Kiddie Co. Enrichment Ctr. v. Cuyahoga Cty. Bd. of Revision ( 2012 )


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  • [Cite as Kiddie Co. Enrichment Ctr. v. Cuyahoga Cty. Bd. of Revision, 
    2012-Ohio-5717
    .]
    Court of Appeals of Ohio
    EIGHTH APPELLATE DISTRICT
    COUNTY OF CUYAHOGA
    JOURNAL ENTRY AND OPINION
    No. 98515
    KIDDIE COMPANY ENRICHMENT
    CENTER, ET AL.
    PLAINTIFFS-APPELLANTS
    vs.
    CUYAHOGA COUNTY BOARD OF
    REVISION, ET AL.
    DEFENDANTS-APPELLEES
    JUDGMENT:
    REVERSED AND REMANDED
    Civil Appeal from the
    Cuyahoga County Common Pleas Court
    Case No. CP CV-775897
    BEFORE: E. Gallagher, J., Boyle, P.J., and Celebrezze, J.
    RELEASED AND JOURNALIZED:              December 6, 2012
    ATTORNEY FOR APPELLANT
    Jeffrey D. Haines
    Haines Law Office, LLC
    Normandy Professional Bldg.
    77 Normandy Drive, Suite 1
    Painesville, Ohio 44077
    ATTORNEYS FOR APPELLEE
    Cuyahoga County Board of Revision
    Jennifer A. Antoon
    Brindza Mcintyre & Seed LLP
    1111 Superior Avenue
    Suite 1025
    Cleveland, Ohio 44114
    Timothy J. McGinty
    Cuyahoga County Prosecutor
    By: Mark R. Greenfield
    Assistant County Prosecutor
    The Justice Center, 8th Floor
    1200 Ontario Street
    Cleveland, Ohio 44113
    South Euclid-Lyndhurst School District
    Jennifer A. Antoon
    Robert A. Brindza
    Susanne M. Degennaro
    Daniel M. Mcintyre
    David A. Rose
    David H. Seed
    Brindza Mcintyre & Seed LLP
    1111 Superior Avenue
    Suite 1025
    Cleveland, Ohio 44114
    EILEEN A. GALLAGHER, J.:
    {¶1} This cause came to be heard upon the acelerated calendar
    pursuant to App.R. 11.1 and Loc.App.R. 11.1. Kiddie Company Enrichment
    Center, Ltd. appeals from the Cuyahoga County Court of Common Pleas
    order affirming the dismissal of appellant’s complaint against the valuation of
    real property by the defendant-appellee, Cuyahoga County Board of Revision.
    For the following reasons, we reverse and remand.
    {¶2} Appellant is a limited liability company incorporated in the state
    of Ohio.     Scott Kellogg is the managing member and president of the
    company.
    {¶3} In July 2008, appellant purchased three parcels of real property
    for $875,000 as the sole bidder at a public auction in Lyndhurst, Ohio. The
    parcels are located at 1111 Alvey Avenue and are identified by the Cuyahoga
    County fiscal officer as parcels 712-08-010, 712-08-011 and 712-07-005. In
    tax year 2009, the fair market value of the properties was appraised at a
    combined value of $2,258,800.
    {¶4} Scott Kellogg filed a complaint (the “2010 complaint”) against the
    tax year 2009 valuation. In filling out the complaint form, Kellogg listed
    himself and his wife, Faith Kellogg, as the owners of the property. On the
    signature line of the form, Kellogg signed his name but did not indicate any
    position with, or relation to, appellant. Appellant’s name is not mentioned
    anywhere on the face of the 2010 complaint.
    {¶5} The board of revision dismissed the 2010 complaint. Relying on
    Public Square Tower One v. Cuyahoga Cty. Bd. of Revision, 
    34 Ohio App.3d 49
    , 
    516 N.E.2d 1280
     (8th Dist.1986), the board found that Kellogg’s failure to
    list the correct owner of the property rendered the complaint defective and,
    therefore, the board lacked jurisdiction to hear the case on its merits. The
    record does not indicate that Kellogg or appellant appealed that order.
    {¶6} A second complaint (the “2011 complaint”) was filed against the
    valuation of the real property located at 1111 Alvey Avenue. Scott Kellogg
    again completed the complaint form in which appellant was listed as the
    owner of the property and Kellogg was listed as the complainant. In the
    signature area, Kellogg indicated that he was signing and filing the complaint
    in his capacity as the president and managing member of appellant.
    {¶7} The board of revision dismissed the 2011 complaint by relying on
    R.C. 5715.19(A)(2) and the Ohio Supreme Court’s holding in Elkem Metals
    Co. v. Washington Cty. Bd. of Revision, 
    81 Ohio St.3d 683
    , 
    693 N.E.2d 276
    (1998). The board found that the 2011 complaint was a second filing in the
    same triennium, and because none of the exceptions contained in R.C.
    5715.19(A)(2)(a) through (d) were applicable, the 2011 complaint was barred.
    {¶8} Pursuant to R.C. 5717.05, appellant filed an appeal of the board
    of revision’s order with the Cuyahoga County Court of Common Pleas, which
    affirmed the board’s order. The appellant filed its notice of appeal to this
    court.
    {¶9} Appellant’s sole assignment of error states:
    The Cuyahoga County Court of Common Pleas erred in affirming
    the Board of Revision’s dismissing of Kiddie Company
    Enrichment Center, Ltd.’s 2010 complaint for lack of jurisdiction
    pursuant to Elkem Metals Co., L.P. v. Washington Cty. Bd. of
    Revision (1988), 
    81 Ohio St.3d 683
     (second filing in a triennium
    period) as there is no evidence that it had ever previously filed a
    complaint against the valuation of real property.
    {¶10} We review an appeal from a trial court’s decision on a complaint
    against the valuation of real property for an abuse of discretion. Black v. Bd.
    of Revision of Cuyahoga Cty., 
    16 Ohio St.3d 11
    , 
    475 N.E.2d 1264
     (1985); Weiss
    v. Bd. of Revision, 8th Dist. No. 67681, 
    1995 Ohio App. LEXIS 1932
     (May 11,
    1995). An appellate court undertaking a review for abuse of discretion may
    not overturn the trial court “simply because the appellate court might not
    have reached the same conclusion or is, itself, less persuaded by the trial
    court’s reasoning process than by the countervailing arguments.” State v.
    Morris, 
    132 Ohio St.3d 337
    , 
    2012-Ohio-2407
    , 
    972 N.E.2d 528
    , ¶ 14.
    Appellant bears the burden of showing that the trial court’s decision was
    “unreasonable, arbitrary, or unconscionable.” J.M. Smucker, LLC v. Levin,
    
