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Williams v. Schneider

Court of Appeals of Ohio, Eighth District, Cuyahoga

December 21, 2017

JACQUELINE T. WILLIAMS, [1] DIRECTOR OHIO DEPARTMENT OF COMMERCE PLAINTIFF
v.
JOANNE C. SCHNEIDER, ET AL. DEFENDANTS-APPELLANTS

         Civil Appeal from the Cuyahoga County Court of Common Pleas Case Nos. CV-04-548887, CV-05-555252, CV-05-555408, CV-05-555412, CV-05-558095, CV-05-559117, CV-05-559879, CV-05-571494, CV-05-572965 CV-05-560633, CV-05-564814, CV-05-569073, and CV-06-592402

          For Cleveland Construction, Inc. James R. Small James L. Ferro Cleveland Construction, Inc. For Home Savings and Loan Company of Youngstown Richard J. Thomas Jerry R. Krzys Henderson Covington Messenger, Newman & Thomas Co., L.P.A., Charles Richley Raley Jr. Michael J. Sikora Sikora Law L.L.C. For City of Parma Heights Darrel A. Clay Robert T. Hunt Charles T. Riehl Walter & Haverfield, L.L.P. ATTORNEYS FOR APPELLANTS

          For Matthew L. Fornshell M. Colette M. Gibbons Robert M. Stefancin Ice Miller, L.L.P., For Parma Heights Land Development, L.L.C. Joseph H. Gutkoski Harvey Labovitz Tim L. Collins Collins & Scanlon L.L.P., For Cuyahoga County Treasurer, W. Christopher Murray, II Michael C. O'Malley Cuyahoga County Prosecutor BY: Colleen Majeski Assistant County Prosecutor ATTORNEYS FOR APPELLEES

          BEFORE: Jones, J., Kilbane, P.J., and E.T. Gallagher, J.

          JOURNAL ENTRY AND OPINION

          PER CURIAM

         {¶1} In the early 2000s, Joanne and Alan Schneider were involved in a Ponzi scheme that cost innocent investors millions of dollars.[2] Individual investors were not the only ones affected by the couple's fraud, and litigation resulting from the Schneiders' investment scheme is still ongoing. These consolidated appeals are the culmination of court proceedings that arose from part of the Schneiders' wrongdoings and involved investment in property in Parma Heights, a suburb of Cleveland.

         {¶2} In 8th Dist. Cuyahoga No. 104201, intervenor-appellant, city of Parma Heights, appeals the trial court's judgment denying its motion for summary judgment and granting summary judgment in favor of appellee, The Home Savings & Loan Company of Youngstown, Ohio ("HSL"). In 8th Dist. Cuyahoga No. 104206, appellant Cleveland Construction, Inc. ("CCI"), also appeals the trial court's judgment denying its motion for summary judgment and granting summary judgment in favor of HSL. In 8th Dist. Cuyahoga No. 104232, appellant HSL challenges the trial court's judgments relating to the distribution of receivership assets. Additional parties to these appeals that filed appellate briefs include the receiver on the case, Matthew Fornshell, and prior owners of the subject property, Parma Heights Land Development, L.L.C., and ATC Realty Sixteen, Inc. Numerous other parties in the underlying cases are not part of this consolidated appeal.

         {¶3} For the purposes of judicial clarity, we consider the arguments raised in each appeal separately, but issue one consolidated opinion because the resolution of issues raised in one case impact those posed in the others.

         {¶4} For the reasons set forth below, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

         I. Procedural and Factual History

         {¶5} The assigned errors raised herein concern trial court judgments relating to the priority and validity of various liens filed against parcels of real property in Parma Heights and the court's receivership orders.

         A. The Cornerstone Properties Project

         {¶6} In 2003, Pearl Development Company ("PDC"), an entity controlled by Joanne Schneider, proposed a mixed-use development project funded by private and public sources that could have potentially revitalized a large portion of Parma Heights near the intersection of Pearl Road and West 130th Street; the project was called "Cornerstone" and the involved property, "Cornerstone Properties." The real property compromising Cornerstone Properties consisted of five separate parcels of land: three of the parcels were aggregated into the "Pearl" property and the other two parcels were known as "Garnet" and "Ruby."

