Hadcock Properties, Inc. v. Mesar , 2013 Ohio 2033 ( 2013 )

[Cite as Hadcock Properties, Inc. v. Mesar, 2013-Ohio-2033.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF MEDINA )
HADCOCK PROPERTIES, INC. C.A. No. 12CA0054-M
Appellant
v. APPEAL FROM JUDGMENT
ENTERED IN THE
DAVID MESAR COURT OF COMMON PLEAS
COUNTY OF MEDINA, OHIO
Appellee CASE No. 09CIV0786
DECISION AND JOURNAL ENTRY
Dated: May 20, 2013
MOORE, Presiding Judge.
{¶1} Defendant-Appellant, Hadcock Properties, Inc., appeals from the February 1,
2012 judgment entry of the Medina County Court of Common Pleas. We reverse.
I.
{¶2} Hadcock Properties, Inc. owns a shopping center with six rental units in the City
of Brunswick. David Mesar rented the unit at 3843 Center Road for the purpose of running a
tanning salon called “Time to Tan.” Hadcock Properties, Inc. and Mr. Mesar entered into a lease
agreement for a period of three years beginning February 1, 1997, and ending January 31, 2000.
After the lease expired, the parties waited fourteen months before entering into a new lease. The
second lease was for a period of five years beginning April 1, 2001, and ending March 31, 2006.
After the second lease expired, the parties entered into a third lease for a period of five years
beginning June 1, 2006, and ending May 31, 2011. The record indicates that the second and
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third leases were not properly acknowledged and/or witnessed pursuant to the Statute of
Conveyances.
{¶3} In January of 2009, Mr. Mesar ended his tenancy with Hadcock Properties, Inc.
by moving out of the rental unit and issuing a final payment check in the amount of $1,100.00.
{¶4} Hadcock Properties, Inc. filed a complaint alleging breach of contract and
destruction of the premises and asking for attorney fees. Mr. Mesar filed an answer generally
denying the allegations in the complaint, and then filed an amended answer raising the
affirmative defense of failure to comply with the Statute of Conveyances. After obtaining new
counsel, Hadcock Properties, Inc. filed an amended complaint also alleging part performance,
reformation, and promissory estoppel. Mr. Mesar responded by filing an answer/motion to
dismiss for failure to state a claim upon which relief can be granted. Mr. Mesar’s answer again
raised the defense of failure to comply with the Statute of Conveyances. The trial court denied
Mr. Mesar’s motion to dismiss.
{¶5} The matter was tried before the trial court, first on the issue of liability, then on
the issue of attorney fees.
{¶6} In its June 20, 2011 judgment entry regarding liability under the lease, the trial
court held as follows:
***
The parties entered into a five year lease. This lease did not comply with the
requirements of Ohio’s Statute of Conveyances. This Court cannot reform the
lease if it does not comply with the Statute of Conveyances. The Court can,
however, apply the doctrine of part performance to remove the lease from the
operation of the Statute of Conveyances. In doing so, it brings the parties under
the terms of the defectively executed lease.
In this case the Court finds that the doctrine of part performance should be applied
to this lease. The lessor [Hadcock Properties], by altering the structure of the
leased premises; by allowing [Mr.] Mesar to change the electrical system; and by
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applying for a zoning variance at [Mr.] Mesar’s behest, sufficiently changed []
[Hadcock Properties’] position as to allow this Court to enforce the provisions of
the five year lease entered into in 2006.
***
Thus, under the terms of the lease, the trial court awarded damages to Hadcock Properties, Inc. in
the amount of $14,300.00, plus prejudgment and statutory interest.
{¶7} In its February 1, 2012 judgment entry regarding attorney fees, the trial court held
that “the provision regarding the awarding of attorney fees is not enforceable since the
enforcement of the provision would be inequitable.” In reaching this conclusion, the trial court
reasoned that Mr. Mesar did not “contribute in any way to the mistake made in the drafting of the
lease” causing it to be noncompliant under the Statute of Conveyances. As a result, the court
found it equitable to allow Hadcock Properties, Inc. to recover damages, but inequitable to allow
Hadcock Properties, Inc. to recover attorney fees. In support of its reasoning, the trial court
relied upon the “American Rule” for the proposition that, barring certain exceptions, a prevailing
party in a civil action may not recover attorney fees as a part of the costs of litigation.
{¶8} Hadcock Properties, Inc. appealed, raising one assignment of error for our
consideration.
II.
ASSIGNMENT OF ERROR
THE TRIAL COURT ERRED IN SELECTIVELY ENFORCING THE
RENTAL, BUT NOT THE ATTORNEY FEES PROVISION OF A
DEFECTIVELY EXECUTED LEASE REMOVED FROM THE STATUTE OF
CONVEYANCES UNDER THE DOCTRINE OF PART PERFORMANCE.
