Case Title: Lunn v. Lorain County Board of Revision

Citation: 2016-Ohio-8075

Docket Number: 2014-1669

State: ohio

Court: Ohio Supreme Court

Date: 2016-12-13T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Lunn v. Lorain Cty. Bd. of Revision, Slip Opinion No. 2016-Ohio-8075.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in an 
advance sheet of the Ohio Official Reports.  Readers are requested to 
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 
South Front Street, Columbus, Ohio 43215, of any typographical or other 
formal errors in the opinion, in order that corrections may be made before 
the opinion is published. 
 
 
SLIP OPINION NO. 2016-OHIO-8075 
LUNN ET AL., APPELLEES, v. LORAIN COUNTY BOARD OF REVISION ET AL., 
APPELLANTS. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Lunn v. Lorain Cty. Bd. of Revision, Slip Opinion No.  
2016-Ohio-8075.] 
Taxation—Real-property-valuation—Although property owner satisfied initial 
burden to show recent arm’s-length sale, opposing parties offered rebuttal 
evidence challenging arm’s-length character of purchase and owner 
offered no evidence to overcome rebuttal evidence—Board of Tax Appeals’ 
decision reversed. 
(No. 2014-1669—Submitted August 30, 2016—Decided December 13, 2016.) 
APPEAL from the Board of Tax Appeals, No. 2013-2661. 
_______________________ 
Per Curiam. 
{¶ 1} This real-property-valuation case involves a single-family residence 
in Elyria owned by appellee Betty L. Lunn.  She challenged the Lorain County 
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auditor’s valuation of the property for tax year 2012, alleging that her February 
2011 purchase was a recent arm’s-length sale that established a lower true value.  
The Lorain County Board of Revision (“BOR”) retained the auditor’s valuation, 
finding that she had provided insufficient evidence of the sale.  The Board of Tax 
Appeals (“BTA”) reversed and valued the property according to the sale price.  The 
auditor and BOR (collectively, “the county”) jointly appealed to this court. 
{¶ 2} The county first argues that Lunn, who did not appear at the BOR 
hearing, failed to meet her burden of proof with competent and probative evidence 
of an arm’s-length sale.  We reject this argument in view of the evidence Lunn gave 
the BOR and the absence of any dispute concerning her purchase.  We hold that the 
BTA acted reasonably and lawfully when it found that Lunn satisfied her initial 
burden to show a recent arm’s-length sale under former R.C. 5713.03, 
Am.Sub.H.B. No. 260, 140 Ohio Laws, Part II, 2665, 2722.1 
{¶ 3} The county also argues that even if Lunn met her initial burden, it 
rebutted her claim by showing that an insolvent real estate mortgage investment 
conduit (“REMIC”) sold the property to Lunn post-foreclosure.  We agree with this 
aspect of the county’s argument and hold that Lunn’s purchase was a “forced sale” 
under R.C. 5713.04.  We reverse the decision of the BTA because Lunn failed to 
overcome the presumption, arising under R.C. 5713.04, that the REMIC’s 
postforeclosure sale was not indicative of the property’s true value. 
Facts and Procedural History 
{¶ 4} The auditor valued the subject property at $85,170 for tax year 2012.  
Lunn complained that its true value was $22,000—the price she paid for it in 
February 2011.  In response to her complaint, appellee Elyria City Schools Board 
                                                 
