Kathryn A. Belfance, Trustee, )
Successor in Interest to )
Copperweld Steel Company, )
) CASE NOS. 95-M-898
Appellant, ) 95-M-899
vs. ) (REAL PROPERTY TAX)
Trumbull County Board )
of Revision, the ) DECISION AND ORDER
Trumbull County Auditor, )
LaBrae Local Schools Board )
of Education and Champion )
Local Schools Board of )
For the Appellant- Robert Stefancin
Brouse & McDowell
500 First National Tower
Akron, Ohio 44308
For the County- Dennis Watkins
Appellees Trumbull County Prosecuting
By: Paul Heltzel
Assistant Prosecuting Attorney
160 High Street Northwest
Warren, Ohio 44882
For the LaBrae- Ron Joseph, Superintendent
Local School 4651 West Market Street
District Leavittsburg, Ohio 44430
For the Champion- Pamela Hood, Superintendent
Local School 5759 Mahoning Avenue NW
District Warren, Ohio 44483
Entered June 30, 1997
Mr. Johnson, Ms. Jackson and Mr. Manoranjan concur.
This cause and matter comes on to be considered by the
Board of Tax Appeals upon two notices of appeal filed under date of
August 29, 1995, from decisions, dated August 2, 1995, of the
Trumbull County Board of Revision ("BOR"), appellee herein.
The subject property is located in the Champion and
Warren Township taxing districts of Trumbull County, Ohio, and
further identified as Parcel Nos. 41-621900 and 46-373100.
The Trumbull County Auditor found the true and taxable
values of the subject property for tax year 1994 to be as follows:
Parcel No. 41-621900
True Value Taxable Value
Land $ 1,266,900 $ 443,420
Buildings $ 2,305,200 $ 806,820
Total $ 3,572,100 $1,250,240
Parcel No. 46-373100
Land $ 690,500 $ 241,680
Buildings $ 5,981,000 $2,093,350
Total $ 6,671,500 $2,335,030
Upon consideration of the complaints filed, the Trumbull
County BOR determined that there should be no change in value.
The contentions of value for tax year 1994, presented by
way of notices of appeal are as follows:
Parcel No. 41-621900
True Value Taxable Value
Land $ 464,152 $ 162,453
Buildings $ 844,546 $ 295,592
Total $ 1,308,698 $ 458,045
Parcel No. 46-373100
Land $ 252,975 $ 88,542
Buildings $ 2,191,212 $ 766,924
Total $ 2,444,187 $ 855,466
The subject property is the former Copperweld Steel
("Copperweld") production facility. The site is comprised of
491.49 acres and improved with a steel mill facility consisting of
31 one- and two-story buildings containing approximately 2,037,116
square feet. The buildings were constructed between 1920 and 1970.
Most are steel-framed, brick, block, metal panel and/or fiberglass
buildings, some with dirt floors, others with floors reinforced to
sustain the weight of foundry equipment. Other improvements
include landscaping, fencing and paving.
As a result of the age of the buildings and the changes
which have taken place in the steel industry, the plant has some
functional obsolescence. However, steel production has never
ceased at the plant despite the financial difficulties facing the
owner of the facility as will be discussed, infra. The appraiser
who testified at hearing indicated that the highest and best use of
the property is continued use as a steel mill and that opinion is
well supported by the record.
The original complaint was filed with the BOR by
Copperweld on March 31, 1995. That corporation had filed for
bankruptcy protection on November 22, 1993 and had been operating
as a "debtor in possession" pursuant to federal bankruptcy law
since that time. Countercomplaints were filed by both school
boards in whose districts the plant is located.
On August 25, 1995, the debtor filed a "Plan of
Reorganization" which was formally modified in September of that
year. The plan, as modified and approved, called for the sale or
liquidation of substantially all of the corporation's property,
distribution of the funds received into a "Liquidation Trust", and
the dissolution and termination of Copperweld's corporate
existence. (Appellant's Exh. 17A)
As of August 25, 1995, the debtor had entered into a
contract for the sale of substantially all of its assets, including
the parcels here under consideration, to Hamlin Holdings, Inc.
