Court Opinion

ID: 2702195
Source: CourtListenerOpinion
Date Created: 2014-08-04 19:47:35.923497+00
Date Added: 2024-06-11T12:54:40.455534
License: Public Domain

[Cite as Datillo v. Euclid, 2013-Ohio-4807.]

                 Court of Appeals of Ohio
                                EIGHTH APPELLATE DISTRICT
                                   COUNTY OF CUYAHOGA

                               JOURNAL ENTRY AND OPINION
                                        No. 99849

                                     ALBERT DATILLO
                                                 PLAINTIFF-APPELLANT

                                                  vs.

                              CITY OF EUCLID, ET AL.
                                                 DEFENDANTS-APPELLEES

                                               JUDGMENT:
                                                AFFIRMED

                                      Civil Appeal from the
                             Cuyahoga County Court of Common Pleas
                                      Case No. CV-796396

        BEFORE: Kilbane, J., E.A. Gallagher, P.J., and McCormack, J.

        RELEASED AND JOURNALIZED:                       October 31, 2013
ATTORNEYS FOR APPELLANT

Nicole T. Fiorelli
Patrick J. Perotti
Dworken & Berstein Co., L.P.A.
60 South Park Place
Painesville, Ohio 44077

ATTORNEYS FOR APPELLEES

Steven A. Friedman
Bruce A. Khula
Squire Sanders L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114

L. Christopher Frey
Law Director
City of Euclid
585 East 222nd Street
Euclid, Ohio 44123
MARY EILEEN KILBANE, J.:

       {¶1} Plaintiff-appellant, Albert Datillo, an individual who works in the city of

Euclid but does not reside there, appeals from the order of the trial court that dismissed

his class action complaint for a refund of income taxes collected by the city of

Euclid-Euclid School District’s shared taxing district. For the reasons set forth below,

we affirm.

       {¶2} Effective April 16, 1993, the General Assembly enacted 1991 Ohio S.B.

No. 190 that provided for the creation of shared income tax districts pursuant to which a

municipal corporation and a city, local, or exempted village school district may agree to

share proceeds of an income tax set forth in R.C. 718.09. Pursuant to former R.C.

718.09(B):

       The legislative authority of a municipal corporation * * * may propose to
       the electors an income tax, one of the purposes of which shall be to provide
       financial assistance to the school district through payment to the district of
       not less than twenty-five percent of the revenue generated by the tax. * *
       *.

Accord 1996 Ohio Atty.Gen.Ops. No. 96-012. In that opinion, the attorney general

explained that “a shared income tax is structured as a municipal income tax,” and points

out that one of its purposes is to provide financial assistance to the school district through

payment to the district of not less than 25 percent of the revenue generated by the tax.

       {¶3} Under the former version of R.C. 718.09, the municipality and the board of

education established a tax rate, a percentage of tax revenue to be paid to the school

district, the purpose for which the school district was to use the money, and the schedule
of payments to the school district. Id. The municipality then enacted an ordinance

containing these provisions. Id.

       {¶4} As originally enacted, the shared income tax contemplated within former

R.C. 718.09 was based upon income earned within the municipality. R.C. 718.09 (1993).

 Accordingly, both residents and nonresidents of the shared tax district were subject to

this tax.

       {¶5} On August 22, 1994, acting pursuant to the version of R.C. 718.09 then in

effect, the city of Euclid passed Ordinances 200-1994 to amend the city’s income tax

code. Under this legislation, the city of Euclid increased its municipal income tax rate

from 2 percent to 2.85 percent, effective December 1, 1994. Euclid Codified Ordinances

Chapter 791. See generally 1996 Ohio Atty.Gen.Ops. No. 96-012; Bosher v. Euclid

Income Tax Bd. of Review, 99 Ohio St.3d 330, 2003-Ohio-3886, 792 N.E.2d 181.

       {¶6} Euclid Codified Ordinances 791.01 sets forth the purpose of the levy of

income tax and states:

       To provide funds for the purposes of general municipal functions of the
       City * * *.

       {¶7} Euclid Codified Ordinances 791.02 defines income as follows:

       (1) All salaries, wages, commissions, other compensation and other income
       from whatever source received by residents of the City.

       (2) All salaries, wages, commissions, other compensation and other income

       from whatever source received by nonresidents for work done or services

       performed or rendered or activities conducted in the City.
       {¶8} Euclid Codified Ordinances 791.36 provides for the disbursement of the

funds collected and provides in relevant part as follows:

       (c) Of the additional .85 percent income tax levied by Ordinance 200-1994,
       passed August 22, 1994, .38 percent shall be used to supplement both the
       General Fund, for such basic expenses as safety services and general
       maintenance, and the Permanent Improvement Fund, for expenses such as
       sewers, streets and curbs, as determined by ordinance, and .47 percent shall
       be used for school district current expenses.

