Union Stock Yards Co. v. City of Hillsboro

[Cite as Union Stock Yards Co. v. Hillsboro, 191 Ohio App.3d 564, 2010-Ohio-5975.]

IN THE COURT OF APPEALS OF OHIO
FOURTH APPELLATE DISTRICT
HIGHLAND COUNTY

UNION STOCK YARDS :
COMPANY, :
:
Appellee, : Case No. 09CA17
:
v. : Released: December 2, 2010
:
CITY OF HILLSBORO, : DECISION AND JUDGMENT
: ENTRY
Appellant. :
_____________________________________________________________
APPEARANCES:

Thomas M. Tepe, for appellee.

Kathryn Hapner, for appellant.
_____________________________________________________________

Per Curiam.

{¶ 1} Appellant, the city of Hillsboro, appeals the trial court’s

judgment entered in favor of appellee, the Union Stock Yards Company.

The trial court determined that a binding contract existed under which

appellant agreed to purchase property from appellee for the price of

$325,000. The court awarded appellee $140,000 in damages. Appellant

argues that the trial court should have entered summary judgment in its

favor. Appellant raises several subarguments in support of its assertion, but

appellant’s essential argument is that no valid contract exists between the
Highland App. No. 09CA17 2

parties. We agree. The undisputed evidence shows that as a matter of law,

no valid contract existed. Accordingly, we sustain appellant’s first

assignment of error and reverse the trial court’s judgment. The remaining

assignments of error are moot and we need not address them.

I

FACTS

{¶ 2} In the fall of 2007, the Hillsboro city council passed a

resolution that authorized the mayor to enter into an agreement to purchase

appellee’s real estate for a price not to exceed $325,000. The resolution

stated: “The Mayor is hereby authorized and directed to enter into a

purchase agreement for the real property located in the City of Hillsboro * *

* from the Union Stockyards [sic, Stock Yards] Company for the purchase

price not to exceed $325,000, upon the following conditions: (1) the

purchase must be completed before the end of 2007 calendar year; (2)

property must pass an environmental study and (3) if a new survey is

required, the Seller will pay for the cost of the survey.” Although an

agreement was prepared and appellee signed it, the mayor never executed an

agreement to purchase the real estate.

{¶ 3} On February 7, 2008, appellee filed a complaint against

appellant for breach of contract. Appellant subsequently filed a motion for
Highland App. No. 09CA17 3

judgment on the pleadings and later filed a summary-judgment motion.

Appellant asserted that no contract existed because it did not execute the

agreement and thus the purported contract does not comply with the statute

of frauds. Appellant further argued that the contract is invalid for failing to

comply with certain statutory provisions governing municipal contracts.

Appellant also contended that even if the city council’s resolution could be

construed as a contract, the contract contained three conditions, at least one

of which remained unfulfilled. Appellant additionally argued that any

promissory-estoppel or equitable-estoppel claim must fail because these

doctrines are inapplicable against a political subdivision when the political

subdivision is engaged in a governmental function.

{¶ 4} The trial court overruled both of appellant’s motions. At the

trial, council member Charles Walker testified that he believed that the city

had agreed to purchase the property but for whatever reason, the mayor

decided in December that he wanted an appraisal. The mayor testified that

the appraisal was conducted after the city council passed the resolution and

that the property appraised at $185,000.

{¶ 5} On June 19, 2009, the trial court entered judgment in appellee’s

favor. The court determined that the parties reached an oral agreement and

that the resolution constituted “a sufficient writing signed by the city to be
Highland App. No. 09CA17 4

charged to remove this contract from the [statute of frauds].” The court

awarded appellee $140,000 in damages.

II

ASSIGNMENTS OF ERROR

{¶ 6} Appellant timely appealed and raises the following assignments

of error:

First Assignment of Error:

The trial [court] erred in overruling appellant’s motion
for summary judgment.

Second Assignment of Error:

The trial court erred in its determination that a valid real
estate purchase contract existed between appellant and appellee
even though appellant, the purchaser, did not execute said
contract.

Third Assignment of Error:

The court erred in determining that plaintiff was ready,
willing and able to close the transaction and that therefore,
specific performance was appropriate.

Fourth Assignment of Error:

The decision of the court is against the manifest weight
of the evidence in that requirements of Title 7 of the Ohio
Revised Code which lists various formalities that are
prerequisites in order to bind a municipal corporation to a
contract were not met.