{¶9} In its sole assignment of error, Hadcock Properties, Inc. argues that the trial court
erred in selectively enforcing some provisions of the lease after exercising its equitable powers to
remove it from the Statute of Conveyances but refusing to enforce others. Specifically, Hadcock
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Properties, Inc. argues that the attorney fees provision should be enforced along with the
remainder of the lease because, once removed from the Statute of Conveyances, enforceability of
the lease should not be “piecemeal.” This Court agrees.
{¶10} “Ohio has long adhered to the ‘American rule’ with respect to recovery of
attorney fees: a prevailing party in a civil action may not recover attorney fees as a part of the
costs of litigation.” Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, ¶ 7, citing
Nottingdale Homeowners’ Assn., Inc. v. Darby, 33 Ohio St.3d 32, 33–34, (1987). See also State
ex rel. Beebe v. Cowley, 116 Ohio St. 377, 382 (1927). “However, there are exceptions to this
rule. Attorney fees may be awarded when a statute or an enforceable contract specifically
provides for the losing party to pay the prevailing party’s attorney fees, or when the prevailing
party demonstrates bad faith on the part of the unsuccessful litigant[.]” (Internal citations
omitted.) Wilborn at ¶ 7.
{¶11} “When the right to recover attorney fees arises from a stipulation in a contract, the
rationale permitting recovery is the ‘fundamental right to contract freely with the expectation that
the terms of the contract will be enforced.’” Id. at ¶ 8, quoting Nottingdale at 36. Further, “[t]he
presence of equal bargaining power and the lack of indicia of compulsion or duress are
characteristics of agreements that are entered into freely.” Wilborn at ¶ 8, citing Nottingdale at
35. “In these instances, agreements to pay another’s attorney fees are generally ‘enforceable and
not void as against public policy so long as the fees awarded are fair, just and reasonable as
determined by the trial court upon full consideration of all of the circumstances of the case.’”
Wilborn at ¶ 8, quoting Nottingdale at syllabus.
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{¶12} Here, due to the doctrine of part performance, the trial court found that the terms
of the defectively executed lease were nonetheless applicable to the parties. In the lease, the
parties agreed to the following provision regarding attorney fees:
In case suit should be brought for recovery of the premises or for any sum due
hereunder, or because of any act which may arise out of the possession of the
premises, by either party, the prevailing party shall be entitled to all costs incurred
in connection with such action, including [] reasonable [attorney] fee[s].
In its judgment entry, the trial court did not find the proffered attorney fees of $15,681.34 to be
unfair, unjust, or unreasonable. Nor did the trial court find that Mr. Mesar lacked equal
bargaining power or that he signed the lease under duress. Instead, the trial court stated:
In this particular case there is no statute authorizing the awarding of attorney fees.
There is a contractual provision, but the contract itself does not comply with the
Statute of Conveyances. It doesn’t seem equitable, at least to this Court, to allow
a litigant to recover attorney fees when that litigant drafted a contract that did not
comply with the Statute of Conveyances.
{¶13} We conclude that the trial court’s reasoning is flawed because once the lease has
been removed from the Statute of Conveyances it operates as a contract between the parties. As
stated above, individuals have the fundamental right to contract freely with the expectation that
the terms of the contract will be enforced. See Wilborn at ¶ 8, quoting Nottingdale at 36.
{¶14} In the present matter, Hadcock Properties, Inc. and Mr. Mesar signed a lease
agreement that awarded attorney fees to the prevailing party of certain types of legal actions. By
removing the lease from the Statute of Conveyances, the trial court brought the parties under the
terms of the lease. Therefore, because Hadcock Properties, Inc. prevailed in its breach of
contract action against Mr. Mesar, and the parties’ lease agreement contained a provision for the
prevailing party to be awarded reasonable attorney fees, the trial court erred in failing to award
Hadcock Properties, Inc. attorney fees in the amount of $15,681.34.
{¶15} Accordingly, Hadcock Properties, Inc.’s assignment of error is sustained.
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III.
{¶16} In sustaining Hadcock Properties, Inc.’s sole assignment of error, the judgment of
the Medina County Court of Common Pleas is reversed, and this cause remanded for further
proceedings consistent with this decision.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Medina, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellee.
CARLA MOORE
FOR THE COURT
WHITMORE, J.
HENSAL, J.
CONCUR.
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APPEARANCES:
BRIAN K. SKIDMORE, Attorney at Law, for Appellant.
JOSEPH F. SALZGEBER, Attorney at Law, for Appellee.