SSN II, Ltd. v. Warren Cty. Bd. of Revision

[Cite as SSN II, Ltd. v. Warren Cty. Bd. of Revision, 2013-Ohio-1112.]
IN THE COURT OF APPEALS
TWELFTH APPELLATE DISTRICT OF OHIO
WARREN COUNTY
SSN II, LTD., et al., :
CASE NO. CA2012-04-037
Plaintiffs-Appellants, :
OPINION
: 3/25/2013
- vs -
:
WARREN COUNTY :
BOARD OF REVISION, et al.,
:
Defendants-Appellees.
:
CIVIL APPEAL FROM WARREN COUNTY COURT OF COMMON PLEAS
Case No. 10CV78534
Robert W. Cettel, The Drees Center, 7265 Kenwood Road, Suite 210, Cincinnati, Ohio
45236, for plaintiffs-appellants
David P. Fornshell, Warren County Prosecuting Attorney, Michael Greer, 500 Justice Drive,
Lebanon, Ohio 45036, for defendants-appellees
S. POWELL, J.
{¶ 1} Plaintiffs-appellants, SSN II, LTD and Randal R. Sadler, trustee, appeal from a
decision in the Warren County Court of Common Pleas affirming two administrative decisions
of the Warren County Board of Revision regarding valuation of properties. For the reasons
outlined below, we affirm the decision of the common pleas court.
Warren CA2012-04-037
{¶ 2} SSN II and Sadler are owners of two parcels of land located in Warren County
that collectively form the 18-hole Clearcreek Par 3 Golf Course. Both parcels contain certain
"golf features," which appellants specify as teeing grounds, cart paths, sprinkler systems,
drainage systems, water hazards such as ponds and streams, fairways, bunkers, roughs,
putting greens, and holes. The parcel owned by Sadler is 32.2230 acres and contains holes
1 through 9, with cart paths on holes 1 through 3. The tees and greens have automatic
sprinkler systems, and there is a three-acre lake. The parcel owned by SSN II is 53.1865
acres and contains holes 10 through 18. There are cart paths on holes 10 through 13 and on
holes 17 and 18. The tees and greens have automatic sprinkler systems. Also located on
SSN II's parcel is a club house with pro shop, a parking lot, cart storage building, a driving
range, and a canopy deck that is used by customers to hit golf balls ("driving range canopy
deck").
{¶ 3} In 2009, the Warren County Auditor valued the properties. Appellants appealed
the auditor's valuation to the Warren County Board of Revision ("BOR"). Appellants alleged
in their complaints that the properties' valuations should be reduced because certain aspects
of the properties should have been classified as business fixtures under R.C. 5701.03, rather
than real property under R.C. 5701.02. Following a hearing, the BOR refused to grant any
reduction in valuation for Sadler's property, and only slightly reduced the valuation of SSN II's
property.
{¶ 4} Appellants appealed the BOR decision to the Warren County Court of Common
Pleas. Appellants again argued that certain aspects of the property were erroneously
classified as real property, including golf features. Appellants also contended that the driving
range canopy deck was erroneously classified as real property.
{¶ 5} At the common pleas court level, the magistrate found that the tees, cart paths,
water hazards, fairways, bunkers, roughs, and holes fell under the definition of real property
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and did not constitute business fixtures. Additionally, the magistrate found that the driving
range canopy deck constituted an improvement, which is classified as real property. Finally,
the magistrate found that the underground sprinkler systems could be classified as personal
property, but that the record was devoid of any valuation of the sprinkler systems to show the
degree the auditor's value should be reduced. Appellants filed an objection to the
magistrate's decision. The judge overruled the objection, and affirmed the magistrate's
decision.
{¶ 6} Appellants now appeal, and assert two assignments of error for review.
{¶ 7} Assignment of Error No. 1:
{¶ 8} THE TRIAL COURT ERRED BY NOT MAKING FINDINGS OF FACTS AND
CONCLUSIONS OF LAW CONSISTENT WITH STATUTORY LAW AND THE SUPREME
COURT'S DICTA IN FUNTIME, INC. VS. WILKINS, TAX COMMISSIONER BY NOT
PROPERLY APPLYING THE OTHERWISE SPECIFIED TEST AND THE DECISIVE TEST
TO THE GOLF COURSE FEATURES OF THE PROPERTY; AND, NOT FINDING THAT
GOLF COURSE FEATURES SHOULD NOT BE TAXED AS REAL PROPERTY.