III
Highland App. No. 09CA17 5

ANALYSIS

{¶ 7} In its first assignment of error, appellant argues that the trial

court erred by denying its summary-judgment motion. The crux of this

assignment of error is that a valid contract does not exist.

{¶ 8} When reviewing a trial court’s decision regarding a motion for

summary judgment, appellate courts must conduct a de novo review. Doe v.

Shaffer (2000), 90 Ohio St.3d 388, 390, 738 N.E.2d 1243; Grafton v. Ohio

Edison Co. (1996), 77 Ohio St.3d 102, 105, 671 N.E.2d 241. In such a

review, an appellate court reviews the trial court’s decision independently

and without deference to the trial court’s determination. See, e.g., Brown v.

Scioto Bd. of Commrs. (1993), 87 Ohio App.3d 704, 711, 622 N.E.2d 1153.

{¶ 9} A trial court may grant a motion for summary judgment only

when (1) the moving party demonstrates there is no genuine issue of

material fact, (2) reasonable minds can come to only one conclusion, after

the evidence is construed most strongly in the nonmoving party’s favor, and

that conclusion is adverse to the opposing party, and (3) the moving party is

entitled to judgment as a matter of law. Civ.R. 56; see also Bostic v. Connor

(1988), 37 Ohio St.3d 144, 146, 524 N.E.2d 881; Harless v. Willis Day

Warehousing Co. (1978), 54 Ohio St.2d 64, 66, 375 N.E.2d 46.
Highland App. No. 09CA17 6

{¶ 10} The existence of a contract is a question of law. Telxon Corp.

v. Smart Media of Delaware, Inc., Summit App. Nos. 22098 and 22099,

2005-Ohio-4931, at ¶ 40; see also Hocking Valley Community Hosp. v.

Community Health Plan of Ohio, Hocking App. No. 02CA28, 2003-Ohio-

4243, at ¶ 11. “[T]o declare the existence of a contract, both parties to the

contract must consent to its terms; there must be a meeting of the minds of

both parties; and the contract must be definite and certain.” (Citations

omitted.) Episcopal Retirement Homes, Inc. v. Ohio Dept. of Indus.

Relations (1991), 61 Ohio St.3d 366, 369, 575 N.E.2d 134. A contract does

not exist unless the parties have a meeting of the minds as to the essential

terms of the contract. Id.; see also Kostelnik v. Helper, 96 Ohio St.3d 1,

2002-Ohio-2985, 770 N.E.2d 58, at ¶ 16.

{¶ 11} In a case bearing facts similar to those in the case at bar, the

Supreme Court of Ohio considered whether a city manager possessed

authority to bind the city to a long-term lease. See Shampton v. Springboro,

98 Ohio St.3d 457, 2003-Ohio-1913, 786 N.E.2d 883. In Shampton, the

plaintiff asserted that he and the city had entered into a long-term lease and

that the city breached the agreement. The plaintiff also asserted a

promissory-estoppel claim. On appeal to the Supreme Court of Ohio, the

court determined that the city never entered into a long-term lease with the
Highland App. No. 09CA17 7

plaintiff. The court first looked to the city charter, which gave the city

manager the power to enter into contracts but only if the city council

authorized the city manager to bind the city or otherwise ratified the

contract. The court then examined the plain meaning of the city council’s

resolution, which stated: “The City Manager is hereby authorized to enter

into a temporary lease agreement.” Id. at ¶ 30. The court determined that

the city council delegated the authority to bind the city to the temporary

lease arrangement to the mayor. The court then determined that although the

city manager entered into a temporary lease arrangement with the plaintiff,

the city manager never executed a long-term lease with the plaintiff. The

court thus rejected the plaintiff’s breach of contract claim.

{¶ 12} The court also rejected the plaintiff’s promissory estoppel

claim. The court explained:

To be successful on a claim of promissory estoppel,
“[t]he party claiming the estoppel must have relied on conduct
of an adversary in such a manner as to change his position for
the worse and that reliance must have been reasonable in that
the party claiming estoppel did not know and could not have
known that its adversary's conduct was misleading.” Ohio State
Bd. of Pharmacy v. Frantz (1990), 51 Ohio St.3d 143, 145, 555
N.E.2d 630, citing Heckler v. Community Health Serv. (1984),
467 U.S. 51, 59, 104 S.Ct. 2218, 81 L.Ed.2d 42. Persons
seeking to enter into a contractual relationship with a
governmental entity are on constructive notice of the statutory
limitations on the power of the entity’s agent to contract.
Bohach v. Advery, Mahoning App. No. 00-CA-265, 2002-Ohio-
3202, 2002 WL 1396744. Since state and local laws are readily
Highland App. No. 09CA17 8

