United States Fire Ins. v. Am. Bonding Co., Inc. , 2016 Ohio 7968 ( 2016 )

[Cite as United States Fire Ins. v. Am. Bonding Co., Inc., 2016-Ohio-7968.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
UNITED STATES FIRE INSURANCE, : APPEAL NOS. C-160307
FAIRMONT SPECIALTY GROUP, C-160317
INC., FAIRMONT SPECIALTY : TRIAL NO. A-1302207
INSURANCE COMPANY, FAIRMONT
INSURANCE COMPANY, and :
FAIRMONT PREMIERE INSURANCE O P I N I O N.
COMPANY, :
Plaintiff-Appellee/Cross- :
Appellant,
:
vs.
:
AMERICAN BONDING COMPANY,
INC., :
Defendant-Appellant/Cross-
Appellee. :
Civil Appeals From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed in Part, Reversed in Part, and Cause
Remanded
Date of Judgment Entry on Appeal: December 2, 2016
Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A., Scott M. Zurakowski and
Matthew W. Onest, for Plaintiff-Appellee/Cross-Appellant,
Carolselli Beacher McTiernan & Coleman, LLC, and David A. McGowan, for
Defendant-Appellant/Cross-Appellee.
OHIO FIRST DISTRICT COURT OF APPEALS
CUNNINGHAM, Judge.
{¶1} Following a bench trial, defendant-appellant/cross-appellee
American Bonding Company, Inc., (“ABCI”) appeals from the trial court’s judgment
awarding damages to plaintiff-appellee/cross-appellant United States Fire
Insurance, Fairmont Specialty Group, Inc., Fairmont Specialty Insurance Company,
Fairmont Insurance Company, and Fairmont Premiere Insurance Company
(“Fairmont”), on Fairmont’s claims for breach of contract and indemnification under
a 2005 underwriting agreement between the parties. Fairmont filed a cross-appeal
from the same judgment challenging the trial court’s award of damages to ABCI for
withdrawals from a build-up fund established under the agreement. We have
consolidated these appeals.
I. The Underwriting Agreement between Fairmont and ABCI
{¶2} In July 2005, ABCI contacted Fairmont seeking it as a surety for
ABCI’s bail-bond business. ABCI sought to be appointed Fairmont’s authorized
agent allowing it to provide criminal bail bonds using powers of attorney issued in
various denominations by Fairmont. The parties executed a four-page, 33-paragraph
document—the Producers Underwriting Agreement, or PUA. The PUA provided that
ABCI was solely responsible for administering the bail bonds written using
Fairmont’s powers of attorney. Upon demand by Fairmont, ABCI was required to
immediately return all unused powers of attorney. ABCI was required to contest and
pay any bond forfeitures, and to seek remission of previously paid judgments. With
Fairmont’s knowledge, ABCI used agents to issue its bail bonds.
{¶3} ABCI was also to provide full and unconditional indemnification to
Fairmont for losses and expenses suffered as a result of any breach of the agreement,
including ABCI’s failure to properly administer bonds that it wrote using Fairmont’s
powers of attorney.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶4} The build-up fund account. Pursuant to the PUA, the parties
established a build-up fund account (the “BUF”) with Amergy Bank. The BUF was a
joint savings account funded by fees charged by ABCI on each bond written using a
Fairmont power of attorney. The BUF provided a pool of cash to ensure that
Fairmont could satisfy any losses it suffered as a result of ABCI’s bond business,
including bond forfeitures.
{¶5} Under the terms of the PUA, Fairmont was not required to provide
ABCI with notice of BUF withdrawals. But Amergy sent ABCI regular bank
statements detailing the BUF transactions. While Fairmont had broad discretion
over the use of BUF funds, including using them to satisfy its legal fees, it was
required to maintain an accounting of the fund’s assets. During this litigation,
Fairmont provided a detailed accounting of BUF transactions to ABCI.