       {¶9} By 2005, however, the provisions of the enabling legislation R.C. 718.09

were amended to provide that an ordinance enacted pursuant to this revised code

provision may not levy the shared income tax on individuals who were not residents of

the municipality. See 2005 Ohio H.B. No. 66, effective June 30, 2005. However, these

changes do not specify that they were made retroactively.

       {¶10} On November 28, 2012, plaintiff-appellant, Albert Datillo, filed a class

action complaint against the city of Euclid, and the city of Euclid Tax Administrator.

Datillo alleged that he works in Euclid and has paid the 2.85 percent income tax that

benefits the city and the Euclid School District, but he is not a resident of Euclid and

receives no benefit from the .47 percent of his tax payments that are used for school

district expenses. Datillo asserted that the shared income tax, as established under the

1994 ordinance, violates due process, is illegal, and unjustly enriches the city. He prayed

for injunctive relief and a refund for himself and all members of the putative class.

       {¶11} On February 8, 2013, the defendants filed a motion to dismiss pursuant to

Civ.R. 12(B)(6), asserting that Datillo failed to state a claim for relief. Defendants

argued that the tax was lawfully enacted under the former version of R.C. 718.09 and is
within the city’s general power to tax residents and nonresidents who earn income in the

city. They additionally argued that a taxpayer may not, as a matter of law, dissect a

general tax and then challenge a particular component of the tax for failing to provide a

benefit to him or her individually, and that, in any event, the shared income tax provides a

benefit to all who work or live in Euclid.

       {¶12} On April 12, 2013, the trial court granted the defendants’ motion to dismiss.

 In a written opinion, the court observed that:

       The U.S. Supreme Court has ruled that “a general tax cannot be dissected to
       show that, as to certain constituent parts, the taxpayer receives no benefit.”
       Union Refrigerator Transit Co. v. Kentucky, 199 U.S. 194, 203 [26 S.Ct.
       36, 50 L.Ed. 150] (1905). The City has the power to impose taxes on both
       residents and non-residents, and has the discretion to allocate those monies
       collected as it wishes * * *. [T]he City’s .47 percent allocation to the
       City’s school district is constitutional and * * * the Plaintiff’s dissection of
       the City’s tax allocation in order to determine whether the Plaintiff receives
       a benefit fails as a matter of law.

       {¶13} Datillo now appeals and assigns the following interrelated errors for our

review:

       The trial court erred in dismissing Datillo’s complaint holding that the
       special [shared] tax that the City of Euclid imposed on nonresident
       taxpayers for the Euclid School District comports with due process.

       The trial court erred in dismissing Datillo’s claim for unjust enrichment.

       {¶14} An appellate court reviews a ruling on a motion to dismiss pursuant to

Civ.R. 12(B)(6) under a de novo standard of review. Perrysburg Twp. v. Rossford, 103

Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶ 5
       {¶15} A motion to dismiss for failure to state a claim upon which relief can be

granted is procedural and tests the sufficiency of the complaint. State ex rel. Hanson v.

Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 1992-Ohio-73, 605 N.E.2d 378. In

order to prevail on a motion to dismiss pursuant to Civ.R. 12(B)(6), it must appear

“beyond doubt that the plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Byrd v. Faber, 57 Ohio St.3d 56, 60, 565 N.E.2d 584

(1991); Grey v. Walgreen Co., 197 Ohio App.3d 418, 2011-Ohio-6167, 967 N.E.2d 1249,

¶ 3 (8th Dist.).

       {¶16} With regard to the contention that the Euclid ordinance violates due process,

we note that in Angell v. Toledo, 153 Ohio St. 179, 181, 91 N.E.2d 250 (1950), the Ohio

Supreme Court rejected the contention that the city violated the due process rights of a

nonresident by taxing income earned in that city. The court stated that

       the test of whether a tax law violates the due process clause is whether it
       bears some fiscal relation to the protections, opportunities, and benefits
       given by the state, or, in other words, whether the state has given anything
       for which it can ask a return.

       The municipality certainly does afford protection against fire, theft, et
       cetera, to the place of business of plaintiff’s employer and the operation
       thereof without which plaintiff’s employer could not as readily run its
       business and employ help. In other words, the city of Toledo does afford to
       plaintiff not only a place to work but a place to work protected by the
       municipal government of Toledo.

       We are of the opinion that Section 6 of Ordinance No. 18-46 of the city of

       Toledo is a valid enactment.

