Daily Development for Monday, February 27, 2006
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

TAXATION; PROPERTY TAX; ASSESSMENT: A decision to purchase a vacant building instead of making lease payments until such time as a suitable tenant was found, did not constitute economic duress, and therefore, the proper value for tax purposes was the sale price.  Cobblestone Square Co., Ltd. v. Lorain County Bd. of Revision, 835 N.E.2d 1 (Ohio 2005). 

In May 2001, Appellant, Cobblestone Square Co., Ltd. purchased approximately 8.34 acres and a one-story cement-block building (the “Subject Property”), for $5,800,000.  For tax year 2001, the property was valued at $3,417,110.  The Board of Education of Elyria City School District (“Elyria”) filed a complaint with the Lorain County Board of Revision (“BOR”), contending that the property should be valued at the $5,800,000 sale price.

The BOR determined that the property should be valued at $4,000,000.  Elyria filed an appeal with the Board of Tax Appeals (“BTA”), which determined the value of the property to be $5,800,000.  This appeal followed: 

The facts leading up to the sale were as follows: In 2000, Cobblestone had developed a new shopping center elsewhere and sought to lease a portion of it to Kmart.  Kmart was a tenant at the Subject Property.  Cobblestone agreed to assume Kmart’s lease at the subject property and in return Kmart agreed to move to the new center.  Thus, in 2000 Cobblestone assumed the lease , which ran until February 2009, at payments of $579,000 per year. 

Cobblestone sought the landlord’s permission to subdivide the Subject Property, but the landlord refused, prompting Cobblestone to purchase the building for $5,800,000.

At the tax valuation hearing,  Cobblestone argued that the property should be valued at the value assessed by the auditor, $3,417,110.  Cobblestone first contended that the $5,800,000 purchase price reflected not only the value of the property but also the value of being released from the lease that would have run through 2009.  Upon review of the record, the Supreme Court of Ohio held that Cobblestone failed to provide any evidence of such a breakdown in purchase price. 

Next, Cobblestone contended that the purchase was motivated by economic duress.  Though the sale price is the best method of determining the true value in an arm’s length sale, Cobblestone argued that the transaction was not at arm’s length.  The court noted that an arm’s length transaction is voluntary, and thus not characterized by duress.  The court recognized that there was no contention that Cobblestone entered the lease assumption under duress.  The court held that the landlord’s refusal to subdivide the building did not constitute economic duress.

Finally, the court determined that Cobblestone made business decisions that may have been good or bad, but did not demonstrate economic duress.  Accordingly, the court affirmed BTA’s decision valuing the property at the sale price of $5,800,00.

Note:   The concurring opinion is noteworthy because it found that there was economic duress on the grounds that Cobblestone purchased an empty building at a price which no one else would have paid.  However, the concurrence agreed that Cobblestone failed to prove the property’s true value.

Comment 1: The case is interesting in part because of the tale it tells.  Note that Cobblestone stole a tenant and then was faced with negotiating with the landlord from which it stole the tenant to alter the terms of the lease to reduce its exposure on the assumption.  Needless to say, the landlord, stripped of the Kmart tenant (at the time still a good tenant, one assumes) was not amused, and unwilling to be cooperative.  It further was unccooperative in giving Cobblestone a “buy out” price.  But why should it be?  The situation on the buy out is not unlike a lender charging a yield maintenance prepayment premium. 

Comment 2: But was the price Cobblestone paid for the land the “market value” of the land?  It would seem that other evidence ought to be accepted by the court to show what a willing buyer now would pay for the land, since Cobblestone was hardly a market player in this part of the transaction.  The concurrence seems to have that part of the analysis right.  Whether one calls the circumstance “duress” or not, the fact is that the price paid by Cobblestone did not reflect the market value of the property being taxed. 

Items reported here and in the ABA publications
are for general information purposes only and
should not be relied upon in the course of
representation or in the forming of decisions in
legal matters.  The same is true of all
commentary provided by contributors to the DIRT
list.  Accuracy of data and opinions expressed
are the sole responsibility of the DIRT editor
and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a
source that is readily accessible by members of
the general public, and should take that fact
into account in evaluating confidentiality


DIRT is an internet discussion group for serious
real estate professionals. Message volume varies,
but commonly runs 5  15 messages per work day.

Daily Developments are posted every work day.  To
subscribe, send the message

subscribe Dirt [your name]



To cancel your subscription, send the message
signoff DIRT to the address:


for information on other commands, send the message
Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only
commercial and general real estate matters but also focuses specifically upon
residential real estate matters.  Because real estate brokers generally find
this service more valuable, it is named “BrokerDIRT.”  But residential
specialist attorneys, title insurers, lenders and others interested in the
residential market will want to subscribe to this alternative list.  If you
subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as
BrokerDIRT carries all DIRT traffic in addition to the residential discussions.

To subscribe to BrokerDIRT, send the message

subscribe BrokerDIRT [your name]



To cancel your subscription to BrokerDIRT, send the message
signoff BrokerDIRT to the address:


DIRT is a service of the American Bar Association
Section on Real Property, Probate & Trust Law and
the University of Missouri, Kansas City, School
of Law.  Daily Developments are copyrighted by
Patrick A. Randolph, Jr., Professor of Law, UMKC
School of Law, but Professor Randolph grants
permission for copying or distribution of Daily
Developments for educational purposes, including
professional continuing education, provided that
no charge is imposed for such distribution and
that appropriate credit is given to Professor
Randolph, DIRT, and its sponsors.

DIRT has a WebPage at:


Your e-mail address will only be used within the ABA and its entities. We do not sell or rent e-mail addresses to anyone outside the ABA.

To change your e-mail address or remove your name from any future general distribution e-mails you can call us at 1-800-285-2221, or write to: American Bar Association, Service Center, 321 N Clark Street, Floor 16, Chicago, IL 60610

If you are an ABA member, log in to the ABA Web site at https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=http://www.abanet.org/abanet/common/MyABA/home.cfm to edit your member profile. Otherwise, complete the form located at https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=https://www.abanet.org/members/join/coa2.html

To review our privacy statement, go to https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=http://www.abanet.org/privacy_statement.html.

If you have any problems, please contact the list owner at