Court Opinion

ID: 3206575
Source: CourtListenerOpinion
Date Created: 2016-05-25 13:07:09.409868+00
Date Added: 2024-06-11T12:44:00.903790
License: Public Domain

[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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                   OHIO FIRST DISTRICT COURT OF APPEALS

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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                    OHIO FIRST DISTRICT COURT OF APPEALS

       {¶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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                     OHIO FIRST DISTRICT COURT OF APPEALS

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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