Opinion
No. 84-1560
Decided January 29, 1986.
Municipal corporations — Streets and highways — Assessment and collection of street assessments — Notice provisions of R.C. Chapter 727 substantially complied with, when.
APPEAL and CROSS-APPEAL from the Court of Appeals for Lawrence County.
Defendants-appellees and cross-appellants are the city of Ironton and various city and county officials named individually in their capacities as governmental officials. Plaintiffs-appellants and cross-appellees comprise the Ninth Street Community Paving Project Committee, an unincorporated association, and resident-landowners of the city of Ironton who reside in the areas where the street improvements, the subjects of this action, took place.
As early as 1962, the city of Ironton considered street improvements in its environs in the areas known in this cause as the Ninth Street Development and the Twelfth Street-Liberty Avenue projects. The city delayed action in undertaking street improvements within these areas because the financing of such improvements would require special property assessments, and the property owners and residents within the areas did not enjoy the per capita income considered average for the city.
In 1975, the Ironton City Council decided to apply for federal funds through the United States Department of Housing and Urban Development's "Block Grant" program in order to assist the financing and development of street improvements in the Ninth and Twelfth Street areas of Ironton. At this time, an organization known as the "Ironton Community Development Committee" was formed in order to ensure public participation in the preparation of the Block Grant applications and in the disbursement of any funds received pursuant thereto. The record indicates that a number of the appellant landowners in the areas in question were members of this committee and attended the meetings held by this committee in the early part of 1975. During the course of these meetings many of the essential points contained in the Block Grant applications were discussed. It was emphasized that the city was hoping to establish some sort of assessment relief program, inasmuch as most of the affected property owners were of limited economic means. It was also pointed out that the assessments on the projected street improvements would most likely be at a rate of $50 per lineal foot of the street improved. The record indicates that the major facets of the street projects were widely publicized in the local media.
On March 25, 1976, the Ironton City Council adopted a resolution of necessity concerning the improvements for the Ninth Street area. However, the record indicates that final profiles and plans for the project had not been completed or filed with the clerk of city council in conformity with R.C. 727.12.
On April 1, 1976, the appellee city sent notices of the resolution of necessity by certified mail to a portion of the affected property owners. The record reveals that many of these notices were either not delivered or were returned unclaimed. Some notices were prepared but never mailed.
On May 7, 1976, a copy of the notice was published in local newspapers; however, the profiles and plans of the Ninth Street project were not completed until June 3, 1977.
On September 9, 1976, the city council passed an ordinance to proceed with the improvements identified in the resolution of necessity. The record indicates that the first phase of the construction project had already begun on May 7, 1976. Also on September 9, 1976, most of the notices of the resolution of necessity were finally mailed to the affected property owners.
On October 7, 1976, the city council adopted an identical ordinance to the one passed on September 9, because most of the property owners had not received proper notice under the initial ordinance. Shortly thereafter, the city council adopted a resolution concerning its policy of property assessments with respect to the project. The city's policy was to assess landowners for new sidewalks only where none had previously existed, or where the sidewalks were seriously damaged prior to the commencement of construction.
The record indicates that the events surrounding the Twelfth Street-Liberty Avenue project were essentially the same as those surrounding the Ninth Street project, except for the fact that the actions undertaken thereto occurred on different dates.
The Department of Housing and Urban Development ("HUD") eventually approved the city's applications for the street improvement projects, and granted the city $800,000 for the projects. However, by letters dated November 24, 1976 and December 29, 1976, HUD notified the city that Block Grant funds had to be used for construction costs and could not be escrowed and applied directly to assessment relief for disadvantaged property owners.
Following the completion of both projects, the city council approved and levied property assessments on affected landowners for the costs of the projects in March and June 1981.
Several of the appellants testified that they received no notice of possible assessments until their bills arrived in 1981. Some of the appellants testified that they were unaware of the fact that they could be assessed for owning land adjacent to property where the street improvements took place. Several appellants complained that the assessments levied on their properties exceeded one-third of the county auditor's valuation of their properties after the improvements.
In March 1982, appellants brought this action in the court of common pleas seeking to enjoin the assessment and collection of the street assessments levied on their properties.
On January 20, 1983, the trial court denied appellants' claim for equitable relief. The trial court held that appellees "substantially complied" with the provisions contained in R.C. Chapter 727 with respect to notice concerning the city's resolution to undertake the street improvements and levy assessments. The court also found that none of the assessments levied by the city exceeded the one-third limitation on value under R.C. 727.03, or that appellees had acted improperly in their calculation of the assessments in light of the federal funds received for the projects. Lastly, the trial court held that the appellants were estopped from complaining about the assessments, based upon their failure to timely object to said assessments. Because of this, appellants were estopped from presenting evidence with respect to damages to their properties which they claimed were caused by the street improvement projects.
