Simbo Properties, Inc. v. M8 Realty, L.L.C. , 2019 Ohio 3091 ( 2019 )

[Cite as Simbo Properties, Inc. v. M8 Realty, L.L.C., 2019-Ohio-3091.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
SIMBO PROPERTIES, INC., :
Plaintiff-Appellant, :
No. 107161
v. :
M8 REALTY, L.L.C., :
Defendant-Appellee. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: August 1, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-16-856616
Appearances:
Paul W. Flowers Co., L.P.A., Paul Flowers, and Louis E.
Grube, for appellant.
Frantz Ward, L.L.P., James B. Niehaus, and Kelley J.
Barnett, for appellee.
RAYMOND C. HEADEN, J.:
Plaintiff-appellant Simbo Properties, Inc. (“Simbo”) appeals from
verdicts finding in favor of defendant-appellee M8 Realty, L.L.C. (“M8”) on matters
pertaining to a commercial real estate lease agreement between Simbo, the owner
and landlord, and M8, the tenant. For the reasons that follow, we affirm.
Procedural and Factual History
In December 2012, Simbo and M8 entered into a written lease
agreement pursuant to which Simbo leased a commercial real property to M8. The
parties negotiated the lease agreement to govern M8’s tenancy. The initial term of
the lease agreement was for 18 months, ending on June 19, 2014.
During M8’s tenancy, Simbo claimed that M8 violated several
provisions of the written lease agreement resulting in the filing of Simbo’s lawsuit.
In particular, during M8’s tenancy, Simbo claimed M8 caused property damage,
including a blockage in the storm sewer and destruction of a flag pole. Simbo also
claims M8 did not pay real estate taxes that Simbo claims M8 was required to pay
under the lease agreement. Lastly, Simbo further claimed M8 was subject to an
automatic renewal term of the lease agreement and was therefore contractually
obligated to pay rent from June 2014 through December 2014.
Simbo filed a four count complaint against M8 on January 4, 2016,
seeking the following: Count 1 — rent (in excess of $150,000); Count 2 — real estate
taxes ($32,158.34); Count 3 — property damage (in excess of $30,000 for flag pole
and storm sewer); Count 4 — breach of other pertinent lease provisions. M8 filed
its answer and counterclaim on February 5, 2016. M8’s counterclaim stated M8
provided timely notice to Simbo of its intent not to renew the lease and therefore no
rent was owing. M8’s counterclaim asserted an alternate claim for relief in the event
the trial court found the lease agreement did, in fact, renew. In the alternative, M8
claimed Simbo breached M8’s right to quiet enjoyment and constructively evicted
M8 from the premises when the commercial property was leased to a new tenant.
M8 filed an amended counterclaim on October 20, 2016. The amended
counterclaim was identical to the original counterclaim except that paragraph 5
relating to written notice for the automatic renewal was removed from the amended
pleading. Discovery proceeded, and motions for summary judgment were filed by
both parties. Simbo’s motion sought summary judgment on Counts 1 and 3. M8’s
motion sought judgment on Counts 1 and 4 of Simbo’s complaint. On January 24,
2017, the trial court denied Simbo’s motion for summary judgment and granted
M8’s motion for summary judgment on Count 4 only. The matter proceeded to trial
on Counts 1, 2, and 3 of Simbo’s complaint on July 24, 2017.
During trial, M8 was granted a directed verdict on Count 3 alleging
that M8 created a storm sewer blockage on the leased premises. A jury heard the
remaining issues and rendered a verdict in favor of M8 on Count 1, the outstanding
rent due, finding that there was no automatic renewal term. Simbo had sought an
award under Count 1 in excess of $150,000. This was the largest dollar amount of
damages requested in the lawsuit. A verdict in favor of Simbo was entered on Count
2, real estate taxes, in the amount of $32,158.34. On the remaining issue set forth
in Count 3 — the replacement of the flag pole — a verdict was rendered for Simbo in
the amount of $5,000. Simbo also prevailed on M8’s counterclaim that sought an
unspecified amount of damages.
On August 31, 2017, Simbo filed a motion for additur and
prejudgment interest and a motion for attorney fees and legal expenses. On the
same date, M8 filed a motion to amend its counterclaim to conform to the evidence
and motion for new trial or remittitur, or for judgment notwithstanding the verdict
as well as a motion for attorney fees.
Due to a concern about a potential conflict, the trial judge recused
herself from the case and the case was transferred to the administrative judge on
October 11, 2017, for “good cause shown.” On October 16, 2017, the administrative
judge held a hearing on the postjudgment motions filed by the parties. The trial
court issued its ruling on the postjudgment motions on January 9, 2018. On the
issue of the award of attorney fees under the lease agreement, the trial court
determined M8 was the “prevailing party” since it won the “main” issue in the
lawsuit and, as a result, was entitled to all attorney fees as specified in the lease
agreement. M8’s motion to amend its counterclaim to conform to the evidence and
motion for new trial or remittitur, or for judgment notwithstanding the verdict was
denied. The trial court denied Simbo’s motion for additur and prejudgment interest
and its motion for attorney fees and legal expenses. Simbo filed a motion for
reconsideration or clarification or in the alternative, Civ.R. 60(B) relief from
judgment. This motion was denied on February 1, 2018.
On February 5, 2018, Simbo filed an appeal challenging the trial
court’s judgment. The appeal was dismissed since the trial court’s judgment was not
a final appealable order where the issue of attorney fees was not resolved. On
remand, Simbo filed a motion for a new trial arguing the original trial judge’s recusal
precluded postjudgment issues from being fairly adjudicated by the administrative
judge. In addition, Simbo filed a brief on the pending issue of legal fees. A hearing
was held on February 21, 2018, on the postjudgment issue of legal fees. On April 25,
2018, the trial court denied Simbo’s motion for a new trial and awarded M8 attorney
fees and expenses in the amount of $238,335.73. Simbo filed the instant appeal.
