Hyde Park Circle, L.L.C. v. Cincinnati , 2016 Ohio 3130 ( 2016 )

[Cite as Hyde Park Circle, L.L.C. v. Cincinnati, 2016-Ohio-3130.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
HYDE PARK CIRCLE LLC, : APPEAL NOS. C-150192
C-150211
Plaintiff-Appellee/Cross- : TRIAL NO. A-1106849
Appellant,
:
and
: O P I N I O N.
STATE EX. REL HYDE PARK CIRCLE
LLC, :
Relator-Appellee, :
vs. :
:
THE CITY OF CINCINNATI,
:
Defendant-Respondent-
Appellant/Cross-Appellee, :
and :
MILTON R. DOHONEY, JR., in his :
Official Capacity as City Manager for
the City of Cincinnati, :
and :
REGINALD ZENO, in his Official :
Capacity as Finance Director for the
City of Cincinnati, :
Respondents-Appellants, :
and :
JOHN R. JURGENSEN CO., :
Defendant. :
OHIO FIRST DISTRICT COURT OF APPEALS
Civil Appeals From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed in Part, Reversed in Part, and Cause
Remanded
Date of Judgment Entry on Appeal: May 25, 2016
Strauss & Troy, Joseph J. Braun and Matthew W. Fellerhoff, for Plaintiff-
Appellee/Cross-Appellant, Hyde Park Circle LLC, and Relator-Appellee State ex rel.
Hyde Park Circle LLC,
Paula Boggs Muething, City Solicitor, and Emily E. Woerner, Assistant City
Solicitor, for Defendant-Respondent-Appellant/Cross-Appellee the City of Cincinnati
and Defendants-Appellants Milton R. Dohoney, Jr., and Reginald Zeno.
Please note: this case has been removed from the accelerated calendar.
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OHIO FIRST DISTRICT COURT OF APPEALS
MOCK, Presiding Judge.
{¶1} These appeals relate to a dispute between a developer, Hyde Park
Circle (“HPC”), and the city of Cincinnati (the “City”) over the handling of a taxpayer-
funded development project in Madisonville. We reverse that portion of the trial
court’s judgment relating to the damages awarded to HPC on its breach-of-contract
claim against the City. The remainder of the trial court’s judgment is affirmed.
Background Facts and Procedural History
{¶2} The relationship between HPC and the City began when HPC
approached the City with a concept for developing the area around the former Oakley
Drive-in near the intersection of Red Bank Expressway and Madison Road—29 acres
known as Madison Circle. The development, which is located within a tax-
increment-financing (“TIF”) district designated as District 19, Madisonville Incentive
District, would include a nursing-care facility, an assisted-living facility, an office
park, retail space, and a pet facility. HPC requested public funding to complete the
project and sought to use TIF funds.
{¶3} While the City and HPC were working toward an agreement for public
financing and approval of the development, the City informed HPC that Madison
Road would need to be widened at the entrance of the property to provide left-hand
turn lanes, based upon a traffic-impact study. Because of the steep downgrade of the
property at Madison Road, the road would need to be widened to the north, on
property owned by the Children’s Home of Cincinnati. Ray Schneider, HPC’s owner,
attempted to negotiate a purchase of a small portion of property from the Children’s
Home. These negations did not succeed, and the Children’s Home director contacted
then City Manager Milton Dohoney, involving him in the discussions instead.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶4} At the insistence of the then-head of the City’s Department of
Transportation and Engineering, Eileen Enabnit, Schneider also attempted to
negotiate a land purchase from another adjacent property owner, this time to the
east of the development. The City wanted to connect the development with Hetzel
Street, and eventually Red Bank Road. These negotiations also failed, and HPC
acquired an abandoned gas station to the east of the property instead.
{¶5} In December 2007, HPC and the City entered into a development
agreement for Madison Circle (the “Development Agreement”). The Development
Agreement provided that the City would construct “City Improvements” as outlined
in exhibit B2, which would include installing a traffic signal and widening Madison
Road. The budget for the City Improvements was just under $1.5 million of TIF
funds. Exhibit B1 outlined “Public Improvements,” which included a new access
road to the development from Madison Road, with associated utilities, creating a cul-
de-sac on Charlemar Avenue, and providing an access road connecting Charlemar to
the development. The budget for the Public Improvements was just over $2.5
million of TIF funds. The Development Agreement, as well as a service agreement
entered into by the parties, limited the total amount of TIF funds to $4 million.
