[Cite as Cocca Dev. v. Mahoning Cty. Bd. of Commrs., 2010-Ohio-3166.]
STATE OF OHIO, MAHONING COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
COCCA DEVELOPMENT, LTD. ) CASE NO. 08 MA 163
)
PLAINTIFF-APPELLANT )
)
VS. ) OPINION
)
MAHONING COUNTY BOARD OF )
COMMISSIONERS )
)
DEFENDANT-APPELLEE )
CHARACTER OF PROCEEDINGS: Civil Appeal from the Court of Common
Pleas of Mahoning County, Ohio
Case No. 07 CV 3005
JUDGMENT: Reversed and Remanded.
APPEARANCES:
For Plaintiff-Appellant: Atty. Mark A. Hutson
Atty. William A. Myers
100 DeBartolo Place, Suite 400
Boardman, Ohio 44512
For Defendant-Appellee: Atty. Paul J. Gains
Mahoning County Prosecutor
Atty. Linette M. Stratford
Atty. Gina DeGenova Bricker
Assistant Prosecuting Attorneys
21 West Boardman Street, 6th Floor
Youngstown, Ohio 44503
JUDGES:
Hon. Cheryl L. Waite
Hon. Gene Donofrio
Hon. Mary DeGenaro
Dated: June 25, 2010
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WAITE, J.
{¶1} Appellant Cocca Development, Ltd., appeals the entry of summary
judgment by the Mahoning County Court of Common Pleas against it and in favor of
Appellee, Mahoning County Board of Commissioners in this breach of contract
action.
{¶2} Appellant is the successor in interest to 7655, LLC (“7655”), which, in
2001, was the owner of the Southwoods Executive Center (“Southwoods”) in
Boardman, Ohio. In 2001, Appellee leased space at Southwoods for the Mahoning
County Educational Service Center (“MCESC”). At that time, the county was
required to provide equipment and office space to the MCESC pursuant to R.C.
3319.19.
{¶3} The county began accepting proposals from prospective lessors of
office space for MCESC on November 1, 2000. Throughout the document, the
packet uses language associated with a traditional RFP and also language
associated with a traditional bid document. The proposal packet, specifically
captioned “Request for Proposals,” (“RFP”), included specifications for the office
space, blank affidavits, and instructions to bidders. The instructions to bidders
explicitly stated that proposals must be submitted on the prescribed form provided
with the materials, and should not be detached from “the remainder of the contract
documents.” (Instructions to Bidders, ¶1.1.) Section 1.1 further instructed interested
persons to furnish a summary of the proposal, which could be provided on separate
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paper, “but should be attached to the contract document package.” (Instructions to
Bidders, ¶1.1.)
{¶4} The instructions also included the following provision:
{¶5} “16.1 The county may terminate this agreement at any time, in whole
or in part due to non-appropriation of funds by providing sixty (60) days written notice
to the vendor. The county shall pay all reasonable costs incurred by the vendor up to
the date of termination. The vendor will not be reimbursed for any anticipated profits
which have not been earned to the date of termination [the termination provision].”
{¶6} The specifications in the RFP read, in pertinent part: “To determine the
award of the contract, the County will negotiate using criteria factors including but not
limited to, ability to meet aforementioned requirements, date of availability for
occupancy, quality of the proposed facility, interior and exterior aesthetics, and cost
of the lease.” (Bid Specifications, p. 7.) According to the affidavit of Lynn Davenport,
7655’s Executive Vice President and Treasurer, the county and 7655 engaged in
negotiations between the opening of proposals on November 1, 2000, until the
execution of the lease on February 2, 2001 concerning the layout of space, the work
to be performed by 7655, use of the building’s auditorium, and a right to relocate
MCESC to nearby office space. (Davenport Aff., ¶4.)
{¶7} The parties executed a ten year lease, with two five year renewal terms,
on February 15, 2001. The signature page of the lease indicates that it was
approved as to form on February 7, 2001 by an assistant prosecutor with the
Mahoning County Prosecutor’s Office.
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{¶8} On January 1, 2007, R.C. 3319.19 was amended and the county’s
obligation to provide funding for the MCESC was eliminated. After determining that
MCESC would not assume the rental obligations under the lease, Appellee elected to
terminate the lease for non-appropriation of funds. However, the lease itself did not
contain a provision that authorized Appellee to terminate for that reason.