Law and Analysis
I. Directed Verdict
In its first assignment of error, Simbo argues that the trial court erred
by granting a directed verdict on Count 3 alleging M8 created a storm sewer
blockage. Specifically, Simbo claimed it introduced sufficient evidence that M8’s
actions caused damage to the commercial property’s storm sewer and that the trial
court’s judgment on this issue of causation was error.
“Appellate review of a motion for a directed verdict is de novo.”
Ridley v. Fed. Express, 8th Dist. Cuyahoga No. 82904, 2004-Ohio-2543, ¶ 82. “A
directed verdict is appropriate only where the party opposing it has failed to adduce
any evidence on the essential elements of his claim.” Cooper v. Grace Baptist
Church, Inc., 81 Ohio App.3d 728, 734, 612 N.E.2d 357 (10th Dist.1992). “The
question to be determined involves a testing of the legal sufficiency of the evidence
to take the case to the jury, and is a question of law, not of fact.” Hargrove v. Tanner,
66 Ohio App.3d 693, 695, 586 N.E.2d 141 (9th Dist.1990). “Accordingly, the courts
are testing the legal sufficiency of the evidence rather than its weight or the
credibility of the witnesses.” Snavely Dev. Co. v. Acacia Country Club, 8th Dist.
Cuyahoga No. 86475, 2006-Ohio-1563, ¶ 20.
When evaluating a directed verdict on appeal, the reviewing “‘court
must determine whether any evidence exists on every element of each claim or
defense for which the party has the burden to go forward.’” Claris, Ltd. v. Hotel Dev.
Servs., L.L.C., 10th Dist. Franklin No. 16AP-685, 2018-Ohio-2602, ¶ 27, citing
Eastley v. Volkman, 132 Ohio St.3d 28, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 25. “A
cause of action for breach of contract requires the claimant to establish the existence
of a contract, the failure without legal excuse of the other party to perform when
performance is due, and damages or loss resulting from the breach.” Lucarell v.
Nationwide Mut. Ins. Co., 152 Ohio St.3d 453, 2018-Ohio-15, 97 N.E.3d 458, ¶ 41.
The claimed “‘damages must be the natural and proximate result of the defendant’s
breach.’” Claris, Ltd. at ¶ 28, citing Mills v. Best W. Springdale, 10th Dist. Franklin
No. 08AP-1022, 2009-Ohio-2901, ¶13.
Simbo argues it has established sufficient evidence of proximate
cause through owner Mark Sims’s lay testimony and this, absent expert testimony,
is sufficient to defeat a motion for directed verdict. At trial, Sims detailed a March
2014 incident with a leaky oil tanker and how the subsequent clean-up caused a
blockage in the property’s storm sewer. He testified that M8 used Oil-Dri pellets to
absorb the spilled oil, but M8 failed to clean up the Oil-Dri pellets in a timely
manner. Sims observed the Oil-Dri pellets being washed into the storm sewer. The
commercial property subsequently flooded in July 2014, which required plumbers
to remedy the situation. The plumbers returned in October 2014 for ongoing
plumbing issues.
Mark Sims claimed the July and October plumbing issues were
caused by a storm sewer blockage stemming from the Oil-Dri pellets and their
improper disposal by M8 — a violation of the terms of the lease requiring M8 to not
cause damage to the leased premises. Simbo sought reimbursement from M8 for
the plumbing repairs. No testimony, except Sims’s statements, was introduced
regarding the storm sewer blockage and how M8’s actions caused the blockage.
Invoices detailing the plumbing work made no mention of the Oil-Dri pellets or the
source of the blockage. The only testimony offered was from Mark Sims. The trial
court found that this testimony was insufficient to establish causation. The trial
court stated:
[N]obody, including Mr. Sims said the pellets were — there were this
many of them or this was taken out, or this plugged this; or nobody
talked about how it was that pellets being down there somehow
necessitated or caused the work to be performed as delineated in these
invoices.
And again, I don’t see the word — well, let — in fact there is also talk
about a possible break. I don’t think causation — I don’t think there
has been sufficient evidence of causation. I’m not discounting Mr.
Sims’ testimony to the extent that takes us only one step as to what he
personally saw. Beyond that, there is no testimony as to some pellets
that he saw in the sewer causing the damage or any damage so as to
necessitate the work performed on the sewers as outlined in these
invoices; so I think that really takes care of the Motion for Directed
Verdict on Count 3 as it relates to the sewer.
(Tr. 554-555.)
In order for a party to a contract to recover damages as a result of
another’s breach of that contract, such damages must be caused by the breach, or
such damages would not have occurred had the defendant performed the promises
which he made in the contract. Cammerer Farms v. Terra Internatl., Inc., 12th
Dist. Warren No. CA91-02-020, 1991 Ohio App. LEXIS 6269, 8 (Dec. 23, 1991).
Mark Sims testified to the incident with the Oil-Dri pellets and the subsequent
repairs by the plumber. Mark Sims testified that the plumber lowered a video
camera into the sewer to determine the source of the clog, and the video showed the
clog was caused by the Oil-Dri pellets. However, the video footage was not presented
at trial to support Sims’s assertion that the pellets caused the blockage. Photographs
obtained during the repairs were introduced as exhibits, but did not depict Oil-Dri
pellets. None of the plumbing invoices referenced a clog or blockage caused by Oil-
Dri pellets. The cause of the blockage was left to speculation. Where causation is
not adequately proven and the jury will be left to speculate on this issue, granting a
direct verdict is appropriate. Id. at 11.
