[Cite as HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision, 124 Ohio St.3d 481, 2010-Ohio-687.]




 HIN, L.L.C., APPELLEE, v. CUYAHOGA COUNTY BOARD OF REVISION ET AL.,
           APPELLEES; BEDFORD BOARD OF EDUCATION, APPELLANT.
              [Cite as HIN, L.L.C. v. Cuyahoga Cty. Bd. of Revision,
                        124 Ohio St.3d 481, 2010-Ohio-687.]
Taxation — R.C. 5713.03 — When a property has been the subject of two arm’s-
        length sales between a willing seller and a willing buyer within a
        reasonable length of time either before or after the tax lien date, the sale
        occurring closer in time to the tax lien date establishes the true value of
        the property for taxation purposes — In determining the date a sale of
        property occurs for the purpose of establishing the true value of property
        pursuant to R.C. 5713.03, the auditor should use the date that the real
        property conveyance fee statement is filed in the auditor’s office as the
        sale date of the property.
 (No. 2008-2408 — Submitted November 18, 2009 — Decided March 4, 2010.)
             APPEAL from the Board of Tax Appeals, No. 2006-A-712.
                                 __________________
                               SYLLABUS OF THE COURT
1.      When a property has been the subject of two arm’s-length sales between a
        willing seller and a willing buyer within a reasonable length of time either
        before or after the tax lien date, the sale occurring closer in time to the tax
        lien date establishes the true value of the property for taxation purposes.
2.      In determining the date a sale of property occurs, only for purposes of
        establishing the true value of property pursuant to R.C. 5713.03, the
        auditor should use the date that the real property conveyance fee statement
        is filed in the auditor’s office as the sale date of the property.
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        O’DONNELL, J.
        {¶ 1} In this case, two sales of the same property occurred within a few
months of the tax lien date, one prior and one subsequent to it, and we are called
upon to provide guidance as to which sale better represents the true value of the
property and to clarify when each sale occurred and what date the auditor should
use to determine true value. Specifically, we address whether the Board of Tax
Appeals (“BTA”) correctly determined the true value of the property, consisting
of 34.5784 acres improved with a 78,500-square-foot office building, located at
17500 Rockside Road in Bedford, Ohio, to be $4,790,000, the amount that the
BTA calculated that JBK Cuyahoga Holdings L.L.C. paid for it in December
2003, before the tax lien date, as opposed to $7,400,000, the amount that HIN,
L.L.C., paid for it in April 2004, several months after the tax lien date.
        {¶ 2} R.C. 5713.03 provides that in determining the true value of a
parcel of real estate that has been the subject of an arm’s-length sale between a
willing seller and a willing buyer within a reasonable length of time either before
or after the tax lien date, the auditor shall consider the sale price to be the true
value for taxation purposes. Two specific issues are presented in this case: first,
when a property has been the subject of two transfers within a few months of the
tax lien date, which of the two sales should be used by the auditor to establish the
property’s true value, and second, whether the auditor should consider the date on
the purchase agreement, the date the deed was signed, the date of the closing, the
date the real property conveyance fee statement is filed in the auditor’s office, or
the date of recording the transfer of the property as the date of sale for taxation
purposes.
        {¶ 3} For purposes of determining the true value of property according to
R.C. 5713.03, the auditor should use the date that the real property conveyance
fee statement is filed in the auditor’s office as the sale date of the property. In this
case, because the December 2003 sale occurred closer in time to the tax lien date