         {¶7} In March 2003, the Schneiders approached CCI, a construction management firm, to discuss the Cornerstone project. Thereafter, CCI entered into a contract with PDC to provide construction management for the project.

         {¶8} On June 26, 2003, HSL issued a loan in the amount of $3, 320, 000 to the Schneiders in their personal capacities. To secure the debt, the Schneiders executed a note and an open-end mortgage in favor of HSL encumbering the Garnet property. On July 9, 2003, HSL issued a loan in the amount of $3, 700, 000 to PDC through its president, Joanne Schneider. In return, PDC executed a note and two separate open-end mortgages in favor of HSL encumbering the Pearl and Ruby properties. The Schneiders used $2, 802, 627.20 from the proceeds of the loan from HSL to satisfy two pre-existing mortgages that had previously encumbered the Pearl and Ruby properties.[3]

         {¶9} In December 2003, Parma Heights City Council passed an ordinance authorizing the city to enter into a "Project Development Agreement" with the Schneiders and their business entities. The city and the Schneiders agreed that all reasonable costs incurred by the city for improvements to the Cornerstone Properties would be paid for by the Schneiders through service payments in lieu of taxes under a Tax Increment Financing Program ("TIF"). The contract also allowed for the collection of special assessments of 40 semi-annual payments over a 20-year period against the Cornerstone Properties if the Schneiders failed to make the payments under the TIF. The Schneiders agreed to file a petition with Parma Heights to levy a special assessment for the construction of the public improvements.

         {¶10} In May 2004, the city passed a resolution to proceed with construction of the project. In July 2004, CCI provided PDC with a bridge loan in the amount of $2, 500, 000 so that PDC could continue construction on the project. Unfortunately, the Schneiders' scheme fell apart soon after construction began. When the Ponzi scheme collapsed, so did the funding for the Cornerstone project and by December 2004, construction on the project had completely halted. The Schneiders defaulted on their obligations to make service payments in lieu of taxes under the TIF. Joanne Schneider eventually pleaded guilty to a number of criminal charges and went to prison. Investors and contractors scrambled to recover what they could from the Schneiders' remaining assets, but, as mentioned, litigation resulting from their criminal activities continues to the present day. The property is still not fully developed or in use, and remains the largest undeveloped parcel in the city.

         {¶11} CCI filed two separate mechanic's liens in the amounts of $720, 152.22 and $837, 583.50 against the Pearl property pursuant to R.C. 1311.01. The affidavits supporting each mechanic's lien stated that the last day of work on the Pearl property was December 3, 2004. CCI also obtained a judgment lien against PDC for the $2, 500, 000 bridge loan the construction management firm had provided to the development company.

         {¶12} More than a dozen separate civil actions were filed in the Cuyahoga County Court of Common Pleas as a result of the project's failure. The actions were consolidated before a single trial judge. On February 4, 2005, the trial court appointed a receiver, appellee Matthew Fornshell, to oversee the assets.

         {¶13} Parma Heights' work on public improvements to the Cornerstone Properties ceased sometime in 2005 or 2006. On May 22, 2006, Parma Heights passed Ordinance 2006-16 and levied a special assessment in the amount of $2, 695, 852.55, which was the amount the city had spent "to date" on improvements to the Cornerstone Properties for "construction and installation of public sanitary sewers, storm sewers, water mains, street lighting, concrete curbs, asphalt pavement sidewalks, traffic signals, other public utility lines, and all together with the necessary appurtenances thereto."

         {¶14} On October 16, 2006, the city certified $3, 743, 190.74 to Cuyahoga County for collection, which included the $2, 695, 852.55 in costs and $1, 047, 338.19 in estimated interest over the 20-year repayment period. The amount did not include $394, 366.48 in fees and expenses the city had determined it was owed pursuant to the Project Development Agreement. The city had originally estimated that it would spend about $15 million on improvements to the Cornerstone Properties.

