Lehigh Gas-Ohio, L.L.C. v. Cincy Oil Queen City, L.L.C.
66 N.E.3d 1226
Ohio Ct. App.2016Background
- Lehigh Gas-Ohio (Lehigh) and Solomon Belay entered a deal: Belay paid $300,000 "key money" to operate two gas-station/convenience-store/Subway sites via LLCs (Cincy Oil Queen City; Cincy Oil Hopple). Separate written lease, management-and-security, and management agreements governed each property; none mentioned key money.
- Belay needed franchise approvals (am/pm and Subway). Am/pm verbal approval was later rescinded after Lehigh notified am/pm of defaults; Subway refused approval after Belay failed the required Wonderlic test.
- Cincy Oil failed to remit alcohol-sales tax receipts to Lehigh as required; Lehigh served a default notice, evicted Cincy Oil, and retained certain commissions. Cincy Oil vacated the sites and ceased payment on one promissory note used to finance part of the key money.
- At trial the court found both parties breached: it awarded Lehigh alcohol-tax recovery and held Lehigh liable for withheld gas commissions, ordered refunds for inventory, fuel deposits and safes, and split the (reduced) key money evenly, requiring Lehigh to return a portion.
- On prior appeal (Lehigh I) this court reversed the finding that Lehigh interfered with franchise approvals and remanded for the trial court to consider alternative contractual and quasi-contractual theories for refunds. On remand the trial court awarded refunds using impossibility and unjust-enrichment reasoning; Lehigh appealed.
- The court of appeals (this opinion) affirms only the awards that follow the written contracts (gas commissions to Cincy Oil; return of fuel deposits), reverses refund awards based on impossibility or unjust enrichment for key money, inventory, and safes, and remands for entry of judgment reflecting those adjustments.
Issues
| Issue | Plaintiff's Argument (Lehigh) | Defendant's Argument (Belay / Cincy Oil) | Held |
|---|---|---|---|
| Whether key money must be returned under the parties' contracts | No — written agreements governed the relationship and contain no refund term; Cincy got the opportunity to operate regardless of franchise approval | Yes — key money purchased the franchise opportunity/rights and must be returned when approval failed | Key money not refundable under contract; no agreement (oral or written) required refund, so no breach by Lehigh |
| Whether impossibility of performance permits refund of key money | Impossibility doctrine is an affirmative defense, not a basis to award damages; franchise non-approval was foreseeable | The failure of franchise approval made performance impossible, so money should be pro rata refunded | Trial court erred to apply impossibility to create a refund term; non-approval was foreseeable and doctrine cannot be used to invent contract terms |
| Whether unjust enrichment requires restitution of key money | Retention of key money was not unjust because Cincy’s own defaults caused termination and there is an existing contract covering the subject | Cincy conferred a benefit (key money); Lehigh knew of it; equitable restitution is required to prevent unjust retention | Unjust enrichment not shown: Cincy lacks superior equity and the retention had an adequate legal basis (valid bargain); restitution improper |
| Whether fuel deposits, inventory, and safes must be returned | These items should be refunded pro rata because Cincy operated only one year of five | Cincy sought return of four-fifths of these payments | Contracts govern: fuel deposits must be returned per agreement ($40,000). Inventory and safes were tenant personal property abandoned after lease termination and became Lehigh’s under the lease; no refund due |
Key Cases Cited
- Alexander v. Buckeye Pipeline Co., 53 Ohio St.2d 241 (1978) (court cannot rewrite clear contract terms or create unexpressed obligations)
- Nolan v. Nolan, 11 Ohio St.3d 1 (1984) (lower courts must follow mandates of superior court on remand)
- Cincinnati v. Fox, 71 Ohio App. 233 (1st Dist. 1943) (plaintiff seeking restitution must show superior equity; mere conferment of benefit is insufficient)