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than the April 2004 sale, the BTA reasonably and lawfully determined the true
value of the property to be $4,790,000, and we therefore affirm that decision.
                         Facts and Procedural History
       {¶ 4} Prior to September 8, 2003, Tops Markets, L.L.C. agreed to sell 36
acres, including the property at issue, to U.S. Bank for $4,900,000. Thereafter,
U.S. Bank agreed to assign its interest in the purchase contract to JBK Properties,
Inc.   At the end of September, Tops Markets and JBK Properties signed a
purchase and sale agreement at the agreed price of $4,900,000; JBK Properties
agreed to purchase the property contingent upon U.S. Bank’s agreement to lease it
and the bank’s ability to obtain various incentives from the city of Bedford. The
parties subsequently amended the agreement to require a closing on or before
December 30, 2003.
       {¶ 5} On November 1, 2003, U.S. Bank agreed to a 15-year, four-month
lease of the property from JBK Cuyahoga Holdings L.L.C. ending on January 31,
2019, with an option to extend the lease for two additional five-year terms. The
lease provided that U.S. Bank would be responsible to pay the real estate taxes,
insurance, maintenance, and utilities for the property, but it also obligated JBK
Cuyahoga to make an upfront, lump-sum payment of $739,470 to the bank for
improvements to the premises and relocation expenses. U.S. Bank subsequently
agreed to pay more rent for the office building in exchange for JBK Cuyahoga’s
consent to terminate a separate lease for the warehouse on a 2.3911-acre parcel,
which JBK Cuyahoga had agreed to build.
       {¶ 6} On December 24, 2003, Thomas M. Fitzgerald, an officer of Tops
Markets, signed deeds to the 34.5784-acre and 2.3911-acre parcels.               JBK
Cuyahoga presented the deeds and the real property conveyance fee statement to
the auditor on December 30, 2003, two days prior to the January 1, 2004 tax lien
date, and recorded the deeds the same day.




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         {¶ 7} Thereafter, in January 2004, in an unrelated situation, Scott
Revolinski, a broker with RFP Commercial, contacted JBK Cuyahoga on behalf
of HIN, L.L.C., a corporation interested in purchasing property with a triple net
lease1 to complete a likekind exchange pursuant to Section 1031, Title 26,
U.S.Code (“1031 Exchange”).2 On February 26, 2004, as amended on March 25,
2004, JBK Cuyahoga accepted an offer from HIN to purchase the 34.5784-acre
parcel for $7,400,000, and on April 1, 2004, JBK Cuyahoga accepted an offer
from HIN to purchase the 2.3911-acre parcel for $110,000. On April 29, 2004,
John Kuhn, principal of JBK Cuyahoga, signed deeds conveying both parcels to
HIN. The next day, HIN presented the deeds and the real property conveyance
fee statement to the auditor and recorded the deeds.
         {¶ 8} The auditor of Cuyahoga County, Frank Russo, assessed the true
value of the 34.5784-acre parcel for tax year 2004 as $7,848,400. HIN objected
and filed an original complaint challenging the valuation of the property with the
Cuyahoga County Board of Revision.                    Subsequently, the Bedford Board of
Education filed a counter-complaint seeking to retain the assessed value. After
considering the evidence, the Cuyahoga County Board of Revision found the true
value to be $7,848,400. HIN then appealed that decision to the BTA.
         {¶ 9} The BTA found that two sales of the property had occurred. The
transfers in the first sale, to JBK Cuyahoga, were recorded on December 30,


1. “Under a triple net lease, the tenant is responsible for paying utilities, maintenance, real estate
taxes, and insurance.” Strongsville Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 112 Ohio St.3d
309, 2007-Ohio-6, 859 N.E.2d 540, ¶ 3, fn.1, citing The Appraisal of Real Estate (Appraisal
Institute, 12th Ed.2001) 477.

2. “ ‘The concept behind a 1031 exchange is that, when a property owner sells a property and
reinvests its proceeds into another property, any economic gain has not been realized in a way that
generates funds to pay any tax.’ Hilliard City Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision
(Jan. 13, 2009), BTA No. 2006-T-1804, at 7. Accordingly, the Internal Revenue Code defers the
taxation of any gain from the sale of the property in this situation. Id. at 6.” Worthington City
Schools Bd. of Edn. v. Franklin Cty. Bd. of Revision, 124 Ohio St.3d 27, 2009-Ohio-5932, 918
N.E.2d 972, ¶ 8.




