Vandercar, LLC v. Port of Greater Cincinnati Dev. Auth.

• Docket Number: S. C-210643,C-210665,C-220130
• Decision Date: 09 September 2022
• Citation: 196 N.E.3d 878
• Parties: VANDERCAR, LLC, Plaintiff-Appellee/Cross-Appellant, v. The PORT OF GREATER CINCINNATI DEVELOPMENT AUTHORITY, Defendant-Appellant/Cross-Appellee.
• Court: Ohio Court of Appeals

196 N.E.3d 878

VANDERCAR, LLC, Plaintiff-Appellee/Cross-Appellant,

v.The PORT OF GREATER CINCINNATI DEVELOPMENT AUTHORITY, Defendant-Appellant/Cross-Appellee.

NOS. C-210643

C-210665

C-220130

Court of Appeals of Ohio, First District, Hamilton County.

Date of Judgment Entry on Appeal: September 9, 2022

Taft Stettinius & Hollister LLP, W. Stuart Dornette, Russell S. Sayre and Beth A. Bryan, Cincinnati, for Plaintiff-Appellee/Cross-Appellant.

Calfee, Halter & Griswold LLP, Mitchell G. Blair, Matthew A. Chiricosta, Cleveland and David T. Bules, Cincinnati, for Defendant-Appellant/Cross-Appellee.

OPINION.

Myers, Presiding Judge.

{¶1} The deterioration of the Millennium Hotel in downtown Cincinnati had long been an obstacle to the city's efforts to attract convention business. In 2019, Vandercar, LLC, entered into a $36 million purchase contract with the hotel's former owners in order to facilitate the redevelopment of the hotel "as a four-star (or better) convention center hotel." Several months later, Vandercar assigned its interest in the contract to the Port of Greater Cincinnati Development Authority ("the Port") in exchange for two potential fees totaling $7.5 million. The Port acquired the hotel property and paid Vandercar one of its potential fees, in the amount of $2.5 million. However, although demolition on the Millennium Hotel was completed in 2022, the dust has not yet settled on the parties’ dispute over the Port's obligation to pay Vandercar the second fee of $5 million.

{¶2} Vandercar sued the Port for breach of contract and bad faith, claiming it was owed additional fees when the Port issued revenue bonds that included funds for demolition of the hotel and other activities that Vandercar claimed were for redevelopment. The trial court granted summary judgment in Vandercar's favor on its breach-of-contract claim in the amount of $5 million, but denied its motion for prejudgment interest. The court granted the Port's motion for partial judgment on the pleadings on Vandercar's bad-faith claim. Both parties have appealed.

{¶3} Because we find that the contract is clear and unambiguous in requiring the Port to pay Vandercar its $5 million fee, we affirm the trial court's grant of summary judgment in favor of Vandercar on its breach-of-contract claim. And because prejudgment interest cannot be assessed against the Port as an arm of the state in the absence of statutory or contractual authority, we affirm the trial court's denial of Vandercar's motion for prejudgment interest. Finally, because Vandercar's bad-faith claim was subsumed in its breach-of-contract claim, we hold that the trial court properly dismissed the bad-faith claim as a separate, stand-alone cause of action. However, because we find that Vandercar has alleged that the Port acted in bad faith, we reverse the trial court's granting of judgment on the pleadings as to the recovery of attorney fees and remand for further proceedings.

Factual Background

{¶4} On July 1, 2019, Vandercar entered into a Purchase and Sale Agreement ("the Purchase Contract") with Cincinnati S.I. Co., the owner of the Millennium Hotel, to purchase the property for $36 million. The Purchase Contract was amended on August 27, 2019, and on September 13, 2019.

{¶5} On October 4, 2019, Vandercar assigned its rights under the Purchase Contract to the Port in an Assignment and Assumption Agreement, and the parties entered into an Agreement Regarding Assignment ("the Agreement"). The Agreement provided:

THIS AGREEMENT REGARDING ASSIGNMENT (the "Agreement ") is entered into effective as of the 4th day of October, 2019 (the "Effective Date "), by and between VANDERCAR, LLC, an Ohio limited liability company ("Vandercar "), and THE PORT OF GREATER CINCINNATI DEVELOPMENT AUTHORITY, a port authority and political subdivision and body corporate and politic duly organized and validly existing under the laws of the State of Ohio (" Port "), under the following circumstances:

A. Vandercar is a party to that certain Purchase and Sale Agreement with Cincinnati S.I. Co., an Ohio limited partnership ("Seller ") dated as of July 1, 2019, as amended by that certain First Amendment to Purchase and Sale Agreement dated as of August 27, 2019, and as further amended by that Second Amendment to Purchase and Sale Agreement dated as of September 13, 2019 (as so amended, and as may be further amended and/or supplemented from time to time, together, the "Contract "). A true, correct, and complete copy of the Contract is attached hereto as Exhibit A and incorporated herein.

