Beachland Ents., Inc. v. Cleveland Bd. of Rev. , 2013 Ohio 5585 ( 2013 )

[Cite as Beachland Ents., Inc. v. Cleveland Bd. of Rev., 2013-Ohio-5585.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 99770
BEACHLAND ENTERPRISES, INC., ET AL.
PLAINTIFFS-APPELLEES/
CROSS-APPELLANTS
vs.
CITY OF CLEVELAND
BOARD OF REVIEW, ET AL.
DEFENDANTS-APPELLANTS/
CROSS-APPELLEES
JUDGMENT:
AFFIRMED IN PART; REVERSED IN PART;
REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-779321
BEFORE: Keough, P.J., McCormack, J., and E.T. Gallagher, J.
RELEASED AND JOURNALIZED: December 19, 2013
ATTORNEYS FOR APPELLANTS
Barbara Langhenry
Director of Law
Lewis J. Dolezal
Asst. Director of Law
City of Cleveland
601 Lakeside Ave.
Cleveland, Ohio 44114
ATTORNEYS FOR APPELLEES
John W. Monroe
James A. Budzik
Mansour, Gavin, Gerlack & Manos
55 Public Square, Suite 2150
Cleveland, Ohio 44113
KATHLEEN ANN KEOUGH, P.J.:
{¶1} In June 2011, the city of Cleveland (the “city”), through its commissioner of
the city’s division of assessments and licenses, issued an assessment against Beachland
Enterprises, Inc., d.b.a. Beachland Ballroom and Tavern, and its president, Cindy Barber
(collectively “Beachland”), for their failure to remit admission taxes from the patrons of
the Beachland Ballroom for the period July 2007 through January 2011.
{¶2} Beachland appealed the assessment pursuant to Cleveland Codified
Ordinances (“CCO”) 195.16 to the city’s Board of Review, which affirmed the
commissioner’s assessment. Beachland then filed an administrative appeal of the
Board’s decision pursuant to R.C. Chapter 2506 in the common pleas court. The trial
court affirmed the Board’s decision in part, reversed in part, and remanded.
{¶3} The city appealed the trial court’s judgment, and Beachland cross-appealed.
We affirm in part, reverse in part, and remand.
I. Background
{¶4} Under CCO Chapter 195, the city levies an 8% tax on the amounts paid for
admission to events within the city of Cleveland. 1 CCO 195.02. Event sponsors are
required to collect the admissions tax, and report and remit it to the city on a monthly
basis. CCO 195.04.
{¶5} Beachland is a music and concert club and, since 2000, has held events for
CCO 195.02 was amended effective May 1, 2013 to provide that the admissions tax is 4%
1
for any live entertainment venue that has an occupant capacity of 150 but not more than 750 people.
which it sold tickets and charged an admission fee. As the city’s responsible tax
administrator, the commissioner conducted an investigation regarding Beachland’s
compliance with CCO Chapter 195.
{¶6} In 2009, as part of the investigation, auditors from the city’s division of
assessment and licenses conducted field visits to the Beachland Ballroom and verified
that Beachland collected an admissions fee for events held there. Subsequently, on July
6, 2010, the commissioner officially engaged Beachland for an audit of the monthly tax
reporting period from July 2007 through January 2011. After being informed of the
audit, Beachland untimely filed tax returns for the months July 2007 through October
2010, and timely filed a return for November 2010. Subsequently, Beachland untimely
filed returns for December 2010 and January 2011. Cindy Barber signed all of the
returns on the line requiring the “signature of responsible party.” She listed her title as
president of Beachland.
{¶7} Utilizing solely the tax returns submitted by Beachland, in May 2011,
auditors for the city’s division of assessments and licenses issued an examination report
that contained findings of admissions tax deficiencies against Beachland. The
commissioner adopted the report and issued an assessment in June 2011 against
Beachland and Barber, jointly and severally, in the amount of $119,320.08 for unpaid tax
liability, $41,601.69 in interest, and $244,016.85 in penalties.
{¶8} Beachland appealed the commissioner’s assessment to the city’s Board of
Review under CCO 195.16. Prior to the hearing, Beachland requested that the Board
issue a subpoena duces tecum to the commissioner for the tax records of other businesses
in the city. (Beachland wanted to argue selective enforcement by the city of its
admission tax ordinances.) The Board advised Beachland that it did not have the
authority to issue subpoenas. Subsequently, Beachland requested that the hearing before
the Board be open to the public; the Board denied the request and ordered that the hearing
would be confidential, as required by CCO 195.17.
{¶9} At the hearing, counsel for the city presented the commissioner’s tax file,
which included sworn affidavits from the auditors regarding their field visits to
Beachland, the tax returns filed by Barber on behalf of Beachland, and correspondence
between the city’s division of assessment and licenses and Beachland dating back to 2000
in which the city advised Beachland of its duty to collect and remit the admissions tax and
its tax delinquency, and Barber offered various explanations for Beachland’s failure to
file the required returns and remit the admissions tax. Counsel also presented a copy of
the commissioner’s tax assessment to Beachland, as well as copies of lawsuits filed by the
city against other entities for their failure to collect and remit the admissions tax.