{¶9} Appellant, as successor in interest to 7655, filed a complaint for
declaratory relief, breach of contract, and equitable and promissory estoppel, as well
as a motion for a temporary restraining order, asserting that Appellee’s termination of
the lease constituted a breach of the terms of the lease. Appellee argued in its
answer that the lease was void because its terms violated Ohio competitive bidding
laws, and that estoppel cannot be asserted against a government agency.
{¶10} More specifically, Appellee argued that the lease was the product of the
competitive bidding process, and, therefore, the lease was void because it did not
contain all of the material elements contained in the original bid. In this argument,
Appellee relied on the termination provision in the instructions to bidders. Appellee
claimed that the absence of a similar provision in the actual lease invalidated the
lease according to Ohio competitive bidding law.
{¶11} The trial court agreed, holding that the omission of the termination
provision in the lease “added an additional provision beneficial to [Appellee],” and, as
a consequence, the lease was void. (8/6/08 J.E., p. 3.) The trial court’s judgment
entry presupposed without analysis that the “agreement” referred to in the termination
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provision is the lease, and appears to presuppose that the process used to obtain the
lease was a competitive bid process, not the RFP process.
{¶12} Although the trial court did not cite any case law in its decision, the
decision appears to be predicated on the rule of law announced in Checie v.
Cleveland (November 20, 1939), 8th Dist. No. 17429. According to the Eighth District
Court of Appeals in Checie, “ ‘[a]ny contract entered into with the best bidder
containing substantial provisions beneficial to him which were not included in the
specifications is void for it is not the contract offered to the lowest bidder by the
advertisement.’ ” Id. at *14, quoting Desmond [sic] v. City of Mankato (1903), 89
Minn. 48, 93 N.W. 911, syllabus at paragraph 3.
{¶13} The Checie Court decided, “ ‘[t]his rule should be strictly enforced by
the courts, for if the lowest bidder may, by an arrangement with the municipal
authorities, have incorporated into his form of contract new provisions beneficial to
him or have onerous ones excluded therefrom which were in the specifications upon
which the bids were invited, it would emasculate the whole system of competitive
bidding.’ ” Id., quoting Desmond [sic] at 53.
{¶14} In the matter sub judice, Appellant argues that the “agreement” referred
to in the termination provision is not the lease, but, rather, the agreement that existed
pursuant to an RFP between the county and 7655 after 7655’s proposal was
submitted and prior to the execution of the lease. As earlier discussed, Appellee
contends that the “agreement” referred to in the termination provision is the lease,
itself.
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{¶15} Appellant further argues that, even if the “agreement” referred to in the
termination provision is the lease, the lease at issue in this case is not subject to Ohio
competitive bidding law pursuant to R.C. 307.86(I), which specifically exempts leases
for office space from conformance with R.C. 307.86. Subsection (I) exempts leases
for office space where:
{¶16} “(a) The contracting authority is authorized by the Revised Code to
lease the property.
{¶17} “(b) The contracting authority develops requests for proposals for
leasing the property, specifying the criteria that will be considered prior to leasing the
property, including the desired size and geographic location of the property.
{¶18} “(c) The contracting authority receives responses from prospective
lessors with property meeting the criteria specified in the requests for proposals by
giving notice in a manner substantially similar to the procedures established for giving
notice under section 307.87 of the Revised Code.
{¶19} “(d) The contracting authority negotiates with the prospective lessors to
obtain a lease at the best and lowest price reasonably possible considering the fair
market value of the property and any relocation and operational costs that may be
incurred during the period the lease is in effect.”
{¶20} For its argument, Appellant relies on the title of the document issued by
the county, that is, the “Request for Proposals,” the discretionary language in the bid
specifications, and the negotiations following the selection of 7655’s proposal to
argue that the RFP at issue is not governed by Ohio competitive bidding law. In
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other words, even if the “agreement” in the termination provision referred to the
lease, and the termination provision was a material provision in the RFP, the county
had the discretion to negotiate the termination provision out of the lease and
exercised that discretion.
