Title: Shampton v. Springboro

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Shampton v. Springboro, 98 Ohio St.3d 457, 2003-Ohio-1913.] 
 
 
SHAMPTON ET AL., APPELLEES, v. CITY OF SPRINGBORO ET AL., APPELLANTS. 
[Cite as Shampton v. Springboro, 98 Ohio St.3d 457, 2003-Ohio-1913.] 
Municipal corporations — Contracts — Failure to comply with contracting 
limitations set forth in a municipal charter renders any resulting 
agreement between the municipality and another party invalid. 
(No. 2001-2251 — Submitted January 22, 2003 — Decided April 30, 2003.) 
APPEAL from the Court of Appeals for Warren County, Nos. CA2000-08-
080 and CA2000-09-081. 
__________________ 
 
FRANCIS E. SWEENEY, SR., J. 
{¶1} 
In 1995, appellant, the city of Springboro, owned and operated the 
Heatherwoode Golf Course.  The city leased a restaurant on the golf course 
grounds to a private operator.  In January 1995, the city commenced a search to 
replace the departing restaurant operator and eventually selected Michael 
Shampton.  Shampton formed Two Victor Company, Ltd. (“Two Victor”), to 
lease and run the restaurant. 
{¶2} 
In early April 1995, Springboro City Manager Edward Doczy 
began negotiating with Shampton for a long-term lease agreement between Two 
Victor and the city.  After much negotiation, Doczy created a document titled 
“Heatherwoode Clubhouse Restaurant Negotiation Issues.”  This document 
addressed a number of long-term lease issues and listed a “[p]roposed lease” term 
of “15 years with 3-year re-negotiation provisions.”  The document contained 30 
numbered paragraphs detailing the terms of a long-term lease.  This document 
was not signed and, in fact, does not contain signature lines.  Paragraph 21 of the 
document states the following: 
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{¶3} 
“Property tax issues will be further discussed with the benefit of 
legal counsel.” 
{¶4} 
Likewise, paragraph 22 of the document states: 
{¶5} 
“Property and liability insurance will be further discussed with the 
benefit of legal counsel.” 
{¶6} 
Finally, paragraph 29 reads: 
{¶7} 
“Implementation schedule:  It is the intent of the City and the 
Operator to enter into a temporary agreement on or about April 21, 1995.  The 
Operator would take over existing food and beverage operations at the golf course 
and clubhouse on or before May 1, 1995.  The main restaurant would be open 
with lunch or diner [sic] menu and table service during the week of May 21, 1995.  
The City and Operator will develop completion dates for renovations and 
remodeling prior to the signing of a long-term lease.  The long-term lease is to be 
created and signed no later than ________.” 
{¶8} 
Unable to quickly complete a long-term agreement with Shampton, 
Doczy asked the Springboro City Council to issue a resolution authorizing him to 
enter into a temporary lease with Two Victor so that Two Victor could begin 
operating the restaurant before the start of the summer golf season.  In response, 
the city council passed Resolution No. R-95-32, which provided: 
{¶9} 
“A RESOLUTION AUTHORIZING THE CITY MANAGER TO 
ENTER INTO A TEMPORARY LEASE AGREEMENT WITH THE 
SELECTED OPERATOR OF THE GREENS RESTAURANT 
{¶10} “WHEREAS, after considering numerous applicants, the City 
Manager has tentatively selected an operator for the Greens Restaurant; and 
{¶11} “WHEREAS, negotiations are ongoing for a long-term lease with 
such operator; and 
{¶12} “WHEREAS, it is the desire of the City and the operator that the 
operator be permitted to enter upon the premises and commence restaurant 
January Term, 2003 
3 
operations, subject to the rental amounts shown on the attached Schedule of 
Rents, and in accord with other interim arrangements as determined by the City 
Manager; 
{¶13} “* * * 
{¶14} “The City Manager is hereby authorized to enter into a temporary 
lease agreement with the operator tentatively selected under such terms and 
conditions as he sees fit, monthly rental payments to be in accord with the 
attached Schedule of Rents. 
{¶15} “* * * 
{¶16} “The City Manager shall proceed as expeditiously as possible 
toward the completion of negotiations for a long-term lease agreement.”  
(Capitalization sic.) 
{¶17} Pursuant to the authority given to him under the resolution, Doczy, 
on behalf of the city, executed a temporary lease with Two Victor.  It provided 
that either party could terminate the lease without cause by giving 30 days’ notice, 
and stated that “[t]he parties specifically intend that this Lease Agreement shall 
continue in effect only until a long-term lease containing more detailed terms and 
conditions can be negotiated and executed.”  Despite this provision, no long-term 
lease was ever executed. 
{¶18} Shampton closed a restaurant that he had been operating elsewhere 
and, as the manager of Two Victor, began running the restaurant at 
Heatherwoode, making substantial financial investments in that facility.  In the 
summer of 1996, the city was apprised that the restaurant would probably not be 
exempt from property taxes if it were run by a private party under a lease.  Under 
the terms of the temporary lease, Two Victor was obligated to pay any taxes 
incurred by the restaurant, but when Doczy told Shampton that the restaurant 
would not be exempt from property taxes, Shampton told Doczy that he wanted a 
contract under which Two Victor would not be responsible for the property taxes. 
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{¶19} On October 25, 1996, Doczy sent a letter to Shampton notifying 
him that the city was terminating its temporary lease with Two Victor as of 
December 31, 1996, and would not enter into a long-term lease.  The letter 
presented Shampton with the option of entering into an agreement whereby the 
company managing the golf course would supervise Shampton.  It also stated that 
