2014 Ohio 5489
Ohio Ct. App.2014Background
- CIT leased an MRI and related site improvements to Brown County General Hospital (a county hospital governed by a board of Hospital Trustees) via two 2008 leases signed and authorized by the Hospital's trustees and CEO.
- The Hospital faced financial distress and obtained $5 million in revenue bonds (secured by hospital revenues, not county credit); the Board of Commissioners approved general operating and capital budgets in 2008 that assumed the MRI project in broad terms.
- The Hospital defaulted on the leases; CIT negotiated a Forbearance Agreement with the Hospital and an Assignment and Assumption Agreement by which Southwest Healthcare Services (Southwest) would assume the Hospital’s lease obligations; Southwest later defaulted on payments to CIT.
- CIT sued Southwest and Brown County claiming joint and several liability on the leases; the trial court granted summary judgment for CIT against Southwest but granted summary judgment for Brown County.
- The trial court held (and the court of appeals affirmed) that no principal/agent relationship existed between the Board of County Commissioners and the Hospital Trustees under R.C. Chapter 339, and that, even if an agency existed, statutory prerequisites to bind the county (board assent entered in minutes and a fiscal officer certificate) were not satisfied, rendering the leases void against the county.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether R.C. Chapter 339 creates a principal–agent relationship making the county liable for contracts of the Hospital Trustees | Relying on Chapter 339 and R.C. 339.06(F), CIT argued the county is liable for trustee contracts except where statute expressly excludes liability | County argued county boards have only statutory powers; trustees cannot bind county unless statute or county assent permits | No. Chapter 339 does not create a principal–agent relationship; trustees lack authority to bind the county for these leases |
| Whether conduct/course of dealing created an implied agency between trustees and county | CIT argued the county retained authority and its conduct (budget approval, bond issuance) implied agency | County argued lack of express agency agreement or county acceptance; statutory limits on county power preclude implied agency here | No. Court found no evidence of an implied agency; even if there were, statutory requirements were not met |
| Whether the leases bind the county despite lack of formal county assent or fiscal certificate | CIT contended county approval of hospital budgets and related actions implied assent to the leases | County asserted contracts binding the county require formal assent entered in minutes and a fiscal officer certificate; absent those, contracts are void | Leases are void against the county for failure to comply with R.C. 305.25 and R.C. 5705.41(D)(1) (no board assent in minutes; no fiscal officer certificate) |
| Whether summary judgment for county was appropriate | CIT argued factual disputes (about agency and assent) precluded summary judgment | County maintained no genuine issue of material fact and was entitled to judgment as a matter of law | Affirmed. Court granted summary judgment for county as a matter of law; CIT’s assignments of error overruled |
Key Cases Cited
- Cincinnati Golf Mgt., Inc. v. Testa, 132 Ohio St.3d 299 (Ohio 2012) (defines agency and actual authority standards)
- In re Guardianship of Spangler, 126 Ohio St.3d 339 (Ohio 2010) (statutory boards have only powers expressly or clearly impliedly conferred)
- Dies Elec. Co. v. City of Akron, 62 Ohio St.2d 322 (Ohio 1980) (municipal contracting standards and charter authority distinctions)
- Wierzbicki v. Carmichael, 118 Ohio App. 239 (Ohio Ct. App. 1963) (discusses county hospitals as governmental entities; use of "agency" in non–principal/agent sense)
- Trinidad Paving Co. v. Bd. of Cty. Commrs. of Cuyahoga Cty., 15 Ohio App.3d 66 (Ohio Ct. App. 1984) (contracts made contrary to statute are void and courts will not enforce them)