{¶6} Two bond forfeitures. This litigation was precipitated by
judgments of forfeiture on two bonds issued by ABCI employing Fairmont powers of
attorney. The first bond was written for a Hamilton County criminal defendant,
John Doe, in the amount of $15,000. The bond had been issued by ABCI’s agent,
Monette Cofer. The Doe bond was forfeited and rendered to judgment. Cofer
received notice of these actions.
{¶7} The second bond was issued to another local criminal defendant,
Hugo Espinal, in the amount of $25,000. Cofer again provided the bond and
received notice when the bond was forfeited. In 2012, Fairmont learned of the
forfeitures and sent written notice to ABCI seeking payment of the judgments. ABCI
refused and Fairmont paid the judgments. Fairmont ultimately sought
indemnification from ABCI on the bond forfeitures.
{¶8} The Roche Surety litigation. In mid-2005, while ABCI was entering
into the PUA with Fairmont, ABCI and its principal owner and corporate officer, Richard
Crain, were defendants in a Florida state court action brought by Roche Surety. Roche
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OHIO FIRST DISTRICT COURT OF APPEALS
Surety, one of Fairmont’s competitors, claimed that ABCI had breached their
underwriting agreement. In August, ABCI added a counterclaim seeking damages against
Roche Surety for its alleged intentional interference with ABCI’s newly minted business
relationship with Fairmont. Roche Surety served a subpoena on Fairmont seeking
documents, including the PUA, directly related to ABCI’s Florida counterclaim alleging
interference in an advantageous business relationship with Fairmont. Fairmont hired
local counsel to protect its proprietary information. Fairmont informed ABCI that it
expected ABCI to indemnify it for the substantial legal fees incurred in the litigation.
{¶9} Fairmont terminates the PUA. On January 29, 2007, Fairmont
terminated the PUA and served written notice on ABCI. Fairmont reminded ABCI that it
remained responsible for the administration of all outstanding bail bonds. Fairmont
provided ABCI with a list of the 77 unused powers of attorney still in ABCI’s possession,
and demanded their return as provided for in the PUA. While ABCI had a policy of
returning unused powers of attorney, according to Fairmont’s litigation and collections
manager, Frances Trevino, ABCI did not return the unused powers of attorney. ABCI had
destroyed many of its Fairmont files before this litigation began and could not document
its return of the powers of attorney.
{¶10} Litigation over the PUA. In 2013, Fairmont began this action
against ABCI for breach of the PUA, and for failing to indemnify Fairmont for the
bond forfeitures and Roche Surety litigation fees. In its second amended complaint,
Fairmont sought damages for indemnification under the PUA, breach of contract,
unjust enrichment, breach of fiduciary duty, and spoliation of evidence. ABCI
asserted counterclaims alleging that Fairmont had breached the PUA and its
fiduciary duties by making unwarranted withdrawals from the BUF. It also raised
claims of conversion and sought an accounting under the PUA.
{¶11} The case was tried to the court over a single day. Crain and Trevino
were the sole witnesses. A large number of Fairmont’s documents detailing the
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OHIO FIRST DISTRICT COURT OF APPEALS
course of its business with ABCI were admitted into evidence. The parties filed
written post-trial briefs and closing arguments.
{¶12} On December 18, 2015, the court issued an opinion letter which was
subsequently incorporated into the trial court’s February 9, 2016 judgment. The trial
court entered judgment for Fairmont on its claims for contractual indemnification
and breach of contract, raised in counts one and two of its second amended
complaint. The court found that ABCI had breached the PUA and awarded Fairmont
$39,944.50 in damages. It entered judgment for ABCI on Fairmont’s remaining
claims.
{¶13} The trial court also entered judgment for ABCI on count one of its
counterclaim alleging that Fairmont had breached the PUA through “inappropriate
withdrawals from the BUF” to cover its losses and expenses for the unused powers of
attorney and for the Roche Surety litigation. The court found in favor of Fairmont on
all of ABCI’s remaining counterclaims, including its claim for breach of trust and/or
fiduciary duty raised in count two.
