Beachwood City School Dist. Bd. of Edn. v. Warrensville Hts. City School Dist. Bd. of Edn. , 2020 Ohio 4459 ( 2020 )

[Cite as Beachwood City School Dist. Bd. of Edn. v. Warrensville Hts. City School Dist. Bd. of Edn., 2020-Ohio-
4459.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
BEACHWOOD CITY SCHOOL DISTRICT :
BD. OF EDUCATION,
: No. 108253
Plaintiff-Appellant,
:
v.
:
WARRENSVILLE HEIGHTS CITY
SCHOOL DISTRICT BD. OF :
EDUCATION,
:
Defendant-Appellee.
JOURNAL ENTRY AND OPINION
JUDGMENT: REVERSED AND REMANDED
RELEASED AND JOURNALIZED: September 17, 2020
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-902080
Appearances:
Brindza, McIntyre & Seed, L.L.P., Daniel M. McIntyre,
and David A. Rose; and Reminger Co., L.P.A., Holly Marie
Wilson, and Aaren R. Host, for appellant.
Pepple & Waggoner, Ltd., Christian M. Williams,
Donna M. Andrew, and Brian J. DeSantis; and Taft,
Stettinius & Hollister, L.L.P., Thomas J. Lee, Adrian D.
Thompson, and Josh M. Mandel, for appellee.
MARY J. BOYLE, P.J.:
At the heart of this case are two 1997 agreements between plaintiff-
appellant, Beachwood City School District Board of Education (“Beachwood”), and
defendant-appellee, Warrensville Heights City School District Board of Education
(“Warrensville Heights”). The agreements provide that the school districts would
share the tax revenue from a 405-acre tract of land known as the Chagrin Highlands
(the “Chagrin Land”) that the city of Beachwood annexed from the city of Cleveland
in 1990. Despite the disparity between the school districts and the resulting optics
in which these agreements were developed and executed, the issue before us in this
appeal is limited to whether the agreements that the parties spent years negotiating
are valid and enforceable.
Beachwood raises one assignment of error, that “the trial court erred
in granting summary judgment in favor of” Warrensville Heights. Beachwood
identifies three issues under its sole assignment of error: (1) whether the parties’
agreements are valid without approval from the Ohio Board of Education; (2)
whether their agreements are valid without fiscal certificates; and (3) whether
Warrensville Heights is immune from Beachwood’s tort claims.
We find merit to Beachwood’s sole assignment of error and hold that
the 1997 agreements are valid and enforceable. We therefore reverse the trial court’s
judgment and remand for further proceedings consistent with this opinion.
I. Procedural History and Factual Background
In August 2018, Beachwood filed a complaint against Warrensville
Heights for promissory estoppel, unjust enrichment, conversion, fraud, and two
counts of breach of contract. Beachwood sought monetary damages, a declaratory
judgment that the 1997 agreements between the parties are valid, and a permanent
injunction to enforce the agreements. Beachwood attached the two agreements as
exhibits to the complaint.
In October 2018, Warrensville Heights moved to dismiss
Beachwood’s complaint, arguing that Warrensville Heights is statutorily immune
from claims for promissory estoppel, unjust enrichment, conversion, and fraud.
Warrensville Heights further maintained that Beachwood did not allege facts
showing that the agreements ever became valid and enforceable. Beachwood filed
an opposition, and the trial court denied Warrensville Heights’ motion to dismiss.
In November 2018, Warrensville Heights answered Beachwood’s
complaint and filed a counterclaim against Beachwood for specific performance.
The counterclaim alleged that the agreements were invalid, but if the trial court
found otherwise, Warrensville Heights sought an order directing Beachwood to
comply with its obligation under the agreements to engage in joint educational
programs. Beachwood filed an answer, and the parties engaged in discovery.
In December 2018, Warrensville Heights filed a motion for summary
judgment, and Beachwood filed an opposition. The following facts come from the
deposition transcripts and the opposing summary-judgment motions.
Both Beachwood and Warrensville Heights are political subdivisions
under Chapter 2744 of the Ohio Revised Code and are public school districts
organized and operating under the laws of the state of Ohio within Cuyahoga
County.
In March 1990, the city of Beachwood annexed the Chagrin Land
from the city of Cleveland. Both parties agree that despite the municipal annexation,
the Chagrin Land remained within the Warrensville Heights City School District.1
In October 1990, Beachwood requested that the Ohio Department of
Education transfer the Chagrin Land for school-district purposes from Warrensville
Heights to Beachwood pursuant to R.C. 3311.06. Warrensville Heights opposed the
request. An Ohio Department of Education representative instructed Beachwood
that it must negotiate in good faith with Warrensville Heights pursuant to Ohio
Adm.Code Chapter 3301-89 to try to reach an agreement in the best interest of the
districts’ educational programs. Warrensville Heights and Beachwood attempted,
unsuccessfully, to resolve the dispute. In 1993, the Ohio Department of Education
provided Warrensville Heights and Beachwood with names of potential mediators
who had backgrounds in public education. The parties disagreed on which of the
1 School districts and municipalities are separate political subdivisions of the state
of Ohio. Although a city school district generally consists of territory within the limits of
each municipality, the school district boundaries need not coincide with the territorial
limits of the municipality. 1 Anderson, Ohio School Law Guide, Section 2.04 (2020).
“Annexation” means “annexation for municipal purposes.” R.C. 3311.06(A)(1). When a
municipality annexes territory of an adjoining municipality, the territory is not
automatically transferred to the school district of the annexing municipality unless the
territory comprises an entire school district. 1 Anderson, Ohio School Law Guide,
Section 2.22 (2020).
mediators to select. In 1995, the parties asked the Ohio Department of Education to
approve a “mediation conducted locally by a mutually acceptable facilitator” because
the parties were unclear whether such action would comply with Ohio Adm.Code
Chapter 3301-89. The Ohio Department of Education’s response is not in the
record, but in May 1996, the parties agreed to use former U.S. District Judge Robert
M. Duncan (“Duncan”) to facilitate the matter.
The parties met with Duncan to mediate a resolution in November
1996 and January 1997. On April 8, 1997, Duncan issued a memorandum with
respect to the “request of the Beachwood City School District for transfer of territory
from the Warrensville Heights City School District.” In his memorandum, he stated:
The property, which is a 405-acre tract formerly owned by the City of
Cleveland, but within Warrensville Heights City School District, was
annexed to the City of Beachwood on March 20, 1990. In October 1990,
the Beachwood City School District Board of Education authorized
action to obtain the transfer of the property to the Beachwood District
pursuant to R.C. 3311.06. The Warrensville Heights District has firmly
and consistently opposed the transfer. All attempted efforts to settle
the transfer issue have failed.
Duncan then set forth the following recommendations:
1. It was agreed that the property will remain in the Warrensville
Heights City School District.
2. Warrensville Heights proposed that real estate tax revenues from
the property, generated from that amount of market value of the
property (as determined by the Auditor) which exceeds the current
amount of $22,258,310 should be shared by the parties. * * *
a. It was agreed that Warrensville Heights shall receive 100%
of tax revenue generated by portions of the property
classified as residential or agricultural.
b. If no abatement of real estate taxes is granted, Warrensville
Heights proposed that it should receive 70% and Beachwood
should receive 30% of tax revenue generated by the portions
of the property classified other than as residential or
agricultural. Beachwood proposed the portions of 60% to
Warrensville Heights and 40% to itself. * * * I indicated my
view that the Warrensville Heights proposal was more
equitable.
c. If abatement of real estate taxes is granted, Warrensville
Heights proposed a graduated scale of percentage change in
its favor, ranging to 100% abatement. Beachwood proposed
that the scale should only vary up to 25% abatement, since
any percentage in excess of that amount would require the
approval of Warrensville Heights. Consensus was reached
that the scale should only vary to 25% and above, as follows:
***
3. It was agreed that the parties shall mutually engage in joint
educational programs and activities, including but not limited to
those programs and activities discussed previously.
Duncan concluded his memorandum by “strongly urg[ing] both Boards of
Education to act favorably on the recommendations.”
In April 1997, the Ohio Department of Education asked the school
districts for a status update, and they responded that they had received Duncan’s
recommendation and were in the process of preparing “a formal agreement between
the parties.”