                                                  4
                                January Term, 2010




2003, and in the second sale, to HIN, on April 30, 2004. HIN, L.L.C. v. Cuyahoga
Cty. Bd. of Revision (Nov. 18, 2008), BTA No. 2006-A-712, at 5. Because the
December 30, 2003, transfer occurred closer in time to January 1, 2004, the tax
lien date, the BTA considered it the better indicator of the true value of the
property for taxation purposes. Id. at 6. The BTA therefore ordered the auditor to
assess the true value of the property at $4,790,000, which reflected the $4,900,000
sale price minus $110,000 paid for the 2.3911-acre parcel in April 2004. Id. at 10,
fn. 4.
         {¶ 10} The Bedford Board of Education appealed the BTA’s decision to
this court, contending first that the December 2003 sale price does not establish
the true value of the property because it does not reflect any property value
increase attributable to the long-term lease to U.S. Bank that encumbered the
property on the tax lien date. Second, Bedford argues that the BTA improperly
relied on the recording dates of the deeds, rather than the dates the parties actually
negotiated the sale prices, when it determined that the December 2003 sale
occurred closer in time to the tax lien date than the April 2004 sale; thus, Bedford
asserts that the “sale price which was closer in time to the tax lien date was the
sale in 2004.” Third, Bedford maintains that the BTA’s decision is internally
inconsistent because it relied on the December 2003 sale price to value the
34.5784-acre parcel but used the April 2004 sale price to value the 2.3911-acre
parcel. Lastly, Bedford claims that the BTA has jurisdiction to use the April 2004
sales price of $7,400,000 to determine the true value of the property for tax year
2005 pursuant to R.C. 5715.19(D), which relieves a party of the need to file a new
complaint for subsequent tax years until the original complaint is finally
determined.
         {¶ 11} HIN urges that the December 2003 sale, being closer in time to the
tax lien date, provides a better indication of the property’s value as of the January
1, 2004 tax lien date. It further contends that neither the date that the buyer and



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seller agreed to the sale price nor the date that the parties executed the sales
contract should be used in determining whether the December 2003 or the April
2004 sale is closer in time to the tax lien date because a sale cannot be deemed to
have been completed until a closing occurs. HIN also maintains that this court
lacks jurisdiction to consider the value of the property for tax year 2005 because
that matter was not part of the notice of appeal and therefore is not properly
before the court.
       {¶ 12} Thus, this court is called upon to decide whether the BTA correctly
determined that the December 2003 sale should be used to establish the true value
of the property as of January 1, 2004, the tax lien date.
               Valuation of Real Property for Taxation Purposes
       {¶ 13} Pursuant to R.C. 5717.04, this court reviews a decision of the BTA
to determine whether it is reasonable and lawful.           And as we indicated in
Strongsville Bd. of Edn. v. Wilkins, 108 Ohio St.3d 115, 2006-Ohio-248, 841
N.E.2d 303, ¶ 7, a decision of the BTA will be affirmed if it correctly applies the
law.
       {¶ 14} R.C. 5713.03 sets forth how real estate is to be valued for tax
purposes: “In determining the true value of any tract, lot, or parcel of real estate
under this section, if such tract, lot, or parcel has been the subject of an arm’s
length sale between a willing seller and a willing buyer within a reasonable
length of time, either before or after the tax lien date, the auditor shall consider
the sale price of such tract, lot, or parcel to be the true value for taxation
purposes.” (Emphasis added.)
       {¶ 15} In construing a statute, we must ascertain and give effect to the
intent of the legislature. Dircksen v. Greene Cty. Bd. of Revision, 109 Ohio St.3d
470, 2006-Ohio-2990, 849 N.E.2d 20, ¶ 16. Determining this intent requires the
court “to read words and phrases in context and construe them in accordance with
rules of grammar and common usage.” State ex rel. Russell v. Thornton, 111