("Hamlin") The sale was consummated on October 11, 1995;
adjustments to the purchase price were made as late as January 1,
The appeal before this Board is prosecuted by the
Trustee of the Liquidation Trust, the entity obligated to pursue
the claims of the debtor corporation for eventual distribution by
order of the bankruptcy court. The matter was submitted to the
Board of Tax Appeals pursuant to R.C. 5717.01 upon the notices of
appeal, the statutory transcript certified by the Trumbull County
BOR, the testimony and other evidence adduced at the hearing before
this Board and the briefs of the parties.
At the hearing before this Board, appellant presented
the testimony of Mr. Scott King, CPA, JD. Mr. King, an employee of
Price Waterhouse LLP, works with financially distressed companies.
Mr. King is not an appraiser and did not prepare an appraisal of
the subject property. Mr. King did participate in the negotiation
and sale of Copperweld's assets as a consultant to the unsecured
creditors' committee in the liquidation proceedings. He also
serves as an advisor to the Liquidation Trustee. Mr. King's
testimony at hearing provided a history of the worsening financial
condition of the company, an explanation of the contract for the
sale of the steel facility and some justification for the purchase
price allocation entered at closing.
During the pendency of the bankruptcy proceedings,
Copperweld's management team actively pursued the sale of
substantially all of the company's assets. Hamlin was the eventual
successful purchaser. It was Mr. King's testimony that the final
sales price received for the working steel plant was $36,619,000 1.
This figure included cash paid Hamlin of $8,640,000, a worker's
compensation "adjustment" of $3,000,000, promissory notes executed
by Hamlin and payable to the Liquidation Trustee in the amount of
The record includes other evidence of the amount paid by
Hamlin for the assets purchased which, at first glance, appears to
contradict Mr. King's testimony. During the BOR hearing, a
representative of the debtor disclosed that the sales price reached
was $59,700,000. (S.T. Exh. 3, 10) The appellant also submitted a
letter to this Board indicating that Copperweld's assets were sold,
as of October 11, 1995, for $73,000,000. (S.T. Exh. 9). Our
further review indicates that the greater reported sales prices
include an amount for accounts receivable which were retained by
the debtor's estate and collected by the Liquidation Trustee.
(Appellant's Exh. 16, p. 25)
$9,780,000 and an agreement to assume $15,199,000 of Copperweld's
previously acquired liabilities.
Mr. King then described the allocation entered int o at
the closing. At that time, the assets were allocated in the
Real Property $ 500,000
Acquired Assets $16,400,000
It was Mr. King's position that the allocations to both
inventory and all other acquired assets were defensible by
reference to other expert opinions received by company management
when contemplating the courses of action open in light of its
worsening financial condition. As its financial condition became
critical, Copperweld's largest shareholders refused to infuse
additional resources and attempted to sell their interests but
could find no willing purchaser. Without the capital infusions,
the board of directors and current management concluded that
bankruptcy was the only course of action available. At that time,
company management requested Ernst & Young, its accountant, to
prepare a "liquidation analysis". Such an analysis was necessary
to determine whether the company would be required to liquidate its
assets or would be able to reorganize and continue operations.
Based upon many factors, including management's opinion that a
The $33,320,000 sale price identified at closing was modified
by post-sale considerations. The additional funds paid were
allocated to inventory. (Appellant's Exh. 19, Attachment III)
higher return for creditors could be garnered through
reorganization rather than through liquidation, the board of
directors sought bankruptcy relief through reorganization.
Ernst & Young's liquidation analysis presented the
accounting firm's opinion as to the liquidation value of the
company's assets. That analysis predicted that property, plant and
equipment, then carried on the corporation's books for a net value
of $52,604,000 would bring $10,000,000 if the company was
Mr. King's focus, however, was not on the liquidation
value of the property, plant and equipment, but on the liquidation
value of the inventory and other assets. It was the witness'
position that the liquidation analysis prepared prior to the filing
of the bankruptcy substantiated the purchase price allocations
agreed to at closing. As indicated above, the parties allocated
$16,420,000 to inventory. The liquidation analysis theorized that
the same assets would garner $20,079,000 upon liquidation if they
were sold for 50 per cent of their book value.
