Case Title: Natl. Distillers & Chem. Corp. v. Limbach

Citation: 1994-Ohio-33

Docket Number: 19930671

State: ohio

Court: Ohio Supreme Court

Date: 1994-12-20T00:00:00Z

Document:
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National Distillers & Chemical Corporation, n.k.a. Henkel                        
Corporation, Appellee v. Limbach, Tax Commr., Appellant.                         
[Cite as Natl. Distillers & Chem. Corp. v. Limbach (1994),                       
Ohio St.3d      .]                                                               
Taxation -- Machine drawings capitalized as part of machinery                    
     are exempt from personal property tax -- R.C. 5701.03,                      
     applied.                                                                    
     (No. 93-671 -- Submitted October 25, 1994 -- Decided                        
December 20, 1994.)                                                              
     Appeal from the Board of Tax Appeals, No. 90-X-552.                         
     The Tax Commissioner, appellant, contends that the                          
position National Distillers & Chemical Corporation, appellee,                   
argued concerning sales tax on machine drawings in Emery                         
Industries, Inc. v. Limbach (1989), 43 Ohio St.3d 134, 539 N.E.                  
2d 608, precludes it from arguing what she views to be a                         
contrary position in this case.  She also maintains that                         
National Distillers did not prove a different value for the                      
drawings than she had found in her order.                                        
     National Distillers operated what is now the Emery Group                    
Division of the Henkel Corporation, a producer of chemicals.                     
It expanded its chemical plant from 1981 through 1983.  Its                      
company engineers designed the basic process, but it hired                       
outside engineering firms to prepare the final drawings.  It                     
included these drawings in bid packages, which were the subject                  
of the Emery decision.  National Distillers retained the                         
drawings after expanding the plant.                                              
     The drawings were drafted on Mylar plastic.  Mylar, a more                  
permanent material than paper, is transparent, and, thus,                        
blueprints can easily be reproduced from them.                                   
     National Distillers continually refers to the drawings and                  
updates them when it modifies the plant. Its maintenance                         
personnel also review the drawings when repairing the                            
machinery.  National Distillers would transfer the drawings if                   
it sold the equipment.                                                           
     For tax years 1984 and 1985, National Distillers claimed                    
an exemption from personal property tax for these drawings,                      
under R.C. 5701.03, at seventy-eight percent of the charges                      
paid for outside engineering services.  The commissioner, on                     
review, determined that only thirty percent of the costs                         
represented the cost of the drawings.  National Distillers                       
appealed this order to the Board of Tax Appeals ("BTA").                         
     National Distillers' director of engineering services                       
testified at the BTA's hearing.  During the plant expansion,                     
the witness was a group leader of chemical engineering and                       
supervised several of the expansion projects.  He managed and                    
reviewed the work of the outside engineers.                                      
     The witness testified that, overall, seventy-eight percent                  
of the costs charged by the outside engineers was for actual                     
engineering drawings.  He readily admitted that this number was                  
his best estimate based on his personal experience in                            
engineering and managing these projects.                                         
     The BTA found the witness to be credible and agreed that                    
seventy-eight percent of the costs were for the drawings.  The                   
remainder of the costs, the BTA determined, was for                              
construction supervision, developing operating manuals, and                      
administration.                                                                  
     After the BTA hearing, the commissioner submitted exhibits                  
entered into the record in Emery Industries, Inc. v. Limbach,                    
supra, to establish that National Distillers had taken a                         
contrary position in the Emery case.  However, the BTA refused                   
to take judicial notice of these exhibits.  The BTA ruled that                   
these exhibits were not facts generally known within its                         
territorial jurisdiction or capable of accurate and ready                        
determination by resort to sources whose accuracy cannot                         
reasonably be questioned.                                                        
     The cause is now before this court upon an appeal as of                     
right.                                                                           
                                                                                 
     Taft, Stettinius & Hollister, Stephen M. Nechemias and                      
Patrick J. Mitchell, for appellee.                                               
     Lee Fisher, Attorney General, and James C. Sauer,                           
Assistant Attorney General, for appellant.                                       
                                                                                 
