Carey v. Down River Specialties, Inc. , 2016 Ohio 4864 ( 2016 )

[Cite as Carey v. Down River Specialties, Inc., 2016-Ohio-4864.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 103595
JOSEPH A. CAREY, ET AL.
PLAINTIFFS-APPELLANTS
vs.
DOWN RIVER SPECIALTIES, INC.
DEFENDANT-APPELLEE
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-14-820274
BEFORE: E.T. Gallagher, J., Kilbane, P.J., and Stewart, J.
RELEASED AND JOURNALIZED: July 7, 2016
ATTORNEYS FOR APPELLANTS
William Louis Tabac
P.O. Box 780
Parkman, Ohio 44080
Daniel Thiel
The Law Office of Daniel Thiel, L.L.C.
75 Public Square
Suite 650
Cleveland, Ohio 44113
ATTORNEY FOR APPELLEE
Lester S. Potash
Lester S. Potash, Attorney at Law
25700 Science Park Drive
Suite 270
Cleveland, Ohio 44122
EILEEN T. GALLAGHER, J.:
{¶1} Plaintiffs-appellants, Joseph A. Carey and K.K. Tricks, L.L.C. (collectively
“Carey”), appeal a judgment in favor of defendant-appellee, Down River Specialties, Inc.
(“Down River”), on Carey’s contract claims against Down River. Carey also appeals the
trial court’s judgment in favor of Down River on its counterclaims against Carey. Carey
raises the following two assignments of error:
1. The trial court erred when it overlooked and failed to address
plaintiffs-appellants’ contract claims that defendant-appellee breached the
lease in issue and that plaintiffs-appellants were therefore entitled to
suspend their performance, terminate the lease, and recover as damages the
funds they expended in reliance on the lease.
2. The trial court erred when, by overlooking and failing to address
plaintiffs’-appellants’ contract claims that the defendant-appellee breached
the lease, which entitled plaintiffs-appellants to terminate the lease and
suspend their performance, it concluded that plaintiffs-appellants breached
the lease and that defendant-appellee was entitled to recover damages from
plaintiffs-appellants on its counterclaim.
{¶2} We find no merit to the appeal and affirm.
I. Facts and Procedural History
{¶3} In October 2010, Carey entered into a commercial lease with Down River to
occupy and use a building located at 620 Frankfort Avenue in Cleveland, Ohio, as either a
nightclub or an adult cabaret. The lease agreement contained a 90-day purchase option
and a 48-month purchase option. If Carey did not exercise either of the purchase
options, the agreement operated solely as a commercial lease agreement.
{¶4} Prior to signing the lease, Carey and his attorney negotiated with Michael
Tritola (“Tritola”), a principal of Down River. When the parties executed the lease
agreement, Carey asked Tritola if Down River had a certificate of occupancy needed to
operate the premises as an adult cabaret. Tritola advised Carey that the certificate of
occupancy was destroyed by a prior tenant, but he (Tritola) “might have a copy
somewhere.” (Tr. 153.) Tritola advised Carey that he could operate an adult cabaret in
the leased space without a certificate since adult entertainment was a “grandfathered use”
of the property and had been used for that purpose for the previous 25 years. Despite the
missing certificate of occupancy, Carey signed the parties’ agreement and made a
$200,000 down payment.
{¶5} At Carey’s request, Tritola endeavored to procure another certificate of
occupancy from the city of Cleveland, even after the lease was signed and Carey had
possession of the building. Unfortunately, Tritola encountered difficulty obtaining the
certificate. He ultimately filed a petition for mandamus from this court, and the city
subsequentlty issued the requested certificate.