         {¶15} In the meantime, the receiver moved the court to authorize the sale of the Cornerstone Properties free and clear of any liens, claims, or encumbrances and transfer the interests of the lienholders to the proceeds of the sale. The court set forth the auction procedures and, in doing so, precluded any claims on the property via the following June 2006 order:

The Court further finds that the sales of the properties shall be free and clear of all liens, claims and encumbrances * * *. Accordingly, all such liens, claims and encumbrances which now exist or are hereafter placed of record prior to the date of sale on or against the properties shall be, and they hereby are, extinguished as liens, claims and encumbrances against the properties; rather, the liens, claims and encumbrances against a particular property will attach to the net proceeds of the sale of that property. All such net proceedings from the sale of a Property will be held in a separate interest bearing account until further order of the Court.

         {¶16} In November 2006, the Cornerstone Properties sold at auction for $7, 900, 000 to the McGill Property Group, L.L.C. ("McGill"). The court confirmed the sale on January 2, 2007, and, consistent with the terms of the purchase agreement entered into at auction, issued a judgment entry stating, in part:

4. The sale of the Properties to the Buyer shall be free and clear of any lien, claim, or encumbrance whether known or unknown, * * * including but not limited to those liens and encumbrances expressly identified and included in the title commitment issued with respect to the Properties and incorporated by reference in this Order * * *. Sale of the Property shall be free and clear of any and all asserted or unasserted, known or unknown, statutory or contractual * * * assessments and governmental funded improvements whether assessed or not, including assessments that can be filed or certified for inclusion on the County Auditor's tax duplicate now or in the future for any improvements already made to or for the benefit of the Properties. Any and all valid and enforceable liens, claims or encumbrances of the Properties, including but not limited to any liens or claims arising from any assessments, liens or taxes, or the provisions of any governmentally funded improvements, whether assessed or not, shall be transferred, fixed and attached to the net proceeds of the sale of the Properties, with the same validity, priority, force and effect as such liens and/or claims had upon the properties immediately prior to the closing.

         {¶17} The net proceeds of the sale after expenses were $6, 621, 496.23, and was held by the receiver in a separate account.

         {¶18} Following the sale, McGill assigned its rights to Cornerstone Properties to appellee Parma Heights Land Development, L.L.C.[4] It was not until after the sale, McGill alleged, that it learned that the city had previously placed a special assessment on the property.

         {¶19} On December 4, 2007, the city sought to intervene in the matter to protect its rights under the special assessment. The trial court granted the city's motion to intervene. The city now alleges it is owed $4, 137, 557.72 pursuant to its special assessment, which includes $3, 743, 190.74 it spent on improvements to the Cornerstone Properties (the principal amount due plus 20 years of interest) and an additional $394, 366.48 in legal fees, engineering fees, other professional fees, and miscellaneous expenses.

         {¶20} On December 21, 2007, the trial court issued a Findings and Order of Distribution. The decision limited secured claims to amounts due and owing as of February 4, 2005 and stated that allowed claims would be given the following priority: (1) administrative claims, (2) secured claims, and (3) unsecured claims. The distribution order also provided for a Secured Creditor Allocation account, which the court defined as "ten percent (10%) of each Secured Claim that shall be set aside for payment of Allowed Administrative Claims." The order required the receiver to obtain the court's approval by way of application before paying an administrative claim, required the applications be served on "all parties desiring notice that have filed a Notice of Appearance, " and indicated that "objections to the applications must be filed and served in accordance with the Local Rules of the Court."

         {¶21} In late 2008, the trial court issued an order requiring those parties that claimed secured creditor status with respect to the Cornerstone Properties to move for summary judgment on the issue of priority of the various liens. CCI, HSL, and Parma Heights each argued their respective liens had priority. Parma Heights Land Development, L.L.C., who owned Cornerstone Properties at the time, argued that the trial court should transfer the city's assessment on the Cornerstone Properties to the proceeds from the sale of the property.