{¶10} Beachland did not present any witnesses or evidence at the hearing. It
objected to the commissioner’s assessment, however, on the grounds that (1) the Board’s
hearing was in violation of Ohio’s Sunshine Law because it was not open to the public;
(2) the assessment was not supported by reliable, substantial, and probative evidence
because the city’s entire case consisted of inadmissable hearsay; (3) Beachland was
unable to establish its selective enforcement argument given the mandate in CCO 195.17
that all information obtained from tax returns, investigations, verifications, or hearings
under CCO Chapter 195 remain confidential; (4) the assessment of interest and penalties
on the tax liability was unreasonable and excessive; and (5) Barber was not personally
liable for the taxes, interest, or penalties,
{¶11} The Board rejected Beachland’s arguments and affirmed the commissioner’s
assessment. It found that (1) the hearing was properly not open to the public because
hearings before quasi-judicial bodies are not “meetings” for purposes of Ohio’s Sunshine
Law, and under CCO 195.17, any information gained as a result of hearings conducted by
the Board must remain confidential; (2) the Board could properly consider the evidence
submitted by the commissioner because the hearsay rule does not apply to administrative
hearings and, even if it did, the commissioner’s ruling and investigatory file were
admissible under Evid.R. 803; (3) Barber could be held personally liable for the tax
assessment, including the penalties and interest; and (4) the amount of the assessment was
reasonable and just.
{¶12} Beachland appealed the Board’s decision to the common pleas court
pursuant to R.C. Chapter 2506. The trial court decided the case on the basis of the
record submitted by the Board and the parties’ briefs. The trial court found that the
Board was a quasi-judicial body and, therefore, outside the purview of Ohio’s Sunshine
Law. It further found that the rules of evidence do not apply to hearings before
administrative bodies and, even if they did, the exception to the hearsay rule outlined in
Evid.R. 803(8) would allow for admission of the commissioner’s assessment and
investigative file. Accordingly, the trial court affirmed the Board with respect to its
conclusions about public hearings and the applicability of the rules of evidence to its
hearings.
{¶13} The trial court also affirmed the assessment of taxes against Beachland
Ballroom. With respect to the assessment of interest and penalties, however, the trial
court found that the issue was “not ripe” for its review because the Board and
commissioner have discretion in “applying monthly penalty and interest assessment” but
had not “fully vetted” this issue “in the administrative process.” Accordingly, the trial
court remanded the matter “for further hearing and clarification.” Finally, the trial court
held that Barber was not personally liable for the assessment and, therefore, reversed the
assessment against her.
{¶14} The city appealed, and Beachland cross-appealed.
II. Analysis
A. Standard of Review
{¶15} Common pleas courts and appellate courts apply different standards of
review to appeals brought pursuant to R.C. Chapter 2506. The common pleas court
considers the whole record, including any new or additional evidence admitted under R.C.
2506.03, and determines whether the administrative order is unconstitutional, illegal,
arbitrary, capricious, unreasonable, or unsupported by the preponderance of substantial,
reliable, and probative evidence. R.C. 2506.04.
{¶16} An appeal to the court of appeals is more limited in scope. We review on
questions of law and must affirm the common pleas court unless we find that the decision
of the common pleas court is not supported by a preponderance of reliable, probative, and
substantial evidence. Kisil v. Sandusky, 12 Ohio St.3d 30, 34, 465 N.E.2d 848 (1984).
“Whether the common pleas court abused its discretion is within the ambit of ‘questions
of law’ in R.C. 2506.04 administrative appeals.” Global Country of World Peace v.
Parma Planning Comm., 8th Dist. Cuyahoga No. 94534, 2010-Ohio-6023, ¶ 12, citing
Henley v. Youngstown Bd. of Zoning Appeals, 90 Ohio St.3d 142, 148, 2000-Ohio-493,
735 N.E.2d 433.
B. The City’s Appeal
1. Interest and Penalties
{¶17} Under CCO 195.16, “any person dissatisfied with any Administrative Ruling
issued by the Commissioner of Assessment and Licenses * * * may appeal therefrom to
the Board of Review within thirty (30) days from the issuance of such Ruling. The
Board shall, upon hearing, have jurisdiction to affirm, reverse or modify any such
Administrative ruling, or any part thereof.”
{¶18} Dissatisfied with the commissioner’s ruling that assessed taxes, interest,
and penalties, Beachland filed a notice of appeal with the Board of Review. In its notice
of appeal, Beachland specifically stated that it was appealing pursuant to CCO 195.16.
Beachland made no reference in its notice of appeal to CCO 195.22, which provides that
[u]pon recommendation of the Commissioner, the Board of Review may
abate penalty, interest or both. Or, upon a written appeal by the taxpayer
upon the refusal of the Commissioner to recommend abatement of penalty,
interest, or both, the Board may nevertheless abate penalty or interest, or
both, for reasonable cause shown.