Upon appeal, the court of appeals reversed and remanded in part in a split decision. The appellate court majority found that the appellees had substantially complied with notice requirements, and therefore affirmed that portion of the trial court's disposition. However, the court of appeals reversed the lower court with respect to the calculation of the assessments in light of the federal funds received by the city. The court further held that the trial court erred in denying appellants the opportunity to present evidence concerning the claims of damages to their properties as a result of the street projects.
The cause is now before this court pursuant to the allowance of a motion and cross-motion to certify the record.
Spater, Gittes Terzian, Frederick M. Gittes, Kathaleen B. Schulte and Robin A. Bozian, for appellants and cross-appellees.
Peck, Shaffer Williams, Thomas A. Luebbers and Charles Cooper, city solicitor, for appellees and cross-appellants.
The first issue presented for our consideration is whether the appellees substantially complied with the notice provisions set forth in R.C. Chapter 727 in a manner satisfying due process, as a matter of equity. The appellees contend that they substantially complied with these requirements in notifying affected property owners of potential assessments arising out of the street projects. The appellant property owners counter that the record is replete with examples of either sloppily attempted notification or simply no notification at all, and that such amounts to a denial of due process. Within this notice issue, appellants contend that the appellees failed to file the profiles and plans of the projects with the clerk of city council in a timely manner as mandated by R.C. 727.12. The appellants further contend that the resolutions adopted by city council were undertaken before most property owners received the purported notice, and before the plans were finalized. Appellants submit that some properties were assessed an amount exceeding one-third of the county auditor's valuation for said properties, thus violating the strictures of R.C. 727.03. The appellees counter this assertion by contending that the valuations for the purposes of assessments are computed with respect to the actual value of properties, and not the valuations computed by the county auditor for taxing purposes.
With respect to this notice issue, as well as the other issues involved in the cause sub judice, principles of equity must be taken into account along with constitutional considerations of due process. 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 Kellogg v. Ely (1864), 15 Ohio St. 64, and Steese v. Oviatt (1873), 24 Ohio St. 248.
Our review of the record herein leads us to conclude that while the appellees' methods were less than perfect in apprising affected property owners of the proposed projects and assessments, the appellees did substantially comply with the notice provisions contained in R.C. Chapter 727. As this court held in paragraph five of the syllabus of Tone v. Columbus (1883), 39 Ohio St. 281, persons who object to the levy of special assessments on the grounds that the assessment procedures used were defective, may be estopped from raising such objection as follows:
"Active participation in causing the improvement to be made will estop the party engaged therein from denying the validity of the assessment; but to create an estoppel from silence merely, it must be shown that the owner had knowledge: 1. That the improvement was being made; 2. That it was intended to assess the cost thereof, or some part of it, upon his property; 3. That the infirmity or defect in the proceedings existed which he is to be estopped from asserting; and, 4. It must appear that some special benefit accrued to his property from such improvement which it is inequitable, under the circumstances, he should enjoy without compensation."
The record reveals that some of the instant appellants participated in meetings and hearings held with respect to the Block Grant applications and the street improvement projects. Moreover, other property owners who had knowledge of the projects under the Tone standard are estopped from claiming that the assessments herein were void ab initio.
We find that appellees made a bona fide, albeit imperfect, attempt to notify property owners in the affected areas of Ironton by certified mail and by publication. In addition, we believe that the lower courts were correct in determining that the improvements made were within the common knowledge of the persons residing within the areas of the street projects. Our implementation of equitable principles to the matter at hand prevents the hypertechnical application of the notice provisions within R.C. Chapter 727, and compels us to affirm the finding of substantial compliance with respect to those provisions. Our holding of substantial compliance with respect to proper notice necessarily entails a rejection of appellants' due process argument. We therefore affirm the appellate court majority on this issue.
With regard to the issue concerning the lack of profiles and plans for the projects filed with the clerk of city council as required under R.C. 727.12, we are again faced with a technical error on the part of appellees. Nevertheless, we find that the appellees have substantially complied with the statute in issue. Appellees concede that the plans and profiles were not on file in the office of the clerk of council, since such an office did not exist at the relevant time in issue. However, appellees point out that such plans and profiles were in fact filed with the office of the city engineer. In any event, our review of the record reveals that not one person requested to see the plans or profiles of the projects. Therefore, we affirm the lower court's finding that a failure of exact compliance with R.C. 727.12 was non-prejudical to appellants.
We also reject appellants' argument that the assessments levied by appellees on certain properties exceeded the one-third limitation contained in R.C. 727.03. The appellants' argument is based on the valuation of property computed by the county auditor for real estate tax purposes. We find that the appellees did not run afoul of this statute because there is ample evidence in the record to show that the assessments were based on the actual value of the subject properties. The record before us indicates that the testimony on tax valuation was not the sole valuation testimony. As pointed out by the court of appeals, several property owners within the projects' area testified that the fair market value of their properties exceeded the amount of the assessments by three times. In affirming the lower courts on this and the other aspects surrounding the notice issue whereby appellants seek to avoid payment on the assessments entirely, we endorse the appellate court's conclusion that "[a]ppellants must not be permitted to avoid the costs of benefits they willingly received."