         {¶22} HSL argued that because the proceeds of its loan were used to satisfy the Pearl mortgage, its lien had priority on the Pearl property pursuant to R.C. 1311.14. CCI claimed that their mechanic's liens on the Pearl property had priority pursuant to R.C. 1311.13(A) because the first visible work occurred prior to the recording of HSL's loan. CCI further asserted that the recorded instruments upon which HSL relied were flawed, thereby negating HSL's priority argument. Parma Heights argued that its special assessment had priority against all others asserting secured creditor status.

         B. The Priority Opinion and Order

         {¶23} On May 16, 2011, the trial court issued its ruling on the priority of the liens asserted by the parties ("Priority Opinion"). In its Priority Opinion, the trial court made the following determinations: (1) the ten percent Secured Creditor Allocation set up for the benefit of the receivership had priority over all other lienholders; (2) HSL's July 10, 2003 recorded mortgage satisfied the two pre-existing mortgages that encumbered the Ruby and Garnet properties; (3) HSL's mortgage lien had "priority as against all subsequently filed mechanic's liens, * * * but only as to the Ruby Property and the Garnet Property"; (4) "the Pearl Property was not encumbered by the mortgages [HSL's loan] satisfied"; (5) HSL's loan funds were not used "for improvements at the Pearl Property"; and (6) because "visible construction work commenced at the Cornerstone Properties before [HSL] recorded its mortgage, " CCI's mechanic's liens took precedence as to the Pearl property.

         {¶24} The trial court further found, with respect to the city's claim of priority based on its special assessment:

[Parma Heights] maintains that it is entitled to priority of its claims as against all others asserting secured status. The City bases its claim on legislation enacted on May 22, 2006[, ] and thereafter certified to the Auditor of Cuyahoga County on October 16, 2006[, ] imposing a Special Assessment against the Cornerstone Properties.
* * *
For a variety of reasons, the City of Parma Heights is not entitled to assert a claim of priority as against Home Savings and Loan Company or Lienholders. Putting aside for the moment the question whether the City's effort to impose its assessments is void as a matter of law, the City cannot unilaterally achieve retroactive super priority over other liens previously recognized in law.
* * * [T]he liens of Home Savings and Loan Company or Lienholders clearly predate the City's October 16, 2006 Special Assessment. The fact that the City had a contractual arrangement with the previous owners, the Schneiders who were operating a Ponzi scheme, is immaterial and does not affect in any way the priority of claims subsequently perfected before the City took any action of its own.

         {¶25} Following the issuance of its May 16, 2011 opinion and order, it was discovered that the order contained internal discrepancies. HSL filed a notice of appeal (8th Dist. Cuyahoga No. 96911) and we remanded the case to the trial court for a decision on HSL's previously filed motion to partially vacate the Priority Opinion. In that motion, HSL argued that the Priority Opinion mistakenly identified the Garnet property as the property to which HSL's loan applied, rather than the Pearl property. HSL further argued that the evidence demonstrated that only "$2, 802, 627.20 of the proceeds of the loan [to PDC] * * * were used to satisfy the J.A.M. Pearl Mortgage, " so that fact should have been included in the Priority Opinion.

         {¶26} On August 29, 2011, the trial court issued a judgment entry granting HSL's motion to partially vacate the Priority Opinion. The amended judgment entry clarified that HSL's loan satisfied two pre-existing mortgages that encumbered the Ruby and Pearl properties and not the Garnet property. Based on this inadvertent error, the trial court reversed its prior determination that CCI had priority over the Pearl property, and concluded that HSL "ha[d] priority of its liens as against all [other] lienholders." The court clarified that "[t]o the extent that the court's May 16, 2011 opinion and order regarding the priority of liens held otherwise, the order is corrected consistent with the above."

