Opinion
No. 87-435
Submitted November 18, 1987 —
Decided June 15, 1988.
Municipal corporations — Civil procedure — Taxpayer's action — Claim brought pursuant to R.C. 733.56 and 733.59 must be brought within one-year period of R.C. 733.60, when.
APPEAL from the Court of Appeals for Cuyahoga County, No. 52205.
In 1977, appellant Euclid-Ninth Community Urban Redevelopment Corporation (hereinafter "ENCURC") applied to the city of Cleveland (hereinafter "city") for approval to develop property located on the northwest corner of East Ninth Street and Euclid Avenue which had previously been designated by the city as a blighted area. On June 30, 1977, a contract was executed between the city and ENCURC whereby ENCURC agreed to acquire the property, demolish existing structures, construct a thirty-five-story office tower, a four-story office building and multi-level parking garage, and undertake various street improvements. In consideration for the redevelopment of the property, ENCURC received real estate tax abatement thereon for a period of twenty years. The agreement was subsequently modified by the parties on November 9, 1977.
Among its many provisions, the agreement provided that ENCURC would lease the completed project to the National City Center Joint Venture "composed of Oliver Tyrone Corporation * * * and The Prudential Insurance Company of America" (hereinafter "Joint Venture"). The agreement further provided that ENCURC could sell or assign its interests in the project to any other community urban redevelopment corporation qualifying under R.C. Chapter 1728 and having a net worth of at least ten million dollars. Similarly, the Joint Venture was permitted to sell or assign its leasehold interest in the project provided the assignee possessed a net worth of at least ten million dollars. Subject to the aforementioned conditions, the city, pursuant to the agreement, consented to any future assignments by ENCURC or the Joint Venture.
This consent was specifically authorized by Section 2 of Cleveland Ordinance No. 1495-77, which provides:
" This Council approves the financial agreement attached as Exhibit G to the Application, and the Mayor is hereby authorized and directed to execute a financial agreement on behalf of the City, substantially in the form of the financial agreement attached as such Exhibit. This Council further approves the lease of the Project to, and the operation and maintenance thereof pursuant to such lease by the National City Joint Venture as described in the financial agreement under the terms and conditions therein set forth and approves the alternative forms of security for completion of the Project as described in the financial agreement. This Council hereby determines that the requirements concerning the payments in lieu of taxes on improvements to be made by the Corporation pursuant to the financial agreement are in accordance with the provisions of Ordinance No. 2374-76 passed December 13, 1976, and determines that methods set forth in the relocation plan set forth in the Application and financial agreement are feasible." (Emphasis added.)
In July 1983, the Joint Venture assigned its leasehold interest to Carlyle/National City Associates (hereinafter "Carlyle"). In accordance with the agreement, Carlyle's net worth exceeded ten million dollars.
On August 23, 1983, appellee, Jay Westbrook, instituted the present taxpayer's action in the Court of Common Pleas of Cuyahoga County, essentially seeking termination of the agreement and reimbursement to the city and other governmental units for the amount of taxes abated since the inception of the agreement. On November 3, 1983, appellants filed a motion to dismiss the action for lack of standing. This motion was granted by the court on March 6, 1985.
On April 12, 1985, appellee filed an amended complaint to which appellants filed a similar motion to dismiss on May 20, 1985. On May 23, 1986, the motion to dismiss the amended complaint was granted on the basis that appellee lacked standing.
On January 12, 1987, the court of appeals reversed, holding that appellee rightfully asserted a common-law basis for pursuing the instant action.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Lockwood Thompson and Francis K. Cole, for appellee.
Squire, Sanders Dempsey, George J. Umstead and Eben G. Crawford, for appellants Prudential Insurance Company of America and Oliver Partnership.
Baker Hostetler, Bruce O. Baumgartner and Christopher J. Swift, for appellants Euclid-Ninth Community Urban Redevelopment Corporation, Carlyle Real Estate Limited Partnership XI, Carlyle Real Estate Partnership XII, Carlyle/National City Associates, Carlyle National City Associates, Inc. and JMB Realty Corporation.
Thomas C. Simiele and James G. Wyman, urging affirmance for amicus curiae, Cleveland Board of Education.
The present action seeks to invalidate the tax abatement afforded appellant ENCURC by virtue of its financial agreement with the city. Through this effort, appellee endeavors to prevent ENCURC from deriving future tax benefits under the agreement and to recover any benefits realized since June 30, 1977. In his initial complaint, appellee alleged that the action was brought "pursuant to statutes relating to taxpayers' actions." This allegation was omitted from the amended complaint, the dismissal of which is the subject of the instant appeal. While appellee was correct in arguing below that, pursuant to Civ. R. 8(A), a plaintiff need not allege the legal basis for his action, the reference in the complaint that statutory relief may be available is instructive. The availability of the relief, of course, is not dependent upon the allegations of the complaint. Rather, it is derived from the nature of the relief sought by the plaintiff and afforded by statute.