{¶6} During the construction process, the parties’ relationship deteriorated.
The parties disagreed over the City’s handling of the Madison Road widening or “City
Improvements,” in particular, concessions the City made to the Children’s Home.
The City had to acquire additional property at Madison Road for the widening from
the Children’s Home, and the City paid the Children’s Home for that property, as
well as paying for the installation of landscaping, a sign, a decorative wall, and
entranceway. Moreover, midway through the construction process, HPC lost a letter
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OHIO FIRST DISTRICT COURT OF APPEALS
of credit after the FDIC took control of the issuing bank. The City had required HPC
to maintain a letter of credit because it had sold part of the property to the nursing-
care facilities prior to the execution of the Development Agreement.
{¶7} Because HPC lost the letter of credit, and because the development did
not reach completion within 24 months as required by the Development Agreement,
the City concluded that HPC had breached the Development Agreement. The City
refused to issue further TIF funds to HPC when it submitted reimbursement
documentation to the City. One such denied reimbursement related to subcontractor
J.K. Muerer, who had performed street work within the development. HPC could
not pay J.K. Meurer and could not pay another subcontractor, Kween Industries,
Inc., causing the subcontractors to file mechanic’s liens against the property.
{¶8} HPC notified the City that it objected to the denied TIF
reimbursements, as well as inappropriate payments made from the TIF account by
the City. Then, in 2011, Dohoney wrote a letter to HPC, stating that the City believed
that HPC breached the Development Agreement by failing to pave two roadways
within the development, Babson Place and Sport Dog Drive. The City retained a
company, John R. Jurgenson Co., to complete the paving.
{¶9} The complications over the Madison Circle development eventually led
HPC to file suit against the City. HPC also discovered that, in 2010, the City had
illegally used $5 million of TIF funds, including funds from TIF District 19, to pay the
Cincinnati Public School Board to make up for a general-fund budget shortfall.
HPC’s amended complaint contained, in relevant part, claims for breach of contract
and trespass against the City, and a statutory-taxpayer action for mishandling of TIF
funds against the City, Dohoney, and the City’s finance director. HPC also filed a
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OHIO FIRST DISTRICT COURT OF APPEALS
trespass claim against John R. Jurgenson Co. HPC dismissed without prejudice its
claim against the City for trespass, and eventually settled with John R. Jurgenson
Co., dismissing it from the suit.
{¶10} The City filed a counterclaim against HPC for breach of contract for
HPC’s alleged failure to complete the work during the agreed timeframe, its failure to
dedicate streets within the development to the City, and its failure to maintain an
irrevocable letter of credit.
{¶11} The matter proceeded to a bench trial. With regard to HPC’s
statutory-taxpayer action, the trial court determined that the City had illegally taken
money from the TIF accounts, including TIF District 19, to pay Cincinnati Public
Schools. The trial court enjoined the City in the future from loaning itself
neighborhood TIF-account funds to pay general-fund obligations. The trial court
ordered the City to return $4 million to the TIF accounts, and awarded HPC
$177,124.65 in attorney fees and costs as provided by the taxpayer statute. With
regard to HPC’s claim for breach of the Development Agreement, the trial court
determined that HPC could not be reimbursed for actions it took prior to entering
into the Development Agreement, including actions related to acquiring the gas-
station property east of the development. The trial court also determined that the
City was not liable to HPC for the handling of the Madison Road widening, or “City
Improvements.” The trial court determined that HPC should have been reimbursed
by the City for the services provided by J.K. Meurer, in the amount of $247,500.
{¶12} As to the City’s counterclaim against HPC for breach of the
Development Agreement, the trial court agreed with the City that HPC had
materially breached the Development Agreement by failing to maintain a letter of
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OHIO FIRST DISTRICT COURT OF APPEALS
credit, but found that the City had suffered no damages. The trial court found that
HPC’s failure to complete the work within the agreed timeframe did not constitute a
breach of the Development Agreement, because the City had contributed to the delay
by denying reimbursements. The trial court also ordered HPC to complete roadway
work and roadway dedication within the development.