Doczy was willing to consider any alternate proposal that Shampton would make 
by November 15, 1996.  Shampton informed the city that he was not interested in 
running the restaurant under the supervision of the company managing the golf 
course operator, and Two Victor vacated the restaurant facilities in January 1997.  
{¶20} Shortly thereafter, Shampton and Two Victor, appellees herein, 
filed suit against the city, alleging breach of contract and promissory estoppel.  A 
jury returned a verdict in favor of appellees and awarded them $85,000 on their 
breach-of-contract claim and $120,000 on their claim of promissory estoppel.  
The court of appeals upheld the trial court’s judgment.  This court accepted 
jurisdiction upon the city’s discretionary appeal. 
{¶21} The dispute at hand requires us to determine whether the city 
manager, Doczy, had authority under the Springboro Municipal Charter and 
Resolution No. R-95-32 to bind the city to a long-term lease.  The city asserts that 
the lower courts erred in failing to recognize the contracting limitations that the 
charter and the resolution imposed on its city manager. 
{¶22} As a starting point, we look to Section 6.02 of the Springboro 
Charter, which states:  
{¶23} “The Manager shall have the following powers and duties:  
{¶24} “* * * 
{¶25} “(i) To arrange, prepare and sign contracts, franchises and 
agreements, in cooperation with the Village Solicitor/City Attorney, but no such 
contracts, franchises or agreements shall be legal until ratified or authorized by 
ordinance or resolution of the Council * * *.” 
January Term, 2003 
5 
{¶26} In Lathrop Co. v. Toledo (1966), 5 Ohio St.2d 165, 172-173, 34 
O.O.2d 278, 214 N.E.2d 408, we stated:  
{¶27} “Many times this court has held that no recovery can be had on a 
contract that is entered into contrary to one or more of the legislated requirements. 
* * * 
{¶28} “A thread running throughout the many cases the court has 
reviewed is that the contractor must ascertain 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.” 
{¶29} Here, the charter reads that the city manager is within his duties to 
arrange, prepare, and sign contracts.  But it also provides that any such contract is 
not legal until the city council, by ordinance or resolution, either ratifies the 
contract or authorizes the city manager to bind the city.  Appellees assert that 
Resolution No. R-95-32 authorized Doczy to enter into a long-term lease. We find 
that it did not. 
{¶30} Just as when interpreting statutory provisions, the starting point for 
discerning the meaning of a municipal resolution or ordinance is to look at its 
plain terms.  In the instant matter, the resolution expressly authorized Doczy to 
bind the city to a temporary lease agreement with Two Victor, stating that “[t]he 
City Manager is hereby authorized to enter into a temporary lease agreement.”  
The operative words in that phrase are “authorized” and “enter.”  Clearly, the 
word “authorized” is a delegation of power from the council to its city manager in 
accordance with Section 6.02 of the charter, while the word “enter” gives 
unequivocal permission for him to bind the city to a temporary lease.  In contrast, 
the next portion of the resolution instructs the city manager to “proceed as 
expeditiously as possible toward the completion of negotiations for a long-term 
lease agreement.”  The use of different language with respect to the long-term 
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lease is a clear indication that the resolution did not authorize the city manager to 
enter into such an agreement without further approval of its terms by city council. 
{¶31} Furthermore, in any event we find that Doczy never entered into a 
contract with Two Victor.  Although appellees admit that the city and Two Victor 
never executed a long-term lease, they assert that Doczy and Shampton agreed on 
the terms set forth in the Negotiation Issues document that Doczy created and 
thereby formed a contract.  However, the very substance of that document 
demonstrates that some material terms had not yet been agreed upon, including 
which party would be responsible for paying property taxes.  Therefore, there was 
no long-term agreement in existence that appellees could claim was breached. 
{¶32} Appellees were also successful in the trial court on their claim of 
promissory estoppel.  This court has adopted the doctrine of promissory estoppel 
that was set forth in the Restatement of the Law 2d, Contracts (1981), Section 90: 
{¶33} “A promise which the promisor should reasonably expect to induce 
action or forbearance on the part of the promisee or a third person and which does 
induce such action or forbearance is binding if injustice can be avoided only by 
enforcement of the promise.”  See Ed Schory & Sons, Inc. v. Soc. Natl. Bank 
(1996), 75 Ohio St.3d 433, 439, 662 N.E.2d 1074. 
{¶34} 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-
January Term, 2003 
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Ohio-3202, 2002 WL 1396744.  Since state and local laws are readily 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. 
{¶35} 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. 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. 
{¶36} In summary, there was never an agreement to the terms of a long-
term lease, and even if an agreement had been reached, it would be invalid 
because Doczy, as evident in the charter and Resolution No. R-95-32, did not 
have authority to enter into a long-term lease.  Thus, appellees’ claims for breach 
of contract and promissory estoppel are without merit.  Accordingly, we reverse 
the judgment of the court of appeals. 
Judgment reversed. 
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MOYER, 
C.J., 
RESNICK, 
WHITMORE, 
LUNDBERG 
STRATTON 
and 
O’CONNOR, JJ., concur. 
 
