W. Res. Academy v. Franklin

2013 Ohio 4449

• Court: Ohio Court of Appeals
• Decided: October 7, 2013
• Docket: 2012CA00207
• Status: Published

Opinion

[Cite as W. Res. Academy v. Franklin, 2013-Ohio-4449.]

COURT OF APPEALS STARK COUNTY, OHIO FIFTH APPELLATE DISTRICT

WESTERN RESERVE ACADEMY : JUDGES: : : Hon. W. Scott Gwin, P.J. Plaintiff - Appellant : Hon. John W. Wise, J. : Hon. Craig R. Baldwin, J. : -vs- : : ROBERT J. FRANKLIN, ET AL. : Case No. 2012CA00207 : : Defendants - Appellees : OPINION

CHARACTER OF PROCEEDING: Appeal from the Stark County Court of Common Pleas, Case No. 2012CV00579

JUDGMENT: Reversed and Remanded

DATE OF JUDGMENT: October 7, 2013

APPEARANCES:

For Plaintiff-Appellant For Defendants-Appellees

JASON K. WRIGHT ROBERT J. FRANKLIN, PRO SE KEVIN C. SUSMAN LISA FRANKLIN, PRO SE Weltman, Weinberg & Reis Co., L.P.A. 425 N. Front Street # 407 323 West Lakeside Avenue, Suite 200 Columbus, OH 43215 Cleveland, OH 44113 Stark County, Case No. 2012CA00207 2

Baldwin, J.

{¶1} Plaintiff-appellant Western Reserve Academy appeals from the October

16, 2012 Judgment Entry of the Stark County Court of Common Pleas holding that

plaintiff-appellant was not entitled to damages from defendants-appellees Jeff and Lisa

Franklin.

STATEMENT OF THE FACTS AND CASE

{¶2} Appellant Western Reserve Academy operates a boarding school located

in Hudson, Ohio. For the 2006-2007 school year, the total cost for tuition, room and

board and all meals for a boarding student was $34,000.00 not including a $2,000.00

non-refundable deposit.

{¶3} On or about April 6, 2006, appellees signed an Enrollment Contract with

appellant enrolling their son1 Nicholas and paid the $2,000.00 non-refundable deposit.

The Enrollment Contract stated, in relevant part, as follows: “”The undersigned agrees

that enrollment under this Enrollment Contract may be cancelled by the undersigned

without payment of damages other than forfeiture of the Non-Refundable Deposit only

by delivering or mailing to the School prior to July 1, 2006 a written notice of withdrawal.

In the event written notice of withdrawal is delivered or mailed on or after July 1, 2006

but before September 1, 2006, the undersigned agree to remain obligated to pay the

First Payment. The undersigned shall remain obligated to pay the entire tuition fee in full

in the event of absence, dismissal or withdrawal on or after September 1, 2006.” The

first payment was for $17,000.00.

{¶4} Appellees also chose to pay an additional sum of $1,428.00 to participate

in a Tuition Refund Plan which was issued by One Beacon Insurance. The Plan 1 Nicholas is appellee Jeff Franklin’s stepson. Stark County, Case No. 2012CA00207 3

provided that in the event of a non-medical withdrawal, it would pay ”50% of the

unused yearly insured fees provided the student has attended more than fourteen

consecutive calendar days beginning with the student’s first class day of attendance in

the academic year.”

{¶5} There is no dispute that on October 26, 2006, appellees withdrew

Nicholas from school for non-medical reasons. In a letter to appellant, appellee Jeff

Franklin indicated that they were withdrawing Nicholas due to a custody dispute

involving his father. After appellees submitted a Tuition Refund Plan claim through

appellant, the plan, on or about November 15, 2006, paid $13,868.42 to appellant.

{¶6} On February 21, 2012, appellant filed a complaint against appellees,

alleging that appellees were indebted to appellant in the amount of $9,322.98 for tuition.

{¶7} Subsequently, a bench trial was held on September 27, 2012. The trial

court, pursuant to Judgment Entry filed on October 16, 2012, found that although

appellant had proved that appellees breached the contract with appellant, appellant was

not entitled to damages. The trial court found that it was “virtually impossible” for

Nicholas to complete the school year away from home due to the major custody dispute

between his parents. According to the trial court, “[i]t’s easy to see how a child being

torn between both parents, scared, frightened, and removed from the presence of both

parents during this time period certainly could become ill. The uncertainty of his status

with his parents alone would cause an extended amount of trauma.” The trial court also

found the contract to be both unreasonable and unconscionable and that the amount

due should be “viewed as more of a penalty.”