                                          6
                                 January Term, 2010




Ohio St.3d 409, 2006-Ohio-5858, 856 N.E.2d 966, ¶ 11. When the statutory text
is unambiguous, we apply it as written. Dircksen at ¶ 17.
        {¶ 16} R.C. 323.11 defines the tax lien date as the first day of January
annually. Accordingly, as this court stated in Freshwater v. Belmont County Bd.
of Revision (1997), 80 Ohio St.3d 26, 29-30, 684 N.E.2d 304, “the first day of
January of the tax year in question is the crucial valuation date for tax assessment
purposes.” In this case, January 1, 2004, is the relevant valuation date, and the
parties do not differ on this point.
        {¶ 17} The statutory factors to be considered in determining the true value
of property for taxation purposes pursuant to R.C. 5713.03 are whether the
property has been the subject of an arm’s-length sale, whether that sale occurred
between a willing seller and a willing buyer, and whether that sale occurred
within a reasonable length of time either before or after the tax lien date.
        {¶ 18} This court has construed R.C. 5713.03 in Berea City School Dist.
Bd. of Edn. v. Cuyahoga Cty. Bd. of Revision, 106 Ohio St.3d 269, 2005-Ohio-
4979, 834 N.E.2d 782, and has held that “when the property has been the subject
of a recent arm’s-length sale between a willing seller and a willing buyer, the sale
price of the property shall be ‘the true value for taxation purposes.’ ” Id. at ¶ 13,
quoting R.C. 5713.03.
        {¶ 19} While we continue to adhere to the principle of law enunciated in
Berea, that case is distinguishable from this case because Berea involved only one
sale, which occurred prior to the tax lien date, and our review there chiefly
concerned whether that sale had occurred within a reasonable length of time prior
to the tax lien date, such that the auditor should be required to consider the sale
price to be the true value of property for taxation purposes. Id. at ¶ 16. We
concluded that the auditor could not use other evidence of value to determine true
value when a sale had occurred within a reasonable length of time from the tax
lien date; therefore, the recency of the sale provided a basis for the auditor to use



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the sale price as the true value of the property. Id. at ¶ 13. However, this case
involves two sales, one occurring prior to the tax lien date and one occurring
subsequent to the tax lien date, and we are called upon to determine which sale
should be used as evidence of the true value.
       {¶ 20} When a property has been the subject of two arm’s-length sales
between a willing seller and a willing buyer within a reasonable length of time
either before or after the tax lien date, the sale occurring closer in time to the tax
lien date establishes the true value of the property for taxation purposes. This
principle emanates from R.C. 5713.03, which presupposes that an arm’s-length
sale close in time to the tax lien date accurately indicates the value of property as
of that date. It follows that when a property has been the subject of two arm’s-
length sales between willing sellers and willing buyers, the sale occurring closer
in time to the tax lien date provides a more accurate indication of the true value of
the property as of the tax lien date than does a sale occurring more remotely in
time from that date.
       {¶ 21} Bedford’s contention that the date on which the parties agreed to a
sale price is a better date to use for determining the proximity of a sale to the tax
lien date is not well taken. Legal title to real property transfers from the seller to
the buyer with the delivery and acceptance of an executed deed. See Wayne Bldg.
& Loan Co. of Wooster v. Yarborough (1967), 11 Ohio St.2d 195, 212, 40
O.O.2d 182, 228 N.E.2d 841; Kniebbe v. Wade (1954), 161 Ohio St. 294, 297, 53
O.O. 175, 118 N.E.2d 833; Baldwin v. Bank of Massilon (1853), 1 Ohio St. 141,
148. As this court long ago recognized in Churchill v. Little (1872), 23 Ohio St.
301, 307, an executory contract for the purchase of land “does not convey, or
purport to convey, or legally to incumber or affect any estate or interest in land.”
Further, in McCombs v. Howard (1868), 18 Ohio St. 422, 436, quoting 1 Hilliard,
The Law of Vendors and Purchasers of Real Property (1858) 9, this court
described it as settled that “as a general rule, the purchaser, under a contract for