    113 Ohio St.3d 337
    , 
    2007-Ohio-2073
    , 
    865 N.E.2d 866
    , ¶ 16.
    {¶11} R.C. 5715.19(A)(1) provides, in pertinent part, that “any person
    owning taxable real property in the county * * * [and] if the person is a * * *
    limited liability company, or corporation, an officer, a salaried employee, a
    partner, or a member of that person * * * may file * * * a complaint
    regarding” valuation of any real property in that county. As relevant to this
    appeal, R.C. 5715.19(A)(2) provides that “[n]o person, board, or officer shall
    file a complaint against the valuation or assessment of any parcel that
    appears on the tax list if it filed a complaint against the valuation or
    assessment of that parcel for any prior tax year in the same interim period”
    absent one of four changes in circumstance. None of the four changes in
    circumstance are applicable here; therefore, the sole issue is whether
    appellant filed a previous complaint within the same interim period, which
    pursuant to R.C. 5715.24(A)(2) is the three-year period between property
    value reappraisals. As Cuyahoga county had its most recent R.C. 5715.24
    reappraisal in 2009, both the 2010 complaint and 2011 complaint are within
    the same “interim period.”
    {¶12} Appellant’s argument is simple: it did not file the 2010 complaint;
    Scott Kellogg did. Appellant argues that Kellogg made no indication in the
    2010 complaint that he was acting in his capacity as an agent of appellant
    and, therefore, he was acting in his individual capacity.    Thus, appellant
    should not be held responsible for Kellogg’s actions. We find this argument
    compelling.
    {¶13} The idea that a corporation is a legal entity separate and distinct
    from its members is an accepted principle of law. As stated by the United
    States Supreme Court in Cedric Kushner Promotions, Ltd. v. King, 
    533 U.S. 158
    , 
    121 S.Ct. 2087
    , 
    150 L.Ed.2d 198
     (2001), a corporation and an employee
    “are different ‘persons,’ even where the employee is the corporation’s sole
    owner.” 
    Id. at 163
    . The court reasoned that this construction is appropriate
    because the “basic purpose” of incorporation is to create a “distinct legal
    entity, with legal rights, obligations, powers, and privileges different from
    those of the natural individuals who created it, who own it, or whom it
    employs.” 
    Id.
     The Ohio Supreme Court also agrees with this proposition.
    See Agley v. Tracy, 
    87 Ohio St.3d 265
    , 268, 
    719 N.E.2d 951
     (1999) (“A
    corporation is an entity separate and apart from the individuals who compose
    it; it is a legal fiction for the purpose of doing business.”) (Emphasis omitted.)
    {¶14} A corollary of the “distinct legal entity” principle is that corporate
    officers, members and employees may act in more than one capacity: they
    may act in their corporate capacity, according to their status within the
    corporation or in their individual capacity, as citizens and members of society.
    J.D.S. Properties v. Walsh, 8th Dist. No. 91733, 
    2009-Ohio-367
    , ¶ 19 (“An
    officer of a corporation is not personally liable on contracts for which his
    corporate principal is liable, unless he intentionally or inadvertently binds
    himself as an individual.”); Corporate Floors, Inc. v. Lawrence Harris Const.,
    8th Dist. No. 88464, 
    2007-Ohio-2631
    , ¶ 8 (“Harris signed the contract, not in
    his individual capacity, but in his corporate capacity as LHC’s representative.
    He is thus, not personally a party to the contract.        Therefore, he is not
    bound by the arbitration agreement”).           Furthermore, a member of a
    corporation does not have a personal ownership interest in property owned by
    the corporation.    See Parma City School Dist. v. Cuyahoga Cty. Bd. of
    Revision, BTA No. 2003-T-1035, 
    2004 WL 1698440
    , at *3 (July 23, 2004)
    (concluding, after analysis of statutes and case law, that “Mr. Rzepka’s
    membership interest in an Ohio limited liability company provides no
    ownership interest in [the company’s property that was the subject of the
    appeal]”).
    {¶15} Therefore, the central issue in this appeal is whether Kellogg