In May 1997, both school boards voted to adopt Duncan’s
recommendations.
On May 12, 1997, Beachwood and Warrensville Heights entered into
an agreement, which incorporated Duncan’s recommendations and stated in
relevant part:
WHEREAS, certain territory in the Warrensville Heights City School
District has been annexed for municipal purposes to the City of
Beachwood (“the Territory”) * * *; and
WHEREAS, Beachwood has requested the Ohio Board of Education to
transfer the Territory to the Beachwood School District, pursuant to
Section 3311.06(C)(2) of the Ohio Revised Code, which request remains
pending; and
***
WHEREAS, an agreement incorporating Judge Duncan’s
recommendations will permit the Territory to remain in Warrensville
Heights, with a sharing of tax revenues between the two School
Districts on a basis of 70% to Warrensville Heights and 30% to
Beachwood which will provide Beachwood with the equivalent of
approximately 50% of the revenue which it would have received if the
Territory were transferred to Beachwood and other cooperation of
educational benefit to both School Districts[.]
The agreement then stated:
[T]he parties do hereby agree as follows:
1. Beachwood shall withdraw its request to transfer the Territory and
shall not institute any further such request.
2. Real estate tax revenues from that amount of market value of the
Territory (as determined by the Cuyahoga County Auditor) which
exceeds the amount of $22,258,310 (the “Base Amount”) shall be
shared by the parties as set forth below.
a. Warrensville Heights shall receive 100% of real estate tax
revenue generated by portions of the Territory classified as
residential or agricultural.
b. If no abatement of real estate taxes is granted, Warrensville
Heights shall receive 70% and Beachwood shall receive 30%
of real estate tax revenue generated by the portions of the
Territory classified other than as residential or agricultural,
net revenues from the Base Amount.
c. If abatement of real estate taxes is granted, the parties shall
receive the respective percentages set forth below * * *
3. The parties shall mutually engage in joint educational programs and
activities which will be of benefit to both School Districts. The
activities and programs contemplated include student exchanges,
shared field trips, joint staff development activities and distance
learning technology programs. The enumeration of specific types of
programs is illustrative and not intended to limit the cooperative
interaction and exchanges of students, staff and resources. These
programs and services will be reviewed annually by the staff and a
report given to each Board of Education.
***
The superintendent, treasurer, and board president of both school districts signed
the agreement.2
On July 2, 1998, the Ohio Department of Education requested a status
update from the school districts. The parties’ response is not in the record. On
July 8, 1998, Beachwood withdrew its request to transfer the Chagrin Land from the
Ohio Department of Education.
Beachwood’s treasurer, who has been the treasurer since 1989,
testified at her deposition that she monitored the real estate value of the Chagrin
Land throughout the decades as best she could. She explained that every time
2 The parties treat Duncan’s adopted memorandum and the May 12, 1997 agreement
as two separate agreements (or purported agreements). Throughout the rest of this
opinion, we will refer to Duncan’s adopted memorandum and the May 12, 1997 agreement
collectively as the “agreements.”
Warrensville Heights had a new treasurer, she would reach out to the treasurer and
inform him or her of the May 12, 1997 agreement.
In 2013, the Chagrin Land’s value reached the $22,258,310 threshold
set forth in the agreements. Representatives from the school districts met several
times between 2013 and 2016 to discuss the implementation of revenue sharing and
joint educational programming. The school districts participated in joint
educational programming in the 2013-2014 and the 2016-2017 school years.
Warrensville Heights, however, refused to pay Beachwood the amounts that
Beachwood claimed it was due under the agreements.
In its motion for summary judgment, Warrensville Heights argued
that it was entitled to judgment as a matter of law on Beachwood’s claims because
(1) the Ohio Board of Education did not approve the agreements as R.C. 3311.06
required, (2) the agreements did not contain the fiscal certificates pursuant to
R.C. 5705.41 and 5705.412, and (3) Warrensville Heights is statutorily immune from
claims of promissory estoppel, unjust enrichment, conversion, and fraud, and these
claims also fail because the Ohio Board of Education did not approve the
agreements. Beachwood countered each of Warrensville Heights’ arguments.
On February 6, 2019, the trial court granted Warrensville Heights’
motion for summary judgment with a written opinion. The opinion reviewed the
language set forth in R.C. 3311.06 and Ohio Adm.Code Chapter 3301-89, and stated
in relevant part:
Though [Beachwood’s] petition for transfer of territory pended with the
State Board for years, the parties failed to complete the required steps
needed to finalize an agreement pursuant to ORC 3311.06.
An extensive statutory scheme existed specifically for resolving inter-
district territorial and funding disputes, and the court finds the parties
were without the capacity to contract over the transfer of tax dollars,
purported by Plaintiff to be over five million dollars, without the
approval of the State Board of Education.
Because the parties were without the authority to contract absent the
final approval of the State Board, the court finds no valid contract was
formed and [Beachwood’s] remaining counts for promissory estoppel,
unjust enrichment, conversion, and fraud fail.
Beachwood timely appeals from the trial court’s February 6, 2019
judgment.
II. Summary Judgment Standard
We review an appeal from summary judgment under a de novo
standard. Baiko v. Mays, 140 Ohio App. 3d 1, 10, 746 N.E.2d 618 (8th Dist.2000).
Accordingly, we afford no deference to the trial court’s decision and independently
review the record to determine whether summary judgment is appropriate. N.E.
Ohio Apt. Assn. v. Cuyahoga Cty. Bd. of Commrs., 121 Ohio App. 3d 188, 192, 699
N.E.2d 534 (8th Dist.1997). Civ.R. 56(C) provides that before summary judgment
may be granted, a court must determine:
(1) no genuine issue as to any material fact remains to be litigated, (2)
the moving party is entitled to judgment as a matter of law, and (3) it
appears from the evidence that reasonable minds can come to but one
conclusion, and viewing the evidence most strongly in favor of the
nonmoving party, that conclusion is adverse to the nonmoving party.
State ex rel. Duganitz v. Ohio Adult Parole Auth., 77 Ohio St. 3d 190, 191, 672 N.E.2d
654 (1996).
Civ.R. 56(C) also provides an exclusive list of materials that parties
may use to support a motion for summary judgment:
Summary judgment shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, written admissions, affidavits,
transcripts of evidence, and written stipulations of fact, if any, timely
filed in the action, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of
law. No evidence or stipulation may be considered except as stated in
this rule.
The moving party carries an initial burden of setting forth specific
facts that demonstrate his or her entitlement to summary judgment. Dresher v.
Burt, 75 Ohio St. 3d 280, 292-293, 662 N.E.2d 264 (1996). If the movant fails to
meet this burden, summary judgment is not appropriate, but if the movant does
meet this burden, summary judgment will be appropriate only if the nonmovant fails
to establish the existence of a genuine issue of material fact. Id. at 293.
III. Approval by the Ohio Board of Education
Beachwood first argues that the trial court erred in “permitting
Warrensville [Heights] to avoid its contractual settlement obligations” and granting
Warrensville Heights summary judgment on its breach-of-contract claims because
there “remains a genuine dispute of fact as to whether Warrensville [Heights]
breached” the agreements. Beachwood argues that both parties were free to enter
into the agreements and were not restricted by or required to obtain approval from
the Ohio Board of Education. Beachwood further maintains that the trial court
improperly interpreted R.C. 3311.06 to include a “penalty of automatic invalidation”
for agreements not approved by the Ohio Board of Education.
Warrensville Heights does not contest the terms of the agreements.
Instead, it argues that no contract exists between the parties because the Ohio Board
of Education did not review or approve the agreements as the statutory schemes set
forth in R.C. 3311.06 and Ohio Adm.Code Chapter 3301-89 required. Warrensville
Heights contends that the agreements were to share tax revenue, which is part of the
“bundle of rights” that comes with the transfer of territory, and the only type of
agreements that do not require Ohio Board of Education approval are those
involving urban school districts. Warrensville Heights maintains that the
agreements resulted from Beachwood’s request to transfer the Chagrin Land and
subsequent negotiations pursuant to R.C. 3311.06 and Ohio Adm.Code Chapter
3301-89, and approval from the Ohio Board of Education was therefore required
even though the Chagrin Land was not actually transferred. Warrensville Heights
further contends that if the agreements did not require approval from the Ohio
Board of Education, they would circumvent the statutory schemes set forth in
R.C. 3311.06 and Ohio Adm.Code Chapter 3301-89 and would be contrary to the
legislative intent. Warrensville Heights also implies that the agreements are not
enforceable because they resulted from an improper “tax grab” by Beachwood. As a
result, Warrensville Heights argues the agreements are not enforceable, and
summary judgment was therefore appropriate.