Turning our focus to the next issue presented, the appellees on cross-appeal contend that the weight of evidence supports the trial court's finding that the city properly used and accounted for the federal funds involved in the projects. We disagree, and uphold the court of appeals' reversal and remand with the express direction that the trial court deduct the sum of $403,982.60 from the total assessment costs and modify each landowner's assessment in proportion to the relative costs of the project in his or her area.
In Boellner v. Maumee (1974), 39 Ohio St.2d 47 [68 O.O.2d 27], we stated at 50 and 51:
"* * * The obvious objective of special assessment statutes, such as those in R.C. Chapter 727, is to allow a municipality to reimburse its treasury for expenditures actually made. Stockdale Borough v. Astle (1963), 410 Pa. 257, 189 A.2d 152. If a city were allowed to assess property owners for the total cost of an improvement, without reduction for funds received from other sources such as county, state or federal agencies, the city would reap a financial windfall at the expense of the assessed property owners. Such a result would also be contrary to the rule that a special assessment is valid only if the funds collected thereunder are used for the project for which the assessment was levied. See Butler v. Toledo (1855), 5 Ohio St. 225. Therefore, this court holds that the R.C. 727.05 phrase, `total cost of improvements for which special assessments are levied,' means only those costs for which the city is responsible."
We find that Boellner is directly applicable to the case at bar, and further, we adopt the analysis rendered by Judge Stephenson in his concurring opinion below, with respect to this issue:
"* * * The city received approximately $1,253,000.00 in federal grants. The city used some odd $324,000.00 for start-up and miscellaneous costs, which were not the subject of any dispute in this litigation. The city used the remaining $929,000.00 to pay off four contracts. The city accounted for roughly $525,000.00 of these funds ($410,000.00 on Ninth Street Project and $115,000.00 on Twelfth Street work) as the city's costs and offset that amount (i.e., $525,000.00) from the total cost of the project. The remaining difference between the $929,000.00 in federal funds used to pay on the contracts and the $525,000.00 which was offset from the total cost amounted to roughly $404,000.00. This amount was never deducted from the total cost of the project and, thus, appellants were assessed an additional $404,000.00. It appears from the record that the city intended to hold this sum, still assess the landowners for it and then use the $404,000.00 they had reserved for assessment relief."
Since appellees' actions here amount to a violation of R.C. 727.05 and are contrary to our prior pronouncement in Boellner, we affirm the court of appeals on the federal funds issue, and remand the matter to the trial court in accordance with the instructions heretofore indicated.
The final issue submitted for our consideration is whether the trial court erred in denying the appellant landowners the right to present evidence of alleged damages to their properties caused by the street projects. The appellees, on cross-appeal, contend that R.C. 727.18 estops appellants from coming forward with evidence of damages, since appellants did not file claims of such damages within two weeks from the date of completion of the notice required under R.C. 727.13.
In reviewing appellees' contention on this issue, it seems ironic to this court that appellees would argue for an equitable and less restrictive interpretation of the notice provisions and then turn around and contend that R.C. 727.18 should be strictly construed, thus denying appellants the opportunity to present evidence concerning alleged damages to their properties.
R.C. 727.18 provides in relevant part:
"An owner * * * claiming that he will sustain damages by reason of a proposed public improvement * * * shall, within two weeks from the date of completion of the notice required under section 727.13 of the Revised Code, file a claim in writing with the clerk of the legislative authority of the municipal corporation, setting forth the amount of the damages claimed and a general description of the property with respect to which it is claimed such damages will acurue. An owner who fails to file such a claim, shall be deemed to have waived damages and shall be barred from filing a claim or receiving damages. This section applies to all damages which will obviously result from the improvement, but shall not deprive the owner of his right to recover damages arising, without his fault, from the acts of the municipal corporation or its agents. * * *" (Emphasis added.)
Based on this statute, we concur with the reasoning of the court of appeals below in finding that a distinction must be drawn between damages that will obviously result from an improvement ( e.g., removal of shrubbery) and damages resulting from work negligently performed. A strict application of R.C. 727.18 would effectively foreclose any opportunity to redress alleged damages which, on their face, were incurred outside the scope of the statute. Since the allegation of damages is for those damages purported to have occurred during the performance of the construction, we affirm the court of appeals' reversal and remand to allow appellants the opportunity to present evidence of alleged damages within this circumstance. A contrary holding on this point might very well ignore the situation where a property owner is eventually assessed an amount greater than the benefits conferred by the improvements, because his claimed damages were sustained outside the breadth of R.C. 727.18.
In summary, we affirm the court of appeals majority on each and every aspect decided in this complex controversy. On remand, the trial court is instructed to carry out the explicit directions with respect to the calculation of the assessments in light of the federal funds received by appellees; and to also allow appellants the occasion to present evidence concerning damages alleged to have been caused by negligent construction.
Judgment affirmed.
CELEBREZZE, C.J., SWEENEY, LOCHER, HOLMES, C. BROWN, DOUGLAS and WRIGHT, JJ., concur.