    signed the 2010 complaint in his individual capacity or in his corporate
    capacity as the president and managing member of appellant.
    {¶16} The trial court’s journal entry affirming the dismissal of
    appellant’s 2011 complaint indicates that the trial court concurred in the
    board of revision’s reliance on Elkem. The facts of Elkem are distinguishable
    from those in this case in one crucial respect, however.      The taxpayer’s
    argument in Elkem was that its second complaint was not barred by R.C.
    5715.19(A)(2) because its first complaint had been dismissed on jurisdictional
    grounds and was therefore never “filed.”    In this case appellant does not
    argue that the first complaint was a nullity or was never “filed.” Appellant
    argues only that it was not the party who filed the first complaint. This was
    not an issue in Elkem, as there was no dispute in that case as to whether the
    taxpayer had filed the first complaint.    Therefore, Elkem’s holding is not
    controlling in this case.
    {¶17} Appellee’s argument for a plain-text reading of R.C. 5715.19(A)(2)
    is unavailing. According to this argument, appellant’s 2011 complaint was
    correctly dismissed under Elkem because Scott Kellogg had signed and “filed”
    both the 2010 complaint and 2011 complaint. This argument fails because it
    ignores the issue of Kellogg’s representative capacity in filing the 2011
    complaint.     When a taxpayer that is not an individual person, such as
    appellant, files a complaint against the valuation of its real property, the
    taxpayer is the person filing the complaint — not whatever representative of
    the taxpayer who happens to sign and deliver the complaint form. This is
    borne out by the Elkem opinion itself. At no point did the court say that
    Elkem’s attorney, CEO, or other member “filed” the complaint; rather, the
    court referred to Elkem itself filing the complaint. See id. at 687 (“Thus,
    when Elkem delivered its complaint for tax year 1993 to the BOR, it ‘filed’ a
    complaint”).    (Emphasis added.)   The Ohio Supreme Court subsequently
    repeated this interpretation, stating that “[w]e ruled as we did in Elkem
    because the property owner had delivered a prior complaint to the proper
    official, who received and filed it in the interim period.” (Emphasis added.)
    Specialty Restaurants Corp. v. Cuyahoga Cty. Bd. of Revision, 
    96 Ohio St.3d 170
    , 
    2002-Ohio-4032
    , 
    772 N.E.2d 1165
    , ¶ 11.
    {¶18} Furthermore, this interpretation reinforces the goal of the
    statute.   The self-evident purpose of R.C. 5715.19(A)(2)’s rule against
    multiple filings in the same interim period is to prevent taxpayers from
    repeatedly contesting valuations of the same parcel(s) of property within the
    same interim period. In the case of a taxpayer that is a corporation or other
    form of organization, basing the determination of who has “filed” a complaint
    on only the individual identity of who signed the complaint form would
    frustrate that purpose.   A corporate taxpayer, such as appellant, which
    under the terms of R.C. 5715.19(A)(1) has multiple members capable of filing
    a complaint under R.C. 5715.19(A)(2), would be able to file multiple
    complaints within the same interim period simply by having different
    individual members of the organization sign the various complaints, thereby
    becoming the party “filing” them. Under that construction of the statute, in
    the instant case there would have been no dispute over appellant’s 2011
    complaint if appellant’s attorney had signed the complaint form rather than
    Scott Kellogg. Such a construction would be arbitrary at best, and would
    afford corporate taxpayers an unfair advantage over individual taxpayers.
    {¶19} Appellees also argue that appellant should be bound by the 2010
    complaint because there is a “unity of interest” between appellant and
    Kellogg.   In support of this argument, appellees cite two cases from the
    Board of Tax Appeals: Richmond Mall, Inc. v. Cuyahoga Cty. Bd. of Revision,
    BTA No. 90-P-1155, 
    1993 WL 233138
     (June 18, 1993) and Jaydee Realty Co.
    v. Cuyahoga Cty. Bd. of Revision, BTA Nos. 98-S-239, 98-S-310, and 98-S-311,
    