“School boards are creations of statute and have no more authority
than what has been conferred on them by statute or what is clearly implied
therefrom.” Wolf v. Cuyahoga Falls City School Dist. Bd. of Edn., 52 Ohio St. 3d
222, 223, 556 N.E.2d 511 (1990).
The Ohio Revised Code explicitly provides that a board of education
has the power to contract. R.C. 3313.17 states:
The board of education of each school district shall be a body politic
and corporate, and, as such, capable of suing and being sued,
contracting and being contracted with, acquiring, holding, possessing,
and disposing of real and personal property, and taking and holding in
trust for the use and benefit of such district, any grant or devise of land
and any donation or bequest of money or other personal property.
Therefore, Beachwood and Warrensville Heights had the power to contract with one
another. Additionally, R.C. 3313.33 provides in pertinent part that “[n]o contract
shall be binding upon any board unless it is made or authorized at a regular or
special meeting of such board.” There is no dispute that Beachwood and
Warrensville Heights voted to adopt both Duncan’s recommendation and the
May 12, 1997 agreement.
Nevertheless, “in Ohio, political subdivisions cannot be bound by
contract unless the agreement is in writing and formally ratified through proper
channels.” Schmitt v. Educational Serv. Ctr., 2012-Ohio-2208, 970 N.E.2d 1187,
¶ 18 (8th Dist.). Beachwood argues that the “proper channels” were for both boards
of education to ratify the agreements. Warrensville Heights argues that the “proper
channels” were to have the boards approve the agreements and have the Ohio Board
of Education approve the agreements pursuant to R.C. 3311.06 and Ohio Adm.Code
Chapter 3301-89. An examination of those provisions is necessary.
A court’s main objective when interpreting a statute is to determine
and give effect to the legislative intent. State ex rel. Solomon v. Bd. of Trustees of
the Police & Firemen’s Disability & Pension Fund, 72 Ohio St. 3d 62, 65, 647 N.E.2d
486 (1995). We first look to the language of the statute itself to determine the intent
of the General Assembly. Stewart v. Trumbull Cty. Bd. of Elections, 34 Ohio St. 2d
129, 130, 296 N.E.2d 676 (1973). When a statute’s meaning is clear and
unambiguous, we apply the statute as written. Provident Bank v. Wood, 36 Ohio
St.2d 101, 105-106, 304 N.E.2d 378 (1973).
R.C. 3311.06, titled “Territory of district to be contiguous; exceptions;
procedure upon annexation,” states (and stated in 1997) in pertinent part:
(C)(2) When the territory so annexed to a city or village comprises part
but not all of the territory of a school district, the said territory becomes
part of the city school district or the school district of which the village
is a part only upon approval by the state board of education, unless the
district in which the territory is located is a party to an annexation
agreement with the city school district.
***
Any school district, except an urban school district,3 desiring state
board approval of a transfer under this division shall make a good faith
effort to negotiate the terms of transfer with any other school district
whose territory would be affected by the transfer. Before the state
board may approve any transfer of territory to a school district, except
an urban school district, under this section, it must receive the
following:
3 An “urban school district” is “a city school district with an average daily
membership for the 1985-1986 school year in excess of twenty thousand that is the school
district of a city that contains annexed territory.” R.C. 3311.06(A)(3). The parties agree
that neither is an urban school district.
(a) A resolution requesting approval of the transfer, passed by at
least one of the school districts whose territory would be affected
by the transfer;
(b) Evidence determined to be sufficient by the state board to
show that good faith negotiations have taken place or that the
district requesting the transfer has made a good faith effort to
hold such negotiations;
(c) If any negotiations took place, a statement signed by all
boards that participated in the negotiations, listing the terms
agreed on and the points on which no agreement could be
reached.
(D) The state board of education shall adopt rules governing
negotiations held by any school district except an urban school district
pursuant to division (C)(2) of this section. The rules shall encourage
the realization of the following goals:
(1) A discussion by the negotiating districts of the present and future
educational needs of the pupils in each district;
(2) The educational, financial, and territorial stability of each district
affected by the transfer;
(3) The assurance of appropriate educational programs, services, and
opportunities for all the pupils in each participating district, and
adequate planning for the facilities needed to provide these programs,
services, and opportunities.
Districts involved in negotiations under such rules may agree to share
revenues from the property included in the territory to be transferred,
establish cooperative programs between the participating districts, and
establish mechanisms for the settlement of any future boundary
disputes.
***
(G) In the event territory is transferred from one school district to
another under this section, an equitable division of the funds and
indebtedness between the districts involved shall be made under the
supervision of the state board of education and that board’s decision
shall be final. * * *
***
(I) No transfer of school district territory or division of funds and
indebtedness incident thereto, pursuant to the annexation of territory
to a city or village shall be completed in any other manner than that
prescribed by this section regardless of the date of the commencement
of such annexation proceedings, and this section applies to all
proceedings for such transfers and divisions of funds and indebtedness
pending or commenced on or after October 2, 1959.
Simply put, R.C. 3311.06 applies to agreements that transfer territory
from one school district to another. See Bartchy v. State Bd. of Edn., 120 Ohio St. 3d
205, 2008-Ohio-4826, 897 N.E.2d 1096, ¶ 26. R.C. 3311.06(C)(2) requires approval
from the state board of education for territory annexed by a municipality to
“become[] part of the city school district[.]” Although R.C. 3311.06(D) provides that
“[d]istricts involved in negotiations under [Ohio Adm.Code Chapter 3301-89] may
agree to share revenues from the property” and “establish cooperative programs
between the participating districts,” this subsection is limited to “the territory to be
transferred.” Similarly, R.C. 3311.06(I) provides that the statute applies to the
“transfer of school district territory or division of funds and indebtedness incident
thereto[.]” Pursuant to the plain language of the statute, a revenue-sharing
agreement without an actual transfer of territory does not require approval from the
Ohio Board of Education.
Contrary to Beachwood’s argument that R.C. 3311.06 does not
contain a “penalty of automatic invalidation,” the statute and case law make clear
that territory transfers pursuant to the statute are not valid unless they have
approval from the Ohio Board of Education. R.C. 3311.06(C)(2) (“[T]he said
territory becomes part of the city school district * * * only upon approval by the state
board of education[.]”); State ex rel. Bd. of Edn. v. Bd. of Edn., 172 Ohio St. 237, 242,
175 N.E.2d 91 (1961) (“In the absence of the necessary definite approval, the
[territory] transfer was not completed[.]”). However, here, the agreements are clear
that no transfer of territory was to occur, and the Ohio Board of Education did not
need to approve them.
Warrensville Heights argues that approval from the Ohio Board of
Education was required despite the lack of territory transfer because the agreements
were “developed” from Beachwood’s request to transfer the Chagrin Land and
subsequent negotiations pursuant to R.C. 3311.06. However, the agreements
explicitly required Beachwood to “withdraw its request to transfer the [t]erritory and
[to] not institute any further such request.” The agreements stated that instead of
transferring the Chagrin Land, the Chagrin Land would remain in Warrensville
Heights, and Beachwood and Warrensville Heights would share the real estate taxes
generated from the Chagrin Land upon its value reaching a set amount. Pursuant
to the agreements, Beachwood withdrew its request to transfer the Chagrin Land.
Nothing in the record shows that the Ohio Department of Education rejected this
withdrawal or requested any further action of either party. The parties in this case
agreed to not transfer the Chagrin Land, and the revenue that the parties agreed to
share could not be “incident to” a transfer of territory. Therefore, R.C. 3311.06 does
not apply.