{¶6} Carey operated a nightclub for two and a half years before the city of
Cleveland finally issued the certificate of occupancy for the building. During that time,
he was never cited by any government agency for failing to have a certificate of
occupancy. Nevertheless, by the time the city finally issued the certificate, Carey’s
business was failing. Down River reduced Carey’s monthly rent obligation by half in an
effort to help Carey’s business succeed. However, after two months, Carey was unable
to pay the rent, property taxes, and insurance as required by the parties’ agreement. As a
result, Down River instituted eviction proceedings against Carey. Carey voluntarily quit
the premises and returned the keys to Down River.
{¶7} Carey subsequently filed a complaint against Down River, alleging breach of
contract, breach of warranty, and fraud. Carey alleged he was unable to operate the
nightclub as an adult establishment because Down River failed to deliver the necessary
certificate of occupancy. He further alleged that Down River’s failure to deliver a valid
certificate of occupancy was “a failure of the consideration for which the Plaintiffs
bargained for under the Lease.” (Complaint ¶ 7.) Accordingly, Carey claimed he was
entitled to rescind the contract and recover damages in the amount of $705,000, which
represented the $200,000 down payment and two and a half years of rent.
{¶8} Following a bench trial, the court issued a written opinion in which it
discussed Carey’s fraud claim and request for rescission, but provided no analysis of
Carey’s breach of contract or breach of warranty claims. After concluding there was no
evidence of fraud, the court entered judgment in favor of Down River on all of Carey’s
claims and in favor of Down River on its counterclaim for damages. The court entered
judgment against Carey in the amount of $10,336.53. Carey subsequently filed a motion
for a new trial, which was denied. Carey now appeals the trial court’s judgment.
II. Law and Analysis
{¶9} In the first assignment of error, Carey argues the trial court ruled on his fraud
claim and rejected his request for rescission but failed to address the breach of contract
and warranty claims alleged in the complaint. However, if the court truly ignored
Carey’s breach of contract and warranty claims, there would be no final appealable order.
The trial court’s judgment entry specifically states that “the Court finds that the
Defendant is entitled to judgment in its favor on all of the Plaintiffs’ claims.” (Order and
Opinion at 5.) Thus, the court did not abandon or ignore any of Carey’s contract claims.
Rather, it expressly found that Down River did not commit fraud and implicitly found that
Down River did not breach the parties’ lease agreement.
{¶10} Civ.R. 52, which governs judgments where the court acts as the trier of fact,
provides, in relevant part:
When questions of fact are tried by the court without a jury, judgment may
be general for the prevailing party unless one of the parties in writing
requests otherwise * * *, in which case, the court shall state in writing the
conclusions of fact found separately from the conclusions of law.
{¶11} Here, the trial court gave a detailed analysis of Carey’s fraud claim and
request for rescission and concluded that he failed to prove fraud and was not entitled to
rescind the parties’ contract. Carey does not dispute these findings. Therefore, the
court’s judgment on Carey’s fraud claim is affirmed.
{¶12} Although the court did not provide a detailed analysis of Carey’s breach of
contract and warranty claims, it generally found in favor of Down River on all of Carey’s
claims. The trial court’s judgment states, in relevant part:
Unfortunately, the Plaintiff’s business venture was not successful.
However, that mere fact does not give rise to a fraud claim or entitle the
Plaintiff to recision [sic] of a contract that they knowingly and voluntarily
entered in to [sic]. Judgment shall be entered in favor of the Defendant on
all of the Plaintiffs’ claims.
(Emphasis added.) Because Carey did not request additional findings of fact or
conclusions of law regarding his breach of contract claims, the court was not required to
provide any further written analysis of those claims.
{¶13} Where the trial court awards a general judgment in favor of one party, the
court complies with Civ.R. 52 where the record, along with the court’s order, provides an
adequate basis on which to dispose of all the claims presented. Stone v. Davis, 66 Ohio
St.2d 74, 84-85, 419 N.E.2d 1094 (1981) (“If the court’s ruling or opinion, together with
other parts of the trial court’s record, provides an adequate basis upon which an appellate
court can decide the legal issues presented, there is * * * substantial compliance with
Civ.R. 52.”). Therefore, we review the record to determine whether the court had an
adequate basis to find in favor of Down River on all of Carey’s claims.
