Title: Tanson Holdings, Inc. v. Darke Cty. Bd. of Revision

State: ohio

Issuer: Ohio Supreme Court

Document:

Tanson Holdings, Inc., Appellant, v. Darke County Board of Revision, 
1 
Appellee. 
2 
[Cite as Tanson Holdings, Inc. v. Darke Cty. Bd. of Revision (1996), _____ 
3 
Ohio St.3d _____.] 
4 
Taxation -- Real property valuation -- Board of Tax Appeals’ 
5 
inference that sale of real property was not an arm’s-length 
6 
transaction is neither unreasonable nor unlawful, when. 
7 
 
(No. 95-470--Submitted November 30, 1995--Decided March 1, 
8 
1996.) 
9 
 
Appeal from the Board of Tax Appeals, No. 93-M-590. 
10 
 
For tax year 1992, the Darke County Auditor valued the five parcels 
11 
of real property owned by appellant, Tanson Holdings, Inc. (“Tanson”), at a 
12 
true value of $107,230 for land and $372,170 for buildings, for a total true 
13 
value of $479,400.  Tanson filed a complaint with the Darke County Board 
14 
of Revision (“BOR”), alleging that the true value should be zero for the land 
15 
and $200,000 for the buildings.  No witnesses or evidence was presented by 
16 
Tanson at the hearing before the BOR.  The BOR affirmed the auditor’s 
17 
assessment and Tanson appealed to the Board of Tax Appeals (“BTA”). 
18 
 
2
 
The real property in question consists of approximately nineteen acres 
1 
located in Ansonia, Ohio, which was originally owned by the Lambert 
2 
Corporation.  In August 1988, all the stock of Lambert Corporation was 
3 
sold by the Lambert family to TMW, Inc., a corporation solely owned by 
4 
Thomas M. Willoughby.  At the time of the stock purchase extensive 
5 
warranties for environmental matters were given by the sellers to TMW, 
6 
Inc. 
7 
 
In January 1989, three underground storage tanks were found on the 
8 
Lambert Corporation property.  Subsequent testing of the ground around the 
9 
tanks apparently disclosed that extensive contamination had occurred prior 
10 
to the purchase of Lambert Corporation by TMW, Inc.  Willoughby testified 
11 
that from January 1989 until February 1992 the expenses for “legal fees, and 
12 
interest and everything,” including consultant fees, eventually approached 
13 
$300,000.  Of this amount, Willoughby estimated that about $175,000 had 
14 
been hard costs for the cleanup. 
15 
 
A portion of the original purchase price of approximately $2,600,000 
16 
paid by TMW, Inc. for the Lambert Corporation stock was financed by 
17 
Society Bank.  When Society Bank learned of the environmental problems, 
18 
 
3
it allowed TMW, Inc. to transfer the real estate and approximately $950,000 
1 
of debt to Tanson Holdings, Inc. (“Tanson”), a new corporation created 
2 
solely to own the real property of TMW, Inc.  Willoughby was also the sole 
3 
shareholder of Tanson.  Thereafter, in September 1990, title to the real 
4 
property was transferred from Lambert Corporation to Tanson.  The 
5 
conveyance fee statement for the transfer from Lambert Corporation to 
6 
Tanson indicated a price of $950,000.  Willoughby stated that the price was 
7 
set at $950,000 because that was the amount of the existing debt transferred 
8 
with the property.  At a later time, Society Bank sold its mortgage for 
9 
$30,000 to Ohio Lawn & Garden, Inc., a corporation owned by a limited 
10 
partnership which had Willoughby as its general partner. 
11 
 
On October 21, 1993, Tanson transferred the real property by 
12 
quitclaim deed to Knowlton Realty Company (“Knowlton”) for the sum of 
13 
$25,000, which was paid to Ohio Lawn & Garden, Inc.  Knowlton is 
14 
apparently owned by Steven Lambert, the son of William Lambert.  
15 
Knowlton took the property subject to a mortgage held by William B. 
16 
Lambert, the father of Steven Lambert. 
17 
 
4
 
Following litigation, brought by Willoughby, William Lambert paid 
1 
$50,000 towards the cleanup costs of the property.  The agreement of sale 
2 
between Tanson and Knowlton provided that Knowlton and Steven Lambert 
3 
would indemnify and hold Tanson and Willoughby harmless for any future 
4 
costs or liability with respect to any environmental issue connected with the 
5 
operations of Lambert Corporation to approximately mid-1986. 
6 
 
At the hearing before the BTA, Willoughby presented a copy of a 
7 
report from a consultant, which estimated possible cleanup costs at just 
8 
under $1,000,000.  However, Willoughby admitted that, as regards the 
9 
cleanup of the property, there never had been any citations or enforcement 
10 
actions by the EPA involving this property. 
11 
 