This interpretation of R.C. 3311.06 is consistent with its legislative
intent and history. Although the Ohio Board of Education is charged generally with
supervising the public education system pursuant to R.C. 3301.07, the Ohio
Supreme Court has recognized that the purpose of R.C. 3311.06, in particular, is to
provide stable school district boundaries to help give certainty to families and school
officials:
In R.C. 3311.061, the General Assembly expressly stated the legislative
intent underlying 1986 amendments to R.C. 3311.06. The first
paragraph of R.C. 3311.061 recognizes that school district boundaries
are a matter of great concern to the public, that state law has generated
substantial uncertainty over the stability of school district boundaries,
and that this uncertainty has been particularly stressful for families
with school-age children and has hindered the ability of school officials
to plan for the future. The first paragraph concludes that a fair and
lasting solution “can best be achieved through a cooperative effort
involving school district officials, board of education members, and
legislators.”
Bartchy, 120 Ohio St. 3d 205, 2008-Ohio-4826, 897 N.E.2d 1096, at ¶ 28. The
legislature intended to provide stability related to the physical school district
boundaries. Requiring Ohio Board of Education approval for only agreements that
affect the physical school district boundaries is consistent with this purpose.
Warrensville Heights argues that we must construe R.C. 3311.06(I)
broadly to include all the “bundle of rights” that come with the transfer of territory.
It maintains that tax revenue is part of the bundle of rights, and that the sharing of
tax revenue is therefore equivalent to the transfer of territory. But the plain
language of R.C. 3311.06 is not consistent with this argument. The statute provides
that the territory of a school district should be “contiguous” and is specifically
concerned with the “boundaries” — the physical aspects of territory. R.C. 3311.06(I)
also distinguishes between the transfer of territory and “the division of funds and
indebtedness incident thereto.” We therefore decline to interpret the transfer of
territory to mean the sharing of tax revenue separate from the transfer of physical
territory.
Warrensville Heights further maintains that when reading
R.C. 3311.06 as a whole, it is “abundantly clear” that there is “only one specific class
of agreements that do not require approval by the Ohio Board of Education” — those
involving an “urban school district.” This may be true for agreements to transfer
territory. But based on the plain language of R.C. 3311.06(D)(3), revenue-sharing
agreements that are not incident to a transfer of territory also do not need approval
from the Ohio Board of Education. As a result, the trial court erred in concluding
that R.C. 3311.06 required Beachwood and Warrensville Heights to acquire the state
board of education’s approval to make the agreements enforceable.
We next turn to Ohio Adm.Code Chapter 3301-89, titled, “Transfers
of Territory.” Ohio Adm.Code 3301-89-01, titled, “General policies of the state
board of education in a request for transfer of territory under [R.C.] 3311.06 or
3311.24,” is the same today as it was in 1997. It states:
(A) The rules under Chapter 3301-89 of the Administrative Code apply
to the request for a transfer of territory following municipal annexation
under section 3311.06 of the Revised Code.
***
(C) The department of education shall require the boards of education
affected by a request for transfer of territory to enter into good faith
negotiations when it is required by sections 3311.06 and 3311.24 of the
Revised Code.
(D) In situations where agreement has been reached between
respective boards of education, the terms of agreement should be sent
to the state board of education with reasonable dispatch. * * *
The 1997 version of Ohio Adm.Code 3301-89-02, titled “Procedures
of the state board of education in a request for transfer of territory under section
3311.06 * * * of the Revised Code,” stated in pertinent part:
(A) Initial requests
(1) A school district may request a transfer of certain territory for
school purposes under section 3311.06 of the Revised Code by
sending an initial letter requesting the land transfer to the state
board of education[.]
***
(6) Upon receipt of a negotiated agreement, the state board of
education shall adopt a resolution of approval of the negotiated
agreement or may establish a hearing if approval is not granted.
The 1997 version of Ohio Adm.Code 3301-89-04, titled “Procedures
governing negotiations of school districts, other than urban school districts as
defined in division (A)(3) of section 3311.06 of the Revised Code,” stated in pertinent
part:
(A) Negotiation Process
***
(7) Agreements reached shall be adopted by each board of
education involved. A copy of the resolution and the negotiated
agreement shall be transmitted by each board of education to the
state board of education.
***
(C) The following are examples of terms that school districts may agree
to:
(1) Share revenues from the property included in the territory to
be transferred;
(2) Establish cooperative programs between the participating
districts;
(3) Establish mechanisms for the settlement of any future
boundary disputes; and
(4) No tax revenue to the receiving district from the territory
transferred for a period of time.
(D) Before the state board of education may hold a hearing on a
transfer, or approve or disapprove any such transfer, it must receive the
following items:
(1) A resolution requesting approval of the transfer, passed by at
least one of the school districts whose territory would be affected
by the transfer, if the transfer request is pursuant to section
3311.06 of the Revised Code[.]
***
Like R.C. 3311.06, Ohio Adm.Code Chapter 3301-89 applies to the
transfer of territory between school districts. Although Ohio Adm.Code 3301-89-
02(A)(3) provides that “upon receipt of a negotiated agreement, the state board of
education shall determine whether to approve the agreement,” this section concerns
requests and negotiated agreements for “a transfer of certain territory,” “concerning
a transfer of territory,” and “the proposed transfer.” Ohio Adm.Code 3301-89-
04(A)(7) provides that “agreements” adopted by the parties need to be submitted to
the state board of education with a resolution for approval. Although this subsection
does not identify the type of agreement, subsection (C)(1) includes language
referring to the “territory to be transferred.” Moreover, Ohio Adm.Code Chapter
3301-89 was promulgated pursuant to R.C. 3311.06 and 3311.24, which both pertain
to the transfer of territory.
Warrensville Heights argues that following Beachwood’s
interpretation of R.C. 3311.06 and the pertinent sections of the Ohio Adm.Code —
i.e., that the provisions do not apply because there was not a transfer of territory —
would allow school districts to circumvent the entire statutory schemes set forth in
those sections and would render those sections meaningless. Specifically,
Warrensville Heights states that “Beachwood’s novel rule would undermine the
entire comprehensive statutory scheme that has been in place for decades.” But the
plain language of R.C. 3311.06 and Ohio Adm.Code Chapter 3301-89 do not require
the Ohio Board of Education’s approval when there is not a transfer of territory.
Beachwood did not circumvent the statutory scheme — it was simply not required
to follow it.
Lastly, Warrensville Heights’ characterization of Beachwood’s
transfer request as a “tax grab” is irrelevant for the purposes of this appeal. Its
citation to a newspaper article and statistical information suggesting that the
transfer request was inequitable would be relevant to the Ohio Board of Education’s
determination of whether to approve a request for a transfer of territory. See Ohio
Adm.Code 3301-89-02(D) (enumerating questions for the state board of education
to consider). It also undoubtedly influenced the years-long negotiations and
mediation that resulted in the subject agreements: that unabated real estate tax
revenue generated from the amount of market value of the Chagrin Land that
exceeded $22,258,310 would be shared 30 percent to Beachwood and 70 percent to
Warrensville Heights. But the “tax grab” characterization has no bearing on whether
there was actually a transfer of territory, whether the statutory schemes set forth in
R.C. 3311.06 and Ohio Adm.Code Chapter 3301-89 apply to the agreements, and
whether the agreements are valid and enforceable.
Accordingly, neither R.C. 3311.06 nor Ohio Adm.Code Chapter 3301-
89 required Beachwood and Warrensville Heights to obtain the Ohio Board of
Education’s approval, and both parties had the ability to enter into the agreements.
The trial court therefore erred in finding that Warrensville Heights is entitled to
judgment as a matter of law on Beachwood’s breach-of-contract claims on this basis.
IV. Fiscal Certificates
Next, Beachwood argues that no fiscal certificates were necessary for
the agreements to be valid because the agreements were not “qualifying contracts,”
did not involve the expenditure of funds, and did not involve an amount of money
that was ascertainable at the time the agreements were executed. Warrensville
Heights argues that R.C. 5705.41 and R.C. 5705.412 required fiscal certificates to be
attached to the agreements because the agreements involved “expenditures.”
Warrensville Heights maintains that the absence of such certificates renders the
agreements void, relying on CADO Business Sys. of Ohio v. Bd. of Edn., 8 Ohio
App.3d 385, 457 N.E.2d 939 (8th Dist.1983). Warrensville Heights further disputes
that the speculative nature of the future tax revenue obviates the need for fiscal
certificates.