A. Breach of Contract
{¶14} As previously stated, the court did not specifically discuss Carey’s breach of
contract claim in its journal entry. To establish a claim for breach of contract, the
plaintiff must show the existence of a contract, performance by the plaintiff under the
terms of that contract, breach by the defendant, and damage or loss to the plaintiff.
Powell v. Grant Med. Ctr., 148 Ohio App.3d 1, 10, 771 N.E.2d 874 (10th Dist.2002).
Contract interpretation, which is a question of law, is subject to de novo review.
Cleveland-Akron-Canton Advertising Coop. v. Physician’s Weight Loss Ctrs. of Am., 184
Ohio App.3d 805, 2009-Ohio-5699, 922 N.E.2d 1012, ¶ 9 (8th Dist.).
{¶15} Although Carey argues in his appellate brief that Down River breached
some kind of warranty, Carey did not allege a separate count for breach of warranty or
even mention the term “warranty” in the complaint. A “warranty,” is “‘[a] promise that
a proposition of fact is true.’” Dickerson Internationale, Inc. v. Klockner, 139 Ohio
App.3d 371, 378, 743 N.E.2d 984 (2d Dist.2000), quoting Black’s Law Dictionary 1586
(6th Ed.1990). A warranty may also be an “express or implied promise that something
in furtherance of [a] contract is guaranteed by one of the contracting parties.” Wee Care
Child Ctr., Inc. v. Ohio Dept. of Job & Family Servs., 10th Dist. Franklin No. 13AP-1004,
2014-Ohio-2913, ¶ 37, quoting Black’s Law Dictionary (7th Ed.1999) 1581.
{¶16} When interpreting contracts, “[t]he intent of the parties to a contract is
presumed to reside in the language they chose to employ in the agreement.” Kelly v.
Med. Life Ins. Co., 31 Ohio St.3d 130, 509 N.E.2d 411 (1987), paragraph one of the
syllabus. When the terms of a contract are unambiguous, courts will not create a new
contract by finding an intent not expressed in the clear language employed by the parties.
Shifrin v. Forest City Ents., Inc., 64 Ohio St.3d 635, 638, 597 N.E.2d 499 (1992).
{¶17} “The parol evidence rule states that ‘absent fraud, mistake or other
invalidating cause, the parties’ final written integration of their agreement may not be
varied, contradicted or supplemented by evidence of prior or contemporaneous oral
agreements, or prior written agreements.’” Galmish v. Cicchini, 90 Ohio St.3d 22, 27,
734 N.E.2d 782 (2000), quoting 11 Williston, Contracts, Section 33:4, at 569-570 (4th
Ed.1999).
{¶18} The parol evidence rule is not a rule of evidence, but a rule of substantive
contract law employed as an aid to judicial interpretation. Ed Schory & Sons, Inc. v.
Francis, 75 Ohio St.3d 433, 439, 662 N.E.2d 1074 (1996). As a policy matter, the rule
is designed to protect the integrity of written agreements and thereby encourage parties to
put all contractual terms in writing. Galmish at 27.
{¶19} Only when the language of a contract is unclear or ambiguous, or when the
circumstances surrounding the agreement invest the language of the contract with a
special meaning, will extrinsic evidence be considered in an effort to give effect to the
parties’ intentions. Bellman v. Am. Internatl. Group, 113 Ohio St.3d 323,
2007-Ohio-2071, 865 N.E.2d 853, ¶ 7.
{¶20} Carey argues Down River breached the parties’ contract because it failed to
deliver a certificate of occupancy for the premises, which he asserts was a material term
in the parties’ agreement. However, there was no provision in the parties’ written
agreement that required Down River to provide or obtain a certificate of occupancy for
Carey. Section nine of the parties’ agreement states, in relevant part:
The Demised Premises can and shall be used solely for the operation of a
tavern, bar, restaurant, or grand fathered [six] adult entertainment use (as
defined by the City of Cleveland zoning code and Ohio Code) with the
incidental privilege of the sale of alcoholic beverages, and for no other
purpose.
