[Cite as Madison Route 20, L.L.C. v. Lake Cty. Bd. of Revision, 2014-Ohio-3183.]


                                   IN THE COURT OF APPEALS

                               ELEVENTH APPELLATE DISTRICT

                                        LAKE COUNTY, OHIO


MADISON ROUTE 20, LLC, et al.,                          :           OPINION

                 Appellants,                            :
                                                                    CASE NO. 2013-L-019
        - vs -                                          :

LAKE COUNTY BOARD OF                                    :
REVISION, et al.,
                                                        :
                 Appellees.
                                                        :


Appeal from the Ohio Board of Tax Appeals, Case No. 2009-Q-2207.

Judgment: Reversed and remanded.


Jodi Littman Tomaszewski and Joshua J. Strickland, Dworken & Bernstein Co., L.P.A.,
60 South Park Place, Painesville, OH 44077 (For Appellants).

Charles E. Coulson, Lake County Prosecutor, and Gianine A. Germano, Assistant
Prosecutor, Lake County Administration Building, 105 Main Street, P.O. Box 490,
Painesville, OH 44077 (For Appellees Lake County Board of Revision and Lake
County Auditor).

Elizabeth Grooms Taylor and Tad Orval Hoover, 527 Portage Trail, Cuyahoga Falls,
OH 44221 (For Appellee Willoughby-Eastlake City School District Board of Education).

Jennifer A. Antoon, Brindza, McIntyre & Seed, LLP, 1111 Superior Avenue, Suite
1025, Cleveland, OH 44114 (For Appellee Mentor Exempted Village School District
Board of Education).


TIMOTHY P. CANNON, P.J.

        {¶1}     Appellants, Madison Route 20, LLC (“Madison”), and Midway Industrial

Campus, Ltd. (“Midway”), appeal from the decision and order of the Ohio Board of Tax
Appeals, affirming the decision of the Lake County Board of Revision regarding the

valuation of appellants’ real property. At issue is whether appellants established that

certain real property it owns should be valued at $0.00 (“zero”) for purposes of

assessing property taxes. Appellants assert the property contains wetland areas and

that they have been issued a cease and desist order by the Army Corps of Engineers

restricting the use of the applicable wetland areas.           For the following reasons, we

reverse the decision of the Board of Tax Appeals and remand the case for proceedings

consistent with this opinion.

       {¶2}    On March 31, 2009, appellants filed separate complaints with the Lake

County Board of Revision (“BOR”) regarding their 2008 real property tax valuations for

multiple parcels of real property. In each of the complaints, appellants asserted that the

valuation should have been zero, because the properties have “no marketability.”1

       {¶3}    The subject parcels were part of an approximately 215- to 250-acre area

of land located in Willoughby and Mentor, Ohio, which appellants planned to develop for

commercial purposes. In 2004, however, appellants received a cease and desist order

for all activities within “Waters of the United States” from the Army Corps of Engineers,

due to the alleged destruction of wetland areas in violation of federal laws.                 The

complaints asserted that the property had been devaluated due to this order.

       {¶4}    Appellees, the Mentor Exempted Village School District Board of

Education and the Willoughby-Eastlake City School District Board of Education, filed

counter-complaints, asserting that the valuation of the property was correct.



1. The Madison Parcels were given a fair market value of over $400,000 in 2008 and over $700,000 in
2009. The Midway Parcels were given a 2008 value of over $1.8 million and a value of almost $1.6
million in 2009.


                                                2
       {¶5}   During the BOR hearings on this matter, appellants argued that the

property value should be reduced to a nominal or zero value based on the Army Corps

of Engineers’ restrictions on the property.            Eric Calabrese, identified as a

representative/agent of appellants, testified that appellants purchased the property

around the year 2000 with the intent of jointly developing it for commercial purposes.

He further testified they were unable to proceed with development because of the 2004

cease and desist order issued by the Army Corps of Engineers.

       {¶6}   The cease and desist letter was presented as evidence. This letter stated

that the area of concern includes “approximately 250 acres of property” and that work

had taken place in areas designated as federal wetlands located within the property

without proper authorization from the Army Corps. Based on the history of the project

as set forth in the letter, the chief of the enforcement division indicated it appeared to be

“a knowing and wilfull violation of Federal Law.” As a result, the Army Corps ordered

the property owners to “cease and desist all activities within Waters of the United States

at this site.” There is no indication in the letter what portion of the 250 acres the Army

Corps considered to be “within Waters of the United States.”