available for public review, it is a simple matter for a party to
educate itself as to the procedural formalities with which
government officials must comply before they may bind a
governmental entity to a contract. Here, as noted previously,
the charter and Resolution No. R-95-32 clearly did not grant
Doczy the authority to enter into a long-term lease. As a result,
even if Doczy did make any promises regarding the long-term
lease, appellees could not have reasonably relied upon them.
Liability does not attach to the city based on appellees’
mistaken interpretation of the resolution. Thus, appellees’
claim of promissory estoppel is without merit.
Our decision in this case is consistent with long-held
principles of this court. “ ‘An occasional hardship may accrue
to one who negligently fails to ascertain the authority vested in
public agencies with whom he deals. In such instances, the loss
should be ascribed to its true cause, the want of vigilance on the
part of the sufferer, and statutes designed to protect the public
should not be annulled for his benefit.’ ” Lathrop Co. v. Toledo
(1966), 5 Ohio St.2d 165, 173, 34 O.O.2d 278, 214 N.E.2d 408,
quoting McCloud & Geigle v. Columbus (1896), 54 Ohio St.
439, 452-453, 44 N.E. 95. Accord Lancaster v. Miller (1898),
58 Ohio St. 558, 51 N.E. 52. Protection of the public’s
resources in this context sometimes comes with a cost to
misinformed parties.

Id. at ¶ 34-35.

{¶ 13} Similarly, in the case at bar, a plain reading of the city council’s

resolution reveals not that the city council entered into a contract with

appellee but that the city council authorized and delegated the authority to

enter into the contract to the mayor. Because the mayor never entered into a

contract with appellee, there is no valid contract upon which appellee can

base its breach of contract claim.
Highland App. No. 09CA17 9

{¶ 14} Moreover, even if one could construe the council’s resolution

as a contract, the contract did not define the purchase price, but apparently

left it open to further negotiation. There is no evidence that the city council

consented, by its resolution, to purchase the property for $325,000. Instead,

the evidence shows that the council’s resolution authorizes the purchase as

long as the price does not exceed $325,000. No evidence exists that the

mayor, the person to whom council gave the authority to contract, ever

agreed to purchase the property for any price, let alone $325,000. Because

there was no meeting of the minds regarding the purchase price, no valid

contract exists.

{¶ 15} Additionally, just like the plaintiff in Shampton, appellee does

not have a valid promissory-estoppel claim against appellant. Even if

certain council members made promises to appellee regarding the purchase

of its property, appellee could not have justifiably relied on those promises

when the council resolution plainly gave the authority to contract to the

mayor, not to the council or to any individual council member. Liability

cannot attach simply because appellee mistakenly interpreted the resolution

as a contract to purchase the property. Furthermore, the mayor’s decision

not to enter into the contract resulted from his consideration of the city’s

financial resources, which is a valid consideration under Shampton.
Highland App. No. 09CA17 10

{¶ 16} We further find the instant case similar to the facts presented in

Asbury v. Hugh L. Bates Lodge No. 686 (1939), 62 Ohio App. 430, 24

N.E.2d 638. In Asbury, lodge members adopted a resolution to purchase real

estate. The resolution recited that the “master and wardens be given power

to purchase the property.” The court held that the resolution was not an

acceptance of the offer to sell so as to create a binding contract. The court

explained:

[A] resolution to accept is not an acceptance * * *. It is
not a memorandum of a promise, or acceptance of an offer,
made to the lodge. It is evidence that the members of the lodge,
or some of them, had agreed among themselves that the lodge
would accept—not that it did accept. It was not itself a
purchase. The members were not dealing with the offerors in
passing this resolution. They were acting inter sese, and
conferring authority upon their officers. It was an authorization
to the master and wardens to act for the lodge in its dealings
with the offerors. * * *
The fact that the offerors as members of the lodge were
present and participated in the deliberations and actions, and,
therefore, knew that the lodge, or certain members had
concluded to accept, does not change the essential character of
what was done.
Mere statements of intention, promissory expressions, or
statements made to third persons are not sufficient, in
themselves, to create contractual obligations. Such expressions,
even though promissory in form, must be construed in the light
of the surrounding circumstances, and as a normally constituted
person would understand them.