{¶19} Although it did not reference CCO 195.22 in its notice of appeal, at the
hearing before the Board, Beachland argued that the interest and penalties on its tax
assessment were arbitrary and capricious, and it requested that the Board abate the
penalties and interest under CCO 195.22. Similarly, in its posthearing brief to the Board,
Beachland argued that the interest and penalties were excessive and arbitrary, and asked
the Board to exercise its authority under CCO 195.22 to abate the interest and penalties.
{¶20} In its written decision, the Board found that it was without jurisdiction to
abate the interest and penalties due to Beachland’s non-compliance with CCO Chapter
195. The Board stated:
In this appeal, the Commissioner is not recommending that this Board abate
penalty, interest or both, and the Appellants have not appealed from the
refusal of the Commissioner to recommend or to decline to recommend
abatement of penalty, interest, or both. In fact, the record does not reflect
the Commissioner was ever asked by the Appellants to abate the penalty or
interest. In light of this fact, this Board is without authority under the code
to abate the interest and penalties.
{¶21} The trial court reversed the Board’s decision on the issue of penalties and
interest, however, because it found that Beachland had appealed from the commissioner’s
assessment “in its entirety,” had raised the issue of interest and penalties at the hearing
before the Board, and in its notice of appeal to the Board, had asserted that one of the
bases for its appeal was that “any and all penalties calculated in the assessed amount is
excessive, arbitrary, capricious and unreasonable.” The trial court remanded the issue to
the Commissioner for further review and clarification.
{¶22} In its first assignment of error, the city argues that the trial court abused its
discretion in reversing the Board’s decision regarding interest and penalties and in
remanding the issue for “further hearing and clarification.” We agree, because
Beachland did not properly invoke the equitable powers of the Board or the commissioner
under CCO 195.22 for abatement.
{¶23} Contrary to the trial court’s conclusion, the commissioner does not have
“discretion in applying monthly penalty and interest assessment” when he finds unpaid
tax. CCO 195.18 provides that interest on unpaid tax is charged at the rate of 1.5% per
month from the date the unpaid taxes are due. CCO 195.19, regarding penalties on
unpaid tax, states that “[i]n addition to interest as provided in Section 195.18, penalties
are hereby imposed on all admissions tax remaining unpaid from the date that the tax
became due until paid as follows.” It then lists the mandatory penalties to be imposed
for failure to pay admissions tax due, failure to file monthly tax returns or other reports
required by CCO Chapter 195, and failure to remit admissions tax collected or required to
be collected.
{¶24} Thus, as in this case, when the commissioner determines that monthly tax
returns have not been timely filed and the admissions tax has not been remitted as
required, he is required by ordinance to impose certain penalties and interest. However,
under CCO 195.22, he has the authority to abate the interest, penalties, or both if the
assessed party petitions the commissioner for an abatement and demonstrates “reasonable
cause shown.” But Beachland never asked the commissioner for an abatement. Instead,
it appealed the commissioner’s assessment to the Board under CCO 195.16, which is a
statutorily different proceeding than an abatement proceeding under CCO 195.22.
{¶25} In a proceeding under CCO 195.16, a party challenges the legality of or the
amount of the commissioner’s tax assessment by appealing to the Board. An abatement
proceeding under CCO 195.22, however, is materially different from an appeal brought
pursuant to CCO 195.16 in that the party concedes that the tax assessment is correct but
asks the commissioner to invoke the equity powers authorized by CCO 195.22 and
forgive the penalties and interest on that assessment.
{¶26} As stated earlier, CCO 195.22 provides that:
[u]pon recommendation of the Commissioner, the Board of Review may
abate penalty, interest or both. Or, upon a written appeal by the taxpayer
upon the refusal of the Commissioner to recommend abatement of penalty,
interest, or both, the Board may nevertheless abate penalty or interest, or
both, for reasonable cause shown. The Rules and Regulations may
authorize the Commissioner to abate penalty, interest, or both, for
reasonable cause shown.
{¶27} Thus, under an abatement proceeding, a party must first petition the
commissioner to abate the interest and penalties for reasonable cause and, if the
commissioner refuses, the party may appeal such refusal to the Board of Review. If the
commissioner recommends abatement, the Board may affirm that recommendation.
{¶28} In this case, as the Board correctly determined, Beachland did not appeal
from the commissioner’s refusal or recommendation to abate the interest and penalties
because, in fact, Beachland never petitioned the commissioner under CCO 195.22 to do
so. Without such a petition, neither the commissioner nor the Board had discretion or
authority to abate the mandatory interest and penalties.
{¶29} Beachland’s argument that the Board should have considered the
abatement issue at the CCO 195.16 appeal hearing because Beachland raised the issue in
its pre- and posthearing briefs and at the hearing before the Board is without merit. The
Board has no independent power to review the assessment of interest and penalties unless
the commissioner is first petitioned in writing under CCO 195.22 for an abatement and
either refuses or recommends abatement. Because Beachland never petitioned the
commissioner for abatement, it does not matter that Beachland raised the issue before the
Board.