       {¶7}   Calabrese testified that the property owners believe this order prevented

essentially any activity on the property, including development and construction, and

that the property could not be sold under this order. He also explained that appellants

had been unsuccessful in having the order lifted. He believed the property was worth

either zero or “close to zero.”




                                             3
       {¶8}   The Mentor Exempted Village School District Board of Education

presented an exhibit including the sales prices of various vacant industrial lots located in

Mentor/Painesville Township, which did not have a similar wetland condition.

       {¶9}   The BOR issued decisions on August 11, 2009, in which it declined to

adjust the appraised valuations of the parcels.

       {¶10} Appellants subsequently filed separate complaints on March 30, 2010, for

the 2009 tax year. A hearing was held on July 27, 2010, at which Calabrese gave

similar testimony regarding the value of the property and the property owners’ inability

to proceed with development and construction. Appellees presented a 2006 appraisal

valuing a portion of appellants’ property, which included over 102 acres, at $13.15

million. The appraisal, however, was based on the assumption that no wetlands existed

on the property which would negatively impact its value.

       {¶11} On August 4, 2010, the BOR again declined to adjust the value of the

parcels. Appellants appealed both the 2009 and 2010 BOR decisions to the Ohio Board

of Tax Appeals (“BTA”), and the appeals were consolidated.

       {¶12} A hearing was held before the BTA on June 4, 2012. Calabrese was the

only witness and provided testimony which was similar to that given before the BOR.

Calabrese stated he was a “member of the [appellants’] entity.” He asserted there had

been no resolution of the wetlands matter, although appellants took actions to overturn

the determination of the Army Corps of Engineers. He explained that, in his opinion, the

property was worthless. Calabrese stated that he did not believe the entire property

was a wetland and that he had no documentation from the government stating it

believed the entire area was a wetland.




                                             4
      {¶13} Both parties filed post-hearing briefs outlining their positions.

      {¶14} On January 23, 2013, the BTA issued a decision and order, in which it

determined that there was “insufficient evidence to support appellants’ claim of value,”

and there was no specific information regarding the effect of the wetlands on the

property value. It found that although the Army Corps of Engineers’ cease and desist

order would “likely affect the value of the property * * * the evidence provided does not

allow this board to make a determination as to what that effect is” on the parcels at

issue. It found that while appellants attached a “general location map,” nowhere in the

record could they find a delineation of which areas were affected by the cease and

desist order. The BTA also noted it found no support in the record to justify departing

from previous decisions “rejecting claims that real property is worthless or has zero

value.”    As appellants failed to meet their burden of proof, the BTA affirmed the

decisions of the BOR, upholding the values previously determined by the Lake County

Auditor.

      {¶15} Appellants timely appeal and raise the following assignment of error:

              The Board of Tax Appeals erred in failing to hold that the taxable
              value of real property which the federal government has determined
              to be federally protected wetlands, and which is subject to a cease
              and desist order from the Army Corp. of Engineers prohibiting any
              and all use of the property is zero, or, alternatively, that the value is
              minimal as vacant undeveloped agricultural land and setting the
              value of Appellants’ Property as such.

      {¶16} The BTA “‘is responsible for determining factual issues and, if the record

contains reliable and probative support for these BTA determinations,’” we will affirm.

Satullo v. Wilkins, 111 Ohio St.3d 399, 2006-Ohio-5856, ¶14, quoting Am. Natl. Can Co.

v. Tracy, 72 Ohio St.3d 150, 152 (1995). Conversely, we “‘will not hesitate to reverse a




                                              5
BTA decision that is based on an incorrect legal conclusion.’” Id., quoting Gahanna-

Jefferson Local School Dist. Bd. of Edn. v. Zaino, 93 Ohio St.3d 231, 232 (2001). “[T]he

[BTA] has wide discretion in determining the weight to be given the evidence and the

credibility of witnesses that come before it.” (Citations omitted.) Kister v. Ashtabula

Cty. Bd. of Revision, 11th Dist. Ashtabula No. 2007-A-0050, 2007-Ohio-6943, ¶12.

