BTA should subtract that portion from the stated sale price to arrive at the amount of consideration paid for the realty. The latter figure will then constitute the true value of the realty. "The present case does not fall within the rule just stated, because the record does not unequivocally establish a basis for allocating a portion of the sale price to the personal property that was transferred. * * * "We have held that when real property is the subject of a sale and the sale involves an incidental transfer of tangible or intangible personal property, the proponent of allocating a portion of the sale price to assets other than the realty `bears an initial burden of showing the propriety of the allocation.' St. Bernard Self-Storage, L.L.C. v. Hamilton Cty. Bd. of Revision, 115 Ohio St.3d 365, Ohio-5249, ***, 14.*** Although [the property owner] has argued both in its notice of appeal and in its second proposition of law that the sale price should be reduced by an amount attributable to personal property, [it] failed to make that argument to the BTA. Instead, [the property owner] confmed its BTA brief to arguing that Footnote contd. (acknowledging that the information requested on a conveyance fee statement is provided by a grantee under penalties of perjury). 6

13 the BTA should not use the sale price to determine the value of the property at all. The BTA had no duty to reduce the sale price on account of the transfer of personal property because [the property owner] did not ask for the reduction and because the record did not unequivocally establish the propriety of making such an allocation." Olentangy Local Schools Bd ofedn. v. Delaware Cty. Bd. of Revision, 125 Ohio St.3d 103, 2010-Ohio-1040, at (Parallel citation and footnote omitted and emphasis added.) See, also, Little Silver, L.L.C. v. Rhodes, Hamilton App. Nos. C , et al., 2008-Ohio-3325, at 25 ("In a similar case [i.e., Harvard Refuse, Inc: v. Cuyahoga Cty. Bd. of Revision (Feb. 5, 1987), Cuyahoga App. Nos through 51677, unreported], the Eighth Appellate District held that the value of property should not be adjusted when, inter alia, `the taxpayer's conveyance fee statement to the auditor denied that the price included payment for any tangible or intangible personal property' and `[t]here was no evidence from which any reasonable person could value the alleged non-realty aspects of the sales transaction. The property owners would have us accept the reported sale amount for the subject property is inaccurate and that, based upon the appraisal tendered on appeal, more than twothirds of the sale price was attributable to something other than the value of the real estate transferred. However, the purchase agreement failed to allocate any specific value to personalty and no effort has since been made to specifically demonstrate the value of such other assets. While we do not question Ms. Sapina's veracity or that items of personal property may have also been acquired as part of the sale, we find the evidence offered insufficient to "unequivocally establish a basis for allocating a portion of the sale price to the personal property that was transferred." Cf. St. Bernard Self-Storage LLC v. Hamilton Cty. Bd. ofrevision, 115 Ohio St.3d 365, 2007-Ohio Where there exists an arm's-length sale, recent to the 2007 tax lien date, it is inappropriate to consider the alternafive evidence of value offered by appellant. See, 7

14 generally, Pingue v. Franklin Cty. Bd of Revision (1999), 87 Ohio St.3d 62, 64 ("It is only when the purchase price does not reflect the true value that a review of independent appraisals based upon other factors is appropriate. '). While the BOR adjusted the fiscal officer's valuation of the property below the February 2006 sale price, we are unable to either discern upon what evidence the BOR relied in doing so or replicate its fmding of value. The Supreme Court has previously held that this board fails to discharge its statutory duty when it does not independently weigh and evaluate the evidence properly before it and does not base its decision of value upon such evidence. See, e.g., Vandalia-Butler City School Dist. Bd. of Edn. v. Montgomery Cty. Bd. of Revision, 130 Ohio St.3d 291, Ohio-5078; Columbus Bd. ofedn. v. Franklin Cty. Bd. ofrevision (1996), 76 Ohio St.3d 13. "When the BTA determines a value for a property, that valuation is a finding of fact. *** Any finding of fact by the BTA must be supported by the evidence. *** We also require the BTA to state what evidence it considers relevant in reaching a value determination." Columbus City School Dist. Bd. of Edn., supra, (Citations omitted.) Accordingly, we fmd the best evidence of the subject's value, as of the effective tax lien date, i.e., January 1, 2007, to be the amount for which it transferred on February 27, 2006, as determined originally by the Cuyahoga County Fiscal Officer: TRUE VALUE TAXABLE VALUE Land $ 34,900 Land $ 12,200 Building $290,100 Building Total $325,000 Total $113,700 It is therefore the order of this board that the fiscal officer list and assess the subject property in conformity with the decision as announced herein. ohiosearchkeybta 8

15 I hereby certify the foregoing to be a true and complete copy of the action taken by the Board of Tax Appeals of the State of Ohio and entered upon its journal this day, with respect to the captioned matter. Sally F. Van Meter, Board Secretary 9