2022 Ohio 3148
Ohio Ct. App.2022Background
- Vandercar contracted to buy the Millennium Hotel site for $36M in July 2019 and then assigned the purchase contract to the Port on Oct. 4, 2019 in exchange for potential fees totaling $7.5M (a $2.5M Development Fee paid at closing and a $5M Redevelopment Fee payable if the Port issued “Redevelopment Bonds” within one year of closing).
- The Assignment/Agreement distinguished “Property Acquisition Bonds” (to acquire the property) from “Redevelopment Bonds” (to finance redevelopment of the real property) and allowed both types to be issued together or separately.
- In Feb. 2020 the Port adopted resolutions authorizing revenue bonds described as the “Convention Center Hotel Acquisition and Demolition Project” and issued $52.855M in revenue bonds; the Port closed on the property on Feb. 14, 2020 and paid Vandercar the $2.5M fee.
- Vandercar invoiced for the $5M Redevelopment Fee after the February bond issuance; when the Port refused to pay, Vandercar sued for breach of contract and bad faith (seeking the fee and attorney fees).
- The trial court granted summary judgment for Vandercar on breach of contract for $5M (finding demolition and site work were part of "redevelopment"), denied prejudgment interest against the Port, and dismissed the bad-faith claim as a separate cause of action; both parties appealed and the appellate court affirmed in part, reversed in part, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Feb. 2020 bond issuance included "Redevelopment Bonds" such that the $5M fee was triggered | Vandercar: demolition and predevelopment (site studies, demolition) are part of "redevelopment," so the bond issuance included Redevelopment Bonds and triggered the $5M fee | Port: the bonds were only Property Acquisition Bonds; "redevelopment" means financing construction of a new hotel, not acquisition, demolition, or pre-development | Court: Agreement unambiguous; ordinary meanings show "acquisition" limited to gaining possession and "redevelopment" includes demolition/site work; bonds included redevelopment and Port owes $5M (affirmed) |
| Whether a bad-faith breach-of-contract claim is a standalone cause of action and whether bad faith can support an award of attorney fees | Vandercar: pled bad faith (structuring bonds to avoid fee) and seeks attorney fees under bad-faith exception | Port: no separate bad-faith cause exists; bad faith is subsumed in contract claim and no bad faith shown | Court: Bad-faith duty is part of contract and cannot be a free-standing claim (dismissed as separate claim), but allegations could support bad-faith finding; remanded to determine whether Port acted in bad faith and whether attorney fees are warranted (trial court erred to grant judgment on pleading for attorney fees) |
| Whether prejudgment interest under R.C. 1343.03(A) applies against the Port (a port authority) | Vandercar: R.C. 1343.03(A) mandates prejudgment interest on contract judgments | Port: as a statutory political subdivision/arm of the state, prejudgment interest cannot be imposed absent clear statutory or contractual authority | Court: Port is an arm/instrumentality created by statute; absent a statute or contractual promise prejudgment interest cannot be assessed against it; trial court properly denied prejudgment interest (affirmed) |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 671 N.E.2d 241 (1996) (standard of review for summary judgment)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (1978) (use dictionary definitions for undefined contract terms; courts must give words their ordinary meaning)
- Sunoco, Inc. v. Toledo Edison Co., 129 Ohio St.3d 397, 953 N.E.2d 285 (2011) (contract interpreted as whole; resort to dictionaries for plain meaning)
- Sutton Bank v. Progressive Polymers, L.L.C., 161 Ohio St.3d 387, 163 N.E.3d 546 (2020) (clear and unambiguous contract terms enforced as written)
- Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth., 78 Ohio St.3d 353, 678 N.E.2d 519 (1997) (courts cannot rewrite clear contracts)
- Beverage Holdings, L.L.C. v. 5701 Lombardo, L.L.C., 159 Ohio St.3d 194, 150 N.E.3d 28 (2019) (same principle against rewriting contracts)
- Strum v. Strum, 63 Ohio St.3d 671, 590 N.E.2d 1214 (1991) (bad-faith standard for attorney-fee exception to American Rule)
- Beifuss v. Westerville Bd. of Edn., 37 Ohio St.3d 187, 525 N.E.2d 20 (1988) (state/its instrumentalities not liable for prejudgment interest absent statute or agreement)
- State ex rel. Parrott v. Bd. of Pub. Works, 36 Ohio St. 409 (1881) (longstanding rule that state not bound by prejudgment interest absent express statute)