{¶14} The trial court awarded ABCI damages of $16,181.96—the amount of
the inappropriate BUF withdrawals. That amount was offset against Fairmont’s award. A
third inappropriate withdrawal from the BUF for $4,286.74 was also offset from
Fairmont’s recovery. We note that neither party has challenged the trial court’s judgment
as to this third withdrawal on appeal. Thus, Fairmont’s total damage award was reduced
by ABCI’s BUF damages, for a net award to Fairmont of $19,475.80. Because the trial
court concluded that “there is no single prevailing party,” it denied the parties’ claims
for attorney fees.
II. Fairmont’s Claim for Indemnification
{¶15} In its first assignment of error, ABCI contends that the trial court erred in
granting judgment for Fairmont on its claims for contractual indemnification and breach
of contract. We disagree.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶16} In an appeal from a civil bench trial, we generally review the trial court’s
judgment under a manifest-weight standard of review. We weigh the evidence and all
reasonable inferences, consider the credibility of the witnesses, and determine whether in
resolving conflicts in the evidence, the trial court clearly lost its way and created such a
manifest miscarriage of justice that its judgment must be reversed and a new trial ordered.
See Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, 972 N.E.2d 517, ¶ 20.
{¶17} Where, however, the trial court’s judgment is based upon a question of
law, we review the trial court’s determination of that issue de novo. See Taylor Bldg.
Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 34; see
also Seasons Coal Co. v. Cleveland, 10 Ohio St.3d 77, 81, 461 N.E.2d 1273 (1984) (holding
that a finding of an error of law is a legitimate ground for reversal). A determination of
whether a written agreement is a contract of adhesion and thus unconscionable is an issue
of law which we review de novo. See Taylor Bldg. Corp. of Am. at ¶ 34; see also Sikes v.
Ganley Pontiac Honda, Inc., 8th Dist. Cuyahoga No. 82889, 2004-Ohio-155, ¶ 15.
{¶18} The PUA is not a contract of adhesion. ABCI first asserts that the
PUA is a contract of adhesion and is thus unenforceable. A contract of adhesion is a
standardized form contract prepared by one party, and offered to a weaker party, usually a
consumer, who has no realistic choice as to the contract terms. See Taylor Bldg. Corp. of
Am. at ¶ 48. But standardized contracts are not in every instance unconscionable. See
Glaspell v. Ohio Edison Co., 29 Ohio St.3d 44, 47, 505 N.E.2d 264 (1987). The doctrine is
intended to aid parties who had no input in drafting a contract’s terms because they lacked
the power or ability to negotiate. It is not intended to aid parties who chose to accept
terms because they simply were unwilling to do otherwise. A sophisticated party is not
free to avoid its duty under a contract by relying on the fact that it agreed to perform under
a standardized contract. See J&H Reinforcing & Structural Erectors, Inc. v. Ohio School
Facilities Comm., 10th Dist. Franklin No. 12AP-588, 2013-Ohio-3827, ¶ 45.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶19} Here, the evidence clearly shows that the PUA was not an unenforceable
contract of adhesion. First, none of the PUA terms are, on their face, unconscionable. See
Devito v. Autos Direct Online, Inc., 2015-Ohio-3336, 37 N.E.3d 194, ¶ 18 (8th Dist.); see
also Collins v. Click Camera & Video, 86 Ohio App.3d 826, 834, 621 N.E.2d 1294 (2d
Dist.1993). ABCI’s Richard Crain testified that the terms of the Fairmont PUA were “not
unusual” and were common within the bail-bond industry.
{¶20} There is no evidence demonstrating a severe imbalance of bargaining
power between ABCI and Fairmont. While it was undisputed that Fairmont had drafted
the PUA, the evidence adduced at trial reveals that ABCI was a sophisticated business
entity with extensive knowledge of and prior experience in the bail-bond business. ABCI
had been providing bail bonds for decades. During that period, ABCI had worked with
other surety companies.