{¶30} The city’s first assignment of error is sustained. The Board properly
found that it had no authority to consider the abatement of interest and penalties in
Beachland’s appeal brought pursuant to CCO 195.16. Hence, the trial court abused its
discretion in reversing the Board’s decision on abatement of interest and penalties and
remanding for further proceedings.
2. Personal Liability of Cindy Barber
{¶31} In its second assignment of error, the city argues that the trial court abused
its discretion in reversing the Board’s determination that Barber may be held personally
liable for the taxes, interest, and penalties. We agree.
{¶32} In Soltesiz v. Tracy, 75 Ohio St.3d 477, 1996-Ohio-150, 664 N.E.2d 1273,
the Supreme Court of Ohio recognized that a corporate employee may be held personally
liable for the taxes, penalty, and interest where the statute clearly and unambiguously
imposes personal liability upon the employee for the consequences of failing to file the
employer’s tax report or withholding tax. The Supreme Court stated:
[W]hen an employer-corporation fails to either (1) file a tax return or (2)
remit the withheld taxes owed, it is liable for the taxes, the penalty and the
interest accrued. [When the tax statute] is clear and unambiguous and
imposes personal liability upon the responsible employee for the
consequences of failing to file the employer’s tax report or failing to remit
the employee withholding tax * * * the responsible employee is personally
liable for the taxes, the penalty, and the interest accrued.
Id. at 479.
{¶33} Although Beachland is correct that generally corporate officers are not
personally liable for corporate liability, there are numerous examples of Ohio law that
impose such personal liability in the withholding tax context. For example, R.C.
5747.07(G) imposes personal liability upon the employee responsible for the employer’s
fiscal responsibilities if that employee fails to file the report or pay the amount due
regarding income tax required to be withheld from each employee’s compensation.
Likewise, R.C. 5739.33 imposes personal liability on employees having control or
supervision of or charged with the responsibility of filing returns and making payments of
Ohio sales tax. R.C. 5735.35(A)(1) similarly imposes personal liability on employees
charged with the responsibility of filing reports and making payments regarding motor
fuel tax, and R.C. 5743.57(A) imposes personal liability on those employees having
control or supervision of or charged with the responsibility of filing returns or making
payments regarding cigarette taxes.
{¶34} Here, the admissions tax imposed by CCO Chapter 195 is a withholding tax.
The tax is levied upon the person paying an admission fee, and not upon the person or
business charging an admission, although such persons are charged with the responsibility
of withholding the tax. See CCO 195.04(a) (stating that “[e]very person receiving any
payment on which a tax is levied under this chapter shall collect the amount of the tax
imposed by Section 195.02 from the person making the admission payment.”)
{¶35} Persons responsible for the collection of the tax hold the tax in trust for the
city and are required to report and remit such amounts monthly. CCO 195.04. As with
other Ohio withholding taxes, CCO 195.99(o) clearly and unambiguously imposes
personal liability upon the employee or officer responsible for the collection and
remittance of the admissions tax for the failure to report and remit the tax:
I]f any corporation, limited liability company, or business trust required to
file returns and to remit tax due to the City under this chapter fails for any
reason to make the filing or payment, any of its employees having control or
supervision of or charged with the responsibility of filing returns and
making payments, or any of its officers, members, managers, or trustees
who are responsible for the execution of the corporation’s, limited liability
company’s or business trust’s fiscal responsibilities shall be personally
liable for the failure.
{¶36} Because the statute clearly and unambiguously imposes personal liability,
consistent with Soltez, 75 Ohio St.3d at 479, 1996-Ohio-150, 664 N.E.2d 1273, Barber
can be held personally liable for the taxes, interest, and penalties assessed due to
Beachland’s failure to report and remit the admissions tax to the city.2
Beachland’s argument that Barber cannot be personally liable for the interest and penalties,
2
even if she is liable for the tax, is without merit. In Soltez, the Ohio Supreme Court held that a
statute that imposed personal liability for the “failure to file the report or pay the tax due” included
personal liability for the tax, interest, and penalties because the consequence of failing to file the
{¶37} The trial court, however, found that the Board had improperly affirmed the
commissioner’s finding of personal liability by Barber because there was insufficient
evidence that she was the responsible financial officer under CCO 195.99(o). Initially,
we note that the party challenging the assessment has the burden of proof,3 a burden
Beachland failed to meet because it presented no evidence whatsoever at the hearing
before the Board.
{¶38} Nevertheless, although we agree that Barber’s signature on a February
2011 application for a certificate of registration for payment of future admission taxes is
not sufficient to establish her personal liability for the 2007 to January 2011 time frame,
our review of the record demonstrates that the commissioner presented overwhelming
evidence to the Board that Barber was indeed the employee “having control or
supervision of or charged with the responsibility of filing returns and making payments”
and thus subject to personal liability. CCO 195.99(o).