The fiscal certificates that R.C. 5705.41 and 5705.412 require limit the
ability of public agencies to spend public funds. 1 Anderson, Ohio School Law
Guide, Section 5.07 (2020). These statutes require educational boards to “certify
the adequacy of revenues for appropriation measures, wage and salary schedule
increases, and certain contracts.” Id.; see also State ex rel. Tele-Communications,
Inc. v. McCormack, 44 Ohio App. 3d 49, 50, 541 N.E.2d 483 (8th Dist.1988) (the
fiscal officer’s “duty is to certify that funds required to meet the obligations are
available.”).
R.C. 5705.41 is titled “Restriction upon appropriation and
expenditure of money — certificate of fiscal officer.” R.C. 5705.41 requires that a
certificate of a fiscal officer be attached to each contract involving the expenditure
of money. The certificate must state that the amount of funds needed to satisfy the
contract have been, or are in the process of being, appropriated and free from
encumbrances. R.C. 5705.41. The statute states in relevant part that “No
subdivision or taxing unit shall”:
(B) Make any expenditure of money unless it has been appropriated as
provided in such chapter;
***
(D)(1) * * * [M]ake any contract or give any order involving the
expenditure of money unless there is attached thereto a certificate of
the fiscal officer of the subdivision that the amount required to meet
the obligation or, in the case of a continuing contract to be performed
in whole or in part in an ensuing fiscal year, the amount required to
meet the obligation in the fiscal year in which the contract is made, has
been lawfully appropriated for such purpose and is in the treasury or in
the process of collection to the credit of an appropriate fund free from
any previous encumbrances. This certificate need be signed only by the
subdivision’s fiscal officer. Every such contract made without such a
certificate shall be void, and no warrant shall be issued in payment of
any amount due thereon. * * *
R.C. 5705.412, titled “Certificate of revenue required for school
district expenditures,” applies specifically to educational boards and imposes
certificate requirements beyond those of R.C. 5705.41. 1 Anderson, Ohio School
Law Guide, Section 5.07 (2020). The certificate must be made not only by a fiscal
officer, but also by the superintendent and the president of the board of education.
R.C. 5705.412. The certificate must contain more information than the certificates
pursuant to R.C. 5705.41. The version of R.C. 5705.412 that was in effect in 1997
states in pertinent part:
Notwithstanding section 5705.41 of the Revised Code, no school
district shall adopt any appropriation measure, make any contract, give
any order involving the expenditure of money, or increase during any
school year any wage or salary schedule unless there is attached thereto
a certificate signed by the treasurer and president of the board of
education and the superintendent that the school district has in effect
for the remainder of the fiscal year and the succeeding fiscal year the
authorization to levy taxes including the renewal or replacement of
existing levies which, when combined with the estimated revenue from
all other sources available to the district at the time of certification, are
sufficient to provide the operating revenues necessary to enable the
district to maintain all personnel, programs, and services essential to
the provision of an adequate educational program for all the days set
forth in its adopted school calendars for the current fiscal year and for
a number of days in the succeeding fiscal year equal to the number of
days instruction was held or is scheduled for the current fiscal year.
* * * In addition, a certificate attached, in accordance with this section,
to any contract shall cover the term of the contract or the current fiscal
year plus the two immediately succeeding fiscal years, whichever
period of years is greater. * * * Every contract made, order given, or
schedule adopted or put into effect without such a certificate shall be
void, and no payment of any amount due thereon shall be made. The
department of education and the auditor of state jointly shall develop
rules governing the methods by which treasurers, presidents of boards
of education, and superintendents shall estimate revenue and
determine whether such revenue is sufficient to provide necessary
operating revenue for the purpose of making certifications required by
this section.
The text of R.C. 5705.41 and 5705.412 shows that both statutes apply
to contracts involving the expenditure of money. See also Grand Valley Local
School Dist. Bd. of Edn. v. Buehrer Group Architecture & Eng., Inc., 2016-Ohio-716,
48 N.E.3d 626, ¶ 31 (10th Dist.) (“Because the MOU was not an agreement that
authorized any particular expenditure of funds, it was not required to be
accompanied by a certification of funds under either statutory provision
[R.C. 5705.41 or 5705.412].”). Warrensville Heights argues that Chapters 101, 102,
and 121 of the Ohio Revised Code define “expenditure” to include “a contract,
promise, or agreement to make an expenditure, whether or not legally enforceable.”
R.C. 101.70(D)(2); 101.90(B)(2); 102.01(L); 121.60(B)(2). Warrensville Heights
maintains that “an agreement to potentially share tax revenue in the future” is an
“expenditure.”
We disagree. We note that R.C. Chapter 5705 does not define
“expenditure,” but even using the definition provided by Warrensville Heights, the
agreements here do not involve expenditures. To the contrary, the agreements
provide for the sharing of tax revenue: obtaining funds, not spending funds. Indeed,
under R.C. 5705.41(D), taxes and revenue in the process of collection are “deemed”
to be in the treasury or the appropriate fund that the fiscal officer certifies meets an
obligation for the expenditure of money. And under former R.C. 5705.412, the
“superintendents shall estimate revenue” and determine whether it is sufficient “for
the purpose of making certifications required by this section.” The collection of tax
revenue is used to cover the expenditure of funds; it is not an expenditure itself.
Accordingly, the agreements were not required to include fiscal certificates pursuant
to R.C. 5705.41 and 5705.412.
Beachwood’s argument that the agreements are not “qualifying
contracts” pursuant to R.C. 5705.412 lacks merit because the version of
R.C. 5705.412 that was in effect when the agreements were executed does not refer
to “qualifying contracts.” The phrase “qualifying contracts” was not added to
R.C. 5705.412 until an amendment in 2000. Warrensville Heights’ reliance on
CADO Business Sys. of Ohio, 8 Ohio App. 3d 385, 457 N.E.2d 939, is also misplaced
because its holding that a contract is void if it fails to comply with R.C. 5705.412 is
irrelevant when R.C. 5705.412 is not implicated. Moreover, the parties’ dispute
about whether the certificates were needed even though the amount of tax revenue
to be shared was speculative at the time the agreements were executed also misses
the point. R.C. 5705.41 and 5705.412 apply only to the expenditure of funds, and
the collection of tax revenue, regardless of how speculative it is, is not an expenditure
of funds.
Accordingly, the certificate requirements of R.C. 5705.41 and
5705.412 do not apply to the agreements, and the agreements are not void for failing
to include fiscal certificates. Because the parties had the authority to contract with
each other and the agreements did not require Ohio Board of Education approval or
fiscal certificates, the agreements are valid and enforceable. The parties did not
brief, and the trial court did not consider, whether each party breached the
agreements and the amount of damages owed. Genuine issues of material fact exist
regarding these topics. Warrensville Heights is therefore not entitled to judgment
as a matter of law on Beachwood’s breach-of-contract claims.
V. Tort Claims
Lastly, Beachwood argues that the trial court erred in granting
Warrensville Heights summary judgment on Beachwood’s claims for promissory
estoppel, unjust enrichment, fraud, and conversion. Beachwood maintains that the
trial court essentially dismissed these claims as moot and failed to engage in any of
the three-tiered analysis of political-subdivision immunity. Beachwood contends
that Warrensville Heights is not automatically immune from these claims because
there is a genuine issue of material fact regarding whether Warrensville Heights
engaged in a proprietary function by entering the agreements. Warrensville Heights
argues that it was engaged in a governmental function and, as a political subdivision,
is thus immune from Beachwood’s tort claims.
In the trial court’s opinion supporting its journal entry granting
summary judgment, the trial court stated:
Because the parties were without authority to contract absent the final
approval of the State Board, the court finds no valid contract was
formed and Plaintiff’s remaining counts for promissory estoppel,
unjust enrichment, conversion, and fraud fail.
As previously discussed, we find that the parties had the authority to
contract and that their agreements were valid without approval from the Ohio Board
of Education and without fiscal certificates. We therefore reverse the trial court’s
grant of summary judgment on Beachwood’s claims for promissory estoppel, unjust
enrichment, fraud, and conversion and remand for the trial court to consider these
claims consistent with this opinion.