         {¶27} HSL and CCI separately appealed the trial court's August 29, 2011 amended judgment entry.[5] This court heard CCI and HSL's consolidated appeals relating to the Priority Opinion and affirmed the trial court's determination that HSL had priority over CCI's mechanic's liens with respect to the Pearl property. This court stated, in relevant part:

[W]here a mortgagee substantially adheres to the provisions of R.C. 1311.14, its lien on the property has "super priority" over that of any mechanic's liens. R.C. 1311.14 gives a construction mortgage priority over mechanic's liens even if the mortgage was recorded subsequent to the effective date of the mechanic's liens.
In this case, HSL provided evidence to show that: (1) it provided a construction loan to PDC, (2) the loan provided to PDC was used to satisfy the J.A.M. Pearl mortgage, and (3) PDC then began the Cornerstone project. This evidence was sufficient to satisfy R.C. 1311.14.
* * *
This court, therefore, cannot find that the trial court acted improperly in granting summary judgment to HSL on the priority of its lien against the Pearl property.

         (Citations omitted). Cleveland Constr., Inc. v. Schneider, 8th Dist. Cuyahoga Nos. 96911, 97352, 97361 and 97513, 2012-Ohio-5707, ¶ 49.[6] This court clarified that the opinion was limited to issues of priority and that, "in accord with the understanding of all parties, the trial court specifically stated that the issues of validity and amounts [owed to the lienholders] were matters for later decision." Id. at ¶ 51.[7]

         C. The Validity Opinion and Order

         {¶28} The case was remanded to the trial court for the final disposition of the assets in the receivership estate. Parma Heights, CCI, and HSL each filed additional motions for summary judgment. In an order dated June 15, 2015, the trial court issued an opinion regarding the validity of liens ("Validity Opinion"). That decision granted summary judgment in favor of HSL, finding that HSL's mortgage on the Pearl property was a valid lien and CCI's mechanic's liens were invalid. In rendering its decision, the trial court rejected CCI's contention that HSL's mortgage was defectively executed and did not afford constructive notice to third parties that the mortgage encumbered the Pearl property. The trial court found that CCI failed to satisfy its burden of showing that it recorded the mechanic's liens within 75 days of its last day of work on the Pearl Property, as required by R.C. 1311.06(B)(3).

         {¶29} The Validity Opinion did not address the validity of CCI's judgment lien or the city's special assessment. CCI and the city initiated appeals from the Validity Opinion, but this court dismissed the appeals for lack of final appealable orders. White v. Schneider, 8th Dist. Cuyahoga No. 103260, Motion No. 488703 (Oct. 1, 2015); Bradley v. Schneider, 8th Dist. Cuyahoga No. 103261, Motion No. 488600 (Oct. 1, 2015).

         D. Supplemental Motions

         {¶30} In November 2015, HSL filed a supplemental motion for summary judgment as to the amounts owed to HSL. In the motion, HSL argued that it is owed $3, 320, 000 plus contractual interest on the Garnet mortgage, and $3, 700, 000 plus contractual interest on the Pearl and Ruby mortgages, for a total of $7, 020, 000, plus contractual interest at a rate of 5.25% per annum.

         {¶31} The receiver filed a brief in opposition, arguing that the trial court's December 2007 Order of Distribution decision expressly stated that secured claims could not include interest or penalty charges after February 4, 2005. Thus, the receiver claimed, HSL's "request to include contractual interest at a rate of 5.25% per annum is contrary to the court's prior orders, which is the law of the case." HSL moved for leave to file a reply to the receiver's brief in opposition, which the trial court denied.

         {¶32} Also in November 2015, CCI filed a supplemental motion for summary judgment with respect to the validity of its judgment lien. The receiver filed a brief in opposition, arguing that CCI's judgment lien was invalid. CCI moved for leave to file a reply brief, which the trial court denied.