      {¶17} The BTA’s decision in a valuation case such as the present matter will be

reversed “only when it affirmatively appears from the record that such decision is

unreasonable or unlawful.” Throckmorton v. Hamilton Cty. Bd. of Revision, 75 Ohio

St.3d 227, 229 (1996). “The fair market value of property for tax purposes is a question

of fact, the determination of which is primarily within the province of the taxing

authorities.” DAK, PLL v. Franklin Cty. Bd. of Revision, 105 Ohio St.3d 84, 2005-Ohio-

573, ¶14.

      {¶18} Appellants argue that the BTA erred in failing to find that their property had

either zero value or a minimal value and that they introduced sufficient evidence to

support this valuation. Further, they assert this court should adopt, “as a legal standard,

that wetlands in Ohio, especially those subject to a cease and desist Order from a

Federal Agency, possess no value or have a minimal value as agricultural lands.”

      {¶19} The Mentor Exempted Village School District Board of Education argues

that appellants failed to meet their burden to prove that the value of the property was

zero, that the testimony of Calabrese, as a member of the property’s ownership, holds

an inherent bias, and that the evidence of value is not supported by additional,

independent evidence.




                                            6
       {¶20} The Willoughby-Eastlake City School District Board of Education asserts

that, although there was evidence that wetlands existed on appellants’ property, no

evidence of the value of the property was presented. It also contends this court cannot

conclude that wetlands are always valueless, because property containing wetlands can

be properly valued using appropriate appraisal methodologies.

       {¶21} The BTA concluded it was not clear that all of the property was deemed

federal wetlands and, therefore, affected by the cease and desist order.                      This

conclusion is supported by the record. The letter noted the area of concern was “250

acres of property associated with the Riverside Commons development.” However, the

cease and desist order applied to “activities within Waters of the United States.” It is

clear the entire 250 acres is not “within the Waters of the United States.” It is not clear

how much of the acreage fits this definition.             Furthermore, appellees presented

evidence before the BTA of a mortgage placed on the property in March 2010 securing

notes totaling 6.5 million dollars.2 The placing of the mortgage on the property and

issuance of the corresponding loan, made well after the implementation of the cease

and desist order, suggests that the property does in fact have some value.

       {¶22} Appellants concede that if the cease and desist order was removed or

modified, the value of the property could be restored, at least to some extent.

Nevertheless, appellants maintain that the final determination of the property’s wetland

status has no bearing on the value of the property in the present matter. However, even

if the value of the wetlands was permanent, it has been previously recognized that

wetlands do have some value in the marketplace. Streetsboro City School Dist. Bd. of


2. All of the notes under the original mortgage appear to have been made in 2006, approximately two
years after the cease and desist letter was issued.


                                                7
Edn. v. Portage Cty. Bd. of Revision, BTA No. 2005-T-705, 2008 Ohio Tax LEXIS 309,

*7 (Feb. 22, 2008); see also Girman v. Medina Cty. Bd. of Revision, BTA No. 2009-A-

480, 2011 Ohio Tax LEXIS 2291, *5 (Nov. 15, 2011) (noting longstanding precedent

that property has value greater than zero). Appellants attempted to distinguish this

precedent by suggesting the property involved in prior cases remained usable, but that

in this case they are prohibited from selling the property even to conservation groups.

However, the BTA noted there was nothing in the cease and desist letter prohibiting a

sale.

        {¶23} It was neither unreasonable nor unlawful for the BTA to conclude that

appellants failed to meet their burden of proving that the value of the property was zero.

However, in this case, that does not end the inquiry. The BTA acknowledged the cease

and desist order had an impact on the value of the property:            “We agree that the

restrictions imposed on the use of the subject property by the Army Corps of Engineers’

cease and desist order likely affect the value of the property.” Although the BTA upheld

the auditor’s valuation, it is not clear the auditor’s valuation took into account the

restrictions recognized by the BTA as affecting the value. The question is whether it

was proper for the BTA to uphold the auditor’s valuation when sufficient evidence was

presented to suggest it did not reflect the “true value” of the property.