Accordingly, we sustain Beachwood’s sole assignment of error and
reverse the trial court’s grant of summary judgment to Warrensville Heights on all
of Beachwood’s claims. We remand for the trial court to consider Beachwood’s tort
claims and whether Warrensville Heights has immunity, and to resolve the
remaining factual disputes regarding Beachwood’s breach-of-contract claims.
Judgment reversed and remanded.
It is ordered that appellant recover from appellee the costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
_______________________________
MARY J. BOYLE, PRESIDING JUDGE
SEAN C. GALLAGHER, J., CONCURS WITH SEPARATE CONCURRING
OPINION;
ANITA LASTER MAYS, J., DISSENTS WITH SEPARATE DISSENTING OPINION
SEAN C. GALLAGHER, J., CONCURRING:
I fully concur with the majority opinion. I agree that the 1997
agreements are valid and enforceable, that R.C. 3311.06 and Ohio Adm.Code 3301-
89 have no application in this matter because no transfer of territory is involved,
that the agreements did not need approval by the Ohio Board of Education, and that
no fiscal certificates were necessary. I concur with the entire analysis set forth in the
majority opinion and agree that the trial court erred in granting Warrensville
Heights’ motion for summary judgment.
Nonetheless, I certainly understand the concerns raised by the
dissent in this matter. I also recognize that historically, there have been disparities
in Ohio’s public-school financing system, which impacted under-resourced school
districts that serve low-income communities. These disparities were addressed by
the Supreme Court of Ohio in the DeRolph line of cases.
In DeRolph v. State, 78 Ohio St. 3d 193, 1997-Ohio-84, 677 N.E.2d
733 (DeRolph I), the Supreme Court of Ohio held, at that time, that “Ohio’s public
elementary and secondary school financing system violates Section 2, Article VI of
the Ohio Constitution, which mandates a thorough and efficient system of common
schools throughout the state.” Id. at 212. The court recognized there were wealth-
based disparities among Ohio’s school districts that deprived many of Ohio’s public-
school students of high-quality educational opportunities. Id. at 198. The court was
cognizant of the limitations imposed upon it and was not advocating “a ‘Robin Hood’
approach to school financing reform” or suggesting that “funds be diverted from
wealthy districts to the less fortunate.” Id. at 211. The court found that it was for the
General Assembly to create a new school financing system, requiring a “complete
systematic overhaul,” and to enact remedial legislation. Id. at 212-213.
In DeRolph v. State, 89 Ohio St. 3d 1, 2000-Ohio-437, 728 N.E.2d 993
(“DeRolph II”), wherein the Supreme Court of Ohio agreed that the initial attempt
to revise the school-funding system was still unconstitutional, the court recognized
the problems associated with “funding systems that rely too much on local property
taxes” and “the inadequacies of a system that is overreliant on local property taxes.”
Id. at 8. The court found that in order to create a thorough and efficient system of
statewide common schools, that “[s]ignificant changes had to be made in the way
primary and secondary public education is funded * * *.” Id. at 11. Although the
court did not give the General Assembly precise instructions on fixing the school
funding system, it highlighted several areas that needed attention. The court
reiterated that it was for “the General Assembly to legislate a remedy” and that it
was not the role of the court to fashion a remedy. Id. at 12. See also DeRolph v.
State, 97 Ohio St. 3d 434, 2002-Ohio-6750, 780 N.E.2d 529 (“DeRolph IV”) (finding
that DeRolph I and DeRolph II are the law of the case and that the then existing
school-funding system was unconstitutional).
Post-DeRolph litigation, the Ohio’s General Assembly has made
changes to Ohio’s school funding system. A statutory school funding system was
implemented that specifies a per-pupil formula amount and uses that amount, along
with a district’s “state share index” to calculate a district’s base payment, and also
includes payments for targeted assistance (based on a district’s property value and
income), supplemental targeted assistance (based on a district’s percentage of
agricultural property), as well as other considerations. See Ohio Legislative Service
Comm., Final Analysis for H.B. 166, 133rd General Assembly, pg. 132,
https://www.lsc.ohio.gov/documents/budget/133/MainOperating/FI/BillAnalysis
/19-HB166-133.pdf (accessed Sept. 9, 2020). In H.B. 166 of the 133rd General
Assembly (the budget act for fiscal years 2020-2021), the statutory school funding
system was retained in existing law, but it was suspended for fiscal years 2020 and
2021. Id. Instead, the act provides for payments to be made based on the district’s
funding for fiscal year 2019 and requires use of the district’s “state share index” or
“state share percentage” computed for the district for fiscal year 2019. Id. The act
also provides for the payment of student wellness and success funds and
enhancement funds. Id. at pgs. 133-134.
Consistent with the DeRolph litigation, the General Assembly has
created a new school financing system and enacted legislation in its effort to comply
with the requirement of providing a thorough and efficient system of common
schools throughout the state. Nevertheless, disparities between school districts
seemingly remain. This lawsuit is the very embodiment of those ongoing problems.
In any event, this court cannot fashion a remedy that is not supported
by the law and barring further action by the Supreme Court of Ohio, any remedy
remains within the province of the legislature. I am compelled by law to fully concur
with the majority opinion.
ANITA LASTER MAYS, J., DISSENTING:
I respectfully dissent from the majority’s opinion and would find that
the trial court did not err in granting summary judgment in favor of Warrensville
Heights City School District and against Beachwood City School District.
The crafters of the Ohio Constitution “carried within them a deep-
seated belief that liberty and individual opportunity could be preserved only by
educating Ohio’s citizens.” DeRolph v. State, 78 Ohio St. 3d 193, 197, 677 N.E.2d 733
(1997). It is for this reason that
education was made part of our first Bill of Rights. Section 3,
Article VIII of the Ohio Constitution of 1802. Beginning in 1851, our
Constitution has required the General Assembly to provide enough
funding to secure a “thorough and efficient system of common schools
throughout the State.”
Id. “The responsibility for maintaining a thorough and efficient school system falls
upon the state.” Id. at 210. “When a district falls short of the constitutional
requirement that the system be thorough and efficient, it is the state’s obligation to
rectify it.” Id., citing Dupree v. Alma School Dist., 279 Ark. 340, 349, 651 S.W.2d
90 (1983).
Ohio recognizes that
“The mission of education is to prepare students of all ages to meet, to
the best of their abilities, the academic, social, civic, and employment
needs of the twenty-first century, by providing high-quality programs
that emphasize the lifelong skills necessary to continue learning,
communicate clearly, solve problems, use information and technology
effectively, and enjoy productive employment.” State Board of
Education, Preparing Ohio Schools for the 21st Century, Sept. 1990, ii.
Id. at 197.
The Ohio Department of Education (“ODE”) “is the administrative
unit and organization through which the policies, directive, and powers of the State
Board of Education are administered.” Cuyahoga Falls City School Dist. Bd. of
Edn. v. Ohio Dept. of Edn., 118 Ohio App. 3d 548, 554, 693 N.E.2d 841 (10th
Dist.1997), citing R.C. 3301.13, paragraph one.
R.C. 3311.06 governs the annexation procedure for school district
property. Generally, annexation involves a transfer of title to real estate, buildings,
and tax revenue. Approval of the annexation or any agreement reached to effect
annexation as provided in the statute requires ODE approval where a “territory
annexed to a city or village comprises part but not all of the territory of a school
district.” In re Proposed Annexation by Columbus City School Dist., 45 Ohio St. 2d
117, 118, 341 N.E.2d 589 (1976), citing R.C. 3311.06. Ohio Constitution, Article II,
Section 26, “expressly sanctions both the delegation of legislative authority by the
General Assembly in R.C. 3311.06 and the exercise of that authority by the State
Board of Education.” Id. at 120.
It is undisputed that:
On March 20, 1990, the Chagrin Land was annexed by the city of
Beachwood but remained within the Warrensville SD;
On October 23, 1990, Beachwood SD filed a petition with the ODE to
transfer the Chagrin Land to Beachwood SD pursuant to R.C. 3311.06;
The parties engaged in mediation with Judge Duncan as documented
by the Duncan Memorandum and Duncan Recommendation issued by
Judge Duncan;
The mediation was conducted as required by R.C. 3311.06(C)(2);
The parties executed the Chagrin Agreement;
The respective boards approved the Chagrin Agreement;
The Chagrin Agreement provides that the R.C. 3311.06 petition was still
pending at the time the Chagrin Agreement was executed;
Beachwood SD’s ratifying resolution specifically provided that the
R.C. 3311.06 petition was still pending at the time of adoption; and
That Beachwood SD withdrew the petition on July 8, 1998, as provided
in the Chagrin Agreement.