         {¶33} On February 11, 2016, the trial court issued a series of judgment entries. The trial court denied HSL's supplemental motion for summary judgment as to the amounts owed to HSL. The trial court limited the amount of HSL's secured claim to $6, 715, 183.11 and determined that HSL was not entitled to interest accrued after February 4, 2005. The court stated that "there are no additional funds in the Receivership Estate on which [HSL] has a secured claim." The trial court relied on the receiver's December 4, 2015 report filed pursuant to Local R. 26(B), where the receiver attested:

As of December 1, 2015, the aggregate balance of the real property accounts was $8, 015, 086.88. The proceeds from the sale of the Cornerstone Properties account for $6, 715, 183.11 of that aggregate balance. * * * The balance of the Secured Creditor Allocation Account as of December 1, 2015, was $416, 112.46. There have been no transfers from this account since the Receiver's last report.

         {¶34} The trial court determined that the city's special assessment was not a valid lien because (1) it did not comply with statutory requirements, and (2) the city certified the special assessment without the trial court's consent.

         {¶35} The trial court also denied CCI's supplemental motion for summary judgment as to the validity of its judgment lien. The court reasoned that: (1) CCI's action in obtaining its December 3, 2004 cognovit lien and judgment lien against the Schneiders violated the trial court's December 1, 2004 injunction; (2) CCI did not qualify as a secured creditor because it was never in the business of routinely lending money nor did it have secured liens on the date services were provided; and (3) CCI had not submitted evidence to support its judgment lien despite repeated requests from the receiver for documentation to prove its lien.

         {¶36} Finally, the trial court issued a journal entry instructing the receiver to "distribute any remaining assets in the Receivership to unsecured creditors in a pro rata allocation" or "to a charity of the receiver's choice" if he is "unable to distribute assets to any unsecured creditors."

         {¶37} Parma Heights, CCI, and HSL now appeal from various aspects of the foregoing judgments. Upon motions of Parma Heights and CCI, the trial court granted a stay and ordered the receiver to stay distribution of all funds pending appeal, except that the receiver was to continue payment of the ongoing fees and expenses of the receivership.

         II. Law and Analysis

         A. Standard of Review - Summary Judgment

         {¶38} Our review of a trial court's decision on a summary judgment motion is de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). The Ohio Supreme Court has provided the following standard for courts to follow when deciding a summary judgment motion:

Pursuant to Civ.R. 56, summary judgment is appropriate when (1) there is no genuine issue of material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds can come to but one conclusion and that conclusion is adverse to the nonmoving party, said party being entitled to have the evidence construed most strongly in his favor. The party moving for summary judgment bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

         (Citations omitted.) Zivich v. Mentor Soccer Club, 82 Ohio St.3d 367, 369-370, 696 N.E.2d 201 (1998).

         {¶39} Once the moving party satisfies its burden, the nonmoving party "may not rest upon the mere allegations or denials of the party's pleadings, but the party's response, by affidavit or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Civ.R. 56(E); Mootispaw v. Eckstein, 76 Ohio St.3d 383, 385, 667 N.E.2d 1197 (1996). Doubts must be resolved in favor of the nonmoving party. Murphy v. Reynoldsburg, 65 Ohio St.3d 356, 358-359, 604 N.E.2d 138 (1992).

         B. Parma Heights' Appeal

         {¶40} Parma Heights raises three assignments of error challenging the trial court's denial of its motion for summary judgment, its determination that the city's certified special assessment was invalid as a matter of law, and the court's finding that the city did not have priority over other lien claimants. Parma Heights further contends that the trial court did not have the authority to authorize the sale of the Cornerstone Properties free and clear of the city's lien by special assessment.[8]

         1. Lien Validity

         {¶41} We consider the second assignment of error first, whether Parma Heights had a valid lien. If the city's lien was not valid, as the trial court held, then the issue of whether Parma Heights' lien has priority over other lienholders is moot.