Mr. King turned to another exhibit to further justify
the allocations made at closing. At the hearing before the BOR,
the property owner presented an appraisal report prepared by
American Appraisal Associates, Inc. which valued, on a liquidation
basis and as of October 31, 1991, all of the real estate, machinery
and equipment, mobile equipment and office furniture and equipment
owned by Copperweld as of that date. Mr. King referred to the
"Summary of Fair Market Value" (last page of S.T. Exh. B) to
support the allocation of $16,400,000 to the other acquired assets
made at closing. Along with the other assets purchased, which were
valued by the American Appraisal Associates at over $16,000,000,
Hamlin purchased a "12 inch mill". That mill, originally leased by
Copperweld, was not considered property owned by the corporation as
of the date the liquidation analysis was prepared.
It was Mr. King's testimony that the "12-inch" mill,
built in 1990 at a cost of $26,000,000 3 was the "crown jewel" of the
Hamlin purchase. The mill made it possible for Copperweld, or any
successor, to utilize the latest steel making technology and
capture a significant portion of the steel requirements of Japanese
manufacturers in America. As part of the bankruptcy proceedings,
it was determined that the mill was part of the bankruptcy estate
and transferable through sale.
When the value of the mill was added to the other
tangible assets transferred, it was Mr. King's testimony that the
$16,000,000 allocated at closing actually undervalued the assets
transferred. It was Mr. King's further testimony that, when the
value of the other assets transferred at closing was considered,
the allocation of $500,000 to real property was the most that could
be attributed to that asset. (H.R. p. 40)
Appellees presented the testimony of Mr. Ellis J.
Yelton. Mr. Yelton is a real estate appraiser and manager with
Integrity Appraisal Service, a mass appraisal company under
contract with Trumbull County. Mr. Yelton has significant
At the BOR hearing, the debtor's re presentative indicated the
net book value of the "12-inch" mill was $17,000,000. (S.T. Exh.
experience valuing steel facilities, having appraised steel mills
in Kansas City, Lorain, Ohio, Middleton, Ohio and in Mahoning
County, Ohio. Mr. Yelton valued the subject as of tax lien date
and concluded to a value of $10,030,000.
Mr. Yelton initially discounted the cost method of
valuing the property as well as the income method, given the age of
the property's improvements and the fact that steel mills are
rarely leased. Mr. Yelton testified that considering the subject
under the sales comparison method would produce the best indication
In separately valuing the land as if vacant, Mr. Yelton
concluded that the steel facility was underutilizing its land
acreage. Because of that underutilization, the appraiser opined
that a considerable amount of land was appropriately valued as
vacant land. Valuing this land separately, Mr. Yelton concluded to
a land value of $1,175,000 for the primary mill site (235 acres at
$5,000 per acre), $443,000 for the excess land (221.49 acres at
$2,000 per acre), and $420,000 for the Mahoning Avenue site (35
acres which Mr. Yelton believed to be quite valuable because of
expressway exposure and therefore properly valued at $12,000 per
acre), for a total land valuation of $2,038,000.
In estimating value under the market sales approach, Mr.
Yelton reviewed the general steel-making vicinity and found five
sales he believed to be comparable to the subject. Sale dates
ranged from January, 1982 (Comparable No. 1) through February, 1989
(Comparable No. 5). Building sizes range from approximately
150,000 square feet (Comparable No. 5) to 1,050,0000 square feet
(Comparables No. 3 and 4).