The majority finds that the Chagrin Agreement is simply a settlement
agreement subject to general contract principles that resolved the Chagrin Land
transfer tax revenue dispute. I respectfully disagree and determine that R.C. 3311.06
and Ohio Admin.Code Chapter 3301-89 are applicable. I would find that ODE’s
approval is a mandatory prerequisite to validity of the Chagrin Agreement and the
absence of a physical land transfer does not negate the application of the ODE
regulations.
The interpretation of a statute requires that we
first look at its language to determine legislative intent. Provident
Bank v. Wood, 36 Ohio St. 2d 101, 105, 304 N.E.2d 378 (1973). When
a statute’s meaning is clear and unambiguous, we apply the statute as
written. Id. at 105-106. We must give effect to the words used,
refraining from inserting or deleting words. Cleveland Elec. Illum.
Co. v. Cleveland, 37 Ohio St. 3d 50, 53-54, 524 N.E.2d 441 (1988). If a
legislative definition is available, we construe the words of the statute
accordingly. R.C. 1.42.
State v. Gonzales, 150 Ohio St. 3d 276, 2017-Ohio-777, 81 N.E.3d 419, ¶ 4.
In addition,
“[T]he application of [a statute] to the facts is a ‘question of law’ — [a]n
issue to be decided by the judge, concerning the application or
interpretation of the law. Black’s Law Dictionary (7 Ed.1999) 1260.”
[Henley v. Youngstown Bd. of Zoning Appeals, 90 Ohio St. 3d 142, 148,
2000 Ohio 493, 735 N.E.2d 433 (2000)]. Accord Lang v. Ohio Dept.
of Job & Family Servs., 134 Ohio St. 3d 296, 2012-Ohio-5366, 982
N.E.2d 636, ¶ 12 (“A question of statutory construction presents an
issue of law that we determine de novo on appeal”).
Cleveland Clinic Found. v. Bd. of Zoning Appeals, 141 Ohio St. 3d 318, 2014-Ohio-
4809, 23 N.E.3d 1161, ¶ 25.
As explained in Anderson’s Ohio School Law Guide:
A school district is a political entity created by legislative enactment
and organized as an agency of the state to maintain its system of public
schools. * * * A school district is a quasi-corporation. It is a political or
civil division of the state; it is established as an agency or
instrumentality of the state for the purpose of facilitating the
administration of government. Education is a government function. A
school district functions in the execution of state government or state
policy. It possesses limited powers. The powers, duties, and liabilities
of a school district are only such as are prescribed by statute. It has no
common law powers.
Ohio School Law Guide, Section 2.01, 1-2 (2018).
The corporate powers of the board of a school district are set forth in
R.C. 3313.17:
The board of education of each school district shall be a body politic
and corporate, and, as such, capable of suing and being sued,
contracting and being contracted with, acquiring, holding, possessing,
and disposing of real and personal property, and taking and holding in
trust for the use and benefit of such district, any grant or devise of land
and any donation or bequest of money or other personal property.
Id.
School districts are charged with the “constitutional mandate” “to
insure a thorough and efficient system of public elementary and secondary schools.”
Ohio School Law Guide, Section 2.11, 1-2 (2018).
[T]he procedure with reference to territorial organization in relation to
changing the boundaries of school districts, the transfer of territory in
connection therewith, the creation and dissolution of school districts
and the consolidation of districts, is provided exclusively by the
legislature. Any procedure undertaken in such matters must be in
accord with the method or methods prescribed by statutory law in
existence at such time. Officials authorized by the legislature to
establish school districts or to change their boundaries must follow the
procedure prescribed by statute.
Ohio School Law Guide, Section 2.11, 1-2 (2018).
The General Assembly has legislated procedures for the various types
of territorial transfers. R.C. 3311.06 governs transfers “of school district territory in
conjunction with a municipal annexation, either by action of the State Board of
Education or by agreement between the districts affected.” Id. Ohio School Law
Guide, Section 2.11, 1-2 (2018).
Until 1955, “the transfer of school district territory to an adjoining city
for municipal purposes * * * automatically resulted in a corresponding transfer of
school district territory.” Id. at § 2.22. In 1955, R.C. 3311.06 was amended “to
require approval of such transfers by the newly-created” ODE and was more
extensively amended in 1986. Id. See also Ohio Att. Gen. Op. No. 6808, July 7,
1956.
Subsequent to 1986, “[i]n order to encourage the resolution of
annexation disputes by means of interdistrict agreements, the General Assembly”
provided “boards of education [with] broad powers to negotiate annexation
agreements which satisfy the needs of all school districts concerned.” Ohio School
Law Guide, Section 2.22, 1-2 (2018).
For example, the school districts involved may negotiate for
interdistrict payments to the city school district to “share the wealth” that results
from development in territory annexed by the city [fn. 5., R.C. 3311.06(F). See, e.g.,
Miami Trace Local School Dist. Bd. of Edn. v. Washington Court House City School
Dist. Bd. of Edn., 12th Dist. Fayette No. CA2031-01-001, 2013-Ohio-3578 (involving
interpretation of tax-sharing agreement)] and may establish mechanisms for the
settlement of future boundary disputes. [Fn. 6., R.C. 3311.06(D)].
“All annexation agreements adopted after the 1986 amendments
must be approved by the State Board of Education.” (Emphasis added.) Ohio
School Law Guide, Section 2.22, 1-2 (2018), citing R.C. 3311.06(A)(4). An
“annexation agreement” is an agreement that meets the requirements of R.C.
3311.06(F) and that “has been filed with the state board.” Id.
To secure ODE approval of a transfer under R.C. 3311.06, a school
district is required to
make a good faith effort to negotiate the terms of transfer with any
other school district whose territory would be affected by the transfer.
Before the state board may approve any transfer of territory to a school
district, except an urban school district, under this section, it must
receive the following:
(a) A resolution requesting approval of the transfer, passed by at
least one of the school districts whose territory would be affected by the
transfer;
(b) Evidence determined to be sufficient by the state board to show
that good faith negotiations have taken place or that the district
requesting the transfer has made a good faith effort to hold such
negotiations;
(c) If any negotiations took place, a statement signed by all boards
that participated in the negotiations, listing the terms agreed on and
the points on which no agreement could be reached.
R.C. 3311.06(C)(2).
R.C. 3311.06(D) sets forth the goals to be achieved by annexation:
The state board of education shall adopt rules governing negotiations
held by any school district except an urban school district pursuant to
division (C)(2) of this section. The rules shall encourage the realization
of the following goals:
(1) A discussion by the negotiating districts of the present and future
educational needs of the pupils in each district;
(2) The educational, financial, and territorial stability of each
district affected by the transfer;
(3) The assurance of appropriate educational programs, services,
and opportunities for all the pupils in each participating district, and
adequate planning for the facilities needed to provide these programs,
services, and opportunities.
Districts involved in negotiations under such rules may agree to share
revenues from the property included in the territory to be transferred,
establish cooperative programs between the participating districts, and
establish mechanisms for the settlement of any future boundary
disputes.
In addition, R.C. 3311.06(I) provides in critical part that:
No transfer of school district territory or division of funds and
indebtedness incident thereto, pursuant to the annexation of territory
to a city or village shall be completed in any other manner than that
prescribed by this section regardless of the date of the commencement
of such annexation proceedings, and this section applies to all
proceedings for such transfers and divisions of funds and indebtedness
pending or commenced on or after October 2, 1959.
(Emphasis added.) Id. See also Bartchy, 120 Ohio St. 3d 205, 2008-Ohio-4826, 897
N.E.2d 1096, ¶ 20.