        {¶24} Recently, the Ohio Supreme Court addressed this question in Dublin City

School Bd. of Educ. v. Franklin Cty. Bd. of Revision, __ Ohio St.3d __, 2013-Ohio-4543,

on reconsideration, __ Ohio St.3d __, 2014-Ohio-1940.           In that case, the Board of

Revision adopted a valuation method proposed by the property owner. The Board of

Education appealed to the BTA. The property owner’s valuation method was rejected,




                                              8
and the BTA ordered reinstatement of the auditor’s valuation.           However, the Court

stated that reversion to the auditor’s value in that case was not proper. “It is clear from

a review of the record that the auditor’s valuation of the property was too high.

Specifically, there is no evidence indicating that the auditor accounted for the unfinished

state of the units or the units’ depreciation in value due to market conditions * * *.” Id. at

¶21.

       {¶25} The same logic applies to these unique parcels. Here, the cease and

desist order has a clear impact on the value of the property. Neither of the valuations

presented by the boards of education include an assessment of the restrictions imposed

by the order. There is also no indication that the auditor took the cease and desist order

into account or even knew of its existence. As the Court noted in Dublin, the legal

directive to the auditor is to arrive at the “true value in money” of the property in

question. Id. at ¶32, citing R.C. 5713.01(B).

       {¶26} Generally, the BZA is justified in retaining the auditor’s valuation where the

property owner has not met its burden in support of its claimed value. However, “an

exception to this general rule arises when the record affirmatively negates the validity of

the county’s valuation.” Dublin at ¶20. While we do not agree the value is zero, there is

certainly evidence to suggest the property is not useable at this time and, accordingly,

the value is significantly impacted.

       {¶27} Therefore, this matter is remanded to the BZA for the purpose of

determining the true value of the parcels in question. If necessary, the BZA may order

the presentation of additional evidence to assist in its determination. See R.C. 5317.01.




                                              9
       {¶28} The decision of the Ohio Board of Tax Appeals is reversed. We remand

for further proceedings consistent with this opinion.



CYNTHIA WESTCOTT RICE, J., concurs,

DIANE V. GRENDELL, J., concurs in judgment only in part and dissents in part, with a
Dissenting Opinion.


                                ____________________


DIANE V. GRENDELL, J., concurs in judgment only in part and dissents in part, with a
Dissenting Opinion.

       {¶29} I concur in judgment only as to the majority’s decision to reverse the Ohio

Board of Tax Appeals’ determination regarding the valuation of the appellants’ property.

While the majority concludes that the BTA, upon remand, should reconsider its prior

valuation and decide “the true value of the parcels in question,” such a remand is

unwarranted and unnecessary. Since it is undisputed that wetlands exist on appellants’

property and the property is subject to a cease and desist order from the Army Corps of

Engineers, the property lacks value as a matter of law.

       {¶30} In reaching this conclusion, it must be emphasized that the property’s lack

of value arises primarily because it was subject to a cease and desist order since 2004,

detailed in a letter from the Army Corps of Engineers, which prevented “all activities

within the Waters of the United States.” The letter described the “area of concern” as

including approximately 250 acres of property. Calabrese, the representative/agent of

the appellants who was familiar with the property and the ongoing wetlands dispute,

testified on multiple occasions that the cease and desist letter essentially barred any




                                            10
and all actions by appellants, including construction, development, and the sale of the

property, and that they were “handcuffed.” The fact that appellants halted construction

and all other activities on a potentially lucrative development project based on this order

evidences its seriousness and supports the appellants’ contention that the property

cannot be utilized. Given this evidence that activity must cease on the property, the

appellants established a case that it had absolutely no value to them and was rendered

worthless.

       {¶31} Under the majority’s holding, the BTA is in the position to potentially

determine that the property has significant value.        To allow the BTA to order the

appellants to continue paying a potentially large sum of taxes on a property which they

are prohibited from using in any manner is an unjust and inappropriate result, and is un-

American.

       {¶32} The majority asserts that it is not clear that the entire 250 acres are “within

the Waters of the United States.”       Supra at ¶ 22.     As explained above, the letter

specifically stated its “area of concern”: “approximately 250 acres,” which would amount

to all of the property at issue for tax purposes. The letter also notes that “the entire site”

would be posted with cease and desist signs. The letter does not state that only part of

the area is a concern, such that questions would arise regarding the value of the

remaining portions. The critical issue is not only whether the entire 250 acres were

covered by wetlands, but that the appellants were ordered to stop activity on all 250

acres, a conclusion which is supported by the evidence and testimony.

