COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 59915 AUDREY NORRIS : : Plaintiff-appellee : : JOURNAL ENTRY -vs- : AND : OPINION STATE TEACHERS RETIREMENT : SYSTEM : : Defendant-appellant : : DATE OF ANNOUNCEMENT : OF DECISION : MAY 21, 1992 CHARACTER OF PROCEEDING : Civil appeal from : Court of Common Pleas : Case No. CP 061,197 JUDGMENT : AFFIRMED IN PART REVERSED IN PART DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellee: For defendant-appellant: ROBERT STEELY, ESQ. CATHERINE M. COLA, ESQ. OWEN McCAFFERTY, ESQ. ASST. ATTORNEY GENERAL 1370 Ontario Street 30 East Broad Street Suite 1520 15th Floor Cleveland, Ohio 44113 Columbus, Ohio 43266-0410 - 2 - J.F. CORRIGAN, P.J., Defendant State Teachers Retirement System of Ohio (hereafter referred to as "STRS") appeals from the judgment of the trial court which determined that a lump sum which plaintiff Audrey B. Norris received prior to her retirement constituted "earned compensation" which enhances plaintiff's retirement benefits pursuant to R.C. 3307.51. For the reasons set forth below, we affirm in part and reverse in part. I. Plaintiff was employed as superintendent of the Maple Heights Board of Education from 1977 to 1981. During this time, plaintiff was a contributing member of the STRS, a retirement system established for the teachers of the public schools of the state. Also during this time, plaintiff received five salary increases which ranged from 3% to 10.8% of her annual salary. In July 1980, the Maple Heights School Board announced that it would not renew plaintiff's contract when it expired on August 31, 1981. Thereafter, plaintiff requested that she be released from employment on July 1, 1981 in order to begin other employment. The Board consented, then subsequently entered into a written agreement with plaintiff which provided in relevant part as follows: "*** "WHEREAS, the parties desire that Employee be granted additional compensation retroactive to September 1, 1980; and - 3 - "WHEREAS, the parties desire that Employee retire from active service with the Board and terminate her existing contract of employment with the Board effective July 1, 1981. "IT IS THEREFORE MUTUALLY AGREED THAT: "1. Employee's monthly salary shall be increased by the sum of ONE THOUSAND FOUR HUNDRED AND NO/100 ($1,400.00) DOLLARS per month retroactive to September 1, 1980 through June 30, 1981 and that the total additional compensation due her in the sum of FOURTEEN THOUSAND AND NO/100 ($14,000.00) DOLLARS shall be paid June 30, 1981. "2. Effective July 1, 1981 Employee shall retire from service with the Board and Employee's contract of employment shall terminate and be deemed completed as of July 1, 1981 instead of August 31, 1981. "*** "4. Employee waives, abandons and disclaims all claims or rights arising from her employment relationship with Board from the date of her entry into Board's system as an Employee of Board including, but not limited to, any claims or rights to compensatory time and unused vacation leave. "*** "6. Board shall contribute on Employee's behalf to the Ohio State Teachers Retirement System such percentage of Employee's increased compensation provided for herein as may be required by Section 3301.53, 3307.53 and 3307.51 Ohio Revised Code." (Emphasis added.) The board subsequently deducted plaintiff's proportionate pension contribution from the lump sum payment and forwarded it to STRS. STRS refused to accept this contribution, however, because it claimed, the payment was not "earned compensation," - 4 - and was therefore excluded from pension calculations. See Norris v. State Teachers Retirement System of Ohio (1987), 35 Ohio App. 3d 92, 93. Plaintiff then brought this action against STRS and the Board, to have the lump sum payment declared to be "earned compensation," and to recover the deficit in her pension benefits caused by STRS's failure to credit the contribution. The Board was dismissed from the action on February 20, 1986. Thereafter, on February 24, 1986, the trial court entered summary judgment for STRS, concluding that the lump sum payment was not "earned compensation" but was instead "terminal pay," which was explicitly excluded from pension calculations pursuant to R.C. 3307.51. This court reversed and remanded for further proceedings stating that based upon the evidence presented, "[r]easonable minds could find that the $14,000 payment compensated the retiring superintendent for services actually rendered. Alternatively, they could find that the $14,000 compensated her for 'unused sick leave,' 'vacation pay,' or 'terminal pay.' Therefore, summary judgment was inappropriate." See Norris v. State Teachers Retirement System of Ohio, supra, at 95. Following remand, the matter proceeded to trial. The parties' App. R. 9(C) statement reveals that plaintiff testified that her job responsibilities included participation