    1998 WL 724798
    .      Each of those cases involved a lessor-lessee situation
    where one of the parties attempted to file a valuation complaint after the
    other party had filed a complaint within the same interim period. The board
    of tax appeals held that, because the lessee and lessor in each case were in
    privity with each other and the lessee’s right to file the complaint was a
    derivative right acquired by contract from the lessor, the preceding complaint
    in each case barred the subsequent complaint within the same interim period.
    Richmond Mall.     Applying this holding to the facts of the case at bar,
    appellees argue that there is a unity of interest between the parties because
    Kellogg is the president and managing member of appellant.
    {¶20} We do not agree. The unity of interest theory is premised on
    contractual privity between parties and one party acquiring derivative rights
    from the other. Here, there is no such privity, and no derivative rights are at
    issue. As discussed above, even if Kellogg is the sole member or officer of
    appellant, appellant is nevertheless a distinct legal entity from Kellogg as an
    individual.   There is certainly a unity of interest between appellant and
    Kellogg as appellant’s president and managing member, and Kellogg acquired
    derivative rights to act on behalf of the company in his capacity as president
    and managing member; but this unity of interest and these derivative rights
    do not extend to Kellogg as an individual.                             Absent evidence of a contract
    between appellant and Kellogg, the individual, expressly granting to Kellogg
    the power to bring valuation complaints on behalf of appellant, we cannot
    agree that Kellogg, the individual, was in privity with or acquired derivative
    rights of appellant. The question, therefore, is whether Kellogg signed and
    filed the 2010 complaint in his corporate capacity as appellant’s agent or in
    his individual capacity.
    {¶21} As the trial court failed to address the issue of whether Kellogg
    signed the 2010 complaint in his individual or corporate capacity, we find
    that the trial court’s decision is arbitrary and unreasonable and, therefore, an
    abuse of its discretion. Accordingly, we reverse and remand to the trial court
    with instructions to remand to the Cuyahoga County Board of Revision for
    rehearing and determination of this issue.
    {¶22} Appellant’s sole assignment of error is sustained.
    {¶23} The judgment of the trial court is reversed and the case is
    remanded to the Cuyahoga County Board of Revision.
    It is ordered that appellant recover of said appellee costs herein taxed.
    The court finds there were reasonable grounds for this appeal.
    It is ordered that a special mandate issue out of this court directing the
    lower court to carry this judgment into execution.
    A certified copy of this entry shall constitute the mandate pursuant to
    Rule 27 of the Rules of Appellate Procedure.
    EILEEN A. GALLAGHER, JUDGE
    MARY J. BOYLE, P.J., and
    FRANK D. CELEBREZZE, JR., J., CONCUR
    

Document Info

Docket Number: 98515

Judges: Gallagher

Filed Date: 12/6/2012

Precedential Status: Precedential

Modified Date: 10/30/2014