Beverage Holdings, L.L.C. v. 5701 Lombardo, L.L.C.
2017 Ohio 2983
| Ohio Ct. App. | 2017Background
- In 2011 Lombardo sold a preschool business to Beverage and entered a lease + delayed real-property purchase agreement because Lombardo could not immediately sell the building due to mortgage debt.
- Purchase price for the real property was stated as $1,726,000 with adjustments at closing; Beverage leased and operated the business and paid monthly rent ($12,500) plus taxes, insurance, utilities, maintenance, and assessments.
- Section 3(a)(ii) of the purchase agreement reduced the purchase price by "Rents received by Seller from the tenant of the Premises, prorated to date of closing."
- Beverage gave notice to close in March 2015; Lombardo responded by revoking the agreement and disputed how Section 3(a)(ii) should be applied.
- Beverage sued for declaratory judgment and other relief; both parties moved for summary judgment. Trial court granted partial summary judgment for Beverage, holding the rent-credit applied to all rents paid from the date of the agreement through closing (prorated only to account for prepaid rent at closing).
- Lombardo appealed; the appellate majority affirmed. Justice Stewart dissented, arguing that applying the plain language produces an absurd result given other contract provisions and that factual issues exist about parties' intent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How to interpret Section 3(a)(ii) credit for "Rents received...prorated to date of closing" | Credit applies to all rents paid by Beverage from execution through closing; "prorated" merely prevents crediting rent not yet earned at closing | Credit limited to a prorated portion of the rent for the month of closing (single month's rent prorated to closing date) | Court: Unambiguous language gives Beverage credit for all rents paid from agreement date to closing; summary judgment for Beverage on this issue |
| Whether extrinsic/parol evidence may be considered | Not necessary because clause is unambiguous; interpretation is a question of law | Parol evidence should be considered to show parties' intent and avoid absurd results | Court: Terms are unambiguous; parol evidence not admissible; no factual issue requiring parol evidence |
| Whether summary judgment was appropriate on contract interpretation | Yes — no genuine issue of material fact and law favors Beverage | No — factual disputes about intent and surrounding circumstances preclude summary judgment | Court: De novo review; reasonable minds can reach only one conclusion; summary judgment proper |
| Whether applying plain language yields absurd or unintended result | Plain meaning is controlling; no manifest absurdity exists | Applying plain meaning (crediting all rents plus principal credits) would produce an absurd result that harms seller's already precarious finances; factual questions exist | Court rejected the absurdity argument and affirmed plain-language reading; dissent would remand because reasonable minds could differ |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (summary judgment de novo standard)
- Zivich v. Mentor Soccer Club, 82 Ohio St.3d 367 (summary-judgment standards under Civ.R. 56)
- Shifrin v. Forest City Ents., Inc., 64 Ohio St.3d 635 (contract interpretation: intent presumed in language chosen)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (construction of written contract as a matter of law)
- Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130 (parol evidence admissible only when contract ambiguous)
- Beasley v. Monoko, Inc., 958 N.E.2d 1003 (party invoking contract clarity)