       {¶33} The existence of this cease and desist order also distinguishes this case

from Streetsboro, supra, cited by the majority, since the issue is not solely the existence




                                             11
of a wetland condition but also the appellants’ inability to use the property under the

cease and desist order. In the present matter, the order itself renders the property

valueless to appellants.

      {¶34} The conclusion that the property could not be utilized by appellants, and,

therefore, cannot be found to have value, is also supported by federal law. “Property

rights in wetlands are * * * limited by federal statute.” Parkview Corp. v. Dept. of Army,

Corps of Engineers, 490 F.Supp. 1278, 1284 (E.D.Wis.1980). When interference with a

wetland occurs, such as the construction and development in the present case, which

results in the addition of fill or other materials to the wetland area, the Army Corps of

Engineers is permitted to issue “a cease and desist order prohibiting any further work.”

(Emphasis added.) United States v. Osborne, N.D.Ohio No. 1:11CV1029, 2013 U.S.

Dist. LEXIS 43423, 7 (Mar. 27, 2013), citing 33 C.F.R. 326.3(c)(1). Failure to cease

work on the property can result in penalties to the owner. Natl. Assn. of Home Builders

v. United States EPA, 731 F.Supp.2d 50, 52 (D.C.2010). Although the Army Corps of

Engineers may subsequently issue a permit for work on a wetland, it is not always

required to do so. See Stoeco Dev., Ltd. v. Dept. of Army Corps of Engineers, 701

F.Supp. 1075, 1080 (N.J.1988).         If a landowner is prohibited from performing

development or other work on a property and is unable to subsequently obtain a permit,

this can render the property “all but worthless.” Formanek v. United States, 26 Cl.Ct.

332, 340 (1992).

      {¶35} Under this law, a landowner can be ordered to stop essentially all

beneficial or profitable use of a property, or be subject to penalties, until and unless a

permit can be obtained. As one court has noted, when a property cannot be developed




                                           12
in its present condition, approval for construction cannot be obtained or is unlikely at the

time, and there is no way to determine when the permit process may be completed,

such factors must be taken into consideration when calculating the property value for

the purposes of the tax valuation. Gilmour Properties v. Bd. of Assessment Appeals,

873 A.2d 64, 71 (Pa.Commw.2005).

       {¶36} The majority notes that appellants conceded that the value of the property

could be restored if the order was removed or modified. Supra at ¶ 23. As explained

extensively above, the property had no value during the tax years at issue. Appellants

have attempted to have the order lifted since it was issued in 2004, with no success.

Allowing appellants to continue paying a property tax on a valueless property simply

because it may have value in the future is entirely unfair to appellants and should not

provide the basis for a determination in favor of appellees. See Olmsted Falls Bd. of

Edn. v. Cuyahoga Cty. Bd. of Revision, 122 Ohio St.3d 134, 2009-Ohio-2461, 909

N.E.2d 597, ¶ 20 (“[a]s a matter of both case law and elementary principles, each tax

year should be determined based on the evidence presented to the assessor that

pertains to that year”).

       {¶37} The majority also asserts that the existence of a mortgage placed on the

property supports a conclusion that the property does have value. No explanation is

provided regarding how this reflects its value or whether the existence of the cease and

desist order and the wetlands were taken into account at the time of the mortgage. A

mortgage on a valueless parcel of real property does not make the property more

valuable; rather, it simply makes the mortgage worthless.




                                            13
       {¶38} In sum, although the majority of this court clairvoyantly appears to believe

that appellants’ property must have some value, a logical use for the property which

would provide such value is not advanced. A property that cannot be used in any

manner at the time is of no value to an owner. To hold otherwise in this matter results

in a deprivation of appellants’ rights and is simply unjust. Thus, there is no basis to

remand to the BTA for the determination of a new value, since it has already rejected

the appellants’ contention and evidence that the property lacks value.

       {¶39} For the foregoing reasons, I concur in judgment only as to the reversal of

the BTA’s valuation and dissent from the conclusion that a remand is necessary in this

case. I would reverse solely on the ground that the properly is valueless as a matter of

law.




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