(Citations omitted.) Id. at 433-434.
Highland App. No. 09CA17 11

{¶ 17} A similar rationale applies in the case at bar. The city council,

similar to the lodge members, passed a resolution authorizing the mayor to

act for the city in its dealings with appellee. The council’s resolution did not

constitute an acceptance of appellee’s offer to sell. The resolution

contemplated that the mayor would take further action to complete the

contract formation. The resolution authorized the mayor to purchase the

property for a price not to exceed $325,000. The mayor did not accept

appellee’s offer to sell for $325,000. Instead, he requested and obtained an

appraisal of the property, after which, the mayor declined to execute a

contract with appellee.

{¶ 18} In addition to basic contract formation requirements, a

municipality may enter into a contract only as provided by statute. See Pugh

v. Ned Peppers, Montgomery App. No. 22939, 2010-Ohio-1917, at ¶ 47.

This principle is outlined in Buchanan Bridge Co. v. Campbell (1899), 60

Ohio St. 406, 54 N.E. 372:

Whatever the rule may be elsewhere, in this state the
public policy, as indicated by our constitution, statutes and
decided cases, is that, to bind the state, a county, or city for
supplies of any kind, the purchase must be substantially in
conformity to the statute on that subject, and that contracts
made in violation or disregard of such statutes are void, not
merely voidable, and that courts will not lend their aid to
enforce such a contract, directly or indirectly, but will leave the
parties where they have placed themselves. If the contract is
executory, no action can be maintained to enforce it; and, if
Highland App. No. 09CA17 12

executed on one side, no recovery can be had against the party
on the other side.

Id. at 419-420. Thus, a city “cannot be bound by a contract that is not

properly endorsed or ‘formally ratified through proper channels.’” Pugh at ¶

48, citing Wellston v. Morgan (1901), 65 Ohio St. 219, paragraph three of

the syllabus. An individual or entity entering into a contract with a

municipality bears the burden of “ ‘ascertain[ing] whether the contract

complies with the Constitution, statutes, charters, and ordinances so far as

they are applicable. If he does not, he performs at his peril.’ ” Shampton, 98

Ohio St.3d 457, 2003-Ohio-1913, 786 N.E.2d 883, at ¶ 28, quoting Lathrop

Co. v. Toledo (1966), 5 Ohio St.2d 165, 173, 214 N.E.2d 408.

{¶ 19} For example, in Enviro-Flow Cos. Ltd. v. Chauncey, Athens

App. No. 07CA5, 2008-Ohio-698, we held that a village contract was null

and void because of noncompliance with R.C. 731.141. In Enviro-Flow, the

mayor signed a contract with Enviro-Flow for certain sewer repairs. After

Enviro-Flow incurred more expenses than approved in the bid that the mayor

signed, Enviro-Flow filed an action for breach of contract and unjust

enrichment. The village of Chauncey filed a summary-judgment motion, in

which it argued (1) that the contract was null and void due to noncompliance

with R.C. 731.141 and (2) that Enviro-Flow could not maintain an unjust-

enrichment claim against it. The trial court agreed with the village (1) that
Highland App. No. 09CA17 13

the contract was null and void under R.C. 731.141, which requires a contract

to be signed by the village administrator and the village clerk and (2) that

Enviro-Flow could not assert an unjust-enrichment claim against it, a

political subdivision. On appeal, we affirmed the trial court’s judgment. We

stated:

R.C. 731.141 requires both the Village Administrator and
the Village Clerk to sign the contract. In addition, the contract
does not appear to conform to R.C. 705.11 (Village Solicitor is
required to approve the contract as to form.). “ [‘]We think
there is no hardship in requiring [contractors], and all other
parties who undertake to deal with a municipal body in respect
of public improvements, to investigate the subject, and
ascertain at their peril whether the preliminary steps leading up
to contract, and prescribed by statute, have been taken.[’] ” * *
* Lathrop Co. v. City of Toledo (1966), 5 Ohio St.2d 165, 173[,
214 N.E.2d 408, quoting McCloud & Geigle v. Columbus
(1896), 54 Ohio St. 439, 452, 44 N.E. 95].

Id. at ¶ 15. We further determined that Enviro-Flow could not maintain an

unjust-enrichment action against the village. We noted that the unjust-

enrichment claim “sound[ed] in promissory estoppel” and that this doctrine

does not apply “ ‘against a political subdivision when the political

subdivision is engaged in a governmental function.’ ” Id. at ¶ 16, quoting

Hortman v. Miamisburg, 110 Ohio St.3d 194, 2006-Ohio-4251, 852 N.E.2d

716, syllabus.