{¶13} Both parties appeal portions of the trial court’s decision.
The City’s Appeal
{¶14} In its first assignment of error, the City argues that the trial court erred
in awarding $247,500 to HPC on its breach-of-contract claim for the City’s failure to
reimburse HPC for the work performed by J.K. Meurer.
{¶15} We review a trial court’s judgment with regard to a breach-of-contract
action under a manifest-weight-of-the-evidence standard, in which we determine
whether the trial court’s judgment was supported by the greater amount of credible
evidence, and whether the plaintiff met its burden of persuasion by a preponderance
of the evidence. Jag Imperial, LLC v. Literski, 1st Dist. Hamilton No. C-110760,
2012-Ohio-2863, ¶ 10, citing Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-
2179, 972 N.E.2d 517. But, the interpretation of a written contract is in the first
instance a question of law that we review de novo. Jag Imperial at ¶ 11.
{¶16} The City argues that Section 22(a) of the Development Agreement bars
HPC from seeking money damages against the City. Section 22(a) states, in relevant
part, “[w]ith the sole exception of an action to recover monies accruing in the TIF
that the City has agreed to make available pursuant to this Agreement, no action
shall be commenced by the Developer or any successor against the City for monetary
damages.” There is no dispute that the services provided by J.K. Meurer were a
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OHIO FIRST DISTRICT COURT OF APPEALS
proper subject for TIF reimbursement. Thus, the clear and unambiguous language of
Section 22(a) does not bar HPC from seeking to recover money from the City for
reimbursement. See Aultman Hosp. Assn. v. Community Mut. Ins. Co., 46 Ohio
St.3d 51, 53, 544 N.E.2d 920 (1989) (the plain language of a contract governs the
parties’ obligations).
{¶17} The City next argues that even if Section 22(a) does not bar HPC from
seeking monetary damages, the trial court erred in awarding HPC $247,500, because
the evidence presented at trial showed that only $89,448.77 remained of the
available $4 million of TIF funds for the project. At trial, the City presented evidence
that it had spent $49,000 to complete work that should have been performed by
HPC; namely, paving Sport Dog Way and Babson Place, which were “Public
Improvements” under the Development Agreement. The City also presented
evidence that only $138,448.77 remained of the $4 million TIF funds. Thus, the City
argues that the trial court should have awarded HPC $89,448.77. We agree.
{¶18} The Development Agreement is clear that the project was capped at $4
million in TIF funds. In arguing for this court to disregard the $4-million cap, HPC
contends that the “City constantly changed the Agreement as the project moved
forward adding requirements and expenses well beyond the $4 million deal.” But,
the trial court never found, and the record does not show, that the City’s alleged
added requirements and expenses constituted a breach of contract for which HPC
suffered damages.
{¶19} The Development Agreement provided the City with authority to
construct the Madison Road widening and a budget of nearly $1.5 million to do it.
Although the City may not have used those funds in the most economically feasible
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OHIO FIRST DISTRICT COURT OF APPEALS
way when it came to the Children’s Home, HPC bargained away its authority to
construct that portion of the project under the Development Agreement. Moreover,
at trial, Schneider’s testimony reflected his frustration with the City, particularly
Enabnit, with regard to the City’s goal of connecting the development with Hetzel
Street. The record indicates that the Hetzel Street negotiations took place prior to
the execution of the Development Agreement, and cannot form the basis of any
breach-of-contract action. See Jag Imperial, LLC, 1st Dist. Hamilton No. C-110760,
2012-Ohio-2863, at ¶ 13, quoting Galmish v. Cicchini, 90 Ohio St.3d 22, 27, 734
N.E.2d 782 (2000) (“ ‘absent fraud, mistake or other invalidating cause, the parties’
final written integration of their agreement may not be varied, contradicted or
supplemented by evidence of prior or contemporaneous oral agreements, or prior
written agreements.’ ”).