{¶ 9} Appellants argue that the golf features and driving range canopy deck were
improperly classified as real property, when in fact, they constitute personal property.
Appellants assert that these aspects are not real property because they fall under the
"otherwise specified" category outlined by R.C. 5701.02 and 5701.03 and are devoted
primarily to the golf business. We disagree.
{¶ 10} Under R.C. 5717.05, an appeal from a county board of revision may be taken
directly to the court of common pleas. Determining the true value of property on appeal from
a board-of-revision decision is a question of fact for the common pleas court after performing
an independent investigation and reevaluation of the board's value determination. R.C.
5717.05; Black v. Cuyahoga Cty. Bd. of Revision, 16 Ohio St. 3d 11 (1985), paragraph one of
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the syllabus. Nevertheless, a taxpayer has the initial burden and obligation to prove the right
to a reduction. R.C. 5717.01, et seq.; Eastbrook Farms, Inc. v. Warren Cty. Bd. of Revision,
194 Ohio App. 3d 193, 2011-Ohio-2103, ¶ 18 (12th Dist.).
{¶ 11} As fact-finder, the court must "independently weigh and evaluate all evidence
properly before it." Black at 13. "[T]he court's review of the evidence should be thorough
and comprehensive, and should ensure that its final determination is more than a mere
rubber stamping of the board of revision's determination." Id. at 13-14. In essence, R.C.
5717.05 does not provide for a trial de novo at the common pleas court level, but does
contemplate a decision de novo. Id. at 14. A common pleas court has broad discretion to
weigh the evidence and judge the credibility of witnesses. Amsdell v. Cuyahoga Cty. Bd. of
Revision, 69 Ohio St. 3d 572, 574 (1994). Once a common pleas court makes its
determination, it will not be disturbed on appeal absent an abuse of discretion. Black at 14;
Eastbrook at ¶ 17.
{¶ 12} Whether property is classified as real property or as personal property for tax
purposes depends on the interaction of two statutes, R.C. 5701.02 and 5701.03. R.C.
5701.02 defines real property and provides:
(A) "Real property," "realty," and "land" include land itself,
whether laid out in town lots or otherwise, all growing crops,
including deciduous and evergreen trees, plants, and shrubs,
with all things contained therein, and, unless otherwise specified
in this section or section 5701.03 of the Revised Code, all
buildings, structures, improvements, and fixtures of whatever
kind on the land, and all rights and privileges belonging or
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appertaining thereto.
1. Other relevant portions of R.C. 5701.02 include:
(B)(1) "Building" means a permanent fabrication or construction, attached or
affixed to land, consisting of foundations, walls, columns, girders, beams, floors,
and a roof, or some combination of these elemental parts, that is intended as a
habitation or shelter for people or animals or a shelter for tangible personal
property, and that has structural integrity independent of the tangible personal
property, if any, it is designed to shelter. "Building" includes a manufactured or
mobile home building as defined in division (B)(2) of this section.
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{¶ 13} R.C. 5701.03(A) defines personal property, which "includes every tangible thing
that is the subject of ownership, whether animate or inanimate, including a business fixture,
and that does not constitute real property as defined in section 5701.02 of the Revised Code.
* * *."
{¶ 14} In Funtime, Inc. v. Wilkins, 105 Ohio St. 3d 74, 2004-Ohio-6890, ¶ 33, the Ohio
Supreme Court outlined the interaction between these two statutes, and stated:
Reading the two statutes in pari materia and harmonizing them
to give effect to the language of both statutes, we find that the
correct order of application is as follows: first, determine whether
the item meets the requirements of one of the definitions of real
property set forth in R.C. 5701.02. If the item does not, then it is
personal property. If the item fits a definition of real property in
R.C. 5701.02, it is real property unless it is "otherwise specified"
in R.C. 5701.03. If an item is "otherwise specified" under R.C.
5701.03, it is personal property.