1 This former version of R.C. 5713.03 applies here because this case involves tax year 2012.  See 
Lowe’s Home Ctrs., Inc. v. Washington Cty. Bd. of Revision, 145 Ohio St.3d 375, 2016-Ohio-372, 
49 N.E.3d 1266, ¶ 24. 
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of Education (“BOE”) filed a countercomplaint seeking to retain the auditor’s 
valuation. 
{¶ 5} The BOR notified the parties that it would hold a hearing on their 
claims.  Before the hearing, Lunn sent the BOR copies of several documents related 
to her purchase, including a parcel report from the auditor’s website, a conveyance-
fee statement, a partial settlement statement, a partial limited warranty deed, a 
partial purchase agreement, and documents related to the realtor’s listing.  Several 
of these documents indicated that she had purchased the property for $22,000 in 
February 2011. 
{¶ 6} At the BOR hearing, a member of the board noted that Lunn had 
submitted documents concerning her purchase, and the attorney for the BOE 
acknowledged the documents and Lunn’s $22,000 purchase.  Although the BOE 
questioned the weight of Lunn’s evidence, no party argued that it was inadmissible, 
and no one disputed that the February 2011 sale had occurred.  Nevertheless, 
because neither Lunn nor her attorney attended the hearing, the BOR found that she 
had produced insufficient evidence to support her claim and retained the auditor’s 
valuation. 
{¶ 7} Lunn appealed to the BTA but did not file a brief or attend the BTA 
hearing.  The county, however, presented the testimony of an expert witness, Paul 
B. Bellamy, J.D., Ph.D., who explained that Lunn had purchased the property in 
February 2011 from U.S. Bank, National Association, which sold it as trustee for a 
REMIC, and that the REMIC had acquired the property for $33,000 in January 
2011 as a result of a sheriff’s sale.  He opined that the $22,000 sale to Lunn a month 
later did not represent the true value of the property for tax year 2012.  He also said 
that based on restrictions created under federal tax laws, a REMIC cannot act as a 
“typical seller.” 
{¶ 8} The BTA, noting that the parties did not dispute the February 2011 
sale price, reversed the BOR’s decision and established $22,000 as the true value 
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of the property.  The BTA stated that “[a]bsent an affirmative demonstration such 
sale is not a qualifying sale for tax valuation purposes, we find the existing record 
demonstrates that the transaction was recent, arm’s-length, and constitutes the best 
indication of the subject’s value as of [the] tax lien date.” 
{¶ 9} The county appealed to this court.2 
Analysis 
Lunn met her initial burden 
{¶ 10} Based on the nature of her claim, Lunn had to show that her purchase 
was both recent to the tax-lien date and arm’s length in nature.  See Am.Sub.H.B. 
No. 260, 140 Ohio Laws, Part II, at 2722; Columbus City School Dist. Bd. of Edn. 
v. Franklin Cty. Bd. of Revision, 90 Ohio St.3d 564, 566, 740 N.E.2d 276 (2001); 
Snavely v. Erie Cty. Bd. of Revision, 78 Ohio St.3d 500, 503, 678 N.E.2d 1373 
(1997).  If she could prove these facts and if they went unrebutted, the county would 
be required to treat the sale price as the property’s true value for tax year 2012.  
Cummins Property Servs., L.L.C. v. Franklin Cty. Bd. of Revision, 117 Ohio St.3d 
516, 2008-Ohio-1473, 885 N.E.2d 222, ¶ 13.  Absent such a showing, however, the 
county was justified in rejecting the use of the sale price. 
{¶ 11} The county does not dispute that Lunn’s purchase of the property 
occurred within a reasonable length of time of the tax-lien date.  The remaining 
factual question, therefore, is whether the sale occurred at arm’s length “between a 
willing seller and a willing buyer.”  Am.Sub.H.B. No. 260, 140 Ohio Laws, Part II, 
at 2722.  This court has held that “[a]n arm’s-length sale is characterized by these 
elements: it is voluntary, i.e., without compulsion or duress; it generally takes place 
                                                 