{¶8} Appellant now raises the following assignments of error on appeal: Stark County, Case No. 2012CA00207 4

{¶9} THE TRIAL COURT ERRED WHEN IT FOUND THAT THE

ENROLLMENT CONTRACT WAS UNCONSCIONABLE AND THAT THE REMAINING

BALANCE SHOULD BE VIEWED AS A PENALTY.

{¶10} THE TRIAL COURT ERRED WHEN IT FOUND THAT THE APPELLEE’S

(SIC) BREACH OF CONTRACT WAS EXCUSED BY THE DOCTRINE OF

IMPOSSIBILITY.

I

{¶11} Appellant, in its first assignment of error, argues that the trial court erred in

finding that the Enrollment Contract was unconscionable and that the remaining balance

was a penalty. We agree.

{¶12} Under Ohio law, a contract clause is unconscionable where there is the

absence of meaningful choice on the part of one of the parties to a contract, combined

with contract terms that are unreasonably favorable to the other party. Collins v. Click

Camera and Video, Inc., 86 Ohio App.3d 826, 834, 621 N.E.2d 1294 ( 2nd Dist 1993).

{¶13} Unconscionability embodies two separate concepts: (1) substantive

unconscionability, i.e. “those factors which relate to the contract terms themselves and

whether they are commercially reasonable,” and procedural unconscionability, i.e.

“those factors bearing on the relative bargaining position of the contracting parties.” Id.

In Collins, the court explained the difference between the two concepts as follows:

{¶14} “Substantive unconscionability involves those factors which relate to the

contract terms themselves and whether they are commercially reasonable. Because the

determination of commercial reasonableness varies with the content of the contract

terms at issue in any given case, no generally accepted list of factors has been Stark County, Case No. 2012CA00207 5

developed for this category of unconscionability. However, courts examining whether a

particular limitations clause is substantively unconscionable have considered the

following factors: the fairness of the terms, the charge for the service rendered, the

standard in the industry, and the ability to accurately predict the extent of future

liability.....

{¶15} “Procedural unconscionability involves those factors bearing on the

relative bargaining position of the contracting parties, e.g., ‘age, education, intelligence,

business acumen and experience, relative bargaining power, who drafted the contract,

whether the terms were explained to the weaker party, whether alterations in the printed

terms were possible, whether there were alternative sources of supply for the goods in

question.’” Id. at 834. (Citations omitted).

{¶16} The issue of unconscionability is a question of law. See Ins. Co. of North

Am. v. Automatic Sprinkler Corp. , 67 Ohio St.2d 91, 98, 423 N.E.2d 151 (1981).

{¶17} In the case sub judice, there was no evidence that appellees lacked a

meaningful choice or that they were in an unequal bargaining position in terms of the

contract. There was no evidence of coercion or duress or that appellees were pressured

into signing the contract. At the trial, appellees did not call any witnesses.

{¶18} Moreover, the Ohio Supreme Court considered the issue of whether a

cancellation provision was unenforceable as a penalty in Lake Ridge Academy v.

Carney, 66 Ohio St.3d 376, 613 N.E.2d 183 (1993). In such case, a private school

brought an action against a student’s father for breach of contract. The father had

signed a contract with the school to enroll his son for the 1989-1990 school year. The

contract contained a cancellation date of August 1, 1989 and stated that if enrollment Stark County, Case No. 2012CA00207 6

was cancelled after such date, the parent or guardian for the child would be responsible

for the full tuition, books and supplies charges. On August 7, 1989, the defendant

cancelled the contract and the school sued for breach of contract, seeking the balance

due under the contract.

{¶19} After the trial court entered judgment in favor of the defendant on the basis

that he had substantially complied with the cancellation provision and the school was

not harmed by the late withdrawal, the school appealed. The Court of Appeals reversed,

finding that the defendant had breached the contract and that the clause requiring the

defendant to pay the full tuition was not punitive, but rather constituted a valid liquidated

damages provision.

