2019 Ohio 4716
Ohio2019Background
- Lombardo owned real property leased to an affiliate of Beverage Holdings and agreed to sell the real estate and the franchise in separate but related transactions; purchase price for the property was $1,726,000.
- The parties executed a Lease (rent $12,500/month) and a Real Estate Purchase Agreement that provided several closing adjustments, including (a) a "Rents Credit": "Rents received by Seller from the tenant of the Premises, prorated to date of closing," and (b) a "Reduction in Principal Credit" for principal paid down on seller’s loans.
- Beverage gave notice to close on March 12, 2015 and claimed a Rents Credit of $462,500, which—together with other credits—reduced the asserted purchase price substantially; Lombardo disagreed with Beverage’s calculation.
- Trial court granted summary judgment for Beverage, interpreting the Rents Credit to cover all rents received and prorating to the closing date. The Eighth District initially affirmed but on reconsideration reversed, concluding the plain meaning produced a "manifestly absurd" result and remanding for extrinsic evidence.
- Ohio Supreme Court granted review and reversed the court of appeals, holding the Rents Credit’s plain language governs and does not produce manifest absurdity; it reinstated the trial-court judgment for Beverage.
Issues
| Issue | Plaintiff's Argument (Beverage) | Defendant's Argument (Lombardo) | Held |
|---|---|---|---|
| Proper interpretation of the Rents Credit | Credit covers all rents received from execution of lease through closing, prorated to closing date | Credit covers only the prorated portion of the final (prepaid) month after closing (i.e., post-closing portion) | Court: Plain, unambiguous language supports Beverage—credit for all rents prorated to closing date |
| Application of the "manifest absurdity" exception | Exception is narrow; cannot be invoked for merely unpalatable commercial results | Plain reading produces absurd result (double credits over long lease term), so exception should apply | Court: Exception is narrow; alleged harsh outcomes not sufficiently "manifestly absurd" to override plain meaning |
| Need for extrinsic evidence / remand | No—contract is unambiguous; summary judgment appropriate | Yes—if ambiguous or absurd, remand for evidence of parties’ intent | Court: No remand; plain-language rule controls and summary judgment was proper |
| Standard of review on appeal | De novo review of summary judgment and contract interpretation | Same | Court applied de novo review and affirmed trial-court summary judgment |
Key Cases Cited
- Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216 (Ohio 2003) (presume parties’ intent is reflected in plain contractual language)
- Aultman Hosp. Assn. v. Community Mut. Ins. Co., 46 Ohio St.3d 51 (Ohio 1989) (no parol evidence to vary unambiguous written contract)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (Ohio 1978) (give ordinary meaning to common words unless manifest absurdity or other meaning appears)
- Cincinnati Ins. Co. v. Anders, 99 Ohio St.3d 156 (Ohio 2003) (discussing narrow "manifest absurdity" exception to ordinary-meaning rule)
- Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d 353 (Ohio 1997) (courts should not rewrite contracts to achieve a more equitable result)
- Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio St.3d 314 (Ohio 2002) (de novo review applied to appeals from summary judgment)
- Illinois Controls, Inc. v. Langham, 70 Ohio St.3d 512 (Ohio 1994) (where contract ambiguous, parol evidence may be used to ascertain parties’ intent)