2 The BOE filed an appellee brief urging this court to reverse the BTA’s decision.  Because the BOE 
did not file a notice of appeal and S.Ct.Prac.R. 16.03(B)(1) does not allow an appellee brief to seek 
reversal, we strike the BOE’s brief sua sponte.  See Cincinnati School Dist. Bd. of Edn. v. Hamilton 
Cty. Bd. of Revision, 78 Ohio St.3d 325, 327, 677 N.E.2d 1197 (1997). 
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in an open market; and the parties act in their own self-interest.”  Walters v. Knox 
Cty. Bd. of Revision, 47 Ohio St.3d 23, 546 N.E.2d 932 (1989), syllabus. 
{¶ 12} The BTA reduced the valuation because the parties did not dispute 
that Lunn had purchased the property for $22,000 and, according to the BTA, no 
evidence showed that the transaction was not at arm’s length.  The BTA, in effect, 
presumed that the sale had occurred at arm’s length and required the county to 
prove otherwise.  In its first proposition of law, the county challenges the BTA’s 
application of that presumption, arguing that it cannot arise when the taxpayer fails 
to appear at the board-of-revision hearing to authenticate supporting documents and 
be subject to cross-examination. 
{¶ 13} On appeal, we must decide whether the BTA’s decision was 
“reasonable and lawful,” R.C. 5717.04.  Because the county’s first proposition 
involves a judicially created presumption, it initially presents a legal issue that we 
consider de novo.  See Akron City School Dist. Bd. of Edn. v. Summit Cty. Bd. of 
Revision, 139 Ohio St.3d 92, 2014-Ohio-1588, 9 N.E.3d 1004, ¶ 10-11.  But we 
will defer to the BTA’s findings concerning the weight of evidence so long as they 
are supported by the record.  Olmsted Falls Bd. of Edn. v. Cuyahoga Cty. Bd. of 
Revision, 122 Ohio St.3d 134, 2009-Ohio-2461, 909 N.E.2d 597, ¶ 27. 
{¶ 14} We have recognized a rebuttable presumption that a submitted sale 
price “has met all the requirements that characterize true value,” including that the 
sale was made at arm’s length.  Cincinnati, 78 Ohio St.3d at 327, 677 N.E.2d 1197.  
To benefit from this presumption, the proponent of a sale must satisfy a relatively 
light initial burden and need not “definitive[ly] show[ ] * * * that no evidence 
controvert[s] the * * * arm’s-length character of the sale.”  Cummins, 117 Ohio 
St.3d 516, 2008-Ohio-1473, 885 N.E.2d 222, at ¶ 41.  Indeed, we have recognized 
the presumption when the proponent of a sale provided only a deed and 
conveyance-fee statement reflecting the sale, see, e.g., Worthington City Schools 
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Bd. of Edn. v. Franklin Cty. Bd. of Revision, 124 Ohio St.3d 27, 2009-Ohio-5932, 
918 N.E.2d 972, ¶ 28, or just a deed and purchase agreement, Cummins at ¶ 7, 41. 
{¶ 15} We hold that the BTA acted reasonably and lawfully when it 
presumed that Lunn’s purchase occurred at arm’s length, because Lunn met her 
initial burden with evidence of the sale.  Lunn submitted to the BOR a parcel report 
from the auditor’s website, a conveyance-fee statement, a partial settlement 
statement, a partial limited warranty deed, a partial purchase agreement, and 
documents relating to the listing of the property, which showed that she had 
purchased the property for $22,000 in February 2011.  Although Lunn’s documents 
were not authenticated by testimony, the Rules of Evidence do not strictly apply in 
administrative tax proceedings, Orange City School Dist. Bd. of Edn. v. Cuyahoga 
Cty. Bd. of Revision, 74 Ohio St.3d 415, 417, 659 N.E.2d 1223 (1996).  And more 
significantly, neither the county nor the BOE objected to the evidence Lunn 
submitted.  In fact, at no point during the proceedings below did the parties dispute 
that Lunn had paid $22,000 for the property in a recent sale. 
{¶ 16} In so holding, we reject the county’s proposition that a taxpayer-
complainant must appear at the board-of-revision hearing to satisfy its initial 
burden.  “How a party seeking a change in valuation attempts to meet its burden of 
proof before a board of revision is a matter for that party’s judgment.”  Snavely, 78 
Ohio St.3d at 503, 678 N.E.2d 1373.  A party may elect not to appear at a board-
of-revision hearing and instead rely on other evidence supporting its claim, 
although doing so risks a finding by the board that its evidence is inadmissible or 
unpersuasive.  See id.  That is not the case here, however, because no party 
challenged the admissibility of the evidence Lunn submitted, the BOR accepted it, 
and it met the minimum evidentiary threshold previously recognized by this court. 
{¶ 17} Because Lunn met her initial burden, it was presumed that the sale 
“met all the requirements that characterize true value,” Cincinnati, 78 Ohio St.3d 
at 327, 677 N.E.2d 1197.  The BTA correctly found that it was the opposing parties’ 
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burden to offer rebuttal evidence challenging the element of arm’s-length character.  
Cummins, 117 Ohio St.3d 516, 2008-Ohio-1473, 885 N.E.2d 222, at ¶ 13.  The 
county’s efforts in that regard are at issue in the second and third propositions of 
law, which we address below. 
The county rebutted the arm’s-length character of the sale 
{¶ 18} Because Lunn met her initial burden, her purchase price had to be 
accepted as the property’s true value unless the county or BOE demonstrated a 
“reason to disregard the sale price as an indicator of value,” Dublin City Schools 
Bd. of Edn. v. Franklin Cty. Bd. of Revision, 118 Ohio St.3d 45, 2008-Ohio-1588, 
885 N.E.2d 934, ¶ 16.  To that end, the county presented evidence to the BTA 
concerning the seller (a REMIC) and circumstances surrounding the sale.  The 
county contends that the sale was a forced sale under R.C. 5713.04. 
{¶ 19} In general terms, a REMIC is an entity that issues mortgage-backed 
securities and has favorable pass-through federal tax status.  See 26 U.S.C. 860A 
through 860G.  As happened in this case, when a debt obligation held by a REMIC 
defaults, the REMIC may acquire real property through a sheriff’s sale, see 26 
U.S.C. 860G(a)(8).  The Internal Revenue Code provides that a REMIC generally 
may hold title to foreclosed property without jeopardizing its status as a pass-
through entity until the end of the third taxable year following the taxable year in 
which it acquired the property.  Id.; 26 U.S.C. 856(e)(2).  While holding real 
property, a REMIC must remain a passive owner and may not lease or improve the 
property.  26 U.S.C. 860G(a)(8) and 856(e)(4).  The evidence shows that the 
REMIC at issue in this case was insolvent and sold the property to Lunn for $22,000 
just one month after acquiring it at a sheriff’s sale for $33,000. 
{¶ 20} Although we have not previously considered whether a 
postforeclosure sale by a REMIC is a forced sale under R.C. 5713.04, we addressed 
similar circumstances in Schwartz v. Cuyahoga Cty. Bd. of Revision, 143 Ohio St.3d 
496, 2015-Ohio-3431, 39 N.E.3d 1223, a case involving a postforeclosure sale from 
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the United States Department of Housing and Urban Development (“HUD”).  In 
Schwartz, we held that “a sale of foreclosed property by HUD is generally regarded 
as a transaction that is not a voluntary sale between typically motivated market 
participants.”  Id. at ¶ 28.  We noted that such a transaction is a forced sale under 
R.C. 5713.04 and that the “sale price is presumptively not evidence of the 
property’s value.”  Id. at ¶ 28-29. 
{¶ 21} We see no reason to treat this postforeclosure REMIC sale 
differently.  To maintain its beneficial tax status, a REMIC must remain passive in 
its ownership of foreclosed property, and it ordinarily will be compelled to sell as 
quickly as possible.  Here, the REMIC sold the property for $11,000 less than the 
price it had paid just a month earlier.  Those “terms would likely be unacceptable 
to a typically motivated seller,” Columbus City School Dist. Bd. of Edn. v. Franklin 
Cty. Bd. of Revision, 134 Ohio St.3d 529, 2012-Ohio-5680, 983 N.E.2d 1285, ¶ 31, 
and demonstrate an “atypical pressure to sell * * * that negates the arm’s-length 
character of the transaction,” id. at ¶ 30.  The facts in this case lead us to conclude 
that the BTA acted unreasonably when it disregarded the county’s evidence and 
failed to treat the postforeclosure sale as a forced sale under R.C. 5713.04. 
{¶ 22} Because Lunn purchased the property through a forced sale, she had 
“the burden to prove that the sale was nevertheless an arm’s-length transaction 
between typically motivated parties and should therefore be regarded as the best 
evidence of the property’s value.”  Olentangy Local Schools Bd. of Edn. v. 
Delaware Cty. Bd. of Revision, 141 Ohio St.3d 243, 2014-Ohio-4723, 23 N.E.3d 
1086, ¶ 43.  Lunn presented nothing to support her claim besides the documents 
she sent the BOR, and those documents do not prove that the sale was arm’s length 
in nature.  She therefore failed to satisfy her “heavier burden,” id., to prove that the 
forced sale was indicative of the property’s true value, and the BTA erred in setting 
the property’s true value at $22,000. 
 