{¶39} Barber signed and attested to each of the 43 returns filed with the
commissioner as the “responsible party.” Further, the commissioner’s investigative file,
which the commissioner submitted to the Board, contained correspondence between the
report or pay the tax included the imposition of penalties and interest. Like the statute construed in
Soltez, CCO 195.99(o) imposes personal liability for the “failure” “for any reason to make the filing
or payment.” Because the consequence of failing to make the filing or payment includes interest and
penalties, Barber can be held personally liable for the tax, interest, and penalties.
See, e.g., Global Knowledge Training, LLC v. Levin, 127 Ohio St.3d 34, 2010-Ohio-4411,
3
936 N.E.2d, ¶ 12 (“[W]hen an assessment is contested, the taxpayer has the burden to show in what
manner and to what extent the commissioner’s investigation and audit, and the findings and
assessment based thereon, were faulty and incorrect.”)
city and Beachland dating back to 2000. These emails demonstrate that Barber met with
representatives from the city’s division of licenses and assessments to discuss
Beachland’s delinquent registration for payment of admissions taxes and its failure to
timely file and pay taxes. They also demonstrate that she told the commissioner and his
representative that she
would try to make the payments.
{¶40} Reading this correspondence in conjunction with Barber’s signature as the
“responsible party” on the 43 returns filed with the commissioner unequivocally
demonstrates that Barber was indeed the employee responsible for filing returns and
making payments on behalf of Beachland. Accordingly, the commissioner was within
his authority to assess the amount due and owing against Barber personally and therefore,
the trial court abused its discretion in reversing the Board’s decision that affirmed the
commissioner’s assessment of personal liability.
{¶41} The city’s second assignment of error is sustained.
C. Beachland’s Cross-Appeal
1. Public Meeting or Confidential Hearing
{¶42} In its first assignment of error on cross-appeal, Beachland contends that the
trial court abused its discretion in determining that the hearing before the Board of
Review was not a public meeting under R.C. 121.22. We disagree.
{¶43} Ohio’s Sunshine Law, codified at R.C. 121.22, requires “public officials to
take official action and to conduct all deliberations upon official business only in open
meetings unless the subject matter is specifically excepted by law.” The intent of the
Sunshine Law is to prevent public bodies from discussing public business outside the
hearing of the public. See generally, Holeski v. Lawrence, 85 Ohio App.3d 824, 621
N.E.2d 802 (11th Dist.1993).
{¶44} As the Ohio Supreme Court has made clear, a quasi-judicial hearing is not a
meeting for purposes of R.C. 121.22 and thus not subject to the open meeting
requirements. Ross v. Crawford Cty. Bd. of Elections, 125 Ohio St.3d 438,
2010-Ohio-2167, 928 N.E.2d 1082, ¶ 25. That is, “the Sunshine Law does not apply to
adjudications of disputes in quasi-judicial proceedings.” TBC Westlake, Inc. v. Hamilton
Cty. Bd. of Revision, 81 Ohio St.3d 58, 62, 1998-Ohio-445, 689 N.E.2d 32.
{¶45} An administrative agency conducts a quasi-judicial proceeding when it
settles “a justiciable dispute requiring evaluation and resolution. Implicit in this concept
is the exercise of discretion.” Id. The test for determining whether the act by an
administrative agency is quasi-judicial is whether the function involves the exercise of
discretion and requires notice and hearing, all elements being required to constitute a
quasi-judicial act. Id.{¶46} Here, the Board acted as a quasi-judicial body by adjudicating the dispute
between the commissioner and Beachland. The parties received notice and a hearing at
which they were given the opportunity to present evidence, and the Board, exercising its
discretion, evaluated the evidence and decided the dispute. It could not be clearer that
the hearing before the Board was a quasi-judicial proceeding not subject to the
requirements of R.C. 121.22.
{¶47} Beachland contends that the hearing was not quasi-judicial, however,
because the Board has no authority to subpoena witnesses. But the fact that the Board, or
any other administrative agency, is not vested with the full complement of judicial
authority, including subpoena power, does not demonstrate the proceedings are not
quasi-judicial. See, e.g., M.J. Kelley Co. v. Cleveland, 32 Ohio St.2d 150, 290 N.E.2d
562 (1972) (proceedings of administrative officers and agencies are quasi-judicial where
there is a requirement of notice, hearing, and the opportunity to introduce evidence
through witnesses; no requirement of subpoena power).
{¶48} Furthermore, Beachland’s assertion that the Board “specifically prohibited
[it] from calling witnesses to testify” is incorrect. Although the Board was without
power to subpoena witnesses on behalf of Beachland, the transcript of the hearing
demonstrates that the Board offered Beachland the opportunity to present witnesses at the
hearing but Beachland chose not to put forth any evidence. (Tr. 19.)
{¶49} Next, relying on TBC, 81 Ohio St.3d 58, 1998-Ohio-445, 689 N.E.2d 32,
and Ross, 125 Ohio St.3d 438, 2010-Ohio-2167, 928 N.E.2d 1082, Beachland contends
that even if the Board can properly deliberate in private to reach its decision, the hearing
before the Board should have been public. Neither case supports Beachland’s argument.