in contract negotiations on behalf of the board, and that she was so involved in the fall of 1980 and the spring of 1981. Plaintiff was not - 5 - given a salary increase during this time, and by her own calculation, plaintiff had accrued 110 days of compensatory time and 78 days of vacation. Plaintiff's employment contract did not address the issue of compensatory time, however. Plaintiff's attorney, Owen McCafferty, testified that he represented plaintiff in the negotiation of the June 24, 1981 agreement which provided for the lump sum payment. He indicated that his objective was to obtain a salary increase for plaintiff which would compensate her for additional hours she had worked, and was not to obtain a "buy out" of plaintiff's contract. Joseph Domiano, the Board's counsel during its negotiations with plaintiff, testified that plaintiff worked twelve to fourteen hours per day during her contract negotiations and the $14,000.00 lump sum payment, according to Domiano, represented both an increase in her salary, as well as compensation for time spent in negotiations. It was termed a "retroactive salary increase" so that it would be included as compensation for the purposes of the STRS. John Wetzel, treasurer of the board during all relevant times, testified that in his experience with the board, the lump sum payment was an unusually large increase in salary, and that the board wanted plaintiff out of the superintendent position. Finally, Robert Slate, director of finance for STRS testified that the system had no established policy concerning the inclusion of payment for compensatory time in the calculation - 6 - of "earned compensation." He further stated that STRS considered the lump sum at issue here to be "terminal pay." The trial court subsequently determined that the lump sum payment to plaintiff was "earned compensation," and it ordered STRS to credit plaintiff's retirement account accordingly, and to reimburse plaintiff for any deficiency in retirement benefits paid, plus 10% interest per anum. STRS now appeals. II. "THE JUDGMENT OF THE TRIAL COURT IS AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE." In its first assignment of error, STRS asserts that the judgment rendered below is against the manifest weight of the evidence. In Seasons Coal Co. v. Cleveland (1984), 10 Ohio St. 77, 79- 80, the Supreme Court held: "Judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being against the manifest weight of the evidence." The essential elements of this case were set forth in the version of R.C. 3307.51 formerly in effect which provided in relevant part as follows: "Each teacher who is a member of the State Teachers Retirement System shall contribute eight per cent of his earned compensation ***. Such contribution shall be deducted by the employer on each payroll ***. Contributions shall not be withheld on pay for ***, (2) vacation pay covering concurrent periods for which other salary, compensation, or [retirement] benefits *** are part, or (3) - 7 - any other extra compensation or terminal pay which may be paid for services not actually rendered." In addition, as we noted in our previous review of this matter, the language of the agreement itself is not dispositive in light of conflicting provisions within the agreement as well as the surrounding circumstances. See Norris v. State Teachers Retirement System of Ohio, supra, at 94. Upon review of the testimony presented, we find that there was competent, credible evidence that the lump sum payment represented a salary increase for the 1980-1981 school year, as well as compensation for additional hours plaintiff worked during negotiations. STRS claims, however, that it is incredible that plaintiff was paid $14,000.00 solely as compensation for services rendered rather than as payment for her agreement to retire, because this payment represents a 31% salary increase, which is wholly disproportionate to plaintiff's prior increases of between 3% to 10.8%, and because the additional hours which plaintiff spent in negotiations were simply part of her normal job duties. We note, however, that the trial court reconciled the increase at issue with plaintiff's previous salary increases as follows: "The evidence at trial did not specify how much of the $14,000.00 presented an increase in salary nor how much was attributable to compensatory time. However, assuming a back salary of $34,000.00 Norris' 1974-75 salary and assuming a 52 week work year, an average week's salary would amount to $653.85. One hundred ten days is the equivalent of 22 - 8 - weeks (110 divided by 5). Thus, the compensatory time claimed by Audrey Norris if paid at the lowest rate of salary possible would be worth $14,384.62. Since MHSB apparently authorized the payment of compensatory time to Audrey Norris and since the $14,000.00 figure contained in the Agreement in the court's