Simbo argues a directed verdict was granted because the plaintiff did
not introduce expert testimony, but relied upon the testimony of Mark Sims.
Historically, the Ohio Supreme Court has held that “expert opinions are not required
when the conduct at issue is within the jury’s general experience and knowledge.”
Baiko v. Mays, 140 Ohio App.3d 1, 7, 746 N.E.2d 618 (8th Dist.2000). However,
the trial court did not address, nor will this court, whether expert testimony was
required. Simbo needed to introduce evidence showing causation between the Oil-
Dri pellets and the plumbing issues, yet insufficient evidence was provided. M8’s
directed verdict was granted because Mark Sims’s testimony, alone, was insufficient
evidence to establish causation, not because expert testimony was absent.
Because we conclude that there was insufficient evidence to show
M8’s actions caused the storm sewer blockage, we overrule Simbo’s first assignment
of error.
II. Jury Instructions
In Simbo’s second assignment of error, Simbo asserts the trial judge
erred, as a matter of law, by furnishing inapplicable and misleading instructions to
the jury that were incorrect. Specifically, Simbo argues the trial court’s alternative
pleading instruction to the jury relating to M8’s counterclaim was an incorrect
statement of the law.
“A trial court is obligated to provide jury instructions that correctly
and completely state the law.” Cromer v. Children’s Hosp. Med. Ctr. of Akron, 142
Ohio St.3d 257, 2015-Ohio-229, 29 N.E.3d 921, ¶ 22, citing Sharp v. Norfolk & W.
Ry., 72 Ohio St.3d 307, 1995-Ohio-224, 649 N.E.2d 1219. “The question of whether
a jury instruction is legally correct and factually warranted is subject to de novo
review.” Cromer at ¶ 22. “‘An inadequate jury instruction that misleads the jury
constitutes reversible error.’” Cox v. MetroHealth Med. Ctr. Bd. of Trustees, 2015-
Ohio-2950, 39 N.E.3d 843, ¶ 41 (8th Dist.), citing Groob v. KeyBank, 108 Ohio St.3d
48, 2006-Ohio-1189, 843 N.E.2d 1170, ¶ 32.
Simbo argues the trial court’s jury instruction addressing alternative
and hypothetical pleadings contained an incorrect statement. The jury instruction
in question read:
A party may present alternative, inconsistent or hypothetical
allegations in pleadings. The mere presence of alternative, inconsistent
or hypothetical allegations asserted does not mean that one allegation
must be believed and other inconsistent allegations must not be
believed. In this case, M8 asserted a Counterclaim against Simbo.
Specifically, M8 claims that if the jury finds that the lease automatically
renewed as claimed by Simbo in its Count [1], then you should decide
whether M8 was entitled to continue possessing the property during
the renewal period, and whether Simbo’s actions in leasing the
premises to Tesla Motors deprived M8 of the right of possession.
M8’s Counterclaim is an alternative pleading which is permitted under
Ohio Law. Simbo claims that Paragraph 5 of M8’s Counterclaim is an
admission that M8 believed that the lease agreement required written
notice to vacate. M8 claims that Paragraph 5 of its Counterclaim is
simply an alternative pleading as permitted by Ohio Law, and that
paragraph 5 of its Counterclaim is not an admission.
You may find that Paragraph 5 is an admission, is not an admission, or
is ambiguous. In deciding whether or not paragraph 5 of M8’s
Counterclaim was an admission, you should view all the facts and
circumstances of the case as a whole, including the purpose for which
M8 made the statements alleged in Paragraph 5 of its Counterclaim and
whether or not M8 simultaneously denied that the lease agreement
required written notice to vacate.
“The general rule is that an erroneous instruction does not necessarily
mislead a jury.” Cromer at ¶ 36. If the jury instruction incorrectly stated the law, a
de novo review is applied to determine whether the incorrect jury
instruction “‘probably misled the jury in a matter materially affecting the
complaining party’s substantial rights.’” (Citations omitted.) Kokitka v. Ford Motor
Co., 73 Ohio St.3d 89, 93, 652 N.E.2d 671 (1995); Cromer at ¶ 22. “If the complete
set of instructions by the trial court otherwise fairly and correctly lays out the
relevant law, and if it is apparent in the context of the complete instructions that an
isolated error did not prejudice a party’s substantial rights, reversal on the error is
not warranted.” Cromer at ¶ 35.
Count 1 of Simbo’s lawsuit was predicated on whether the lease
agreement contained an automatic renewal term. M8 filed a counterclaim against
Simbo that included this paragraph 5: “Pursuant to the terms of the lease
agreement, the lease agreement would automatically renew unless M8 provided
Plaintiff with written notice to terminate the lease agreement.” M8 amended its
counterclaim, prior to trial, eliminating paragraph 5. At trial, Simbo argued that
Paragraph 5 of the original counterclaim was an admission by M8 that the lease
would automatically renew absent notice by M8 to terminate. Simbo questioned
M8’s representative on the issue. M8, on the other hand, claimed Paragraph 5 was
part of an alternative pleading and not an admission.
Simbo argued the sentence reading “M8’s Counterclaim is an
alternative pleading which is permitted under Ohio Law” was incorrect since only a
portion of M8’s counterclaim was pled in the alternative. Simbo asserted any
instruction that the counterclaim was an alternative pleading was incorrect and
detrimental to its claim under Count 1. Simbo felt once the jurors were told the
counterclaim was pled in the alternative, it endorsed M8’s position that all pleadings
were conditional and not really admissions.
