Richland School District, former and current Galleria owners dispute tax refund in court

Yahoo

31-01-2025

EBENSBURG, Pa. – A school district with a budget eroded by tax assessment appeals, a businessman working to revive The Johnstown Galleria with money from his own pocket, and the company that previously lost the mall in foreclosure are snarled in a legal dispute over a school tax refund.
Presiding over the dispute is Cambria County Senior Judge Patrick Kiniry, whose decision could either lead the parties to the table or spur more lawsuits among them.
At the center of the dispute is a court-ordered $143,000 school tax refund paid in full by Richland School District to Adar Johnstown LLC, the Florida-based company that formerly owned the Richland Township mall.
Current Galleria owner Leo Karruli said he is owed a portion of that tax refund, which instead has been fully received by the former owner.
Commercial property tax assessment appeals and refunds have become 'rampant' in Richland School District over the past 12 years, district Solicitor Tim Leventry said after a hearing Wednesday before Kiniry at the Cambria County Courthouse in Ebensburg.
Relaying information from Richland School District's business manager, he said the amount of taxes that are being collected for 2024 versus for 2013 is a difference of more than $2 million per year. In other words, he said, the assessed values of properties in the township were reduced through tax assessment appeals, costing the school district $2,278,000 per year when compared to 2013.
The possibility of having to pay out any amount more on a tax appeal already paid in full would elicit a lawsuit against Adar, he said.
The tax refund in question stems from a tax assessment appeal initiated by Adar after the mall went into mortgage foreclosure in 2021. Adar's mortage lenders foreclosed on the mall and discharged it in 2022 to a new buyer, Karruli, who has since spent his own money for mall repairs and giving generous deals to tenants in an effort to rebuild the mall.
The closing agreement for the mall included Karruli's reimbursement to Adar for more than 90 days of school, county and township taxes from Sept. 30 to Dec. 31, 2022.
The sale of the Galleria, including Karruli's prorated taxes, was completed prior to the Cambria County court-ordered tax refund.
Richland School District was ordered in 2023 to pay back $143,000 it collected in taxes from Adar. Karruli claims a portion of that refund, $36,000, is owed to him for the prorated taxes he paid in the closing agreement for the mall. Reluctantly, Karruli said, he filed a lawsuit against the school district seeking to gain the funds he believes he is owed.
'I don't need it for me,' he said in interviews prior to the Wednesday hearing. 'I can do a lot with that for the people here in Johnstown.'
Although Karruli's lawsuit was served to the school district, Leventry said a refund is owed by Adar back to Karruli. The school district was not aware of the closing agreement involving Karruli's portion of taxes at the time the court ordered a tax refund, he said.
Further, after an examination of the closing agreement, Leventry said the taxes paid by Karruli were prorated for the calendar year – the way county and township taxes are collected – but school district taxes are collected on a fiscal-year basis, so he maintains Adar owes Karruli $7,200 and not $36,000.
Karruli's attorney, John Kalenish, doubled down on the $36,000 figure.
'We are entitled to $36,000 plus interest,' he said.
Attorney Sharon DiPaolo, of the Siegel Jennings law firm, represented Adar during the tax appeal that Adar initially filed in 2021. Participating in the hearing by telephone Wednesday, she argued that the matter is closed from Adar's perspective. She said that Adar owes nothing and that her contract with Adar has ended.
'The school district violated the court order, and it would not be a simple matter to unwind this,' she said.
DiPaolo said if the court orders Adar to pay, then the company's former mortgage lenders, Wells Fargo, would have to pay back the money because Adar relinquished the mall in foreclosure.
Leventry said he does not know with certainty that Adar transferred the tax refund to Wells Fargo.
'The school district paid the settlement to Adar,' he said.
Leventry said if Adar will not pay, the school district will be forced to file against Adar because it was overpaid.
'They received the entire $143,000, which they should not have,' he said.
DiPaolo said she is not invested in what Wells Fargo received from Adar and Adar is not party to the dispute.
'The school district only needed to follow the court order as the county and township taxing bodies did,' she said. 'I don't know if it's $7,200 or $36,000 (owed to Karruli) but attorneys' fees, if this continues, will outstrip all of that.'
Kiniry recessed the case Wednesday and said he would 'issue a decision – a decision which may result in another hearing.'
After the hearing, Leventry said if the court orders the district to pay, then it will file an action against Adar because the company was paid the money and had an obligation to return it.
'No matter what their argument is, they owe money back in some amount,' he said.
Leventry said repeated electronic and phone communication with Adar for the past few months leading up to the hearing had gone unanswered.
'A mountain is being made out of a molehill because if Adar had just came to the table three months ago and said, 'Yes, we received all this money and shouldn't have gotten it all and we'll agree to pay this back,' then we wouldn't be here,' he said. 'But they refuse to acknowledge. They won't even communicate. So it's understandable that Karruli is making his claim. But at the end of the day, Adar is the one that really received the money and hasn't paid it back.'