opinion, bears some relationship to reality ****." The trial court further determined that based upon the evidence presented, it was unlikely that the lump sum represented a buy out because: "Although the parties were aware that Audrey Norris' contract was not going to be renewed by MHSB for the 1981-82 school year, there was no indication that MHSB would have difficulty in exercising its nonrenewal rights. In fact, Audrey Norris had requested permission to sever her contractual obligations two months earlier than the original expiration date. Except for MHSB's former treasurer's statement at trial that the board wanted Audrey Norris 'out badly', no evidence regarding egregious deficiencies in the superintendent's performance was adduced at trial." As there is no basis in the record presented for us to upset these determinations, we overrule plaintiff's first assignment of error. III. "THE TRIAL COURT ERRED IN AWARDING INTEREST ON THE PAYMENT OF BENEFITS WHEN SUCH INTEREST CANNOT BE AWARDED AGAINST THE STATE OR ANY OF ITS AGENCIES." Within its second assignment of error, STRS asserts that the award of interest to plaintiff is erroneous pursuant to Civ. R. 54(C) because plaintiff's complaint did not contain prayer for - 9 - interest, and is also erroneous because interest may not be awarded against STRS. Civ. R. 54(C) provides in relevant part: "*** Except as to a party against whom a judgment is entered by default, every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled: however, a demand for judgment which seeks a judgment for money shall limit the claimant to the sum claimed in the demand unless he amends his demand not later than seven days before the commencement of the trial. ****." (Emphasis added.) R.C. 1343.03 in turn provides in relevant part: "*** when money becomes due and payable upon any bond, bill, note, or other instrument of writing, upon any book account, upon any settlement between parties, upon all verbal contracts entered into, and upon all judgments, decrees, and orders of any judicial tribunal for the payment of money arising out of tortious conduct or a contract or other transaction, the creditor is entitled to interest at the rate of ten per cent per annum, ****." (Emphasis added.) Accordingly, Civ. R. 54(C) does not preclude the award of interest here. Accord Jeppe v. Blue Cross (1980), 67 Ohio App. 2d 87, 93. As to whether the award may be sustained against STRS, we note that in the absence of a statute authorizing it, or a lawful contract requiring it, a state is not liable to pay interest on its debts. Lewis v. Benson (1979), 60 Ohio St. 2d 66, 67. This rule was recently applied to public school boards of education in Beifuss v. Westerville Bd. of Edn. (1988), 37 Ohio St. 3d 187, syllabus. The court noted: - 10 - "'It is well settled that a board of education is a quasi corporation acting for the public as one of the state's ministerial education agencies 'for the organization, administration and control of the public school system of the state.'" (Citation omitted.) Wayman v. Bd. of Edn. (1966), 5 Ohio St. 2d 248, 249, 34 O.O. 2d 473, 474, 215 N.E. 2d 394, 395. Id. at 189. STRS is likewise a ministerial education agency as it was "'established for the teachers of the public schools of the state' for the purpose of payment of retirement allowances and other benefits pursuant to R.C. Chapter 3307. R.C. 3307.12 provides that 'the treasurer of state shall be the custodian of the funds of the state teachers retirement system,' and R.C. 3307.13 provides that 'the attorney general shall be the legal advisor of the state teachers retirement board.' "As this court found with respect to a similar board (the School Employees Retirement Board), in Fair v. School Employees Retirement System (1975), 44 Ohio App. 2d 115 [73 O.O. 2d 101], neither the State Teachers Retirement System nor the State Teachers Retirement Board is a subdivision of the state but, instead, 'is an instrumentality of the state exercising its powers and duties throughout the state, not solely with a geographical subdivision of the state.' Consistent with our decision in Fair, we find that the State Teachers Retirement Board is an instrumentality of the state." See In re Appeal of Ford (1982), 3 Ohio App. 3d 416, 417-418; accord Mendiz v. The Public School Employees Retirement System of Ohio (May 23, 1989), Franklin app. 88 AP-458, unreported. - 11 - STRS's second assignment of error is sustained, and that portion of the judgment which awards plaintiff interest is hereby reversed. - 12 - It is ordered that appellant and appellee equally share the costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Court of Common Pleas 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. LEO M. SPELLACY, J., and BLANCHE KRUPANSKY, J., CONCUR. JOHN F. CORRIGAN PRESIDING JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run. .