B. Under the Contract, among other things, Vandercar has agreed to purchase, and Seller has agreed to sell, certain Real Property (as such term is defined in the Contract)¹ located in the City of Cincinnati, Hamilton County, Ohio, on which is located the Millennium Hotel Cincinnati.

C. Port wishes to acquire the Real Property in order to redevelop, or cause to be redeveloped, the Real Property for a new hotel (the "Project "), which such acquisition of the Real Property may be financed with the proceeds of revenue bonds issued by the Port Authority (the "Property Acquisition Bonds "), and such redevelopment will be financed with the proceeds of revenue bonds issued by the Port Authority (the "Redevelopment Bonds "). The Property Acquisition Bonds and the Redevelopment Bonds may be issued at the same time as part of one issuance of bonds or, alternatively, may be issued on separate dates as determined by the Port.

{¶6} After setting forth certain obligations of the parties, the Agreement provided for certain payments to Vandercar. One of these was to occur upon the closing of the property ("Development Fee"), and another was to be paid upon the issuance of Redevelopment Bonds ("Redevelopment Fee"). Specifically, the Agreement provided in relevant part:

D. Port desires to assume Vandercar's rights and obligations under the Contract, and Vandercar desires to assign such rights and obligations to Port, subject, however, to the terms, conditions, and provisions of this Agreement.

1. Development Fee and Expenses in Connection with the Property Acquisition and the Contract.

a. On the Closing Date of the acquisition of the Real Property, Port shall pay Vandercar:

i. a "Development Fee" of $2,500,000.00;

ii. An amount of $250,000.00 to reimburse Vandercar for its payment to the Seller of the Initial Deposit required under the Contract;

iii. An amount not to exceed $175,000.00 to reimburse Vandercar for the fees and expenses incurred by Vandercar in connection with the initial due diligence with respect to the Contract, such amount to be paid to be evidenced by invoices provided to the Port with sufficient detail as to the work performed; and

iv. An amount not to exceed $47,500.00 to reimburse Vandercar for the fees and expenses of Government Solutions in connection with the Contract.

* * *

2. Additional Vandercar Redevelopment Fee. The Port shall use commercially reasonable efforts to issue the Redevelopment Bonds within one year from the date of the closing of the purchase of the Real Property[.] * * * The Port shall not use or allow to be used any other method of financing the development of the Project unless such financing causes and allows for the payment of the $5,000,000.00 redevelopment fee described below. If the closing of the Redevelopment Bonds occurs within that one-year period (as may be extend (sic) due to force majeure event), on such date of closing of the Redevelopment Bonds[,] the Port shall pay Vandercar an additional amount of $5,000,000.00.

(Emphasis sic.)

{¶7} On January 15, 2020, the Port adopted Resolution No. 2020-04 ("the January Resolution"), authorizing the issuance and sale of revenue bonds. The January Resolution provided:

WHEREAS, the Port of Greater Cincinnati Development Authority (the "Port"), * * *, authorized and empowered * * * (1) to issue revenue bonds in one or more series for the purpose of financing costs of acquiring, constructing, installing, equipping or improving "port authority facilities," as defined in Section 4582.21, Ohio Revised Code

* * *

WHEREAS, pursuant to Board Resolution No. 2019-26 adopted on September 27, 2019, the Port entered into an Agreement Regarding Assignment dated as of October 4, 2019, with Vandercar, LLC ("Vandercar"), under which the Port accepted an assignment of Vandercar's rights, interests and obligations under a Purchase and Sale Agreement dated as of July 1, 2019 (the "PSA") with Cincinnati, S.I. Co., as amended, and pursuant thereto, the Port intends to acquire and demolish² (i) the Millennium Hotel, Cincinnati, Hamilton County, Ohio and certain other buildings and improvements located upon the Project Site (defined herein), and (ii) to evaluate the timing, scope and size of the construction of new convention facilities, including a new hotel, and an expansion of the convention center on all or a portion of the Project Site (collectively, the "Project"); and

WHEREAS, upon advice from the Port's staff, this Board has determined that it is necessary and proper and in the best interest of the Port to issue revenue bonds in one or more series in the maximum aggregate principal amount of $59,000,000 ("Bonds") in anticipation of the issuance of additional revenue bonds to pay for the costs of the Project[.]

{¶8} The January Resolution then authorized the issuance of the bonds. In it, the Port agreed to use the bond proceeds to pay a portion of the Project's costs. The Project is defined in the January Resolution as acquisition, demolition, and evaluation of the site.

{¶9} Specifically, the January Resolution provided:

The Port will use the proceeds of the Bonds to pay a portion of the costs of the Project and pay or reimburse related costs, to pay certain costs of issuance of the Bonds, to make the capitalized interest deposit, if any, and to fund a debt service fund if required by the Original Purchaser.

{¶10} On February 12, 2020, the Port adopted Resolution No. 2020-11 ("the February Resolution"...