Thomas J. Johnson, an appraiser with the Cole, Layer, Trumble 
12 
Company, testified on behalf of the auditor’s office.  Johnson’s involvement 
13 
with the real property began when Tanson filed a complaint with the BOR 
14 
in 1990, alleging contamination problems.  As a result of a hearing for a 
15 
prior year before the BOR, it had reduced the valuation for 1990 and 1991 
16 
to account for cleanup costs expended by Tanson.  Johnson, who had 
17 
personally viewed the property and reviewed the situation, did not offer an 
18 
 
5
opinion of value, but stated that his company’s prior appraisal of $480,000 
1 
appeared to be a fair and equitable value. 
2 
 
The BTA affirmed the BOR.  Tanson filed a notice of appeal with this 
3 
court. 
4 
 
This cause is now before this court upon an appeal as of right. 
5 
 
Ball, Noga & Tanoury and Ronald B. Noga, for appellant. 
6 
 
Jonathan P. Hein, Darke County Prosecuting Attorney, and Richard 
7 
M. Howell, Assistant Prosecuting Attorney, for appellee. 
8 
 
Per Curiam.  Appellant contends that the BTA erred because there 
9 
was no reliable or probative evidence to support the BTA’s determination 
10 
that the sale from Tanson to Knowlton was not an arm’s-length sale.  In 
11 
Walters v. Knox Cty. Bd. of Revision (1989), 47 Ohio St.3d 23, 546 N.E.2d 
12 
932, we defined the elements of an arm’s-length sale, stating that “it is 
13 
voluntary, i.e., without compulsion or duress; it generally takes place in an 
14 
open market; and the parties act in their own self-interest.”  After reviewing 
15 
the evidence in this case, the BTA found that the relationship between the 
16 
grantor and the grantee “is far from independent.”  The BTA further stated, 
17 
 
6
“[T]his Board does not find that a transfer between appellant and the son of 
1 
the prior owner exhibits the indices of a market sale.” 
2 
 
This court is not a “‘super’ board of tax appeals.”  Hercules Galion 
3 
Products, Inc. v. Bowers (1960), 171 Ohio St. 176, 12 O.O.2d 292, 168 
4 
N.E.2d 404.  The BTA is vested with wide discretion in determining the 
5 
weight to be given to the evidence and the credibility of the witnesses which 
6 
come before it.  Cardinal Fed. S. & L. Assn. v. Cuyahoga Cty. Bd. of 
7 
Revision (1975), 44 Ohio St.2d 13, 73 O.O.2d 83, 336 N.E.2d 433.  In this 
8 
case, Tanson had the duty to prove its right to a reduction in value.  R.R.Z. 
9 
Assoc. v. Cuyahoga Cty. Bd. of Revision (1988), 38 Ohio St.3d 198, 527 
10 
N.E.2d 874.  One of the facts which Tanson had to prove was that the sale 
11 
was an arm’s-length sale.  In Conalco, Inc. v. Monroe Cty. Bd. of Revision 
12 
(1977), 50 Ohio St.2d 129, 4 O.O.3d 309, 363 N.E.2d 722, we held in 
13 
paragraph one of the syllabus: “The best evidence of the ‘true value in 
14 
money’ of real property is an actual, recent sale of the property in an arm’s-
15 
length transaction.”  However, the evidence presented to the BTA raised 
16 
questions about whether the sale was an arm’s-length sale between 
17 
independent parties.  Willoughby testified that, when he purchased the stock 
18 
 
7
from the Lambert family, extensive warranties had been given by the sellers.  
1 
Willoughby further testified that there had been litigation with William B. 
2 
Lambert, the father of Steven Lambert.  Steven Lambert had been one of the 
3 
managers of the property at the time the environmental problems had been 
4 
generated.  When asked if Knowlton was owned by Steven Lambert, 
5 
Willoughby replied, “I guess.” 
6 
 
Based on the meager evidence presented to the BTA, competing 
7 
inferences could be drawn as to whether the relationship between the buyer 
8 
and the seller qualified the sale as an arm’s-length transaction.  The burden 
9 
was on Tanson to convince the BTA that the sale was an arm’s-length 
10 
transaction, and it was unable to meet that burden. 
11 
 
In this case, the BTA as the trier of fact drew the inference that the 
12 
relationship between the buyer and the seller was “far from independent.”  
13 
Whether such an inference drawn from the facts is reasonable is an 
14 
appropriate question for our review.  Ace Steel Baling, Inc. v. Porterfield 
15 
(1969), 19 Ohio St.2d 137, 48 O.O.2d 169, 249 N.E.2d 892.  We have 
16 
reviewed the record and we find the BTA’s inference to be reasonable. 
17 
 
8
 
The decision of the BTA, being neither unreasonable nor unlawful, is 
1 
therefore affirmed. 
2 
Decision affirmed. 
3 
 
MOYER, C.J., DOUGLAS, WRIGHT, RESNICK, F.E. SWEENEY, PFEIFER 
4 
and COOK, JJ., concur. 
5 
 
6