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the sale of land, before conveyance, has ‘neither a legal nor equitable right, as
against the seller, until he pay the purchase money.’ ” See also Coggshal v.
Marine Bank Co. (1900), 63 Ohio St. 88, 57 N.E. 1086, paragraphs one and two
of the syllabus (explaining that the buyer obtains an equitable estate in land, equal
to the amount of the purchase money paid, through the purchase agreement that
may ripen into a right to the conveyance of legal title according to the terms of the
contract, but the seller retains both legal title and a beneficial estate in the
property to the extent of the unpaid purchase money).
       {¶ 22} Nor does entering into a contract to purchase real property
constitute a transfer for taxation purposes. Notably, this court in Victoria Plaza
Ltd. Liab. Co. v. Cuyahoga Cty. Bd. of Revision (1999), 86 Ohio St.3d 181, 182-
183, 712 N.E.2d 751, recognized that the holder of an equitable interest in real
property by virtue of a sales contract is not its legal owner and therefore lacks
standing to file a real-property-tax-valuation complaint. R.C. 323.41 provides
that “[e]ach person holding lands shall pay the tax assessed thereon each year * *
*” (emphasis added), and R.C. 319.20 directs the county auditor to transfer the
property into the buyer’s name on the tax list “on application and presentation of
title.” (Emphasis added.)
       {¶ 23} R.C. 317.22 provides that “[n]o deed of absolute conveyance of
land * * * shall be recorded by the county recorder until * * * [t]he conveyance
presented to the recorder bears the stamp of the county auditor * * * [and s]uch
conveyance has been presented to the county auditor, and by the county auditor
indorsed ‘transferred’ or ‘transfer not necessary.’ ” Before the deed may be
endorsed by the auditor, however, R.C. 319.202 requires the new owner to submit
a real property conveyance fee statement to the auditor declaring the value of the
real property, and pursuant to R.C. 319.20, the auditor must transfer the parcel
into the new owner’s name on the tax list. The purpose of this statutory scheme is




                                         9
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to provide the auditor the necessary information to determine the true value of
property based on a property sale in accordance with R.C. 5713.03.
        {¶ 24} For this reason, in determining the date a sale of property occurs,
only for purposes of establishing the true value of property pursuant to R.C.
5713.03, the auditor should use the date that the real property conveyance fee
statement is filed in the auditor’s office as the sale date of the property.
        {¶ 25} Here, the filing of the real property conveyance fee statement for
the December 2003 sale on December 30, 2003, occurred in closer proximity to
the tax lien date than the filing of the real property conveyance fee statement for
the April 2004 sale on April 30, 2004. Therefore, for purposes of establishing the
true value of the property in accordance with R.C. 5713.03, the auditor should use
the December 2003 sale price as the true value of the property for tax year 2004.
        {¶ 26} Bedford’s position that the earlier sale does not reflect any
property value increase attributed to the long-term U.S. Bank lease is also not
well taken.     We recognize that the parties to sales factor the value of
encumbrances into the selling price of the property. We therefore assume that
both Tops Markets and JBK Cuyahoga considered the value of the long-term
lease when they agreed to the sale price, as both parties anticipated the subsequent
lease of the property to U.S. Bank. There is an expectation that when a willing
seller and a willing buyer agree to the selling price of property, they give due
consideration to the value of leases that encumber it as well as to its potential
rental or income-producing value. See Rhodes v. Hamilton Cty. Bd. of Revision,
117 Ohio St.3d 532, 2008-Ohio-1595, 885 N.E.2d 236, ¶ 3 (declining to adjust the
true value of property on the basis of a long-term lease encumbering it when the
property had been the subject of an arm’s-length sale).
        {¶ 27} Moreover, the General Assembly has mandated that the auditor
consider the sale price to be the true value of the property for taxation purposes.
This section of the Revised Code contains no exception for the auditor to value