{¶ 15} R.C. 5701.02 essentially provides that land itself, including things growing on
the land, is real property. Furthermore, it provides that virtually anything on land, including
buildings, structures, improvements, and fixtures, should be classified as real property unless
it is otherwise specified in R.C. 5701.03. One of the "otherwise specified" categories is a
business fixture. R.C. 5701.03(B) addresses "business fixture," which is (1) "an item of
tangible personal property that has become permanently attached or affixed to the land or to
***
(C) "Fixture" means an item of tangible personal property that has become
permanently attached or affixed to the land or to a building, structure, or
improvement, and that primarily benefits the realty and not the business, if any,
conducted by the occupant on the premises.
(D) "Improvement" means, with respect to a building or structure, a permanent
addition, enlargement, or alteration that, had it been constructed at the same time
as the building or structure, would have been considered a part of the building or
structure.
(E) "Structure" means a permanent fabrication or construction, other than a
building, that is attached or affixed to land, and that increases or enhances
utilization or enjoyment of the land. "Structure" includes, but is not limited to,
bridges, trestles, dams, storage silos for agricultural products, fences, and walls.
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a building * * *," and (2) "primarily benefits the business * * *," or, alternatively, "those
portions of buildings, structures, and improvements that are specially designed, constructed,
and used for the business conducted in the building, structure, or improvement, including, but
not limited to, foundations and supports for machinery and equipment."2
{¶ 16} There is very little case law citing Funtime, and no subsequent case law directly
on point regarding the interaction between these two statutes in the context of business
fixtures. Nevertheless, there are several administrative decisions from the Board of Tax
Appeals ("BTA") that provide guidance, and which the common pleas court relied upon when
making its determination. In interpreting R.C. 5701.03(B), the BTA has found that when an
aspect or item is not personal property, then it is unnecessary to consider whether that
aspect or item primarily benefits the business. Polaris Amphitheater Concerts, Inc. v.
Delaware Cty. Bd. of Revision, BTA No. 2004-V-1294, 2007 WL 283010 (Jan. 26, 2007),
rev'd on other grounds, 118 Ohio St. 3d 330, 2008-Ohio-2454; Inverness Club v. Wilkins, BTA
No. 2004-R-338, 2007 WL 1453730 (May 11, 2007). Furthermore, the BTA has rejected a
broad interpretation of the alternative definition of "business fixture" and has stated that "[t]he
limited inclusion of language by the legislature in the definition of business fixture permits
2. The full text of R.C. 5701.03(B) is as follows:
"Business fixture" means an item of tangible personal property that has become
permanently attached or affixed to the land or to a building, structure, or
improvement, and that primarily benefits the business conducted by the occupant
on the premises and not the realty. "Business fixture" includes, but is not limited
to, machinery, equipment, signs, storage bins and tanks, whether above or below
ground, and broadcasting, transportation, transmission, and distribution systems,
whether above or below ground. "Business fixture" also means those portions of
buildings, structures, and improvements that are specially designed, constructed,
and used for the business conducted in the building, structure, or improvement,
including, but not limited to, foundations and supports for machinery and
equipment. "Business fixture" does not include fixtures that are common to
buildings, including, but not limited to, heating, ventilation, and air conditioning
systems primarily used to control the environment for people or animals, tanks,
towers, and lines for potable water or water for fire control, electrical and
communication lines, and other fixtures that primarily benefit the realty and not the
business conducted by the occupant on the premises.
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foundations and supports specifically designed for machinery, equipment, and the like to be
classified as business fixtures." (Emphasis added.) Polaris at *6.
{¶ 17} We discuss the particular aspects of the golf course in the same order as the
common pleas court for ease of analysis. First, we address the golf features absent the
sprinkler systems, which we collectively refer to as golf features. In Inverness, the BTA
found golf features to be land itself under R.C. 5701.02(A). In considering whether the golf
features were "otherwise specified," particularly as a business fixture under R.C. 5701.03(B),
the BTA found that the golf features were "more akin to permanent fabrication and
construction to the property rather than personal property that has become permanently
attached to the land." Id. at *6. In fact, the BTA found that the golf features had no physical
existence outside of the land itself because they could not be removed from the land without
causing the land significant injury. Id. The BTA found that because the golf features did not
meet the definition of personal property, it was unnecessary to determine whether the golf
features primarily benefited the business. Id. This position was reiterated by the BTA in
SSN II, Ltd. v. Warren Cty. Bd. of Revision, BTA Nos. 2005-V-1441, 2005-V-1442, 2008 WL
509264 (Feb. 15, 2008), dealing with the same parties and three-par golf course as in this
case.