The proffered jury instruction was a correct statement of law.
Civ.R. 8(E)(2) permits alternative pleading or even the use of inconsistent claims,
and states, in pertinent part:
A party may set forth two or more statements of a claim or defense
alternatively or hypothetically, either in one Count or defense or in
separate Counts or defenses. When two or more statements are made
in the alternative and one of them if made independently would be
sufficient, the pleading is not made insufficient by the insufficiency of
one or more of the alternative statements.
According to Civ.R. 8(E)(2), a party can raise a counterclaim that is inconsistent
with its defenses. M8 defended against Count 1 of Simbo’s complaint for unpaid
rent by arguing that the lease agreement did not automatically renew. Alternatively,
in its counterclaim, M8 argued that if the lease automatically renewed, Simbo
breached the lease agreement by constructively evicting M8 from the premises. The
statement “M8’s Counterclaim is an alternative pleading which is permitted under
Ohio law” accurately reflected the law.
Even assuming arguendo that the alternative pleading instruction
was erroneous, Simbo fails to demonstrate prejudice caused by the instruction. As
was stated by the Ohio Supreme Court in Centrello v. Basky, 164 Ohio St. 41, 128
N.E.2d 80 (1955), paragraph eight of the syllabus:
Even though a paragraph in a general charge taken by itself is improper
and misleading, yet where, considered in connection with the
whole charge and the entire instructions of the court to the jury, it is
apparent that no prejudicial error resulted, the judgment rendered on
a verdict will not be reversed for such error.
While Simbo took issue with one sentence of the jury instruction, the instruction
stated the jury could find “Paragraph 5 is an admission, is not an admission, or is
ambiguous.” This language reinforced the position that even though the
counterclaim was an alternate pleading, paragraph 5 could be construed as an
admission. Simbo attempted to introduce paragraph 5 as an admission, and the
language within the instructions provided the jury the option to reach that
conclusion. Additionally, a review of the jury instructions, as a whole, indicates the
instructions were clear and fairly applied to the facts in the case. It is not probable
the jury instruction misled the jury.
Prejudice is generally presumed when a court instructs a jury on an
issue that should not have been charged. Wagner v. Roche Laboratories, 85 Ohio
St.3d 457, 461, 1999-Ohio-309, 709 N.E.2d 162. “A trial court should confine its
instructions to the issues raised by the pleadings and the evidence.” Jones v. Owens,
8th Dist. Cuyahoga No. 79013, 2001 Ohio App. LEXIS 4903, 4 (Nov. 1, 2001). The
jury instruction was warranted based on the evidence adduced at trial regarding
alternative pleadings and admissions. The inclusion of this jury charge was
appropriate and not prejudicial on its face.
The fact that the jury instruction did not mirror an Ohio Jury
Instruction is inconsequential. Ohio Jury Instructions are a product of the Ohio
Judicial Conference and are not binding on the courts. State v. Nucklos, 171 Ohio
App.3d 38, 2007-Ohio-1025, 869 N.E.2d 674, ¶ 57 (2d Dist.).
We do not find the jury instruction erroneous or prejudicial and
therefore overrule Simbo’s second assignment of error.
III. Award of Interest
In Simbo’s third assignment of error, Simbo argues the trial court
erred as a matter of law when it refused to grant Simbo an award of interest as
provided in the lease agreement. Simbo claims it is entitled to late charges and
prejudgment interest for the real estate taxes and the cost to repair the flag pole.
Because Simbo failed to request prejudgment interest and late fees
for the flag pole in its motion for additur and prejudgment interest filed on
August 31, 2017, this matter is waived on appeal. Stores Realty Co. v. Cleveland,
Bd. of Bldg. Stds. & Bldg. Appeals, 41 Ohio St.2d 41, 43, 322 N.E.2d 629 (1975). See
also Young v. Genie Indus. United States, 8th Dist. Cuyahoga No. 89665, 2008-
Ohio-929, ¶ 20. We review the issues relating to the real estate taxes de
novo. Fiorilli Constr., Inc. v. A. Bonamase Constr., Inc., 8th Dist. Cuyahoga No.
94719, 2011-Ohio-107, ¶ 60.
“‘[W]here a party has been granted judgment on an underlying
contract claim, that party is entitled to prejudgment interest as a matter of law.’” Id.
at ¶ 57, quoting Waina v. Abdallah, 8th Dist. Cuyahoga No. 86629, 2006-Ohio-
2090, ¶ 39. Trial courts do not have discretion to award prejudgment interest, but
must determine the amount of interest due the aggrieved party. Fiorilli.
“‘“Prejudgment interest under R.C. 1343.03(A) is based on the premise that a party
to a contract should not retain the use of money owed under a contract when that
amount is due and payable to the other contracting party.”’” Id. at ¶ 59, citing
Wasserman v. The Home Corp., 8th Dist. Cuyahoga No. 90915, 2008-Ohio-5477,
¶ 7, citing RPM, Inc. v. Oatey Co., 9th Dist. Medina Nos. 3282-M and 3289-M,
2005-Ohio-1280.
“The award of prejudgment interest is compensation to the
[aggrieved party] for the period of time between accrual of the claim and judgment.”