{¶50} TBC involved an appeal of a property valuation to the Board of Tax
Appeals (“BTA”). On appeal to the Ohio Supreme Court, the property owner argued that
Ohio’s Sunshine and Public Records laws required the BTA to provide its examiner’s
report to the parties. The Ohio Supreme Court disagreed. It found that the BTA’s
procedure was a quasi-judicial proceeding and that “[a]lthough the BTA opens its
hearings to the public under Ohio Adm. Code 5717-1-15(D), it, like all judicial bodies,
requires privacy to deliberate, i.e., to evaluate and resolve, the disputes.” Id. at 62. The
Supreme Court noted that BTA board members and staff need privacy for candid
discussion of the legal issues and facts and, accordingly, held that “the Sunshine Law
does not apply to adjudications of disputes in quasi-judicial proceedings.” Id.
Likewise, the Ohio Supreme Court held that the examiner’s report was not a public record
subject to disclosure under the Public Records Law.
{¶51} TBC does not support Beachland’s argument that the Board’s hearing in
this case should have been public because the BTA proceedings were open to the public
under Ohio Adm.Code 5717-1-5(D), not under R.C. 121.22. The Board of Review,
however, is not subject to any analogous provision under state or local law that requires
its hearings to be open to the public. To the contrary, CCO 191.2501, the ordinance
establishing the Board, provides that any hearing held by the Board may be private.
Additionally, under CCO 191.2309, any information gained during investigations or
hearing by the Board is deemed confidential.
{¶52} Beachland’s reliance on Ross is similarly misplaced. In Ross, a county
board of elections held a hearing to decide challenges to Ross’s voter registration. The
hearing was open to the public but the board deliberated in private. On appeal to the
Ohio Supreme Court, the voter argued that the board had violated R.C. 121.22 by failing
to vote in public to hold an executive session to deliberate and then by failing to vote in
public on the challenges after its deliberations.
{¶53} The Ohio Supreme Court rejected this argument. It found that “even
though a public body must open all its meetings to the public, there is a category of
gatherings called ‘hearings,’ which do not have to be public.” Id. at ¶ 24. It reiterated
that quasi-judicial hearings are not meetings for purposes of R.C. 121.22 and held that
“because a quasi-judicial proceeding like the one required for the challenges to Ross’s
right to vote * * * is not a meeting for purposes of R.C. 121.22, the Sunshine Law is
inapplicable from the outset.” (Emphasis added). Id. at ¶ 30. Thus, Ross and TBC
are clear that quasi-judicial hearings, such as the Board’s hearing in this case, are not
subject to R.C. 121.22.
{¶54} The trial court also held that the Board’s hearing was not a public hearing
because CCO 195.17 requires that any information gained as a result of returns,
investigations, or hearings under CCO Chapter 195 remain confidential. Beachland
argues that this was error because CCO 195.17 violates Section 28 of the city’s charter,
which states that “[a]ll meetings of the council or committees thereof shall be public and
any citizen shall have access to the minutes and records thereof at all reasonable times.”
{¶55} Beachland’s argument fails, however, because the Board is not city council
nor a subordinate body of the council. It is an administrative body created under CCO
191.2501 for the express purpose of deciding administrative tax appeals. It has no
legislative function. Accordingly, Section 28 is not applicable to proceedings before the
Board.
{¶56} Because the trial court properly held that the hearing before the Board was
a quasi-judicial hearing not subject to R.C. 121.22, Beachland’s first assignment of error
is overruled.
2. Subpoena Power of the Board
{¶57} In its second assignment of error on cross-appeal, Beachland asserts that
the trial court erroneously affirmed the Board’s refusal to issue subpoenas yet hold a
private hearing. 4 Beachland contends that it was prejudiced by the Board’s lack of
authority to issue subpoenas because it could not adequately present evidence and develop
its case. Beachland’s argument is without merit.
{¶58} Although the Board acts in a quasi-judicial manner, it does not have
inherent judicial powers. Green v. W. Reserve Psychiatric Habilitation Ctr., 3 Ohio
App.3d 218, 220, 444 N.E.2d 442 (9th Dist.1981), citing State ex rel. Clarke v. Cook, 103
Ohio St. 465, 1345 N.E. 655 (1921). “Administrative powers are only implied when
clearly necessary to effect an express power. Such implied power can be no greater than
the express power and must be exercised subject to the same express power limitations.”
Id.The trial court made no such ruling and, in fact, there is no reference to the Board’s lack of
4
subpoena power in the trial court’s journal entry. We presume that Beachland is arguing that the
trial court erred in affirming the Board in part because the Board refused its request to issue
subpoenas.
{¶59} The Board of Review is established under CCO 191.2501 with the discrete
powers to hear tax appeals arising under CCO Chapter 191. Under CCO 195.16, it is
also vested with jurisdiction to hear appeals arising under Chapter 195. In neither
chapter is the Board vested with authority to issue or enforce the issuance of subpoenas.