After adjustments, generally for size but to some
comparables for age, Mr. Yelton testified that his comparables fell
into a price range of $3.59 to $4.90 per square foot. Placing some
weight on Comparable No. 5, the sale by Copperweld of an 8.59 acre
plat improved with a 148,944 square foot building for $1,000,000,
but placing the greatest weight upon the sales of a building
complex of over 1,000,000 square feet, Mr. Yelton concluded to a
value of $4.50 per square foot, or $9,167,000, to which he added
his excess land value of $863,000, for a total value of
When a party contests the value of real property, there
exists no presumption that the values found by a board of revision
are correct, merely a presumption that the board of revision has
acted in a lawful manner. Cleveland Bd. of Edn. v. Cuyahoga Cty.
Bd. of Revision (1994), 68 Ohio St. 3d 336; Springfield Local Bd.
of Edn. v. Summit Cty. Bd. of Revision (1994), 68 Ohio St. 3d 493.
Nevertheless, the appellant has the burden of presenting evidence
in support of the value it has presented, then the other parties to
an appeal have the burden of presenting evidence which rebuts that
of the appellant. Id.; Mentor Exempted Village Bd. of Edn. v. Lake
Cty. Bd. of Revision (1988), 37 Ohio St. 3d 318, 319.
The Ohio Constitution provides the authority which
empowers the state to tax real property within its borders.
Article XII, Section 2 provides in pertinent part:
"Land and improvements thereon shall be
taxed by uniform rule according to value, ***
Upon consideration of the above, the General Assembly
enacted R.C. 5713.01, which provides:
"The auditor shall assess all the real
estate situated in the county *** at its true
value in money ***."
In interpreting the meaning of " true value" as set forth
above, the Supreme Court has determined that the best evidence of a
property's fair market value or "true value in money" for tax
purposes is that amount for which the property would sell on the
open market between willing parties. State, ex rel. Park
Investment Co. v. Bd. of Tax Appeals (1964), 175 Ohio St. 41; In re
Estate of Sears (1961), 172 Ohio St. 443.
Further, R.C. 5713.03 requires that if any 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 , the
auditor shall consider the sale price of such
*** parcel to be the true value for taxation
Complementing the above quoted statute is R.C. 5713.04,
"Each separate parcel of real property shall
be valued at its taxable value *** . The price
for which such real property would sell at
auction or forced sale shall not be taken as
the criterion of its value."
Thus, there is a rebuttable presumption that a sale
price reflects the true value of property. Cincinnati Bd. of Edn
v. Hamilton Cty. Bd. of Revision (1997), 78 Ohio St. 3d 325.
However, if evidence is introduced which indicates that the sale
price is not reflective of true value, then a review of independent
appraisals based upon factors other than sale price is appropriate.
Id.; Ratner v. Stark Cty. Bd. of Revision (1986), 23 Ohio St. 3d
If evidence exists which calls into question the
validity of a sale, the party placing reliance thereon to support
its contention of value must show that the sale was made at arm's
length. Tanson Holdings, Inc. v. Darke Cty. Bd. of Revision
(1996), 74 Ohio St. 3d 687; Bedford Bd. of Edn. v. Cuyahoga Cty.
Bd. of Revision et al (Jan. 3, 1997), 95-T-275, 276, unreported.
In Walters v. Knox Cty. Bd. of Revision (1989), 47 Ohio
St. 3d 23, the Ohio Supreme Court identified the elements of an
arm's length sale. Therein, the Court concluded:
" *** an arm's length sale is characterized by
these elements: it is voluntary, i.e. without
compulsion or duress; it generally takes
place in an open market; and the parties act
in their own self-interest."
In Mills v. Lucas Cty. Bd. of Revision (Apr. 29, 1994),
B.T.A. 92-Z-553, unreported, this Board further clarified the
characteristics of an arm's length sale:
"An arm's length sale is one with bidding and
negotiation on the open market. It requires a
ready, willing and able buyer and a ready,
willing and able seller, neither party being
coerced or obligated to buy or sell.
Generally, such a sale involves independent
parties who are not related, and payment in
cash or by conventional financing."
Appellant, by way of brief, argues that the sale from
Copperweld to Hamlin meets the qualifications of an arm's length
sale. While not specifically addressing the challenge of R.C.