{¶ 18} In this case, the common pleas court found that similar to Inverness, the golf
features were "more akin to permanent fabrication and construction to the property rather
than personal property that has become permanently attached to the land." The common
pleas court also found that the golf features are not removable from the land and add value
to the real estate itself. The plain language of R.C. 5701.02(A) provides that land itself is not
subject to the "otherwise specified" clause. Furthermore, the plain language of R.C.
5701.03(B) necessitates a business fixture to be an item of tangible personal property,
unless it is some type of foundation or support. Because the golf features were incorporated
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into the real estate, the golf features were not items of tangible personal property, negating
the need to consider whether the golf features were primarily used for business. Additionally,
such golf features benefit the land. Consequently, with the golf features being akin to the
land itself, we cannot say the common pleas court abused its discretion by classifying the
golf features as real property.
{¶ 19} Next, we address the driving range canopy deck. The common pleas court
found the driving range canopy deck to be an improvement. An improvement is generally
classified as real property and "means, with respect to a building or structure, a permanent
addition, enlargement, or alteration that, had it been constructed at the same time as the
building or structure, would have been considered a part of the building or structure." R.C.
5701.02(D). The common pleas court also found that the driving range canopy deck did not
meet the "otherwise specified" test as it is an improvement and not a fixture. The common
pleas court further found, assuming arguendo, that the driving range canopy deck was
classified as a fixture, it did not constitute a business fixture because decks and canopies are
common to buildings. Consequently, the common pleas court found that the driving range
canopy deck is exempt from the definition of business fixture. While we find this
classification more tenuous, the driving range canopy deck can lend itself to benefits of the
realty rather than the business. Accordingly, we find that the common pleas court did not
abuse its discretion in classifying the driving range canopy deck as real property.
{¶ 20} Last, we discuss the sprinkler systems. When a taxpayer fails to separately
value items that may be classified as tangible personal property, the taxpayer fails to meet
the burden of proving a right to a reduction. York Temple Country Club v. Franklin Cty. Bd.
of Revision, BTA No. 2006-R-50, 2008 WL 1771265 (April 8, 2008); Goecke Ents., Inc. v.
Greene Cty. Bd. of Revision, BTA Nos. 2005-H-598, 2006-H-465, 2007 WL 3226538 (Oct.
19, 2007). The common pleas court found that the sprinkler systems could fall into the
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"otherwise specified" category and meet the definition of business fixture. However, the
common pleas court held that appellants failed to meet their burden of showing they were
entitled to a reduction because they did not include any separate valuation of the sprinkler
systems. Because the burden is upon the taxpayer to prove a right to a reduction, the
common pleas court did not abuse its discretion in failing to alter the valuation of the
property. Appellants' first assignment of error is overruled.
{¶ 21} Assignment of Error No. 2:
{¶ 22} THE TRIAL COURT ERRED BY CREATING ITS OWN ELEMENT NOT
REQUIRED BY STATUTE AND OTHERWISE ERRED BY FINDING THAT THE GOLF
COURSE FEATURES WERE NOT A [SIC] BUSINESS FEATURES BECAUSE
"APPELLANTS FAIL TO IDENTIFY HOW, PRECISELY, THESE THINGS AT ONE TIME
[WERE] TANGIBLE PERSONAL PROPERTY."
{¶ 23} Appellants argue that the common pleas court erred when it required them to
show how golf features were at one time tangible personal property. They argue this was
improper because R.C. 5701.03(B) does not require an item to be considered tangible
personal property to fall within the definition of "business fixture." As discussed above, R.C.
5701.03(B) generally requires an item to be tangible personal property to qualify as a
business fixture. The BTA has rejected a broad interpretation of the alternative definition that
does not require an item to first be tangible personal property and has stated that "[t]he
limited inclusion of language by the legislature in the definition of business fixture permits
foundations and supports specifically designed for machinery, equipment, and the like to be
classified as business fixtures." Polaris, BTA No. 2004-V-1294, 2007 WL 283010, at *6. In
any event, in this case, the golf features were more akin to the land itself, rather than a
portion of a building, structure, or improvement. Consequently, we do not find that the
common pleas court erred in failing to find the alternative definition applicable in this case.
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Appellants' second assignment of error is overruled.
{¶ 24} Judgment affirmed.
RINGLAND, P.J., and M. POWELL, J., concur.
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