Seasons Coal Co., Inc. v. City of Cleveland
| Decision Date | 06 January 1983 |
| Docket Number | 44123,83-LW-3346 |
| Parties | Seasons Coal Company, Inc., et al, APPELLEES, v. City of Cleveland, APPELLANT. |
| Court | Ohio Court of Appeals |
For plaintiff-appellees: John R. Climaco, Paul S. Lefkowitz.
For defendant-appellant: Thomas E. Wagner, Mark I. Wallach Michael A. Pohland Richard F. Horvath.
JOURNAL ENTRY AND OPINION
This cause came on to be heard upon the pleading and the transcript of the evidence and record in the Common Pleas Court, and was argued by counsel; on consideration whereof, the court certifies that in its opinion substantial justice has not been done the party complaining, as shown by the record of the proceedings and judgment under review, and judgment of said Common Pleas Court is reversed. Each assignment of error was reviewed by the court and upon review the following disposition made:
SEE OPINION, JACKSON, J., ATTACHED HERETO AND INCORPORATED BY REFERENCE
The judgment of the trial court awarding damages to the plaintiff Seasons Coal Company is reversed and judgment is entered for the defendant City on the complaint. The decision of the trial court granting judgment to plaintiff on the defendant's counterclaim is also reversed, and judgment entered for defendant in the amount of $1.00 for nominal damages, and punitive damages are awarded on its counterclaim and Seasons Coal. Because such damages are awarded, this cause is remanded to the trial court with instructions to determine the proper amount of said damages.
It is, therefore, considered that said appellant(s) recover of said appellee(s) its costs herein.
It is ordered that a special mandate be sent to said 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. Exceptions.
(See Concurring Opinion attached to Journal Entry and Opinion)
(See Dissenting Opinion attached to Journal Entry and Opinion)
N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time it will become the judgment and order of the court and time period for review will begin to run.
SEASONS COAL COMPANY, INC., ET AL, Plaintiff-Appellees,
v.
CITY OF CLEVELAND, Defendant-Appellant.
Court of Appeals of Ohio, Cuyahoga County.
January 6, 1983.
For Plaintiff-Appellees: JOHN R. CLIMACO PAUL S. LEFKOWITZ 1500 Leader Building Cleveland, Ohio 44114.
For Defendant-Appellant: THOMAS E. WAGNER MARK I. WALLACH MICHAEL A. POHL RICHARD F. HORVATH Room 106 - City Hall 601 Lakeside Avenue Cleveland, Ohio 44114.
OPINION
1. In an action for fraud, the plaintiff must prove (1) that defendant made an actual or implied false representation of or concealment of, a material fact, (2) with knowledge of the falsity, or such utter disregard for the truth that knowledge may be inferred, (3) with the intention to induce the plaintiff to rely upon the representation, and (4) that the plaintiff did rely on the representation to his or her detriment.
2. Where the specifications for a public contract for the purchase of coal provide that each bidder must submit a bid containing an affidavit from a mine owner, attesting to the souree of the coal and that the coal will meet the standard of quality required in the contract, and where it is shown that the successful bidder submitted with its bid an affidavit containing the forged signature of a mine owner, without the knowledge or consent of the mine owner, and where it is demonstrated that the coal delivered by the successful bidder originated from a different mine and was substantially below the quality called for in the contract, the contract is void for fraud. Moreover, such bid is void because it violates provisions of the Cleveland City Charter which require competitive bidding on public contracts.
3. Where a purchaser of coal sues the seller to recover for damage to machinery and for increased operating expenses caused by nonconforming and substandard quality coal delivered by the seller, it is incumbent upon the purchaser to present evidence demonstrating a reasonably reliable estimate of the monetary damages sustained. In the absence of such evidence, the purchaser is entitled to nominal damages only.
4. In an action for fraud, the plaintiff is entitled to punitive damages where the fraud is demonstrated to be particularly gross or egregious.
5. Where a contract for the sale of coal to a municipality is declared void because of fraud perpetrated by the seller or because of the seller's evasion of provisions of the city charter requiring competitive bidding, the seller is not entitled to restitution or quantum merit for the value of the coal already delivered under the contract.
This is an appeal from a judgment by the Court of Common Pleas, awarding damages to the plaintiff-appellee Seasons Coal Company, Inc., and Alexander Coal Company against the defendant-appellant City of Cleveland, in the amount of $1,113,115.10.
This lawsuit arose from a contract between the City and the Seasons Coal Company, under which Seasons agreed to supply all the coal required for operation of the Cleveland Municipal Electrical Light Plant (MELP) for a period of one year. The contract was let after competitive bidding, as required by the charter and ordinances of the City of Cleveland. Plaintiff Seasons Coal later assigned a part of its claim to the Alexander Coal Company.®1¯
Footnote 1 The City of Cleveland alleged that this assignment of contract rights was not made in accordance with Cleveland Ordinance No. 185.35. In view of the disposition of the parties' claim by this Court of Appeals, it is not necessary to address the validity of the assignment to Alexander Coal Company.
On May 20, 1974, the Cleveland City Council enacted an ordinance authorizing the Director of Public Utilities to draft a requirements contract to purchase coal for the Municipal Electric Light Plant. Advertisements for bids appeared in the City Record on February 5 and 12, 1975. The bids were opened February 28, 1975, and Seasons Coal was found to be the lowest and best bidder.
On March 26, 1975, the Board of Control awarded the contract to Seasons Coal, Inc. The duration of the contract was from March 26, 1975 to March 25, 1976.
The specifications contained three alternative options for the quality of coal to be supplied under the contract. Option I was high B.T.U. coal (a minimum of 12,200 B.T.U.). Option II was high carbon content. Option III was low sulfur. Seasons Coal promised to provide Option I coal to the City. Option I coal was to meet the following standards on an "as received" basis: 3 [See original decision for chart]
In addition, the specifications required the coal to be "reasonably free from impurities, bone, slate, dirt, moisture, or excessive dust." (Paragraph C-2 of contract).
The City agreed to pay Seasons $19.00 per ton for the coal, plus $5.63 per ton for transportation, for a total of $24.63 per ton.
Seasons Coal delivered 67,000 tons of coal to the City between March 26 and August 22, 1975. During that period the City paid Seasons approximately $800,000.00 under the contract. On September 12, 1975, the City terminated the contract with Seasons Coal because the coal Seasons had delivered was substantially inferior to the quality required under the contract. Seasons, and its major supplier, the Alexander Coal Company, then initiated this lawsuit against the City of Cleveland, to recover the remainder of the funds allegedly owed to it under the contract, a sum in excess of $800,000.00 plus interest from 1975.
The City raised three defenses to this claim. First, it contended that the contract was void for fraud. Second, it contended that the contract was void under City Charter Section 108 because Seasons Coal had willfully evaded the competitive bidding laws of the City of Cleveland in procuring the contract. Third, the City filed a counterclaim, in which it alleged that it was entitled to both compensatory and punitive damages or to a set-off because the inferior quality of the coal had damaged City equipment, increased labor costs and required the City to purchase electricity from the Cleveland Electric Illuminating Company.
The trial court found for Seasons Coal on its complaint, and denied the City's counterclaim. On appeal, the City again raises the issues of fraud, Charter Section 108, and consequential damages, in its three assignments of error.®2¯ The third assignment of error, dealing with the City's claim of fraud, is discussed first. At the close of this opinion, the alternative claim of appellee Seasons Coal Company for restitution is considered.
Footnote 2 The appellant's assignments of error are as follows:
The City contends that the contract for...
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