{¶21} Appellee does not argue that the RFP in this case does not fall within
the ambit of subsection (I), but, instead, that the county elected to competitively bid
the lease rather than issue a request for proposals pursuant to subsection (I) of the
statute. Appellee’s purchasing director, James Fortunato, claimed that the county
used a competitive bidding process in procuring office space of MCESC. (Fortunato
Aff., ¶4.)
{¶22} Based on the record before us, we find that the “agreement” referred to
in the termination provision was the agreement that existed between the parties after
the submission of 7655’s proposal but before the execution of the lease. The
document at issue was clearly the product of an RFP and not of the traditional bid
process. Although the language in the RFP appears ambiguous, extrinsic evidence
supports the conclusion that Appellant’s interpretation of the termination provision is
reasonable, because Appellee did not object to the omission of the termination
provision from the lease. Furthermore, any ambiguity should be resolved in favor of
Appellant because Appellant is the non-drafting party.
ASSIGNMENT OF ERROR NO. 1
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{¶23} “The trial court erred by concluding that the Request for Proposals
required the Lease to provide that the tenant may terminate the Lease at any time on
sixty day’s notice.”
{¶24} Before the trial court were the affidavit and deposition of James
Fortunato, the affidavits of Lynn Davenport, James Tablack, and Anthony Cocca, the
blank RFP form, the completed RFP form submitted by 7765, the lease, excerpts
from the Mahoning County Purchasing Policies & Procedures Manual, and the
subordination agreement.
{¶25} The construction of the terms of a contract is a question of law to be
decided by the courts, and is also reviewed de novo on appeal. Lovewell v.
Physicians Ins. Co. of Ohio (1997), 79 Ohio St.3d 143, 144, 679 N.E.2d 1119. In
construing the terms of a written contract, the court must give effect to the intent of
the parties; the intent is presumed to rest in the language that the parties have
chosen to employ. Saunders v. Mortensen, 101 Ohio St.3d 86, 2004-Ohio-24, 801
N.E.2d 452, at ¶9, citing Kelly v. Med. Life Ins. Co. (1987), 31 Ohio St.3d 130, 509
N.E.2d 411, paragraph one of the syllabus. “Common words appearing in a written
instrument will be given their ordinary meaning unless manifest absurdity results, or
unless some other meaning is clearly evidenced from the face or overall contents of
the instrument.” Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241, 374
N.E.2d 146, paragraph two of the syllabus.
{¶26} Where the terms of a contract are clear and unambiguous, a court need
not look beyond the plain language of the agreement to determine the rights and
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obligations of the parties. Aultman Hosp. Assn. v. Community Mut. Ins. Co. (1989),
46 Ohio St.3d 51, 53, 544 N.E.2d 920. If a contract is reasonably susceptible to
more than one meaning, then it is ambiguous and extrinsic evidence of
reasonableness or intent can be employed. City of Steubenville v. Jefferson Cty., 7th
Dist. No. 07 JE 51, 2008-Ohio-5053, ¶22.
{¶27} Ambiguous contracts are construed against the drafter. Handel’s Ent.,
Inc. v. Wood, 7th Dist. Nos. 04MA238, 05MA70, 2005-Ohio-6922, ¶104, citing
Graham v. Drydock Coal Co. (1996), 76 Ohio St.3d 311, 314, 667 N.E.2d 949.
However, “this rule of construction is merely a guiding principle the court uses in
determining the parties’ intent after viewing the extrinsic evidence presented by the
parties.” Beverly v. Parilla, 165 Ohio App.3d 802, 2006-Ohio1286, 848 N.E.2d 881,
¶30.
{¶28} Because the termination provision is in the instructions to “bidders”
portion of the document rather than the “bid specification” section of the packet, and
the lease is referred to throughout the instructions as either “the contract” or “the
Contract,” Appellant argues that the “agreement” referred to in the termination
provision is the agreement between the parties to enter into the lease. In other
words, the termination provision was intended to govern the relationship between the
county and 7655 during the time between the submission of 7655’s proposal and the
execution of the lease.
{¶29} Appellee contends that the “agreement” referred to in the termination
provision actually refers to the lease. Appellee states, “because no agreement
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existed between the parties until after the contract was awarded, one can only
conclude that this provision applied to the Lease Agreement and not to the bid packet
itself. And simply because Cocca may have elected to include this provision
elsewhere in the bid packet does not somehow eliminate the purpose of this
language.” (Emphasis in original.) (Appellee Brf., p. 6.) Moreover, Appellee relies
on the fact that the instructions to “bidders” and the specifications were identified as a
single document, and prospective proposals would not be accepted if the instructions
were separated from the specification documents.