Despite this clear and unambiguous language, Carey contends this provision created a
promise that Down River would provide a certificate of occupancy. However, nothing
in the contract could lead one to that conclusion. For example, section nine states, in
relevant part:
Lessee shall be given two sets of keys from the Lessor. If additional keys
are required by Lessee, the cost thereof shall be borne by the Lessee.
{¶21} This language specifically states that the lessor, Down River, was obliged to
deliver two sets of keys to Carey. Yet, that section does not state that Down River was
required to deliver a certificate of occupancy. Further, section 1(D) specifically imposes
a duty on Down River to transfer its liquor license to Carey. Section 1(D) states, in
relevant part:
In addition to leasing the Demised Premises, as consideration for the
payments and performance obligations detailed herein, Lessor shall make
good faith efforts to allow transfer of its liquor license to Lessee during the
term of this agreement. Lessee shall execute any and all applications and
other documents required to cause the transfer of all liquor licenses
presently held at the Demised Premises to be transferred to Lessee. Lessor
shall continue to cooperate in all material ways with the liquor license
transfer process. Lessor shall further execute the Management Agreement
in Exhibit C and deliver the same to Lessee. Said Liquor License shall
remain a secured asset of Lessor via UCC filing until Lessee shall either
transfer the Liquor License back to Lessor at the end of the Lease Term or
exercise the Purchase Option and successfully complete the closing of said
purchase.
{¶22} Although the parties’ agreement clearly and unambiguously imposed
obligations on Down River to deliver two sets of keys and a liquor permit to Carey, there
is no provision requiring it to deliver a certificate of occupancy. It is undisputed that no
certificate of occupancy was produced before the parties executed their agreement. If
the parties intended Down River to be responsible for providing or obtaining a certificate
of occupancy, they could have included such a provision in their agreement. Indeed,
Carey was represented by counsel in the contract negotiations, and his counsel could have
insisted that such a term be included in the contract if that was Carey’s intention.
{¶23} As previously stated, section nine of the parties’ agreement provided that
Carey could operate the premises as a tavern, nightclub, or as a “grand fathered [sic] adult
entertainment use (as defined by the City of Cleveland zoning code and Ohio Code).”
The evidence at trial established that the property had an “established use” designation
that allowed the property to be used for adult entertainment under the Cleveland building
and zoning codes. Therefore, Down River made no false representations regarding the
building’s “established” or “grandfathered” use. The property was delivered in the
condition described in the parties’ lease agreement.
{¶24} Carey nonetheless contends Down River breached the parties’ agreement by
failing to provide a certificate of occupancy for the building. However, when asked
whether Tritola represented that he had a certificate of occupancy for the building, Carey
admitted Tritola had informed him that a prior tenant destroyed the certificate of
occupancy, but that “he might have a copy somewhere.” (Tr. 153.)
{¶25} Carey further testified at trial that the certificate of occupancy issue did not
arise until the time he signed the agreement because he assumed a commercial building
would have a certificate of occupancy. (Tr. 152.) When asked whether Carey
mentioned the certificate of occupancy to Tritola during negotiations, he testified:
Well, I don’t know that that specific term came up. I was buying a
business. And I’m a licensed general contractor in two states. I just
assumed that if you would have a commercial building that you would have
a certificate of occupancy. I don’t know where in the world that you don’t
get one if you have a business.
(Tr. 152.)
{¶26} Under the doctrine of caveat emptor, also know as “buyer beware,” a
purchaser of commercial real estate has no just cause for complaint where the purchaser
had an opportunity to investigate the property without hindrance or concealment by the
vendor, even though there may be misstatements or misrepresentations. Layman v.