5713.04, appellant argues that by selling its assets through a
bankruptcy reorganization rather than liquidating the company
"piecemeal" outside of bankruptcy, or shutting the steel mill down
until a suitable buyer could be attracted, Copperweld acted in its
own best interest.
Closely related to this argument is appellant's claim
that the sale was not a "distress" sale because the property was
exposed to the market both before and after the bankruptcy filing
and the eventual successful purchaser was not the only interested
purchaser, but the best available. Finally, it is appellant's
belief that the purchase price received by the Liquidation Trustee
was the highest amount which could have been garnered for the
assets sold. However, this Board finds, under the facts presented
herein, that Copperweld's impaired financial condition necessitated
the sale of its real property.
Compelling business circumstances may be sufficient to
establish that a recent sale of property is neither arm's length in
nature nor representative of true value. Lakeside Ave. L.P. v.
Cuyahoga Cty. Bd. of Revision (1996), 75 Ohio St. 3d 540. In
Lakeside, the "compulsion" was a non-negotiable purchase price for
a piece of property without which a business would possibly have
been forced into bankruptcy.
In the present matter, the Liquidation Trustee argues
that Copperweld is a willing "seller". However, the true "seller"
of the business is the bankrupt estate. Copperweld is merely a
"debtor in possession". Thus, this matter is much like Walhonding
Hills Campground v. Coshocton Cty. Bd. of Revision (Aug. 6, 1993),
B.T.A. Case No. 92-A-903, unreported, wherein this Board concluded
that sales through a bankruptcy may reflect factors other than the
actual value of the property sold. See, also, LTV Steel v.
Strongsville Bd. of Education, et al. (Nov. 23, 1990), B.T.A. Case
No. 89-J-323 through 327, 374 through 383, unreported.
Not only do we question the efficacy of a sale directly
from a bankrupt estate as indication of fair market value, we note
that appellant relies upon an allocation of the sale price without
any independent appraisal verification. This Board is not required
to accept an allocation of a lump sum purchase price paid for a
group of assets. Elsag-Bailey, Inc. v. Lake Cty. Bd. of Revision
(1996), 74 Ohio St. 3d 647; Consol. Aluminum Corp. v. Monroe Cty.
Bd. of Revision (1981), 66 Ohio St. 2d 410. Instead, this Board
must consider whether that allocation results in a distorted
valuation for the real property. Conalco v. Bd. of Revision
(1977), 50 Ohio 2d 120.
While appellant did not present appraisal testimony at
the evidentiary hearing, the debtor did submit an appraisal before
the BOR, which, presuming an "orderly liquidation" of the tangible
assets, concluded that the value of the real property, as of
October 31, 1991, was $3,115,000. (S.T. Exh. B). That appraisal
report was updated to January 1, 1994 and filed with this Board
October 12, 1995. The updated report estimates market value for
the land and improvements as of January 1, 1994, presuming
continued use as a steel facility, to be $4,200,000. We note that
the appraisals were neither identified or authenticated either
before the BOR or before this Board. Because of the evidentiary
problems attendant to reports without foundation, and expressions
of opinions which were never subject to cross examination, see
Nordonia Hills Bd. of Edn. v. Summit Cty. Bd. of Revision (Nov. 9,
1995), B.T.A. Case No. 94-K-1227, unreported, this Board will not
rely upon either appraisal report to find value. However, we must
note that the allocations made at closing were in disaccord with
the opinions of value obtained both before and during the
bankruptcy proceedings. This Board must conclude that the
allocation made by the parties substantially undervalued the real
property and, therefore, is not a competent or reliable indication
of its true value.