{¶30} We find that the “agreement” referred to in the termination provision
refers to the agreement that existed between the county and 7655 following the
submission of 7655’s proposal and prior to the execution of the lease. Although the
termination provision is ambiguous, several other provisions in the instructions clearly
address this specific time frame. For instance, Section 9.0, captioned: “FAILURE
TO DELIVER ON TIME,” reads, “[f]or each calendar day that lapses after the
prescribed time given in the proposal for delivery on performance, the sum of one-
hundred dollars $100.00 per day shall be deducted from any money due the
contractor, not as a penalty but as liquidated damages.” Section 5.8, captioned:
“Failure to enter into contract upon award,” reads, “[i]n the event that the bidder fails
to enter the contract upon award, the certified check or bond will be forfeited to
Mahoning County as liquidated damages for the delay and expense caused by the
bidder’s default.” Likewise, the placement of the provision in the instructions, rather
than the specifications, also supports the conclusion that the termination provision
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was intended to govern the relationship of the parties prior to the execution of the
lease.
{¶31} Additionally, the extrinsic evidence in this case, the fact that Appellee
did not object to the omission of the termination provision from the lease, supports
the conclusion that Appellant’s interpretation of the phrase “this agreement” is
reasonable. The lease document was approved by an agent of Appellee. Moreover,
Appellee drafted the RFP, and, as a consequence, any ambiguities should be
resolved in favor of Appellant. In other words, to the extent that the documents
attached to the RFP are referred to in the instructions as “the contract documents,”
this ambiguity should be resolved in favor of the non-drafting party. Handel’s, supra.
{¶32} Because the trial court could not have concluded that the termination
provision was a material term of 7655’s proposal without first concluding that the
“agreement” in the termination provision referred to the lease, we find that the trial
court erred as a matter of law, and reverse the judgment of the trial court. Appellant’s
first assignment of error is sustained.
{¶33} Since we have sustained Appellant’s first assignment of error, the
second assignment of error would ordinarily be moot, especially since Appellant has
argued these assignments in the alternative. However, since the issue in the second
assignment is actually crucial to explain the determination of the first assignment, it
must be addressed.
ASSIGNMENT OF ERROR NO. 2
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{¶34} “The trial court erred by failing to conclude that the Lease was the valid
product of negotiations pursuant to the office-lease request-for-proposals exception
to the competitive bidding statutes.”
{¶35} Appellee claims that, “after being awarded the bid, 7655, LLC
presented Mahoning County with a lease agreement that not only omitted the
termination provision originally contained in its proposal but added a substantial
provision wholly beneficial to it.” (Appellee’s Brf., p. 10.)
{¶36} Article 4.1 of the lease reads, in pertinent part:
{¶37} “Tenant represents that a current appropriation is available for the
Minimum Rent and additional rent during the Initial Term. Concurrently with the
execution and delivery of this Lease, and as a condition to the effectiveness thereof,
Tenant shall deliver to Landlord written evidence that there is a balance, not already
obligated to pay existing obligations, in the appropriation available to pay the
Minimum Rent during the Initial Term.”
{¶38} Appellee argues that Article 4.1 of the lease is a “substantial provision
wholly beneficial to [Appellant].” (Appellee’s Brf., p. 10.) Appellee further argues that
Article 4.1 is a “legal nullity” because R.C. 5705.41(D) “provides that a county may
only appropriate funds necessary to fulfill the obligations due in a single calendar
year.” (Appellee’s Brf., pp. 10-11, fn. 2.)