PFEIFER, J., dissents. 
 
BETH WHITMORE, J., of the Ninth Appellate District, sitting for COOK, J. 
__________________ 
 
PFEIFER, J., dissenting. 
{¶37} I trust the jury verdict in this case.  Resolution No. R-95-32 
required the city manager to finalize a long-term agreement with Shampton: “The 
City Manager shall proceed as expeditiously as possible toward the completion of 
negotiations for a long-term lease agreement.”  By charter, the city manager has 
within his enumerated powers the ability “[t]o arrange, prepare and sign 
contracts,” although “no such contracts * * * shall be legal until ratified or 
authorized by ordinance or resolution of the Council * * *.”  The jury heard 
testimony from council members and found that city council had indeed 
authorized the city manager to enter into a long-term lease with Shampton.  The 
jury found that there had been a meeting of the minds between Shampton and the 
city manager.  As a contract that was authorized by city council, the agreement 
entered into between Shampton and the city manager was valid. 
{¶38} At the very least, the city council gave the city manager the 
authorization to negotiate the long-term lease.  As part of his negotiations, the city 
manager made certain representations to Shampton, including the representation 
that the written lease was forthcoming.  The jury found that the city manager’s 
representations induced Shampton to act to his detriment.  As those 
representations were authorized by the city council’s resolution, the jury’s verdict 
should stand. 
__________________ 
 
David A. Chicarelli and John D. Smith, for appellees. 
January Term, 2003 
9 
 
Calfee, Halter & Griswold, L.L.P., Mark I. Wallach and Maura L. Hughes; 
Eckert & Eckert Co., L.P.A., Roger C. Eckert and Michael C. Eckert, for 
appellant. 
 
Barry M. Byron and Stephen L. Byron, urging reversal for amicus curiae 
Ohio Municipal League. 
 
Michael H. Cochran, urging reversal for amicus curiae Ohio Township 
Association. 
__________________