                                          10
                                January Term, 2010




property encumbered by a lease any differently from unencumbered property.
Rather, the only considerations articulated in R.C. 5713.03 are whether the
property has been the subject of an arm’s-length sale between a willing seller and
a willing buyer within a reasonable length of time either before or after the tax
lien date, and we apply those considerations in this case.
       {¶ 28} The record here supports the conclusion that an arm’s-length sale
occurred between a willing seller and a willing buyer in December 2003 and that
the higher sale price for the property obtained in April 2004 resulted from the
serendipity of HIN’s purchase, as HIN contemplated a 1031 exchange and
specifically sought a property with a triple net lease. Thus, the facts here are not
contrived nor do they suggest any effort by the parties to manipulate the sale to
derive a favorable tax result. These are two separate arm’s-length transactions,
and nothing in the record suggests otherwise.
       {¶ 29} Finally, in accordance with Dayton-Montgomery Cty. Port Auth. v.
Montgomery Cty. Bd. of Revision, 113 Ohio St.3d 281, 2007-Ohio-1948, 865
N.E.2d 22, ¶ 32, this court lacks jurisdiction to consider Bedford’s assertions that
(1) the BTA’s decision is internally inconsistent because it valued the 2.3911-acre
parcel using the April 2004 sale price of that parcel and (2) for tax year 2005, the
April 2004 sale price should be used to assess the true value of the property
because Bedford did not preserve these errors for appeal, as it failed to include
them specifically in the notice of appeal.
                                    Conclusion
       {¶ 30} When a property is the subject of two arm’s-length transactions
between a willing seller and a willing buyer within a reasonable time before or
after the tax lien date, the sale occurring closer in time to the tax lien date
establishes the true value of the property for taxation purposes. In determining
which sale occurred in closer proximity in time to the tax lien date, the auditor
should use the date the real property conveyance fee statement is filed in the



                                         11
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auditor’s office as the sale date of the property. Here, the BTA determined that
the December 2003 sale occurred in closer proximity to the tax lien date than the
April 2004 sale and therefore established the true value of the property for tax
year 2004 as $4,790,000. Because that decision is reasonable and lawful, it is
affirmed.
                                                                   Decision affirmed.
         MOYER, C.J., and PFEIFER, O’CONNOR, LANZINGER, and CUPP, JJ., concur.
         LUNDBERG STRATTON, J., concurs separately.
                               __________________
         LUNDBERG STRATTON, J., concurring.
         {¶ 31} While I appreciate that sometimes it is difficult to establish the
date of sale under R.C. 5713.03 for considering the true value for taxation
purposes, I am concerned that the majority implies that only the conveyance fee
date establishes the date of sale for purposes of evaluation by the auditor.
         {¶ 32} I believe that using the date the conveyance fee statement is filed
to establish the date of sale is a useful point in assisting the auditor in determining
value.    However, such a rule should be a rebuttable presumption and an
evidentiary tool only. Language fixing the date of the sale does not appear in the
statute. The General Assembly did not establish the date of the conveyance fee as
the date of sale, and this court should not add such language to the statute. The
parties should be allowed to present evidence at hearings before a board of
revision and the Board of Tax Appeals to establish that the true date of sale is a
different point from the date of the filing of the conveyance fee.
         {¶ 33} However, because the majority includes the following language in
its syllabus, “[t]he auditor should use the date that the real property conveyance
fee statement is filed in the auditor’s office as the sale date of the property,” I
believe that this language may be interpreted to permit the parties to submit
evidence of a different date of sale to rebut the conveyance date. Thus, I concur.




                                          12
                              January Term, 2010




       CUPP, J., concurs in the foregoing opinion.
                             __________________
       Siegel, Siegel, Johnson & Jennings Co., L.P.A., and Jay P. Siegel, for
appellee HIN, L.L.C.
       Kolick & Kondzer, Thomas A. Kondzer, John P. Desimone, and Daniel J.
Kolick, for appellant.
                           ______________________




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