{¶20} Because the evidence showed that the City had spent $49,000 in TIF
funds to complete work that should have been performed by HPC, and that only
$138,448.77 remained of the $4-million TIF funds, we sustain the City’s first
assignment of error to the extent that we hold that the City must pay HPC
$89,448.77 for the City’s breach of the Development Agreement. The assignment is
overruled in all other respects.
{¶21} In the City’s second assignment of error, the City argues that the trial
court erred when it found in favor of HPC on its statutory-taxpayer action.
{¶22} First, the City argues that the trial court erred in allowing HPC to
proceed with a statutory-taxpayer action because HPC never posted security as
required by R.C. 733.59. The Ohio Supreme Court has determined that the posting
of security is a jurisdictional requirement to bringing a statutory-taxpayer action, but
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OHIO FIRST DISTRICT COURT OF APPEALS
that the prerequisite can be waived by the court. See State ex rel. Citizens for a
Better Portsmouth v. Sydnor, 61 Ohio St.3d 49, 54, 572 N.E.2d 649 (1991); State ex
rel. Fisher v. Cleveland, 109 Ohio St.3d 33, 2006-Ohio-1827, 845 N.E.2d. 500.
{¶23} In arguing that HPC failed to satisfy this jurisdictional requirement,
the City relies mainly on a prior decision of this court, McQueen v. Dohoney, 1st Dist.
Hamilton No. C-130196, 2013-Ohio-2424. In McQueen, this court held that the
plaintiffs-relators failed to comply with the security requirement under R.C. 733.59
where the appearance docket from the clerk of courts indicated that the plaintiffs-
relators had failed to pay the initial security deposit, or otherwise deposit any funds
with the clerk. Id. at ¶ 21. As a result, the McQueen court held that the plaintiffs-
relators could not be awarded costs under R.C. 733.59.
{¶24} The record indicates that HPC paid the initial security costs of $325
when it filed the original complaint, distinguishing this case from McQueen where
the record indicated that the costs were never paid. When HPC amended its
complaint to add a taxpayer action, HPC did not post additional security. However,
the statute does not require a specific amount of security, nor does it require any
specific procedure to determine the amount of security. Moreover, HPC offered to
post additional security in its response to the City’s motion to dismiss, and the trial
court denied the City’s motion. The trial court either waived any requirement on the
part of HPC to pay additional security, or determined that no additional security was
required when it denied the City’s motion to dismiss. Thus, on these facts, we cannot
say that the trial court erred in finding that the security requirement had been met.
{¶25} The City also argues that HPC lacks taxpayer standing because it is not
seeking to vindicate a public right, or, in other words, the public benefit in this case is
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insufficient to confer taxpayer standing. In order to have taxpayer standing, not only
must a relator comply with the requirements of R.C. 733.59, but the remedy sought
by the relator must benefit the public. State ex rel. Teamsters Local Union No. 436
v. Bd. of Cty. Commrs., 132 Ohio St.3d 47, 2012-Ohio-1861, 969 N.E.2d 224, ¶ 11. As
stated by the Ohio Supreme Court, “when a remedy being pursued is one that is
merely for the individual taxpayer’s benefit, the taxpayer cannot claim that he is
vindicating a public right, and he will not have standing to pursue a taxpayer action.”
Id. at ¶ 12, citing State ex rel. Caspar v. Dayton, 53 Ohio St.3d 16, 20, 558 N.E.2d 49(1990).
{¶26} The City points to trial testimony from Schneider indicating that the
lawsuit was based on his personal concerns, and not that of the public, and that the
class of people affected by the City’s illegal use of funds is too narrow—those who
seek to use TIF funds for public development. See Home Builders Assn. of Dayton v.
City of Lebanon, 167 Ohio App.3d 247, 2006-Ohio-595, 854 N.E.2d 1097, ¶ 54 (12th
Dist.) (where the court determined that the interests pursued by the relators in a
taxpayer action benefited only those engaging in new construction within the city);
State ex rel. Phillips Supply Co. v. City of Cincinnati, 2012-Ohio-6096, 985 N.E.2d
257, ¶ 21 (1st Dist.) (no taxpayer standing where the relators challenged a city
ordinance that would negatively affect relators’ individual property values in only
one of the city’s 52 neighborhoods); City of Cincinnati ex rel. Radford v. City of
Cincinnati, 1st Dist. Hamilton No. C-030749, 2004-Ohio-3501, ¶ 12 (holding that
relators did not seek to enforce a public right in a taxpayer action where the relators
claimed that the city had wrongfully withheld insurance proceeds from the city’s
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OHIO FIRST DISTRICT COURT OF APPEALS
retirement system, which benefitted only the retirement system’s participants and
beneficiaries).