{¶39} In fact, R.C. 5705.41 reads, in pertinent part:
{¶40} “No subdivision or taxing unit shall:
{¶41} “* * *
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{¶42} “(D)(1) Except as otherwise provided in division (D)(2) of this section
and section 5705.44 of the Revised Code, make any contract or give any order
involving the expenditure of money unless there is attached thereto a certificate of
the fiscal officer of the subdivision that the amount required to meet the obligation or,
in the case of a continuing contract to be performed in whole or in part in an ensuing
fiscal year, the amount required to meet the obligation in the fiscal year in which the
contract is made, has been lawfully appropriated for such purpose and is in the
treasury or in process of collection to the credit of an appropriate fund free from any
previous encumbrances. This certificate need be signed only by the subdivision's
fiscal officer. Every such contract made without such a certificate shall be void, and
no warrant shall be issued in payment of any amount due thereon. * * *”
{¶43} R.C. 5705.44 limits a county’s authority to appropriate funds beyond a
fiscal year. R.C. 5705.44, captioned: “Contracts running beyond fiscal year;
contracts payable from utility earnings,” reads, in pertinent part, “[t]he amount of the
obligation under such contract or lease remaining unfulfilled at the end of the fiscal
year, and which will become payable during the next fiscal year, shall be included in
the annual appropriations measure for the next year as a fixed charge.”
{¶44} Appellee relies on the premise that the RFP was actually a request for
competitive bids in order to argue that the inclusion of Article 4.1 into the lease voids
the contract. Appellee claims that the rule in Checie prevents Appellant from
including any provision favorable to Appellant in the lease that was not included in
the bid specifications.
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{¶45} Under Ohio’s competitive bidding statute, public agencies are required
to award a public contract to the “lowest and best” bidder. R.C. 307.86. The intent of
competitive bidding is, “ ‘to provide for open and honest competition in bidding for
public contracts and to save the public harmless, as well as bidders themselves, from
any kind of favoritism or fraud in its varied forms.’ ” Cedar Bay Constr., Inc. v.
Fremont (1990), 50 Ohio St.3d 19, 21, 552 N.E.2d 202, 204, quoting Chillicothe Bd.
of Edn. v. Sever-Williams Co. (1970), 22 Ohio St.2d 107, 115, 51 O.O.2d 173, 177-
178, 258 N.E.2d 605, 610. See, also, Hardrives Paving & Constr., Inc. v. Niles
(1994), 99 Ohio App.3d 243, 247, 650 N.E.2d 482, 484-485. However, the general
assembly exempted certain contracts from the competitive bidding statute, including
leases for office space, which may be entered into through a request for proposal
process.
{¶46} In Danis Clarkco Landfill Co. v. Clark Cty. Solid Waste Mgt. Dist.
(1995), 73 Ohio St.3d 590, 653 N.E.2d 646, the Ohio Supreme Court explained the
distinction between procurement through requests for proposals and competitive
bidding. In that case, the district issued a request for proposals in order to contract
with a provider of waste disposal services for the county. Following the selection of
the proposal submitted by Ogden Martin Systems, Inc. (“OM”), the district engaged in
negotiations with OM in an effort to enter into a contract with OM for waste disposal
services.
{¶47} A landfill operator whose proposal was rejected by the district filed a
declaratory judgment action seeking to prevent the district from accepting OM’s
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proposal. The landfill operator argued that OM’s request for proposals, which
included several components of competitive bidding, was, as a result of the inclusion
of those components, subject to the competitive bidding statute. The Ohio Supreme
Court held:
{¶48} “The court of appeals in this case recognized that ‘[n]egotiating material
aspects of contracts after the bid opening is violative of the sanctity and integrity of
competitive bidding.’ Review of the District’s RFP makes it clear that the District
chose a process which can only in the most general sense be deemed to be
‘competitive bidding.’ See Yellow Cab of Cleveland, Inc. v. Greater Cleveland
Regional Transit Auth. (1991), 72 Ohio App.3d 558, 561, 595 N.E.2d 508, 509
(‘ “[T]he RFP method of procurement is not competitive bidding.” ’) Certainly, the
RFP process did not contemplate the execution of a contract based upon a simple
acceptance by the District of the successful bidder’s original proposal. Rather, the
RFP contemplated an award solely of the opportunity to further negotiate to reach a
possible contract with the District.” (Emphasis in original.) Id. at 600.
{¶49} The Ohio Supreme Court further held that the district’s decision to
incorporate components of competitive bidding into the request for proposals process
did not convert this process into competitive bidding. Although the district was
required to comply with any competitive bidding provisions that were incorporated
into the request for proposals, the Danis Court concluded that the district was not
“bound to the full panoply of statutory bid requirements set forth in R.C. Chapter 307.”
