Harmon v. Haehn
2011 Ohio 6449
Ohio Ct. App.2011Background
- April 12, 2006 lease for four years eight months; right of first refusal provision triggers payments if lessor sells during early term; Article 28 sets 250,000 payment and 8-month vacate upon sale subject to three-year/three-year window; Harmon renovated, used premises as car dealership; Haehn sold property to AGPG Concepts, terminating lease; Harmon vacated and claimed 250,000; trial court found Article 28 unenforceable as penalty and awarded 25,166 in actual damages; court affirmed finding that the liquidated damages clause is an unenforceable penalty; damages were limited to actual costs shown at trial; no appeal on anticipatory repudiation resolved on cross-appeal grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Article 28 is a liquidated damages clause or a lease buyout provision. | Harmon argues Article 28 is a lease buyout, not a damages clause. | Haehn contends Article 28 is a valid liquidated damages clause. | Article 28 is a liquidated damages clause. |
| If liquidated, whether the clause is enforceable or an unenforceable penalty. | Harmon contends the clause is enforceable as reasonable compensation. | Haehn argues it is enforceable and not a penalty. | Clause is unenforceable as an unenforceable penalty. |
| What damages are recoverable given the unenforceability of Article 28? | Plaintiffs seek $250,000 as stipulated in the lease. | Defendant argues damages should be limited to actual damages proven. | Actual damages ($25,166) awarded; no liquidated damages recovery. |
| Was Haehn's anticipatory repudiation argument preserved for appeal? | N/A | Anticipatory repudiation argument should be addressed via cross-appeal. | Not addressed on merits due to lack of cross-appeal. |
Key Cases Cited
- Lake Ridge Acad. v. Carney, 66 Ohio St.3d 376 (Ohio 1993) (test for distinguishing liquidated damages from penalties; emphasis on reasonableness and relation to actual damages)
- Samson Sales, Inc. v. Honeywell, Inc., 12 Ohio St.3d 27 (Ohio 1984) (liquidated damages must reflect reasonable estimation of damages and not be punitive)
- Midamco, L.P. v. Fashion Bug of Solon, Inc., 116 Ohio App.3d 854 (Ohio 1996) (optional relief clause; not a damages provision; the clause served a different contractual purpose)
- Wright v. Basinger, 7th Dist. No. 01CA81, 2003-Ohio-2377 (Ohio 2003) (illustrates when stipulated damages lack basis and are unenforceable)