{¶21} In early 2005, ABCI believed that Roche Surety was going to terminate its
then-existing surety contract with ABCI. Crain testified that ABCI was working quickly to
obtain another surety during the litigation to avoid an interruption of its bail-bond
business. ABCI acknowledged that at least three other surety companies issued policies in
Ohio. But it had elected to contract with Fairmont without looking to other companies
because it did not want to negotiate with them. Thus, there was no evidence that ABCI
was subject to abnormal or undue pressure to sign the PUA. Moreover, in the Roche
Surety litigation, ABCI stated in its pleading that the Fairmont PUA it now challenges was
“an advantageous business relationship from which [ABCI] derived economic benefit.”
{¶22} ABCI, a sophisticated commercial entity, previously had been involved in
bail-bond surety contracts. It had the opportunity to review the PUA and to pursue other
providers of surety agreements. There was no evidence of compulsion or duress. See J&H
Reinforcing & Structural Erectors, Inc., 10th Dist. Franklin No. 12AP-588, 2013-Ohio-
3827, at ¶ 45; see also Glaspell, 29 Ohio St.3d at 47, 505 N.E.2d 264. The trial court did
not lose its way in failing to hold that the PUA was an unenforceable adhesion contract.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶23} No duty of mitigation under the PUA. ABCI next argues that
Fairmont failed to mitigate damages with respect to the judgments paid on the Doe and
Espinal bail bonds. ABCI contends that even if ABCI had breached its indemnification
obligations, Fairmont had done nothing to prevent or lessen the consequences of the
judgments entered on the bond forfeitures.
{¶24} Generally, the injured party in a breach-of-contract action has a duty to
mitigate damages, meaning that the injured party, here Fairmont, cannot recover
damages that it could have prevented by reasonable affirmative action. See First Fin.
Bank, N.A. v. Cooper, 1st Dist. Hamilton No. C-150664, 2016-Ohio-3523, ¶ 23. But where
“the terms of a contract are clear,” and require full indemnification, the injured party is
under no obligation to mitigate its damages. See Four Seasons Environmental, Inc. v.
Westfield Cos., 93 Ohio App.3d 157, 160, 638 N.E.2d 91 (1st Dist.1994); see also
Frenchtown Square Partnership v. Lemstone, Inc., 99 Ohio St.3d 254, 2003-Ohio-3648,
791 N.E.2d 417, ¶ 20.
{¶25} The construction and interpretation of written contracts involves issues of
law reviewed de novo by appellate courts. Alexander v. Buckeye Pipe Line Co., 53 Ohio
St.2d 241, 374 N.E.2d 146 (1978), paragraph one of the syllabus. The touchstone of
contract interpretation is to give effect to the intent of the parties as evidenced by the
actual language of the contract. See Transtar Elec. v. A.E.M. Elec. Servs. Corp., 140 Ohio
St.3d 193, 2014-Ohio-3095, 16 N.E.3d 645, ¶ 9, citing Skivolocki v. E. Ohio Gas Co., 38
Ohio St.2d 244, 313 N.E.2d 374 (1974), paragraph one of the syllabus. When contract
terms are clear and unambiguous, courts will not, in effect, create a new contract by
finding an intent which is not expressed in the clear language utilized by the parties. See
Alexander at 246.
{¶26} Here, under the PUA, ABCI was required to provide full and
unconditional indemnification to Fairmont for losses and expenses suffered as a result of
ABCI’s failure to properly administer criminal bonds that it wrote using Fairmont’s
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OHIO FIRST DISTRICT COURT OF APPEALS
powers of attorney. The general indemnification provision, found in paragraph 16 of the
PUA, provides that
[ABCI] shall hold [Fairmont] harmless for 100% of all reasonable
costs, expenses, and liabilities that [Fairmont] may sustain or incur in
connection with [ABCI’s] performance of [its] bail bond business and
the subject matter of this agreement. These liabilities are to include,
but not be limited to, bond forfeitures * * *. The bail bond business
and subject matter of the Agreement include, but are not limited to
the execution and/or administration of bonds; * * * forfeiture of
bonds; * * * claims and demands of whatever type and nature; and
participation in any judicial proceeding, voluntarily or otherwise.