Id. at 603.
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{¶50} The Tenth District Court of Appeals in Wheeling Corp. v. Columbus &
Ohio River Railroad Co. (2001), 147 Ohio App.3d 460, 771 N.E.2d 263, observed
that the district in Danis, “sufficiently defined the RFP process as subject to eventual
negotiation of a final agreement which might vary substantially from the original terms
of the RFP,” and, as a result, “the unsuccessful bidder was not entitled to an
injunction, absent fraud or abuse of discretion by the district, to invalidate the
outcome of the RFP.” Id. at 485.
{¶51} The Wheeling Corp. Court reached this conclusion despite the fact that
the parties to that appeal urged diametrically opposed interpretations of the Ohio
Supreme Court’s holding in Danis:
{¶52} “Appellant asserts that the Ohio Supreme Court clearly held in Danis
that, once a government entity issues an RFP, it is bound by the terms expressed
therein and may not deviate in the slightest from those literal terms when rating
proposals and negotiating with the finalist proposers. Appellees, to the contrary, rely
on Danis for the proposition that modifications to an RFP which are done rationally,
fairly, and in good faith, based upon the best interest of the parties when arriving at a
mutually beneficial agreement, are within the discretion of the public agency issuing
the RFP. Our interpretation of Danis lies between these extremes. Where the RFP
in question provides for discretion on the part of the issuing authority, pursuant to
Danis, absent fraud or abuse of discretion, the issuing authority may vary the terms
of the ultimate agreement from the original guidelines of the RFP. Where the RFP
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explicitly forecloses variance, however, we read Danis as requiring adherence to the
terms of the RFP when executing the resulting contract.” Id.
{¶53} It is clear from the plain language of the RFP before us that Appellee
contemplated negotiations following the issuance of the RFP, and that, like the
process in Danis, “the RFP contemplated an award solely of the opportunity to further
negotiate to reach a possible contract” with the county. (Emphasis in original.) Id. at
600. Even though the RFP contained certain elements of competitive bidding, e.g.,
sealed bids, bid bonds, performance bonds, and public opening of bids, the use of
components of competitive bidding does not convert the RFP into a request for
competitive bids. Id. at 603. Therefore, the trial court erred as a matter of law in
concluding that the RFP at issue was a request for competitive bids, and Appellee’s
reliance on Article 4.1 of the lease to void the lease pursuant to Checie is meritless.
{¶54} Further, even though Article 4.1 of the lease is contrary to law, and,
therefore, unenforceable, the lease itself is not void as a matter of law. See Morrow
Cty. Airport Auth. v. Whetstone Flyers, Ltd., 112 Ohio St.3d 419, 2007-Ohio-255, 860
N.E.2d 733, ¶9 (“The court of appeals cites the Eleventh District Court of Appeals for
the proposition that contracts made in violation of state statute or in disregard of such
statutes are void. See Benefit Servs. of Ohio, Inc. Trumbull Cty. Commrs., 11th Dist.
No. 2003-T-0045, 2004-Ohio-5631, ¶33. But neither the General Assembly nor this
court has ever made such a declaration.”) Based on all of the above, Appellant’s
second assignment of error is sustained, as well.
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{¶55} Finally, it is important to note that, in Ohio, a lessor has a duty to
mitigate damages caused by a lessee’s breach of a commercial lease if the lessee
abandons the leasehold. Frenchtown Square Partnership v. Lemstone, Inc., 99 Ohio
St.3d 254, 2003-Ohio-3648, paragraph one of the syllabus. The lessor’s efforts to
mitigate must be reasonable, and the reasonableness should be determined by the
trial court. Id., at paragraph two of the syllabus. It appears on the record that
Appellant mitigated their damages, at least in part, insofar as MCESC executed a
lease with Appellant on July 19, 2007 for separate office space at Southwoods, but
enough facts do not appear of record for this Court to make any final determination
on the issue of damages. Therefore, the matter must be sent back to the trial court.
{¶56} Accordingly, Appellant’s assignments of error are sustained, and the
judgment of the trial court is reversed. This matter is remanded to the trial court on
the issue of damages.
Donofrio, J., concurs.
DeGenaro, J., concurs.