Royal Elec. Constr. Corp. v. Ohio State Univ., 73 Ohio St.3d 110, 117, 1995-Ohio-
131, 652 N.E.2d 687. A trial court has discretion to determine the accrual date, or
when money becomes “due and payable,” under R.C. 1343.03(A). Vail v. String, 8th
Dist. Cuyahoga No. 107112, 2019-Ohio-984, ¶ 55. To determine when the real estate
taxes were due and payable by M8, the trial court interpreted the terms of the lease
agreement. Real estate taxes were governed by Section 5.3 which read:
Landlord shall pay before delinquency all real estate taxes, general or
special assessments, and other governmental impositions imposed
upon or against the Premises, of every kind and nature whatsoever.
Tenant shall reimburse Landlord for seventy percent (70%) of all taxes
so paid within five (5) days of Landlord’s payment of the same and
Landlord’s notice to Tenant.
According to the lease, Simbo had to pay the applicable real estate taxes and then
provide notice of that payment to M8. Upon the occurrence of those two events, real
estate taxes were due and payable. Prejudgment interest as well as late charges
under the lease accrued when M8’s payment for real estate taxes was past due.
In its supplement to its motion for additur and prejudgment interest,
Simbo acknowledged, and county real estate records confirmed, the real estate taxes
were paid July 30, 2015. No evidence was offered indicating M8 was notified of that
payment. Absent notice by Simbo stating the real estate taxes were paid on
July 30, 2015, and reimbursement due, M8 was not required to submit payment for
the taxes and no obligation to pay prejudgment interest or late charges on that
amount accrued.
Simbo claims M8’s acts of tendering payment and acknowledging its
obligation to reimburse the real estate taxes paid by Simbo should result in the
imposition of prejudgment interest. An email sent by an M8 employee, Lynn
Salagovic, to Mark Sims on July 8, 2014, stated, in relevant part, “Mark, we owe
$32,158.34 for the tax bill.” Additionally, M8 tendered a check to Simbo in the
amount of $8,415 in an attempt to satisfy real estate taxes less M8’s security deposit
and other adjustments. Simbo refused the check and returned it, uncashed. A
February 4, 2015 letter from Simbo’s counsel concedes M8 is not obligated to pay
the real estate taxes until they are paid and states “When they are paid, we will
provide you with documentation of the same.” These acts acknowledged M8’s
obligation to pay the real estate taxes, but the dollar amount was not due and payable
and subject to prejudgment interest until Simbo paid the real estate taxes and
notified M8 of that payment. Absent notice from Simbo following the July 30, 2015
payment of the real estate taxes, the amount was not due and owing and subject to
prejudgment interest.
The fact that M8 was contractually obligated to pay the real estate
taxes and was willing to pay them in advance does not require M8 to pay
prejudgment interest on the amount. The trial court did not err when it denied
Simbo interest and late payments for the real estate taxes and flag pole. For these
reasons, we overrule Simbo’s third assignment of error.
IV. Prevailing Party
Simbo’s fourth assignment of error argues that the trial court
committed an error of law and otherwise abused its discretion in determining that
M8 was the “prevailing party” for purposes of recovering attorney fees under the
terms of the lease. Simbo argues that it prevailed on two counts of the complaint
and M8’s counterclaim and, therefore, it should be considered the “prevailing party”
under the lease agreement’s fee-shifting provision.
Although the award of attorney fees is subject to review under an
abuse of discretion standard, the determination of a plaintiff as the “prevailing
party” is subject to review under a de novo standard. Thomas v. Cleveland, 176 Ohio
App.3d 401, 2008-Ohio-1720, 892 N.E.2d 454, ¶ 23 (8th Dist.); Hustler v.
Cincinnati, Inc. v. Elm 411, L.L.C., 1st Dist. Hamilton No. C-130754, 2014-Ohio-
5648, ¶ 13.
Ohio courts follow the so-called “American rule,” which requires that
each party involved in litigation pay his or her own attorney fees. But there are three
well-recognized exceptions to this rule: (1) where statutory provisions specifically
provide that a prevailing party may recover attorney fees, (2) where there has been
a finding of bad faith, and (3) where the contract between the parties provides for
fee shifting. Keal v. Day, 164 Ohio App.3d 21, 2005-Ohio-5551, 840 N.E.2d 1139,
¶ 5 (1st Dist.). Section 37 of the Simbo/M8 lease agreement provides for fee shifting
so that the prevailing party in litigation could recover all reasonable attorney fees
and costs: “If a lawsuit is filed with respect to this Lease, the prevailing party shall
be entitled to collect all reasonable attorney’s fees and costs.” Both Simbo and M8
are sophisticated businesses. Each was represented by counsel. However, the term
“prevailing party” was not defined within the lease agreement. A determination of
whether Simbo or M8 is the “prevailing party” is also complicated by a jury verdict
in favor of both parties. Judgment was rendered in favor of Simbo on Counts 2 and
3 and M8’s Counterclaim; M8 received judgment on Count 1.
The case of EAC Properties, L.L.C. v Brightwell, 10th Dist. Franklin
No. 13AP-773, 2014-Ohio-2078, defined “prevailing party” pursuant to a fee-shifting
provision in a lease agreement. In EAC Properties, Landlord EAC Properties filed
suit for breach of a lease agreement against its tenant, Brightwell, seeking
$33,045.60 in unpaid rent and $5,226.92 in unpaid fees for utilities, maintenance,
insurance, and other related charges. The court determined EAC Properties waived
its right to the rent payments, but tenant Brightwell owed EAC Properties $3,703.97
for unpaid utility expenses. Also, EAC Properties held Brightwell’s security deposit
in the amount of $3,147.30 which was repayable to Brightwell. Based upon the
unpaid utilities owed to EAC Properties and the security deposit owed to Brightwell,
EAC Properties was awarded $556.67.