{¶27} Paragraph 17, the special indemnification clause, further provides that
In the event [ABCI] breaches this Agreement and/or there is any
action by [Fairmont] to enforce contractual compliance, if not
conflicting with any other paragraph herein, [ABCI] will indemnify
and hold [Fairmont] harmless for any and all damages, losses,
injuries, costs, expenses, and liabilities occurring in connection with
such breach or action.
{¶28} Despite these clear and unequivocal provisions, ABCI argues that because
Fairmont had knowledge of the bail-bond proceedings in the Doe and Espinal cases, but
“sat on its hands” and failed to take steps to avoid damages by filing motions seeking
remission of or setting aside the judgments, Fairmont is not entitled to indemnification.
But adopting that position would effectively rewrite the parties’ agreement by invalidating
paragraph 9 of the PUA covering ABCI’s duties of bond administration. That provision
declares that ABCI is “solely responsible for the satisfaction of bond forfeitures,” including
the filing of all motions “to preserve, reinstate and exonerate bonds” at its expense. When
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OHIO FIRST DISTRICT COURT OF APPEALS
contract terms are clear and unambiguous, courts will not create a new contract by finding
an intent which is not expressed in the clear language utilized by the parties. See
Alexander, 53 Ohio St.2d at 246, 374 N.E.2d 146. Since the express terms of the PUA
required ABCI to fully and unconditionally indemnify Fairmont for bond-forfeiture losses,
Fairmont had no general obligation under the common law to mitigate its damages. See
Four Seasons Environmental, Inc., 93 Ohio App.3d at 160, 638 N.E.2d 91. ABCI’s first
assignment of error is overruled.
III. BUF Withdrawals
{¶29} On appeal, each party contests aspects of the trial court’s ruling on the first
two counts of ABCI’s counterclaim concerning Fairmont’s use of the BUF account. ABCI
maintained that Fairmont had breached both its contractual obligations and its fiduciary
duty when Fairmont withdrew funds from the BUF to reimburse itself. The first contested
withdrawal was for attorney fees in the amount of $7,376.96 paid to the Florida law firm
representing Fairmont in the Roche Surety litigation. The second was Fairmont’s
withdrawal from the BUF of $8,785 as liquidated damages for ABCI’s failure to return the
unused 77 powers of attorney.
{¶30} In its opinion letter, the trial court found that these two withdrawals were
“inappropriate.” It concluded that Fairmont “has not proven that the [77] powers of
attorney were not returned and even if it had, [Fairmont] has proven no damages.” And
the court explained that “[w]ith regard to the Roche Surety litigation, [Fairmont] chose to
involve itself in that litigation. That involvement may have been proper and necessary but
it was not as a consequence” of ABCI’s actions.
{¶31} In the second assignment raised in its cross-appeal, Fairmont contends
that the trial court erred in entering judgment against it on count one of ABCI’s
counterclaim, which alleged that Fairmont had breached the PUA when it made the two
challenged BUF withdrawals. We agree.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶32} The powers-of-attorney withdrawal. Fairmont first argues that the
trial court erred when it imposed on Fairmont the burden to prove that ABCI had
returned the 77 unused powers of attorney. The illegitimacy of the $8,785 BUF
withdrawal was an essential element of ABCI’s counterclaim. This court has long held that
the burden of proof of a counterclaim, including damages, is on the defendant bringing the
counterclaim and not upon the plaintiff. See J. R. Trueman & Assocs. Inc. v. Boyer, 1st
Dist. Hamilton No. C-74545, 1975 Ohio App. LEXIS 7302, *3 (Sep. 15, 1975); see also
Dandrew v. Silver, 8th Dist. Cuyahoga No. 86089, 2005-Ohio-6355, ¶ 25.
{¶33} The trial court erred as a matter of law by concluding otherwise. In its
post-trial brief, however, ABCI acknowledged its burden of proof on its own counterclaim.
Thus it was incumbent on ABCI to prove, by a preponderance of the evidence, that it had
returned the powers of attorney.