{¶20} In affirming the judgment of the Court of Appeals, the Ohio Supreme Court

stated, in relevant part, as follows: “when Carney and Lake Ridge entered into their

contract in March 1989, the damages that Lake Ridge might suffer as a result of a

breach by Carney were ‘uncertain as to amount and difficult of proof.’ As the court of

appeals explained, Lake Ridge goes through a long budgeting process which begins

each year in January and ends in the fall. The tuition money paid by students is pooled

and goes towards staff salaries and benefits, department budgets, student materials,

maintenance, improvements, and utilities. Trial testimony reveals that the school budget

process is often an uncertain science; it is quite clear that Lake Ridge would be unable

to calculate and prove the precise damages caused by the loss of one student's

tuition…..

{¶21} “Finally, damages in the amount of the full tuition are not disproportionate

to the actual damages suffered by Lake Ridge. Because by August 1 the Lake Ridge Stark County, Case No. 2012CA00207 7

budget was nearly finalized and it assumed revenues which included Carney's full

tuition, it is not unreasonable to conclude that Lake Ridge's actual damages were the

equivalent of one full tuition. The headmaster testified that if Lake Ridge enjoyed any

savings from Michael Carney's withdrawal, they were ‘minuscule.’ While we cannot say

that Lake Ridge's actual damages were exactly equivalent to full tuition, we can say with

conviction that full tuition is not disproportionate to the school's actual damages.” Id at

383-384.

{¶22} Similarly, at the trial in this case, John Tortelli, appellant’s chief financial

officer, testified that appellant hired teachers and staff based on its projections of how

many students will attend the school year. He further testified on redirect that the

school had only 403 students and that if a student withdrew after the start of the school

year, it was not the practice of people to move students in the middle of a semester.

Tortelli also testified that the budget for the school year was based on the money

coming in for Nicholas’ spot.

{¶23} Based on the foregoing, we find that the trial court erred in finding that the

Enrollment Contract was unconscionable and that the remaining balance was a penalty.

{¶24} Appellant’s first assignment of error is, therefore, sustained.

II

{¶25} Appellant, in its second assignment of error, argues that the trial court

erred in finding that appellees’ performance of the contract was impossible. We agree.

{¶26} Impossibility of performance occurs where, after the contract is entered

into, an unforeseen event arises rendering impossible the performance of one of the

contracting parties. State v. Curtis, 2nd Dist. Greene No. 2008CA22, 2008–Ohio–5643. Stark County, Case No. 2012CA00207 8

Performance may be impracticable because it will involve a risk of injury to person or

property that is disproportionate to the ends to be attained by performance. B–Right

Trucking Co. v. Warfab Field Machining and Erection Corp., 11th Dist. Trumbull

No.2000–T–0072, 2001–Ohio–8724. “Impracticability” means more than “impracticality.”

Id. at 5. A mere change in the degree of difficulty or expense does not amount to

impracticability. Id. A party is expected to use reasonable efforts to surmount obstacles

to performance, and performance is only impracticable if it is so in spite of such efforts.

Id.

{¶27} In the case sub judice, there is no dispute that Nicholas was not

withdrawing due to medical reasons. Both appellees testified that he did not withdraw

because he was ill or had any medical issues. Appellee Robert Franklin testified that

Nicholas withdrew because he was not happy at the school and admitted writing a letter

to appellant indicating that Nicholas was withdrawing due to a domestic dispute

involving his father.

{¶28} Appellees failed to provide any evidence indicating that there was an

impossibility of performance or prevention of performance. Moreover, there were no

unforeseeable events that prevented appellees from complying with the terms of the

contract in this case.

{¶29} Appellant’s second assignment of error is, therefore, sustained. Stark County, Case No. 2012CA00207 9

{¶30} Accordingly, the judgment of the Stark County Court of Common Pleas is

reversed and this matter is remanded for further proceedings consistent with our

Opinion.

By: Baldwin, J.

Gwin, P. J. and

Wise, J. concur.

HON. CRAIG R. BALDWIN

HON. W. SCOTT GWIN

HON. JOHN W. WISE

CRB/dr [Cite as W. Res. Academy v. Franklin, 2013-Ohio-4449.]

IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO

FIFTH APPELLATE DISTRICT

WESTERN RESERVE ACADEMY : : Plaintiff - Appellant : : -vs- : JUDGMENT ENTRY : ROBERT J. FRANKLIN, ET AL. : : Defendant - Appellee : CASE NO. 2012CA00207

For the reasons stated in our accompanying Memorandum-Opinion, the

judgment of the Court of Common Pleas of Stark County, Ohio is reversed and this

matter is remanded. Costs assessed to appellees.