Despite finding in favor of EAC Properties for unpaid utilities, the
trial court found EAC Properties’ primary claim for additional rent in the amount of
over $30,000 failed and because EAC Properties did not prevail on that issue, it was
not entitled to collect attorney fees under the lease agreement. Brightwell was
determined to be the “prevailing party” entitled to collect attorney fees under the
lease agreement. EAC Properties appealed, contesting the classification of
Brightwell as the “prevailing party” for purposes of the fee-shifting provision.
The Tenth Appellate District reviewed the lease agreement that
stated: “[i]f either party is required to commence any action at law or equity against
the other party to enforce any provision of this Lease, the prevailing party shall be
entitled to the reasonabl[e] attorneys’ fees and costs in connection with such action.”
Id. at ¶ 10. Because the lease agreement allowed for fee shifting, the sole issue on
appeal was to define the “prevailing party.” The Tenth Appellate District found that
Brightwell was the “prevailing party” where it succeeded on the main issue in the
action — $30,000 in back rent. EAC Properties at ¶ 12. The fact that the landlord
received a monetary award for outstanding utility bills, a nominal amount in
comparison to the back rent, did not affect the conclusion that the tenant was the
“prevailing party.”
Applying the “main issue” standard, this court finds M8 the
“prevailing party” where it received a jury verdict on the main issue of the case.
Under Count 1, Simbo sought six months’ rent payments totaling in excess of
$150,000. Count 1 represented the largest dollar amount sought by Simbo. M8’s
defense was heightened due to the significant monetary exposure under Count 1. In
contrast, Simbo was awarded $32,158.34 and $5,000, respectively, on Counts 2 and
3 and prevailed on M8’s counterclaim that sought damages in an amount exceeding
$25,000. Defense counsel spent the largest percentage of time defending Count 1,
and the majority of the trial was allocated to Count 1. Adoption of the “main issue”
standard is bolstered by the participation of two sophisticated parties, Simbo and
M8, that were represented by counsel. Simbo and M8 negotiated a contract and
agreed to the fee-shifting arrangement with full appreciation of the potential risks
associated with that term — especially given the holding in EAC Properties, 10th
Dist. Franklin No. 13AP-773, 2014-Ohio-2078. If the parties had desired to define
“prevailing party,” e.g. as the party that prevails on the most counts in the litigation,
Simbo and M8 could have drafted that provision into the lease. The parties had
experience drafting lease agreements and were familiar with their related terms.
Several provisions in the lease were modified during the lease negotiations, but the
fee-shifting provision remained. The parties had the ability to exclude the fee-
shifting clause or define the term “prevailing party,” but chose not to do so. The fee-
shifting clause was a form of risk allocation that Simbo and M8 purposefully
incorporated in the lease agreement.
We must follow the intent of the parties and apply the terms of the
lease agreement:
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.” Nottingdale [Homeowners’ Assn. v. Darby, 33 Ohio
St.3d 32, 36, 514 N.E.2d 702 (1987).] The presence of equal bargaining
power and the lack of indicia of compulsion or duress are
characteristics of agreements that are entered into freely. See id. at 35,
514 N.E.2d 702. 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.” Id. at syllabus.
Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396,
¶ 8. “The role of courts in examining contracts is to ascertain the intent of the
parties. Where the terms in a contract are not ambiguous, courts are constrained to
apply the plain language of the contract.” (Citation omitted.) St. Marys v. Auglaize
Cty. Bd. of Commrs., 115 Ohio St.3d 387, 2007-Ohio-5026, 875 N.E.2d 561, ¶ 18.
The contract language clearly reflected Simbo and M8 intended to allocate the cost
of all reasonable attorney fees to the prevailing party. Because the lease did not
define prevailing party, we adopt the main issue standard of EAC Properties to aid
in that determination. In doing so, we find M8 was the “prevailing party” and was
entitled to recover all reasonable attorney fees.
While the “some relief” standard has been applied to define a
“prevailing party,” we do not find that standard applicable in this matter. The “some
relief” standard is commonly invoked, although not exclusively, in accordance with
consumer protection laws. For instance, this court defined a “prevailing party” in a
Section 1983 case as follows:
A plaintiff is a “prevailing party” if he receives “at least some relief on
the merits of his claim. * * * A plaintiff ‘prevails’ when ‘actual relief on
the merits of his claim materially alters the legal relationship between
the parties by modifying the defendant’s behavior in a way that directly
benefits the plaintiff.’” Farrar v. Hobby (1992), 506 U.S. 103, 111-12,
113 S.Ct. 566, 121 L.Ed.2d 494. “A judgment for damages is any
amount, compensatory or nominal, which modifies the defendant’s
behavior for the plaintiff’s benefit by forcing the defendant to pay an
amount of money he otherwise would not pay.” Id. at 113.
Thomas, 176 Ohio App.3d 401, 2008-Ohio-1720, 892 N.E.2d 454, at ¶ 24.
Statutorily imposed fee-shifting clauses under consumer protection laws were
created to ensure attorneys would be adequately compensated:
Congress created fee-shifting [statutes] for the purpose of helping
public interest litigants overcome some of the hurdles that they may
face in obtaining adequate representation. Congress’ goal was to
increase access to the courts for those litigants who otherwise might be
unrepresented in civil rights litigation.