Id. at 185.
       {¶17} Former R.C. 718.09 authorized the establishment of the “shared income tax”

that was “structured as a municipal income tax.” 1996 Ohio Atty.Gen.Ops. No. 96-012.

Thus, although one of the purposes of the shared income tax is to provide financial

assistance to the school district through payment to the district of not less than 25 percent

of the revenue generated by the tax, the shared income tax is, in essence, simply a

municipal income tax. Euclid Ordinances 791.36. 1 As such, the city may, without

violating due process protections afforded a nonresident, tax income earned in that city

where the tax “bears some fiscal relation to the protections, opportunities, and benefits

given.” Angell.

       {¶18} Here, the city of Euclid amended the city’s tax code on August 22, 1994, to

increase its municipal income tax from 2 percent to 2.85 percent, to both supplement the

city’s general fund and to pay current school expenses. Euclid Ordinances 791.36. The

legislation bears some fiscal relation to the protections, opportunities, and benefits given

by the city of Euclid and comports with due process, in connection with the “protection

against fire, theft, * * * to the place of business of plaintiff’s employer and the operation

thereof without which plaintiff’s employer could not as readily run its business and

employ help.” Angell.

       1In this regard, the shared income tax is unlike the income tax that a school
district could levy acting solely on its own, because that type of income tax may only
be levied upon residents of the school district. R.C. 5748.09.
       {¶19} Although R.C. 718.09 was later amended in 2005 to provide that a

municipality enacting legislation for a shared municipal school district tax may not levy a

tax on nonresidents,2 this amendment was not made retroactive.

       {¶20} In accordance with the foregoing, Datillo’s claim that Euclid Ordinances

791.36 violates due process fails to state a claim for relief.

       {¶21} As to Datillo’s claim that the city has been unjustly enriched, we note that a

claim of unjust enrichment asserts liability in quasi-contract and arises out of the

obligation cast by law upon a person in receipt of benefits that he is not justly entitled to

retain. Hambleton v. R.G. Barry Corp., 12 Ohio St.3d 179, 183-184, 465 N.E.2d 1298

(1984).     The elements are that: (1) a benefit was conferred by a plaintiff upon a

defendant; (2) knowledge by the defendant of the benefit; and (3) retention of the benefit

by the defendant under circumstances where it would be unjust to do so without payment.

 Id.

       {¶22} Euclid Ordinances 791.36 was properly enacted pursuant to the version of

R.C. 718.09 in effect in 1994, and it benefits Datillo’s employer.              See Angell.

Moreover, a taxpayer is not permitted to dissect the tax to show that, as to certain

constituent parts, he receives no benefit. Union Refrig. Transit Co. v. Kentucky, 199

U.S. 194, 6 S.Ct. 36, 50 L.Ed. 150. Therefore, Datillo cannot establish that defendants

retained a benefit from him under circumstances where it would be unjust to do so

without payment.

       2   See 2005 Ohio H.B. No. 66, effective June 30, 2005.
       {¶23} In accordance with the foregoing, Datillo’s claim for unjust enrichment fails

to state a claim for relief.

       {¶24} The trial court properly concluded that it is “beyond doubt that the plaintiff

can prove no set of facts in support of his claim which would entitle him to relief,” and it

properly dismissed the complaint pursuant to Civ.R. 12(B)(6).

       {¶25} Affirmed.

       It is ordered that appellees recover from appellant 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 EILEEN KILBANE, JUDGE

TIM McCORMACK, J., CONCURS;
EILEEN A. GALLAGHER, P.J., CONCURS (SEE SEPARATE CONCURRING
OPINION)

EILEEN A. GALLAGHER, P.J., CONCURRING:

       {¶26} I concur with the majority but write to express my concerns regarding the

initiation of this case.
        {¶27} The Cuyahoga County Court of Common Pleas case designation sheet in

this case, completed by plaintiff’s counsel, identifies this case as a “commercial docket”

case.

        {¶28} This matter, however, is not a case appropriate for a commercial docket

pursuant to the parameters set out by the Ohio Supreme Court.

        {¶29} The commercial dockets were established to focus on litigation between

business entities or a business entity and an owner, sole proprietor, shareholder, partner or

member of a business entity.

        {¶30} In fact, the rules state that “[a] civil case shall not be eligible for assignment

into the commercial docket * * * if a governmental entity is other than a nominal party in

the case * * *.”

        {¶31} In order to maintain the integrity of commercial dockets as envisioned, I

suggest that plaintiffs, as well as commercial docket judges, be cautious in their

identification of commercial docket cases and the maintenance of a case that is

inappropriate on a commercial docket.