In the present context, appellee has sought the invalidation of the transfer of the leasehold interest in the project from Prudential Life Insurance Company of America to Carlyle/National City Associates. It is beyond question that such transfer was authorized by the financial agreement between the city and ENCURC. Thus, the only basis upon which to challenge the assignment of the leasehold interest in a taxpayer's suit is to challenge the authority of the city to execute a contract providing therefor. Stated differently, where the contract clearly provides for the assignment of a leasehold interest to which the city has consented in advance, the basis upon which an assignment may be challenged necessarily turns on the authority of the city to give such consent. This view is borne out by reference to the amended complaint of appellee wherein the first paragraph of his prayer for relief alleges:
"That the grant of tax abatement by the City of Cleveland to Euclid-Ninth Community Urban Redevelopment Corporation under the provisions of Chapter 1728 of the Revised Code of Ohio was illegal and ineffective, and the latter's transfer of its interest to National City Joint Venture, while purportedly authorized by the Financial Agreement did not contemplate and could not lawfully contemplate transfer of the benefits of tax abatement by National City Joint Venture." (Emphasis added.)
A plain reading of the complaint reveals that appellee is not alleging that the contract was breached when the assignment was effectuated. Rather, he is alleging that the contract was void ab initio for permitting the assignment.
It is therefore necessary to ascertain whether there exists a statutory basis for recovery. R.C. 733.56 authorizes the city director of law to seek injunctive relief in certain instances. It provides:
" The village solicitor or city director of law shall apply, in the name of the municipal corporation, to a court of competent jurisdiction for an order of injunction to restrain the misapplication of funds of the municipal corporation, the abuse of its corporate powers, or the execution or performance of any contract made in behalf of the municipal corporation in contravention of the laws or ordinance[ s] governing it, or which was procured by fraud or corruption." (Emphasis added.)
Where the director of law fails to undertake the action contemplated by R.C. 733.56, a taxpayer of the municipality may file suit on its behalf pursuant to R.C. 733.59. This latter section provides as follows:
"If the village solicitor or city director of law fails, upon the written request of any taxpayer of the municipal corporation, to make any application provided for in sections 733.56 to 733.58 of the Revised Code, the taxpayer may institute suit in his own name, on behalf of the municipal corporation. Any taxpayer of any municipal corporation in which there is no village solicitor or city director of law may bring such suit on behalf of the municipal corporation. No such suit or proceeding shall be entertained by any court until the taxpayer gives security for the cost of the proceeding."
It is acknowledged by appellee that he served a written request upon the law director as mandated by R.C. 733.59 prior to the institution of the present action. The service of the request was entirely appropriate since the relief sought is clearly encompassed within the terms of R.C. 733.56 and 733.59. The appellee has alleged that he believes that the financial agreement executed on June 30, 1977 is illegal and unauthorized by R.C. Chapter 1728. Thus, it is an action seeking "to restrain * * * the execution or performance of * * * [a] contract made * * * in contravention of the laws or ordinance[s] governing it * * *."
However, any action predicated upon R.C. 733.56 and 733.59 must be instituted within the limitation period prescribed by R.C. 733.60, which provides:
"No action to enjoin the performance of a contract entered into or the payment of any bonds issued by a municipal corporation shall be brought or maintained unless commenced within one year from the date of such contract or bonds."
Consequently, if R.C. 733.56 and 733.59 are the exclusive basis upon which performance of the financial agreement may be enjoined, the present action was required to be instituted before June 30, 1978. Appellee contends, however, that the availability of relief under R.C. 733.56 and 733.59 does not foreclose a common-law action in equity to obtain the same result. In support of this contention, appellee cites Himebaugh v. Canton (1945), 145 Ohio St. 237, 30 O.O. 471, 61 N.E.2d 483; Walker v. Dillonvale (1910), 82 Ohio St. 137, 92 N.E. 220; and Pierce v. Hagans (1908), 79 Ohio St. 9, 86 N.E. 519. However, a careful review of these decisions yields the opposite conclusion. While appellee is undoubtedly correct in identifying the previously recognized equitable right of taxpayers to restrain public officials from inappropriately expending public funds, a common-law action predicated upon this right may be entertained only in the absence of a statutory remedy. Thus, in Walker, supra, paragraph one of the syllabus states:
The modification of the agreement on November 9, 1977 does not appear to alter the agreement in a manner material to the allegations of the amended complaint. However, assuming arguendo that November 9, 1977 is the operative date of the agreement, appellee would nevertheless be time-barred by R.C. 733.60.
" In the absence of statutory regulation a taxpayer may maintain an action, on behalf of himself and other taxpayers, to recover money illegally paid out of the public treasury; and in such action may unite as defendants all against whom any relief is asked and whose right will be affected by the determination of the subject of the action." (Emphasis added.)
Similarly, in Pierce, supra, and Himebaugh, supra, a common-law taxpayer's action was viewed as cognizable because the relief sought was not encompassed within the terms of the statutes considered by the court.
However, where statutory relief is afforded and clearly applies to the circumstances giving rise to the action, the statute constitutes the exclusive avenue for seeking redress. Moreover, where the legislature has prescribed a time limit for bringing such action, a common-law suit instituted beyond the limitations period may not be maintained. See Dehmer v. Campbell (1933), 127 Ohio St. 285, 188 N.E. 6.
Accordingly, we hold that the relief sought by appellee was encompassed within the terms of R.C. 733.56 and 733.59. We further hold that any action predicated thereon must be brought within the limitations period prescribed by R.C. 733.60. The judgment of the court of appeals is therefore reversed.
Judgment reversed.
MOYER, C.J., SWEENEY, LOCHER, HOLMES, DOUGLAS, WRIGHT and H. BROWN, JJ., concur.