{¶27} We disagree with the City’s argument that HPC’s taxpayer action only
benefited HPC. In determining that the City had illegally used TIF funds to cover a
budget shortfall with Cincinnati Public Schools, the trial court found that the City
had “treat[ed] the TIF accounts as if they [were] a mini-general fund from which it
can randomly make loans to itself that can be delayed or even forgiven * * *.” The
testimony at trial indicates that the City considered the borrowing of TIF funds as an
internal “loan” that the City officials intended to pay back; however, the testimony
also indicated that the City has the ability to forgive its own debt. The City does not
dispute the trial court’s findings that its actions violated Ohio’s TIF laws.
{¶28} Although HPC sought to recover money from the District 19 TIF
account in its breach-of-contract action, HPC’s taxpayer action sought broader relief
in the form of an injunction to keep the City from engaging in its illegal loaning
practice in the future, and a judgment requiring the City to return $4 million to all of
the neighborhood TIF accounts. TIF laws were established to encourage economic
development by diverting tax dollars to public projects within a TIF district. As a
way to encourage development within all of the city neighborhoods, the City must
abide by TIF laws. The public at large, not just HPC, benefits from economic growth
within the city.
{¶29} We determine that the City’s arguments with regard to HPC’s taxpayer
action lack merit, thus, we overrule the City’s second assignment of error.
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{¶30} In its third assignment of error, the City argues that the trial court
erred in awarding attorney fees to HPC on its statutory-taxpayer action because it
awarded fees on matters unrelated to the taxpayer claim.
{¶31} The trial court held hearings on attorney fees on two separate days, in
October 2014 and January 2015. Although the City filed a transcript of proceedings
of the October 2014 hearing, the City never filed a transcript of proceedings of the
January 2015 hearing. The trial court continued the hearing until January 2015 at
the request of the City, because the City wanted more time to respond to HPC’s
attorney fees expert.
{¶32} In reviewing the amount of attorney fees awarded by the trial court,
this court would need to review any evidence of fees put forth before the trial court at
the January 2015 hearing. Because the transcript is necessary to review the City’s
claimed error, this court must presume regularity of the trial court’s decision. See,
e.g., www.headhunting.org, LLC v. Logicalis, Inc., 1st Dist. Hamilton No. C-050512,
2006-Ohio-2619, ¶ 21.
{¶33} We overrule the City’s third assignment of error.
Cross-Appeal by HPC
{¶34} In its sole assignment of error, HPC claims that the trial court erred in
failing to award HPC $105,000 in TIF reimbursement for the work done by Kween
Industries, Inc. As to any damages beyond the J.K. Meurer invoice, the trial court
specifically found that HPC “ha[d] not met its burden of proof as to its other claims
for damages * * * for breach of contract.”
{¶35} As discussed within the City’s first assignment of error, the
Development Agreement limited HPC to $4 million in TIF funds for the project, and
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the record indicates that only $89,448.77 remains out of that budgeted amount.
Having determined that HPC is entitled to $89,448.77 from the City related to the
J.K. Muerer invoice, we agree with the trial court that HPC has not met its burden to
prove that it is entitled to any further money from the City. Therefore, we overrule
HPC’s sole assignment of error.
Conclusion
{¶36} In conclusion, we reverse that portion of the trial court’s judgment
holding that HPC is entitled to $247,500 on its breach-of-contract claim against the
City, and we remand the matter to the trial court to issue an order reflecting that
HPC is entitled to $89,448.77 on its breach-of-contract claim. The judgment of the
trial court is affirmed in all other respects.
Judgment affirmed in part, reversed in part, and cause remanded.
STAUTBERG and SUNDERMANN, JJ., concur.
J. HOWARD SUNDERMANN, JR., retired, from the First Appellate District, sitting by
assignment.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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