     Per Curiam.  The commissioner's first argument is in two                    
parts.  First, the commissioner argues that we may take                          
judicial notice of exhibits admitted into evidence in the                        
earlier case between her and National Distillers.  Second, she                   
argues that the facts presented in these exhibits tend to prove                  
that the value of the drawings was inconsequential and that                      
National Distillers is collaterally estopped from asserting                      
that the value of the drawings was greater than set forth in                     
these exhibits.  We disagree.                                                    
     Evid. R. 201(B) states:                                                     
     "A judicially noticed fact must be one not subject to                       
reasonable dispute in that it is either (1) generally known                      
within the territorial jurisdiction of the trial court or (2)                    
capable of accurate and ready determination by resort to                         
sources whose accuracy cannot reasonabl[y] be questioned."                       
     The exhibits submitted by the commissioner fail to fit                      
into either category.  The percentage of time outside engineers                  
devoted to preparing drawings is not generally known within the                  
territory of this court nor is the accuracy of the sources, the                  
exhibits, reasonably beyond question.  We cannot be sure of                      
their context since no one testified to explain them.                            
     Moreover, the cases the commissioner cites allows us to                     
take "judicial notice" of our docket records; the cases do not                   
state that we may take judicial notice of evidence contained in                  
the transcripts.  In State ex rel. Galloway v. Indus. Comm.                      
(1926), 115 St. 490, 154 N.E. 736, we reviewed our record to                     
determine that the same questions raised in a mandamus petition                  
had been presented and disposed of in an earlier case.  In                       
Klick v. Snavely (1928), 119 Ohio St. 308, 164. N.E. 233, we                     
reviewed our orders to determine that an allegation in a                         
petition was not true.  Finally, in Hughes v. Butler Cty. Bd.                    
of Revision (1944), 143 Ohio St. 559, 28 O.O. 477, 56 N.E. 2d                    
63, we took judicial notice of the record in a case previously                   
before us to determine that we had already answered a principal                  
question in the earlier case.  These cases sound more like                       
collateral estoppel cases; in none of these cases did we take                    
judicial notice of the adjudicative facts contained in earlier                   
cases.                                                                           
     In truth, the commissioner's argument actually is a                         
collateral estoppel, or issue preclusion, argument.  In Krahn                    
v. Kinney (1989), 43 Ohio St.3d 103, 107, 538 N.E. 2d 1058,                      
1062, we stated:                                                                 
     "Collateral estoppel precludes the relitigation of an                       
issue that has been 'actually and necessarily litigated and                      
determined in a prior action.'"                                                  
     In Krahn, we determined that the issue decided in an                        
earlier action did not resolve the issue then before the                         
court.  The earlier action decided whether a guilty plea was                     
knowingly, voluntarily, and intelligently entered; the issue                     
before us in Krahn was whether an attorney committed                             
malpractice by failing to transmit a plea bargain offer.                         
     Turning to this case, we decided, in Emery, that the bid                    
package, which included the drawings, was an inconsequential                     
element of the transaction with the engineering companies.  We                   
determined that the overriding purpose in the Emery                              
transactions was the receipt of professional, engineering                        
services, not the bid package.  Deciding this question did not                   
decide, contrary to the commissioner's argument, that the                        
personal property had insignificant value.  Instead, we                          
determined the objective of the purchaser in contracting with                    
the engineering firms.                                                           
     The issue in the instant case is the value of the                           
drawings.  This issue is different from the issue in Emery and                   
its determination is not barred by collateral estoppel.                          
     Next, as to the value of the drawings, the commissioner                     
argues that the BTA should have included the costs of the                        
drawings in the valuation of the machinery under                                 
full-cost-absorption principles, in which all costs associated                   
with a machine are capitalized on the owner's books.  She                        
maintains that the BTA erred in believing the estimate of the                    
witness.                                                                         
     Nevertheless, R.C. 5701.03 exempts drawings from the                        
personal property tax.  In Goodyear Aircraft Corp. v. Peck                       
(1954), 162 Ohio St. 200, 55 O.O. 101, 122 N.E. 2d 700, we                       
ruled that the language of R.C. 5701.03 is unambiguous and                       
concluded that the costs of the drawings should not be included                  
in the cost of the machinery.  Furthermore, in Youngstown Sheet                  
& Tube Co. v. Bowers (1957), 166 Ohio St.122, 1 O.O. 2d 345,                     
140 N.E. 2d 313, paragraph four of the syllabus, we held that                    
the commissioner cannot avoid the exemption in R.C. 5701.03 for                  
drawings by arguing that he is only taxing the construction                      
projects and that the books of the taxpayer show everything                      
that the commissioner taxed as allocated to the cost of those                    
projects.  Thus, contrary to the commissioner's argument here,                   
drawings capitalized as part of machinery are exempt from the                    
personal property tax.                                                           
     Moreover, we may not reverse a determination of the BTA to                  
grant credibility and weight to a witness absent a showing that                  
the BTA abused its discretion in doing so.  Witt Co. v.                          
Hamilton Cty. Bd. of Revision (1991), 61 Ohio St.3d 155, 157,                    
573 N.E. 2d 661, 663.  The commissioner has not asserted that                    
the BTA abused its discretion in believing the witness; she                      
simply argues that the BTA erred in its decision.  Under Witt,                   
however, we affirm the BTA's decision to believe the witness.                    
     Accordingly, we affirm the BTA's decision.                                  
                                     Decision affirmed.                          
     Moyer, C.J., A.W. Sweeney, Douglas, Wright, Resnick, F.E.                   
Sweeney and Pfeifer, JJ., concur.