Board of Education v. Board of Education

Lundberg Stratton, J.,

dissenting.

{¶ 48} It is undisputed that due to Circuit City’s mistaken belief that it was located within the Cleveland Municipal School District, the North Olmsted schools were deprived of approximately $74,849 of tax revenue. Nevertheless, the majority holds that North Olmsted may not recover any of these tax proceeds. I respectfully disagree.

{¶ 49} North Olmsted filed a complaint seeking to recover the tax proceeds under a theory of unjust enrichment. The majority holds that North Olmsted cannot recover based primarily on two points.

{¶ 50} Relying upon Lyme Twp. Bd. of Edn. v. Lyme Twp. Special School Dist. No. 1 Bd. of Edn. (1886), 44 Ohio St. 278, 7 N.E. 12, the majority holds that North Olmsted cannot seek restitution because North Olmsted cannot prove unjust enrichment. Specifically, the majority holds that because the taxes in question were collected pursuant to a levy for the Cleveland schools, North Olmsted cannot prove that it conferred a benefit upon the Cleveland schools, an element of unjust enrichment. The majority also reasons that “ ‘the process by which a school district budgets and levies and receives taxes, and by which taxes are assessed and distributed’ ” “ ‘does seem to provide adequate controls under which the situation here could have been prevented or corrected in a timely manner.’ ” Quoting Zupancic v. Carter Lumber Co., Franklin App. No. 01AP-1248, 2002-Ohio-3246, 2002 WL 1377932, ¶ 47. Thus, the majority determines that “it is not appropriate to provide an additional remedy through an unjust-enrichment recovery.”

{¶ 51} I believe that principles of equity dictate that North Olmsted can recover the tax proceeds from the Cleveland Municipal School District. “To bring a cause within the jurisdiction of a court of equity, it is requisite that the primary right involved be an equitable right as distinguished from a legal right, or that the remedy at law as to the right involved is not full, adequate and complete.” State ex rel. Lien v. House (1944), 144 Ohio St. 238, 244, 29 O.O. 399, 58 N.E.2d 675.

{¶ 52} “Restitution, on the basis of unjust enrichment, is a common-law remedy designed to prevent one from retaining property to which he is not justly entitled.” Keco Industries, Inc. v. Cincinnati & Suburban Bell Tel. Co. (1957), 166 Ohio St. 254, 256, 2 O.O.2d 85, 141 N.E.2d 465. Restitution is also available *490as an equitable remedy. Santos v. Ohio Bur. of Workers’ Comp., 101 Ohio St.3d 74, 2004-Ohio-28, 801 N.E.2d 441, ¶ 13. “ ‘[F]or restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant’s possession.’ ” (Emphasis added.) Id., quoting Great-West Life & Annuity Ins. Co. v. Knudson (2002), 534 U.S. 204, 214, 122 S.Ct. 708, 151 L.Ed.2d 635.
{¶ 53} “Personal property used in business shall be listed and assessed in the taxing district in which such business is carried on.” R.C. 5711.07. Ohio’s tax code has no provision that permits a local school district to levy and collect personal property tax on business property outside its district. Thus, the Cleveland Municipal School District had no authority to levy and collect the tax proceeds at issue here because the taxpayer’s property was not located within the Cleveland district. Therefore, I would hold that the tax proceeds at issue are more properly characterized as belonging to North Olmsted schools, irrespective of the fact that it was collected under the Cleveland levy. In fact, I am at a loss to understand how the Cleveland district justifies its retention of the tax proceeds at issue, thereby forcing this needless litigation.

{¶ 54} To hold that the Cleveland schools were not unjustly enriched because the tax proceeds at issue were collected pursuant to the Cleveland school district’s levy raises form over substance. “It is a familiar maxim of equity that equity regards substance, not form.” Stem v. Cuyahoga Cty. Bd. of Elections (1968), 14 Ohio St.2d 175, 188, 43 O.O.2d 286, 237 N.E.2d 313 (Taft, C.J., dissenting). I would hold that North Olmsted’s complaint merely seeks to restore tax proceeds to the entity to which they properly belong. Accordingly, I would hold that North Olmsted is seeking an equitable rather than a legal remedy.

{¶ 55} The majority also argues that the school-funding and budgeting process provides avenues for the correction of mistakes when tax proceeds are directed to the wrong district, as occurred herein. Yet the majority fails to identify any such remedy or remedies to return wrongfully diverted tax proceeds to the proper school district. Moreover, even if such remedies are available, it could be difficult to discover mistakes in time for them to be corrected in a timely manner, as the majority recognizes. The majority also recognizes that “ ‘it does not appear that the statutory scheme provides a remedy for appellee at the stage in which appellee sought corrective action.’ ” Quoting Zupancic, 2002-Ohio-3246, 2002 WL 1377932, ¶ 47. Accordingly, I believe that the statutory school-funding and budgeting scheme fails to provide an adequate or complete remedy for the North Olmsted schools to recover the tax proceeds at issue.

{¶ 56} This court has utilized its equitable powers when appropriate. See State v. West (1993), 66 Ohio St.3d 508, 512, 613 N.E.2d 622. “[A] court’s equitable powers may be invoked to provide the flexibility necessary to moderate *491unjust results.” Barone v. Barone, Geauga App. No. 2004-G-2575, 2005-Ohio-4479, 2005 WL 2077319, ¶ 17. Pursuant to our equitable powers, and because North Olmsted has no adequate or complete remedy to secure the return of its tax proceeds though the school-funding or budgeting process, and because the remedy that North Olmsted seeks is equitable in nature, I would order the Cleveland Municipal School District to return the $74,849 in tax proceeds to the North Olmsted School District.

Sylvester Summers Jr. Co., L.P.A., and Sylvester Summers Jr., for appellant. James H. Hewitt Co., L.P.A., and James H. Hewitt III, for appellee.

{¶ 57} Funding Ohio’s schools is a difficult enough task without the additional problem of forcing a school district to relinquish tax proceeds mistakenly directed to another school district. Therefore, I would call on the General Assembly to fashion a clear and adequate remedy to address this situation.

{¶ 58} Therefore, I respectfully dissent.

O’Donnell, J., concurs in the foregoing dissenting opinion.