Accordingly, the Board did not have express or implied authority to issue subpoenas
relating to the hearing.
{¶60} Furthermore, Beachland did not pursue its judicial remedy for the
Board’s inability to issue subpoenas in the common pleas court. Under R.C. 2506.03, at
the hearing of an administrative appeal, the trial court may consider only the evidence
presented in the transcript of the administrative hearing “unless it appears on the face of
the transcript or by affidavit filed by the appellant” that one of the conditions set forth in
R.C. 2506.03(A) exists and, in the interest of justice, additional evidence is required.
Those conditions include that the appellant was not permitted to “cross-examine
witnesses purporting to refute the appellant’s position, arguments, and contentions,”
“offer evidence to refute evidence and testimony offered in opposition to the appellant’s
position, arguments, and contentions,” or
the appellant was unable to present evidence by reason of a lack of the
power of subpoena by the officer or body appealed from, or the refusal,
after request, of that officer or body to afford the appellant opportunity to
use the power of subpoena when posssessed by the officer or body.
R.C. 2506.03(A). Under any of the circumstances outlined in R.C. 2506.03, “the court
shall hear the appeal upon the transcript and additional evidence as may be introduced by
any party.” R.C. 2506.03(B).
{¶61} Beachland never filed an affidavit or moved the trial court for an
opportunity to present additional evidence under R.C. 2506.03. Likewise, Beachland has
never proffered the additional evidence it allegedly could not present as a result of the
Board’s lack of subpoena power or suggested what the evidence would have been if it had
been permitted to introduce additional evidence. Nor does Beachland argue on appeal
that the trial court should have held a hearing to take additional evidence because it was
“apparent from the face of the transcript” that Beachland had been unable to present
evidence to the Board due to the Board’s lack of subpoena power. Accordingly,
Beachland has waived any argument that it was prejudiced by the Board’s lack of
authority to issue subpoenas or that it should have been allowed to present additional
evidence in the trial court. See Smith v. Coventry Twp. Zoning Dept., 9th Dist. Summit
No. 23871, 2008-Ohio-2532, ¶ 11 (May 28, 2008). Beachland’s second assignment of
error is therefore overruled.
3. Hearsay Evidence
{¶62} In its third assignment of error, Beachland argues that the trial court abused
its discretion in affirming the Board’s decision in part because the decision was “based
solely on hearsay evidence and unsworn testimony,” and not supported by substantial,
reliable, and probative evidence. We disagree.
{¶63} As stated by this court in Cleveland v. Posner, 193 Ohio App.3d 211,
2011-Ohio-1370, 951 N.E.2d 476, ¶ 27 (8th Dist.),
[t]he Ohio Supreme Court has held that administrative agencies are not
bound by the rules of evidence applied in court. Simon v. Lake Geauga
Printing Co., 69 Ohio St.2d 41, 44, 430 N.E.2d 468 (1982). Evidence that is
admissible in administrative hearings is defined as follows: “(1) ‘Reliable’
evidence is dependable; that is, it can be confidently trusted. In order to be
reliable, there must be a reasonable probability that the evidence is true.
(2) ‘Probative’ evidence is evidence that tends to prove the issue in
question; it must be relevant in determining the issue. (3) ‘Substantial’
evidence is evidence with some weight; it must have importance and
value.” Our Place, Inc. v. Ohio Liquor Control Comm., 63 Ohio St.3d 570,
571, 589 N.E.2d 1303 (1992). Furthermore, hearsay is admissible in
administrative proceedings. Simon, 69 Ohio St.2d at 44.
{¶64} Thus, we reject Beachland’s argument that the Board could not rely on
hearsay evidence. It is a well-settled principle of administrative law that administrative
agencies are not bound by the rules of evidence and that hearsay is admissible in
administrative proceedings. Shephard v. Ohio Dept. of Job & Family Serv., 166 Ohio
App.3d 747, 2006-Ohio-2313, 853 N.E.2d 335, ¶ 22 (8th Dist.). Furthermore,
Beachland’s assertion that the evidence before the Board consisted of “only unsworn
testimony” is simply wrong. The city submitted the sworn affidavits of the
commissioner certifying a true and exact copy of the assessment document (which
included correspondence between the city and Barber, the auditors’ sworn field reports,
and the tax returns filed by Barber) and attesting to the gross amount of admissions tax
collected from Beachland from 2007-2010, and the sworn affidavit of auditor Mike Ryba
certifying a true and exact copy of the tax returns filed by Beachland. And, even if the
evidence rules applied, the trial court properly determined that the exceptions to the
hearsay ruled outlined in Evid.R. 803 would allow for the Board’s review of the
documents.
