Court Opinion

ID: 3724808
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:54:44.790596+00
Date Added: 2024-06-11T18:01:29.701745
License: Public Domain

I would hold that the parties' lease agreement is not ambiguous and that it does not include a promise by the County that local governments will never collect admissions taxes from the lessee, LaConte. At best, the clause at issue reflects a mutual mistake concerning the power of Willoughby Hills and Highland Heights to collect admissions taxes from activities on County-owned property. This *Page 815 
mistake might make the contract voidable, but it does not require the County to reimburse the lessee. Therefore, I would reverse the trial court's ruling here.
In construing the parties' contract, we must examine the language they used first. If the terms of the contract are clear and unambiguous, we must construe those terms as a matter of law. Only if we determine that the contract language is ambiguous can we venture beyond the terms of the agreement to examine the parties' intent through other evidence. Where terms in an existing contract are clear and unambiguous, this court cannot in effect create a new contract by finding an intent not expressed in the clear language employed by the parties. Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241, 246.
I do not find the language of the contract ambiguous. In a section of the lease agreement relating to the calculation of rent, the lease provides:
  The premises under this Lease are owned by the COUNTY, have been removed from the tax rolls and are not subject to real estate or amusement taxation. However, it is contemplated that LESSEE shall be subject to Ad Valorem taxation upon all personal property owned by LESSEE and used on or in connection with the leased Premises. LESSEE covenants to pay such taxes as may be lawfully assessed against such personal property.
If the parties had intended to require the County to pay admissions taxes, they certainly knew how to do it. LaConte's specific promise, in the third sentence, to pay ad valorem taxes makes it difficult to imply a promise by the County to pay admissions taxes in the first sentence. Furthermore, if the parties had intended that the County would indemnify LaConte for any admissions taxes LaConte was required to pay, they also knew how to do that. There is an express indemnification clause elsewhere in the agreement requiring LaConte to indemnify the County from liability for injuries or property damage that occurs on the premises. There is no similar indemnification clause requiring the County to indemnify LaConte for admissions taxes.
The majority suggests that a construction which does not include a promise to pay renders the contract term meaningless. I disagree. Not every term in a contract must be a promise or a warranty to have meaning. I read this term as an expression of the parties' understanding of the state of the law at the time the contract was made, a basic assumption upon which the contract was based. Unfortunately, the parties were wrong. The question now is, who bears the burden of that error. I do not agree with the majority's conclusion that the County agreed to bear it.
In my view, the majority has contorted the mistake analysis in order to create a self-fulfilling prophesy. The majority assumes that the County is the party *Page 816 
adversely affected by the parties' mistake because it contractually agreed to pay admissions taxes. This assumption demands a circular analysis: that the county cannot avoid the contract on the ground of mistake because it agreed to bear the risk that admissions taxes would be assessed.
The proper approach would recognize that LaConte is the party adversely affected by the mistake because it is required by law to collect admissions taxes from its customers and remit them to the cities. LaConte therefore can avoid the contract unless it bears the risk of the mistake.7
LaConte did not expressly agree to pay admissions taxes in the contract, so we cannot say the contract allocated that risk to it. The issue then becomes: should the risk continue to be allocated to LaConte because:
  (b) [LaConte was] aware, at the time the contract [was] made, that [it had] only limited knowledge with respect to the facts to which the mistake relates but [treated its] limited knowledge as sufficient, or
  (c) the risk [should be] allocated to [LaConte] by the court on the ground that it is reasonable in the circumstances to do so.
See Restatement, Second, of the Law of Contracts (1981), section 154.
With respect to the doctrine of conscious ignorance, comment c to section 154 of the Restatement states:
  c. Conscious Ignorance. Even though the mistaken party did not agree to bear the risk, he may have been aware when he made the contract that his knowledge with respect to the facts to which the mistake relates was limited. If he was not only so aware that his knowledge was limited but undertook to perform in the face of that awareness, he bears the risk of the mistake. It is sometimes said in such a situation that, in a sense, there was not mistake but conscious ignorance.
The illustration accompanying this comment is illuminating:
  2. * * * A  proposes to B  during the negotiations the inclusion of a  provision under which the adversely affected party can cancel the contract in the event of a material error in the surveyor's report, but B refuses to agree to such a provision. The contract is not voidable by A, because A bears the risk of the mistake. *Page 817
A similar circumstance has happened here. By expressing their understanding, both parties recognized that there was a risk that admissions taxes would be charged but did not contractually allocate that risk. LaConte therefore bears it.
Even if LaConte did not bear the risk through conscious ignorance, I would find it was reasonable to allocate the burden to LaConte rather than the County. Unlike property taxes, the liability for admissions taxes does not attach to the land; rather, the ordinances require the person who collects an admission fee to collect the amusement tax from the customer. Because the tax is assessed on the activity, and LaConte is the party conducting the activity, it is reasonable to allocate the burden to LaConte.
For these reasons, I would reverse the trial court's decision and remand for the entry of a declaratory judgment in favor of the county. Accordingly, I dissent.
7 For purposes of this analysis, I will assume that the mistake concerns a basic assumption on which the contract was made and has a material effect on the agreed exchange of performances. These assumptions mean that the contract will be voidable by the party adversely affected by the mistake, LaConte, unless LaConte bears the risk of the mistake under the rules set forth in section 154 of the Restatement. Restatement, Second, of the Law of Contracts (1981), section 152(1).