{¶ 20} Other than the applicable statute, we find Enviro-Flow

indistinguishable from the case at bar. In both cases, the contract fails to
Highland App. No. 09CA17 14

comply with the statute specifying the requirements for a municipal contract.

R.C. 705.11, which is similar to the statute we considered in Enviro-Flow,

states that “[n]o contract with the municipal corporation shall take effect

until the approval of the village solicitor or city director of law is indorsed

thereon.” Here, there is absolutely no dispute that the director of law failed

to indorse his approval on the alleged contract. Therefore, in accordance

with our Enviro-Flow decision, we agree with appellee that the alleged

contract is null and void due to noncompliance with proper statutory

procedures, i.e., R.C. 705.11. See Wright v. Dayton, 158 Ohio App.3d 152,

159-160, 2004-Ohio-3770, 814 N.E.2d 514 (stating that a party does not

have a valid breach-of-contract claim against a municipality unless the

contract was properly executed in accordance with statutory procedures).

{¶ 21} Furthermore, we observe that R.C. 731.05 governs the powers

of a city council and states: “All contracts requiring the authority of the

legislative authority for their execution shall be entered into and conducted

to performance by the board or officers having charge of the matters to

which they relate. After the authority to make such contracts has been given

and the necessary appropriation made, the legislative authority shall take no

further action thereon.” This statute apparently does not give the city

council the authority to execute a contract. Rather, that duty belongs to the
Highland App. No. 09CA17 15

mayor. See Coyne v. Salvatore, Cuyahoga App. Nos. 79507, 79509, and

79510, 2002-Ohio-5819, at ¶ 80 (stating that the power to execute contracts

belongs to the mayor and thus holding by implication that the power to

execute contracts does not belong to the city council). Consequently, we

agree with appellant that the trial court erroneously denied its summary-

judgment motion.

{¶ 22} Moreover, appellee’s estoppel claim must fail because appellee

cannot prove that it justifiably relied on the city council’s resolution when

that resolution constituted only an authorization for the mayor to enter into a

contract.1 See Shampton, 98 Ohio St.3d 457, 2003-Ohio-1913, 786 N.E.2d

883. Furthermore, had appellee investigated whether proper statutory

procedures had been followed, appellee would have discovered that the

resolution could not constitute the contract, but rather that R.C. 705.11

required the law director to indorse the contract.

{¶ 23} Accordingly, because the undisputed evidence shows that the

mayor did not enter into a contract with appellee, no valid contract exists.

Additionally, any alleged contract is null and void due to noncompliance
1
We observe that the Supreme Court of Ohio held in Hortman, 110 Ohio St.3d 194, 2006-Ohio-4251, 852
N.E.2d 716, that “[t]he doctrines of equitable estoppel and promissory estoppels are inapplicable against a
political subdivision when the political subdivision is engaged in a governmental function.” Id. at syllabus.
However, in the case at bar, we find it questionable whether appellant’s conduct in negotiating the purchase
of real estate for the construction of a fire station constituted a governmental function. Our review of the
relevant statutory authority, R.C. 2744.01(C), and the applicable case law does not definitively clarify
whether the negotiation of a real-estate contract for the construction of a fire station constitutes a
governmental or proprietary function. Thus, we choose to decide this issue on grounds other than those set
forth in Hortman. Moreover, the Supreme Court of Ohio has not overruled Shampton.
Highland App. No. 09CA17 16

with statutory procedures. Thus, the trial court erroneously denied

appellant’s summary-judgment motion. Consequently, we sustain

appellant’s first assignment of error and reverse the trial court’s judgment.

The remaining assignments of error are moot, and we need not address them.

See App.R. 12(A)(1)(c).

Judgment reversed.

MCFARLAND, P.J., and HARSHA, J., concur.

KLINE, J., concurs separately.

__________________

KLINE, Judge, concurring.

{¶ 24} I concur in judgment and opinion with one exception. That is, I

believe that purchasing real estate for the construction of a fire station is a

governmental function. Under R.C. 2744.01(C)(2)(a), “[a] ‘governmental

function’ includes * * * [t]he provision or nonprovision of police, fire,

emergency medical, ambulance, and rescue services or protection.”

(Emphasis added.) And in my view, the disputed transaction falls under the

city of Hillsboro’s provision or nonprovision of fire services. Therefore, I

would apply the syllabus in Hortman to Union Stock Yards’ estoppel claim.