The rules promulgated to implement R.C. 3311.06 are codified at
Ohio Adm.Code Chapter 3301-89 that was first adopted in 1987. Ohio Adm.Code
3301-89-01 addresses the general policies of the ODE and applies to “requests for a
transfer of territory following municipal annexation under section 3311.06.” Id.4
The parties are required to “enter into good faith negotiations when it is required
under R.C. 3311.06.” Ohio Admin.Code 3301-89-01(C).
“In situations where agreement has been reached between respective
boards of education, the terms of agreement should be sent to the state board of
education with reasonable dispatch.” Ohio Adm.Code 3301-89-01(D). “A request
for transfer of territory shall be considered upon its merit with primary
consideration given to the present and ultimate good of the pupils in the affected
districts.” Ohio Admin.Code 3301-89-01(F).
Ohio Admin.Code 3301-89-02(A)(1)(a)-(e) lists the procedure and
requirements for filing initial transfer requests. Pertinent here,
(3) Upon receipt of a negotiated agreement, the state board of
education shall determine whether to approve the agreement and
adopt a resolution. The state board of education may conduct a hearing
before determining whether to approve or disapprove the negotiated
agreement.
(Emphasis added.) Ohio Admin.Code 3301-89-02(A)(3).
4 Ohio Admin.Code 3301-89 also applies to R.C. 3311.24 for transfers from and to
an adjoining city board of education, exempt village, or school district under the listed
circumstances.
Where negotiations “have failed to produce an agreement, the [ODE]
shall send” a request to both school districts that contains twenty-five questions for
the ODE and, if necessary, a hearing officer, to consider.
If the ODE determines that a hearing is required, Ohio
Admin.Code 3301-89-03 contains a nonexclusive list of factors for hearing officer
consideration of a transfer request. While the students affected are the paramount
concern, “the fiscal resources acquired should be commensurate with the
educational responsibilities assumed.” (Emphasis added.) Ohio Admin.Code 3301-
89-03(B)(9).
Ohio Admin.Code 3301-89-04 sets forth the “[p]rocedures governing
negotiations of school districts” to reach an annexation agreement. Ohio
Admin.Code 3301-89-04(A) provides eight steps for the negotiation of an
agreement, and subsection (B) lists the goals that the process should “strive for.”
Subsection (C) contains “[e]xamples of terms that school districts may agree to
include sharing property revenue in the transfer territory, establishing cooperative
educational programs and mechanisms for the settlement of future boundary
disputes and that [n]o tax revenue” will give provided “to the receiving district” “for
a period of time.” Subsection (D) lists items that ODE must receive for approval,
denial or a hearing on the transfer.
Once an agreement has been reached, it “shall be adopted by each
board of education” by resolution and both shall be forwarded to the ODE for
approval. (Emphasis added.) Ohio Admin.Code 3301-89-04(A)(7).
The parties’ records reflect that the entire process was governed by
R.C. 3311.06 and the corresponding Ohio Administrative Code requirements. This
conclusion is affirmed by the ODE’s response to Beachwood SD’s initiating petition
and subsequent correspondence. The Beachwood SD resolution approving the
Chagrin Agreement, as well as the preamble to the Chagrin Agreement itself, state
that the R.C. 3311.06 petition was still pending at that time.
The Chagrin Agreement cites the R.C. 3311.06 negotiation procedure
and states that “such an agreement will thus clearly be in the best interests of
Beachwood and Warrensville Heights” and not that the best interest of the students
would be served. Beachwood SD agrees to “withdraw its request to transfer” the
Chagrin Land and “shall not institute any further such request.” Thus, the Chagrin
Land remained with Warrensville SD and Beachwood SD agreed that it would not
attempt to annex the Chagrin Land again if the Warrensville Heights SD agrees to
share revenue.
Beachwood SD offers that without a transfer of the Chagrin Land, the
statute does not apply. I find that such an interpretation would allow a school
district to petition for annexation to induce the affected district to enter into an
agreement that does not comply with the legislative intent and statutory purposes,
policies, and history and does not protect the welfare of the students.
Under R.C. 3301.07, the ODE is charged by the General Assembly
with supervision of the public education system. The ODE “shall administer the
educational policies of this state relating to public schools, * * * finance and
organization of school districts * * * and territory.” R.C. 3301.07(B)(1).
The ODE is unilaterally vested with the authority to protect the best
interests of the students and provide an objective body to weigh the pros and cons
of such an agreement by utilizing the detailed and legislatively authorized standards
and procedures set forth in R.C. 3311.06 and the Ohio Administrative Code.5 I would
find the fact that parties may agree to retain all or part of the land in issue in
exchange for revenue or services evidences the ODE intent that such provisions may
be part of the R.C. 3311.06 negotiations. See Ohio Admin.Code 3301-89-04(C) that
lists examples of terms the parties may agree to.
The ODE is uniquely empowered to approve the Chagrin Agreement
to ensure that the statutory goals are met. ODE approval is a condition precedent
that must be met to create an enforceable and binding agreement as a matter of law.
“The entire legislation regulating school districts, and especially that
part regulating the establishment of public school districts in territory
annexed to a city, is indeed remedial. There is no vested right in the
establishment or transfer of a school district in, or to, a particular
territory. The entire matter is subject to legislative control; and
legislation treating these problems is remedial in the sense that it is
directed solely to the advancement of the public welfare. See 50
American Jurisprudence, 420, Statutes, Section 395; 82 Corpus Juris
Secundum, 918, Statutes, Section 388; and cases cited.”
5 Warrensville SD provides statistical information intended to address some of the
factors the ODE contemplates in entertaining annexation requests, such as that the
transfer of revenue without the Chagrin Land would reportedly allow Beachwood SD to
realize additional tax revenue from the Chagrin Land without potential future liabilities.
The information is indicative of the factors the ODE considers; however, it is merely
informational for the purposes of this appeal.
State ex rel. Bd. of Edn. v. Bd. of Edn., 172 Ohio St. 237, 240, 175 N.E.2d 91 (1961),
quoting Bohley v. Patry, 107 Ohio App. 345, 159 N.E.2d 252 (9th Dist.1958).
The failure to secure ODE approval is fatal to enforcement. A finding
that the specific statutory provisions may be bypassed by relabeling the Chagrin
Agreement to pull it outside of the realm of ODE governance contravenes the
purpose of the statutory scheme and legislative intent and renders the Chagrin
Agreement void and unenforceable.
As this court has previously recognized,
“[i]t is a long-standing principle of Ohio law that ‘all governmental
liability ex contractu must be express and must be entered into in the
prescribed manner, and that a municipality or county is liable neither
on an implied contract nor upon a quantum meruit by reason of
benefits received.’” Kraft Constr. Co. v. Cuyahoga Cty. Bd. of
Commrs., 128 Ohio App. 3d 33, 44, 713 N.E.2d 1075 (8th Dist.1998),
citing 20 Ohio Jurisprudence 3d, Counties, Townships and Municipal
Corporations, Section 278, at 241 (n.d.); Shampton v. Springboro, 98
Ohio St. 3d 457, 2003-Ohio-1913, 786 N.E.2d 883 (holding that city was
not liable on the basis of promissory estoppel even though tenant was
induced by city’s promise of a long term lease to invest in a restaurant
on city property).
Sylvester Summers, Jr. Co., L.P.A. v. E. Cleveland, 8th Dist. Cuyahoga No. 98227,
2013-Ohio-1339, ¶ 25.
In addition,
[t]he Ohio Supreme Court has held that an individual or entity entering
into a contract with a municipality bears the burden of “‘ascertain[ing]
whether the contract complies with the Constitution, statutes, charters,
and ordinances so far as they are applicable. If he does not, he performs
at his peril.’” Shampton at ¶ 28, quoting Lathrop Co. v. Toledo, 5 Ohio
St.2d 165, 173, 214 N.E.2d 408 (1966). Therefore, Summers’s quasi-
contract claims of promissory estoppel, unjust enrichment, and
quantum meruit are not actionable against the City.
Id. at ¶ 26.
In this case, the parties are school districts equally charged with
responsibility for statutory compliance. I determine, construing the evidence most
strongly in favor of Beachwood SD, the trial court did not err in finding there is no
genuine issue of material fact and Warrensville SD is entitled to judgment as a
matter of law. Harless, 54 Ohio St. 2d 64, 67, 375 N.E.2d 46 (1978); Civ.R. 56(C).