Ibrahim, Bills, Bills, Bills*: The Effect of a Rejected Settlement on Attorney’s Fees
Under the Civil Rights Attorney’s Fees Award Act of 1976, 36 Cardozo L.Rev. 1987,
1990 (2015). Attorney fees are awarded to the prevailing party. “But when
important policy reasons exist to promote the bringing of certain litigation, Congress
and state legislatures can and have enacted statutes which provide for attorney’s fees
to the prevailing plaintiff to encourage and enable such litigation.” Stark & Choplin,
Does Fraud Pay? An Empirical Analysis of Attorney’s Fees Provisions in
Consumer Fraud Statutes, 56 Clev.St.L.Rev. 483, 494 (2008). While public policy
in consumer protection litigation supports a broader interpretation of “prevailing
party,” no similar need exists in negotiated commercial fee-shifting clauses between
sophisticated parties.
In Hustler Cincinnati, Inc., 1st Dist. Hamilton No. C-130754, 2014-
Ohio-5648, the First District appears to have applied the “some relief” doctrine as
well as the “main issue” doctrine espoused in EAC Properties to a commercial lease
dispute. In Hustler Cincinnati, Inc., landlord Elm 411 sought to evict HCI from a
commercial lease agreement. HCI wished to remain as a tenant. HCI filed a
declaratory judgment seeking confirmation that a valid lease agreement existed
while Elm 411 filed a forcible entry and detainer suit to evict HCI from the premises.
Following a bench trial, the court found in favor of HCI and rejected Elm 411’s
eviction claim. Based upon a fee-shifting provision within a lease agreement, the
Hustler Cincinnati, Inc. court found HCI was the prevailing party entitled to
attorney fees:
Therefore, we hold, on the authority of Keal, that HCI was the
prevailing party in whose favor judgment was entered. See Keal, 164
Ohio App.3d 21, 2005-Ohio-5551, 840 N.E.2d 1139, at ¶ 8. At the end
of the litigation, HCI had successfully defended against Elm 411’s
forcible-entry-and-detainer action and had retained occupancy of the
premises — the principle issue in dispute. See EAC Properties, L.L.C.,
10th Dist. Franklin No. 13AP-773, 2014-Ohio-2078, at ¶ 12; see also
Hikmet, 10th Dist. Franklin No. 08AP-1021, 2009-Ohio-6477, at ¶ 75.
Therefore, for purposes of the fee-shifting agreement in the lease and
purchase agreement, HCI was a prevailing party entitled to reasonable
and necessary fees and expenses.
Hustler Cincinnati, Inc. at ¶ 20.
While the Hustler Cincinnati, Inc. court references both the “some
relief” and “main issue” doctrines, the court relied on the principle issue in dispute
or “main issue” doctrine as the appropriate test to define the prevailing party.
Similarly, we apply a “main issue” analysis to find M8 the prevailing party.
The “main issue” standard is herein adopted, but is also limited in its
application to the facts herein where two consenting, sophisticated parties,
represented by counsel knowingly and willingly negotiated a commercial lease
agreement.
For the foregoing reasons, the trial court did not err when it found M8
to be the “prevailing party.” We overrule Simbo’s fourth assignment of error.
V. Legal Fees and Expenses
In Simbo’s fifth assignment of error, it claims the trial court erred
when it awarded M8 all of its legal fees and expenses. A trial court’s award of legal
fees and expenses should not be reversed absent a showing that the court abused its
discretion. Bittner v. Tri-County Toyota, Inc., 58 Ohio St.3d 143, 146, 569 N.E.2d
464 (1991).
The Simbo-M8 lease agreement clearly identified the amount of
attorney fees to be granted to the prevailing party: “the prevailing party shall be
entitled to collect all reasonable attorneys’ fees and costs.” Defendant M8 was the
prevailing party and, therefore, entitled to all reasonable attorney fees and costs. In
enforcing the terms of the lease agreement, the trial court needed to ensure the fee
award was “‘fair, just and reasonable as determined * * * upon full consideration of
all of the circumstances of the case.’” Hustler Cincinnati, Inc., 1st Dist. Hamilton
No. C-130754, 2014-Ohio-5648, at ¶ 22, citing Nottingdale Homeowners’ Assn., 33
Ohio St.3d 32, 514 N.E.2d 702, at syllabus.
M8’s attorneys provided an affidavit identifying the hourly rates of
the attorneys and paralegals as well as the number of hours spent on the case. Both
parties presented expert testimony regarding the reasonableness of the requested
attorney fees and expenses.
Simbo argued M8 should recover only those attorney fees attributable
to Count 1, the count on which M8 prevailed at the lower court. Yet, claims that
involve common facts or legal theories may be difficult to divide as to the time and
hours spent on litigating the individual claims. Hustler Cincinnati Inc., supra, at
¶ 24. “[W]here multiple claims are rooted in the same allegations, facts, discovery,
and legal arguments, a trial court does not abuse its discretion in awarding attorney
fees for the time spent on the claims.” Edlong Corp. v. Nadathur, 1st Dist. Hamilton
No. C-120369, 2013-Ohio-1283, ¶ 16, citing Parker v. I&F Insulation Co., 1st Dist.
Hamilton No. C-960602, 1998 Ohio App. LEXIS 1187, 20 (Mar. 27, 1998). M8
provided an accounting of the attorney fees and expenses for which it sought
reimbursement. The billing was not organized by the various counts within the
complaint and counterclaim, but reflected intermingled activity across all issues
raised within the litigation. The billing supported the position that the involvement
of common facts and legal theories made it difficult to divide the time and hours
spent according to the individual counts and issues. In fact, similar to Hustler
Cincinnati Inc., the testimony and exhibits at the hearing for attorney fees does not
reflect any rebuttable testimony that fees could be designated by one claim.
Simbo challenged, under the theory of judicial estoppel, that M8’s
recovery was limited to only reasonable attorney fees and costs related to Count 1.