Binns, 35 Ohio St.3d 176, 177, 519 N.E.2d 642 (1988).
{¶27} Thus, it was incumbent upon Carey to independently verify the permitted
uses and occupancy requirements for the property before entering the agreement. Tritola
advised Carey that he could operate an adult cabaret without a certificate of occupancy
because it was an “established use” under the city’s building and zoning codes. Yet,
Carey never investigated the permitted uses of the building. At trial he testified:
Q: Did you ever check to see or did you ever have your lawyer check to see
before you signed the agreement what the permitted uses of the premises
were?
A: No, I don’t think that I did check.
* * *
Q: * * * You knew that the building had permitted uses; did you not?
A: No, it was an ongoing business. I don’t know. I assumed there
probably were.
Q: All right. Did you ask your lawyer to check this out?
A: No, we didn’t check. * * * I just assumed that because there were a
number of establishments of the type all around that there wouldn’t be an
issue but I did not check.
(Tr. 230.)
{¶28} Moreover, Carey failed to prove damages caused by the alleged breach of
contract, breach of warranty, or fraud claims. Nothing prevented Carey from operating
his business in the leased premises. Indeed, Carey operated a nightclub on the property
for two and a half years. Although building inspectors and police inspected the
premises, including all applicable certificates and permits, Carey was never cited or shut
down for failing to have a certificate of occupancy.
{¶29} Carey’s assertion that his business would have been more profitable if he
operated it as an adult cabaret, is purely speculative. Compensatory damages must be
shown with certainty, and damages that are too speculative are not recoverable. Moton
v. Carroll, 10th Dist. Franklin No. 01AP-772, 2002 Ohio App. LEXIS 505 (Feb. 12,
2002). Although lost profits need not be proven with mathematical precision, the
evidence and theory of the case must provide the finder of fact with known, reliable
factors that can reasonably guide the computation of damages. McNulty v. PLS
Acquisition Corp., 8th Dist. Cuyahoga Nos. 79025, 79125, and 79195, 2002-Ohio-7220, ¶
87, fn. 14. Therefore, Carey failed to establish proof of any damage caused by the
alleged breach of contract, breach of warranty, or fraud.
{¶30} Carey does not contest the trial court’s conclusion that Down River did not
commit fraud when it represented that Carey could use the property for adult
entertainment. Indeed, Down River had a court order documenting the fact that adult
entertainment was a permitted use of the property. The evidence showed that Carey was
given every opportunity to inspect the building, the existence or nonexistence of a
certificate of occupancy, and whether he could have legally operated an adult cabaret
without a certificate of occupancy as suggested by Tritola. No misrepresentations were
made, and we find no evidence that Down River breached the parties’ agreement or any
alleged warranty. Therefore, the record supports the court’s general conclusion that
Down River did not breach the parties’ contract.
{¶31} The first assignment of error is overruled.
B. Down River’s Counterclaims
{¶32} In the second assignment of error, Carey argues the trial court erred in
finding that he breached the parties’ agreement and in awarding Down River damages.
{¶33} Carey contends that because Down River breached the lease by failing to
provide a certificate of occupancy, he was justified in suspending his performance by
ceasing to pay rent and other expenses. However, as previously explained, Down River
did not breach the contract by failing to provide a certificate of occupancy at the
commencement of the lease term. It performed its obligations under the agreement by
delivering possession of the premises to Carey for use as a nightclub. Therefore, Carey
was not excused of his obligations under the lease, and the trial court properly found that
he breached the lease agreement. Carey does not contest the amount of damages the
trial court awarded to Down River.
{¶34} Therefore, the second assignment of error is overruled.
{¶35} The trial court’s judgment is affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the common pleas court to carry this
judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
EILEEN T. GALLAGHER, JUDGE
MARY EILEEN KILBANE, P.J., and
MELODY J. STEWART, J., CONCUR