         {¶42} Ohio courts have repeatedly found special assessments to be akin to general taxes and, as a result, they are collected in the same manner as other taxes. Cleveland Metro. Hous. Auth. v. Lincoln Prop. Mgmt. Co., 22 Ohio App.2d 157, 259 N.E.2d 512 (8th Dist.1970); Collister v. Kovanda, 51 Ohio App. 43, 199 N.E. 477 (8th Dist.1935); State ex rel. Brown v. Cooper, 123 Ohio St. 23, 24, 173 N.E. 725 (1930) (special assessments upon real estate for public improvements are taxes within the meaning of the statutory law); Jackson v. Bd. of Edn., 115 Ohio St. 368, 372, 154 N.E. 247 (1926). In this case, the city originally contracted with the Schneiders and their business entities and agreed that the improvements would be paid by service payments in lieu of taxes (a TIF program) pursuant to R.C. 5709.40. Like assessments levied under R.C. Chapter 727, service payments in lieu of taxes under R.C. 5709.40 are another form of statutory special assessment. Chu Bros. Tulsa Partnership, P.L.L. v. Sherwin-Williams Co., 187 Ohio App.3d 261, 2010-Ohio-858, 931 N.E.2d 1116, ¶ 10 (12th Dist).

         {¶43} The Schneiders petitioned Parma Heights to make public improvements and levy special assessments on the Cornerstone Properties. Pursuant to the petition, Parma Heights City Council passed Ordinance No. 2004-11 on May 24, 2004, declaring it necessary to construct public improvements at the Cornerstone Properties and stating that 100 percent of the improvements would be paid by the special assessments. The work began in 2004 and was completed in 2005 or 2006. Terrence Hickey, the city's finance director, averred that once the city realized that neither the Schneiders nor the receiver (after the property went into receivership) were going to develop buildings on the Cornerstone Properties that could then pay for the TIF program, it became necessary to levy a special assessment against the property.

         {¶44} This court has previously held that "legislative determinations for special improvements and the procedures for such assessments are presumed valid and reasonable until a showing to the contrary has been made." Blake v. Solon, 8th Dist. Cuyahoga No. 65255, 1994 Ohio App. LEXIS 1688, 11 (Apr. 21, 1994). "Where a party seeks to overturn an assessment on the ground that certain legal requirements were not complied with in making the assessment, such party has the burden of alleging and proving that such requirements were not met." Id., citing Schiff v. Columbus, 9 Ohio St.2d 31, 223 N.E.2d 54 (1966).

         i. Substantial Compliance and Waiver

         {¶45} The trial court found that Parma Heights failed to substantially comply with the statutory requirements when it levied the special assessment; therefore, the city's lien was invalid.

         {¶46} "The authority to levy special assessments for local improvements is conferred only by statute and the validity of such assessments is conditioned upon compliance with the requirements of these statutes." Davis v. Willoughby, 173 Ohio St. 338, 343, 182 N.E.2d 552 (1962). "[S]tatutes imposing taxes and public burdens of that nature are to be strictly construed and any doubt as to construction or effect must be resolved in favor of those on whom the burden is sought to be imposed." Id.

         {¶47} While such statutes are to be strictly construed, Ohio courts have held that substantial, not strict, compliance with the statutes is generally sufficient. Ninth St. Community Paving Project Commt. v. Ironton, 22 Ohio St.3d 25, 29, 488 N.E.2d 204 (1986); State ex rel. Wise v. Solon, 8th Dist. Cuyahoga No. 64210, 1993 Ohio App. LEXIS 5560, 8 (Nov. 18, 1993); but see Mallo v. Dover, 36 Ohio App. 84, 84, 172 N.E. 841 (8th Dist.1929) (notice provisions of assessing statute must be strictly conformed to).

         {¶48} When considering whether the city substantially complied with the statutory provisions, this court also takes into consideration principles of equity. See Ninth St. Community Paving Project Commt. at 28 ("The use of equitable principles is proper not only because appellants have sought injunctive relief, but also by virtue of this court's longstanding application of equity to real estate assessment controversies."); see also Kellogg v. Ely, 15 Ohio St. 64, 1864 Ohio LEXIS 103 (1864) and Steese v. Oviatt, 24 Ohio St. 248, 1873 Ohio LEXIS 121 (1873).

         {¶49} The trial court held that the special assessment was invalid because the city failed to comply with the requirements and procedures set forth in R.C. 727.12 and 727.23 - 727.25 and the city's contract with the Schneiders did not waive any defects in the ...


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