{¶65} Finally, we reject Beachland’s assertion that the trial court erred in affirming
the Board’s decision in part because it was not supported by reliable, provative, and
substantial evidence. We again note that Beachland fails to acknowledge that it had the
burden of proof to demonstrate that the commissioner’s findings and assessment were
incorrect, but that it chose not to introduce any evidence on its behalf and, hence, failed to
meet its burden. Nevertheless, the commissioner submitted reliable, probative, and
substantial evidence to support the tax assessment. The exhibits were reliable because
they were certified copies of the documents contained in the commissioner’s tax file; they
were probative because they detailed the findings and calculation of the assessment issue,
thus proving the assessment was correct; and they were substantial because they formed
the basis of the tax assessment and rebutted the arguments raised by Beachland at the
hearing before the Board.
{¶66} Beachland’s third assignment of error is therefore overruled.
D. Conclusion
{¶67} The trial court’s judgment is affirmed in part and reversed in part. We
affirm that part of the trial court’s judgment that affirmed the Board’s decision that the
Board’s quasi-judicial proceeding is not subject to Ohio’s Sunshine Law or the Rules of
Evidence. We also affirm that part of the trial court’s judgment that affirmed the
assessment of tax against Beachland Ballroom. We reverse the part of the trial court’s
judgment that reversed the Board’s imposition of penalties and interest against Beachland
and Barber, and reverse the trial court’s judgment finding that Barber is not personally
liable for the tax, penalties, and interest. The matter is remanded for the trial court to
issue judgment affirming the Board’s decision in its entirety.
{¶68} Affirmed in part; reversed in part; remanded.
It is ordered that the parties share equally in the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said 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.
KATHLEEN ANN KEOUGH, PRESIDING JUDGE
EILEEN T. GALLAGHER, J., CONCURS;
TIM McCORMACK, J., DISSENTS. (SEE ATTACHED DISSENTING OPINION).
TIM McCORMACK, J., DISSENTING:
{¶69} I respectfully dissent.
{¶70} “That the power to tax is the power to destroy; that the power to destroy may
defeat and render useless the power to create.” McCulloch v. Maryland, 17 U.S. 316, 4
L.Ed. 579 (1819).
{¶71} It is perplexing to attempt to understand how America’s most economically
distressed city, a city that has hemorrhaged most of its population and most of its
commerce, finds itself locked in a death spiral with one of its few, innovative,
value-producing enterprises; one that actually invites large numbers of people into the
city. While this court has not been called upon to directly answer this apparently
unanswerable mystery, it is the question that ultimately dominates this prolonged legal
dispute.
{¶72} We are required by this appeal to merely interpret provisions of a city tax
code, not to attempt to make sense of how this conflict, with much larger consequences,
came to our doorstep. We can only expect that based on the regional value of Beachland
Ballroom, the parties jointly recognize the multi-dimensional value of this unique
Cleveland taxpayer; that prudence in resolving this potentially destructive administrative
action is adopted from this day forward.
{¶73} While dissenting, I agree in part with my colleagues, the majority, in their
disposition of Beachland’s cross- appeal. I would, though, fully affirm the trial court in
reversing the Cleveland Board of Review’s assertion and action that it is without
authority, without power to affect the imposition of interest and penalties in the amount of
$285,708.54 on Beachland. I would affirm the trial court in reversing the Board’s
imposition of personal liability as to Beachland’s president.
{¶74} Pursuant to CCO 195.16, “any person dissatisfied with any Administrative
Ruling issued by the Commissioner of Assessment and Licenses * * * may appeal
therefrom to the Board of Review * * * from the issuance of such Ruling. The Board
shall, upon hearing, have jurisdiction to affirm, reverse or modify any such
Administrative ruling, or any part thereof.” (Emphasis added.) This section and similar
provisions for appeal were written and adopted to ensure that governments at any level
are precluded from ruling through neglect, error, or fiat.
{¶75} I agree with the trial court that despite the provisions of CCO 195.22, CCO
195.16 is worded sufficiently broadly to authorize the Board to review the
Commissioner’s refusal to abate the penalties or interest in this case, where Beachland
appealed the Commissioner’s decision “in its entirety.” The taxpayer in this case faced a
crushing, extraordinary amount of penalties and interest of $285,618.54 — almost three
times more than the amount of claimed taxes owed of $119,320.08. Requiring a rigid
hypertechnical compliance with CCO 195.22 produces a harsh result under the
circumstances of this case. I agree with the trial court’s prudent determination that the
issue of penalties and interest has not been fully vetted in the administrative process. I
would affirm the trial court’s decision remanding this issue for further hearing and
clarification so as to achieve an equitable result.
{¶76} I would also affirm the trial court’s finding regarding Beachland’s
president’s personal liability. The trial court reasoned that CCO Chapter 195 does not
define “Fiscal Officer,” nor does it provide that the Fiscal Officer is the responsible party.
All of the documents Ms. Barber signed were in her capacity as the Corporation’s
“President.” Furthermore, the Board found personal liability based on R.C. Chapter
5739 (Ohio Sales Tax). The trial court rejected the Board’s reasoning because Ms. Barber
was not assessed penalties or prosecuted under Section 5739. I agree.
{¶77} For these reasons, I would affirm the judgment of the trial court.