 
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Conclusion 
{¶ 23} Although Lunn triggered a rebuttable presumption that her purchase 
of the subject property met all the requirements that characterize true value by 
presenting unchallenged evidence of the sale, the county successfully rebutted that 
presumption by showing that the transaction was a forced sale under R.C. 5713.04.  
At that point, a second rebuttable presumption arose, this time operating against 
Lunn.  We reverse the decision of the BTA and reinstate the BOR’s valuation 
because Lunn offered no evidence to overcome the presumption that the sale was 
not arm’s length in nature. 
Decision reversed. 
O’CONNOR, C.J., and O’DONNELL, LANZINGER, KENNEDY, and FRENCH, JJ., 
concur. 
PFEIFER, J., dissents, with an opinion joined by O’NEILL, J. 
_________________ 
 
PFEIFER, J., dissenting. 
{¶ 24} I would affirm the Board of Tax Appeals’ determination that based 
on the record before it, the February 2011 sale of the subject property “was recent, 
arm’s-length, and constitutes the best indication” of the property’s value. 
{¶ 25} Although expert witness Dr. Paul Bellamy testified that the sale to 
appellee Betty L. Lunn was not at arm’s length, he did not testify concerning the 
proper valuation.  Accordingly, I would defer to the next most recent sale, a mere 
month before Lunn purchased the property.  That transaction involved a sheriff’s 
sale that was open to the public and, therefore, available to any willing bidder.  That 
is a better indication of value than the auditor’s appraisal, which clearly does not 
take account of the fact that no one is willing to spend more than $33,000 to 
purchase the property. 
{¶ 26} Accordingly, I dissent. 
O’NEILL, J., concurs in the foregoing opinion. 
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_________________ 
Dennis P. Will, Lorain County Prosecuting Attorney, and John P. Kilroy, 
Assistant Prosecuting Attorney, for appellants. 
_________________