This Board must also address the value evidence
presented by the appellees. Mr. Yelton testified that he attempted
to eliminate sales which were not, in his opinion, arm's length
transactions. However, upon cross examination and subsequent
rebuttal testimony, appellant presented evidence which indicated
that Mr. Yelton's Comparable Sale No. 5, the 1989 sale of 8.59
acres between Copperweld Steel and Ohio Star Forge Company, was
actually Copperweld's contribution to a joint venture with Daido
Steel, its Japanese trading partner and eventual majority
Appellant has also brought forth evidence which calls
into question the reliability of another of Mr. Yelton's
comparables. Mr. Yelton identified the sale of 75.60 acres
improved with 1,048,329 square feet of building space on Oberlin
Avenue in Canton, Ohio, which sold in December, 1984 for a sale
price of $5.25 per square foot and again in November of 1986 for a
price of $4.82 per square foot. The appraisal submitted by
appellant identifies a sale at the same location. However, the
sale identified through appellant's appraisal is an 886 acre parcel
improved with 3,852,819 square feet of building space which sold
November, 1989 for the sale price of $2.95 per square foot. Mr.
Yelton's comparable sale may be the acquisition of a small portion
of a larger complex which later may have been transferred as part
of a sale of the entire complex. Once again, this Board received
no testimony concerning the comparable sale considered by
appellant's appraisal company. Thus, our consideration of which
sale is actually more comparable to the subject is mere conjecture.
Therefore, we reject Mr. Yelton's reliance upon the
Copperweld sale to Ohio Star Forge as an indication of value and
place little weight on the sales by Republic Steel and Enduro as
those properties appear to have been a part of a larger sale
occurring within a reasonable time and about which we have little
information. However, we find Mr. Yelton's Comparables 1 and 4,
which he believed to set the lower range of value at $4.00 per
square foot and $3.59 per square foot are both competent and
credible indications of value. While both comparables are
considerably smaller than the subject, Mr. Yelton faced that
disability in his adjustments, which we find to be reasonable.
Considering that sale prices for similar properties appear,
generally, to have declined over the relevant time period, this
Board finds that the lower end of Mr. Yelton's range, which we
round to $3.60 per square foot, represents competent and probative
evidence by which to value the subject property. We further find
that Mr. Yelton's opinion relating to the value of the land and its
underutilization to be credible and supported by the record.
Therefore, the value of the subject, as determined upon a
preponderance of credible evidence, is as follows:
2,037,116 Sq. Feet
@ $3.60 per square foot (rounded) = $7,333,600
Additional land value (256.49 Ac.) = 863,000
Total Value $8,196,600
Finally, this Board finds it unnecessary to reduce value
based upon the remediation costs agreed to be paid to the Ohio
Environmental Protection Agency. Deductions for costs of
remediation have not, in this state, become the standard
measurement of "true value" for environmentally damaged properties.
Vogelgesang v. CECOS Internatl., Inc. (1993), 85 Ohio App. 3d 339.
Instead, the appellant (or other party asserting diminution in
value) must establish the actual effect of the contamination on
fair market value. Alder v. Licking Cty. Bd. of Revision, et al.
(Apr. 22, 1994), B.T.A. Case No. 92-R-976, unreported. While the
valuation of environmentally contaminated properties remains
somewhat uncharted in this state, it is clearly dependent upon
accepted principles of appraisal methodology S
CECO , supra; Chem-
Masters Corp. v
. Geauga Cty. Bd. of Revision (Dec. 21, 1990),
B.T.A. Case No. 88-J-994, unreported. As the appellant has
brought forth no appraisal evidence which indicates substantial
reductions from fair market value attributable to the cost of
remediation are appropriate, this Board finds it improper to make
any deductions to Mr. Yelton's opinion of value.
Upon consideration of the existing record and the
applicable law, the Board of Tax Appeals finds and determines upon
a preponderance of credible evidence, that the value of the subject
property as of January 1, 1994 was:
Parcel No. 41-621900
True Value Taxable Value
Land $ 1,319,070 $ 461,670
Buildings $ 1,539,200 $ 538,720
Total $ 2,858,270 $1,000,390
Parcel No. 46-373100
Land $ 718,930 $ 251,630
Buildings $ 4,619,400 $1,616,790
Total $ 5,338,330 $1,868,420
It is the order of the Board of Tax Appeals that the
Auditor of Trumbull County list and assess subject real
property in conformity with this decision and order. It is
further ordered that this value be carried forward in
accordance with the law. ohiosearchkeybta