On July 17, 2017, before trial, M8 filed a brief in opposition to Simbo Properties,
Inc.’s motion in limine requesting the court to define prevailing party, and argued
the prevailing party could recover fees and expenses only on successful claims. Yet,
after trial, the trial judge granted M8, the prevailing party, attorney fees and
expenses on all claims. “The doctrine of judicial estoppel ‘forbids a party “from
taking a position inconsistent with one successfully and unequivocally asserted by
the same party in a prior proceeding.”’” Greer-Burger v. Temesi, 116 Ohio St.3d
324, 2007-Ohio-6442, 879 N.E.2d 174, ¶ 25, quoting Griffith v. Wal-Mart Stores,
135 F.3d 376, 380 (6th Cir.1998), quoting Teledyne Industries, Inc. v. NLRB, 911
F.2d 1214 (6th Cir.1990). “The doctrine applies only when a party shows that his
opponent: (1) took a contrary position; (2) under oath in a prior proceeding; and (3)
the prior position was accepted by the court.” Greer-Burger. The trial court did not
rule on M8’s brief, and therefore, judicial estoppel did not apply to this issue.
The record includes sufficient evidence to support the trial court’s
attorney fees and expenses award. The trial court did not abuse its discretion when
it awarded attorney fees and expenses to M8’s counsel, and as a result, Simbo’s fifth
assignment of error is overruled.
VI. Payment of Legal Fees
Simbo argues in its sixth assignment of error that the trial court erred
as a matter of law when it awarded legal fees that were not actually paid by M8.
Simbo asserts M8’s attorneys were paid a monthly fixed fee by M8 and the expenses
related to the Simbo-M8 litigation were satisfied under the fixed-fee payments.
An award of legal fees and expenses is reviewed for an abuse of
discretion. Cruz v. English Nanny & Governess Sch., Inc., 2017-Ohio-4176, 92
N.E.3d 143, ¶ 104 (8th Dist.).
Simbo contends M8 is not entitled to attorney fees because it did not
establish the requested attorney fees were paid by M8. In support of its position,
Simbo references awards of attorney fees under R.C. 149.43 and 149.43(C)(2)(b)
that provide that payment of attorney fees are applicable only where the prevailing
party actually paid or was obligated to pay the requested attorney fees. State ex rel.
Quolke v. Strongsville City School Dist. Bd. of Edn., 8th Dist. Cuyahoga No. 99733,
2013-Ohio-4481, ¶ 5; State ex rel. Citizens for Open, Responsive & Accountable
Govt. v. Register, 116 Ohio St.3d 88, 2007-Ohio-5542, 876 N.E.2d 913, ¶ 24. The
above statutes address discovery rule sanctions and remedial fees where public
records were not provided. These statutes and related case law are not applicable
where parties executed a lease agreement including a fee-shifting provision whereby
the prevailing party was entitled to collect all reasonable attorney fees and costs.
The limitation on collection of attorney fees in the lease agreement is
that the fees must be reasonable; not whether the fees were actually paid by M8
rather than the fees being incurred by the prevailing party, M8, as shown under
internal payment and accounting procedures of M8 and the Bernie Moreno
Companies and presented as part of the record.
As evidence in support of its claim for attorney fees and costs, M8
submitted to the trial court the attorney fees and expenses incurred in the Simbo-
M8 litigation and introduced expert testimony regarding the reasonableness of
those amounts. The Chief Financial Officer of Bernie Moreno Companies, Robert
Kistler (“Kistler”), also testified regarding M8’s accounting procedures. In his
capacity as CFO, Kistler completes the accounting work for M8 and Bernie Moreno
Companies. While Bernie Moreno Companies is not a party to this lawsuit, M8 is
one of several businesses owned by Bernie Moreno Companies, and Bernie Moreno
Companies, rather than M8, paid the legal fees related to the Simbo-M8 litigation.
According to Kistler, Bernie Moreno Companies paid its attorneys a
monthly retainer for its legal services. (Tr. 939.) The litigation expenses incurred
for the instant lawsuit, however, were not included in the fixed-fee arrangement but
were paid in addition to the fixed-fee amount. (Tr. 948-950.) Legal expenses were
paid from Bernie Moreno Companies’ operating account and were to be
subsequently applied to M8 on the company’s accounting records. (Tr. 938, 949.)
Kistler stated the Simbo-M8 litigation fees bills, in addition to the
monthly fixed-fee arrangement, were paid in full as of February 21, 2018, except for
the most recent billing. (Tr. 935.) Yet, as of the date of the hearing, the accounting
records for Bernie Moreno Companies and M8 did not reflect any legal fees charged
back from the general operating account to M8. (Tr. 956.) Simbo argues the
absence of accounting records substantiating payment of the Simbo-M8 litigation
fees precludes M8 from recovering attorney fees and costs under the fee-shifting
clause.
Simbo’s arguments are unsupported. M8 introduced expert evidence
verifying the reasonableness of its attorney fees and costs. Kistler testified the
Simbo-M8 litigation costs were not included within Bernie Moreno Companies’
monthly fixed-fee arrangement and had been paid up to and including the
February 21, 2018 invoice. No evidence was required to show M8’s internal
accounting records reflected the payments for the Simbo-M8 litigation had been
applied to M8 rather than Bernie Moreno Companies. Ample evidence was
presented for the trial court to award attorney fees and costs to M8.
The trial court’s decision to award M8 attorney fees and costs was not
an abuse of discretion. This court overrules Simbo’s sixth assignment of error.
Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
RAYMOND C. HEADEN, JUDGE
FRANK D. CELEBREZZE, JR., P.J., and
MICHELLE J. SHEEHAN, J., CONCUR