{¶34} Our review of the record reveals that the far greater weight of the evidence
adduced at trial indicates that ABCI failed to return the powers of attorney. Fairmont
demanded the return of the 77 powers of attorney then “currently outstanding” in its
January 2007 letter to ABCI terminating the agreement for cause. Fairmont’s Trevino
testified that ABCI did not return the powers of attorney. ABCI’s Crain testified at trial
that it was ABCI’s policy to return unused powers of attorney. But he admitted that he was
unaware of which powers of attorney were outstanding and had no records reflecting that
ABCI had returned the 77 powers of attorney at issue as he was not involved in that
process.
{¶35} Under paragraph 9 of the PUA, ABCI was solely responsible for the
administration of the bail bonds written using Fairmont’s powers of attorney.
Paragraph 4 of the PUA obligated ABCI to “immediately surrender * * * any and all
unused Powers of Attorney.” It also provided an express measure of the damages due if
ABCI failed to return the unused powers of attorney within 15 days: ABCI was required to
tender the full premium amounts of the powers of attorney. This enforceable liquidated-
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OHIO FIRST DISTRICT COURT OF APPEALS
damages provision protected Fairmont from the difficult-to-calculate damages resulting
from ABCI’s failure to return unused powers of attorney which could still have been used
to secure bonds. See Sec. Fence Group, Inc. v. City of Cincinnati, 1st Dist. Hamilton No.
C-020827, 2003-Ohio-5263, ¶ 7. Moreover, paragraph 18 of the PUA governs the use of
BUF funds. The purpose of the BUF is as “security for any and all indemnification set
forth in paragraphs 16 and 17” of the PUA, and that all sums in the BUF may be used to
satisfy that indemnification, without prior notice to ABCI.
{¶36} Thus, the trial court erred in shifting the burden of proof to Fairmont
regarding the validity of the $8,785 withdrawal. The clear weight of the evidence in the
record reflects that ABCI did not return the unused powers of attorney. Since the court
entered judgment on ABCI’s counterclaim, it did not apply the parties’ agreed-upon
liquidated-damages provision relating to the 77 unreturned powers.
{¶37} The Roche Surety litigation withdrawal. Fairmont next argues
that the trial court failed to apply the actual language of the PUA when it determined that
the $7,396.96 BUF withdrawal for attorney fees related to the Roche Surety litigation was
inappropriate. Contrary to the trial court’s statement that ABCI had not drawn Fairmont
into the Roche Surety litigation, the evidence adduced at trial reveals otherwise.
{¶38} Throughout the Roche Surety litigation, Fairmont had informed ABCI
that it expected reimbursement for its legal fees. The indemnification protection
conferred upon Fairmont in paragraph 16 of the PUA includes that ABCI would indemnify
and hold Fairmont harmless for all costs and expenses incurred “in any judicial
proceeding, voluntarily or otherwise” relating to ABCI’s bail-bond business.
{¶39} Here, the overwhelming weight of the evidence in the record reflects that
ABCI’s Florida counterclaim placed the Fairmont PUA, and ABCI’s economic benefit
under the PUA, at the forefront of the Roche Surety litigation. Fairmont entered the
Florida litigation only after receiving a subpoena from Roche Surety. ABCI’s actions thus
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OHIO FIRST DISTRICT COURT OF APPEALS
caused Fairmont to incur legal expenses. And under the clear language of the PUA,
Fairmont was entitled to use BUF funds to reimburse its legal expenses.
{¶40} Thus, the trial court’s judgment in favor of ABCI on count one of its
counterclaim for breach of contract related to the challenged BUF withdrawals was against
the manifest weight of the evidence. Fairmont’s second assignment of error, raised in its
cross-appeal, is sustained.
{¶41} Fairmont’s alleged breach of fiduciary duty. In the second
assignment of error raised in its appeal, ABCI asserts that the trial court erred in failing to
enter judgment in its favor on count two of its counterclaim alleging that Fairmont had
breached its trust and/or fiduciary duty to ABCI when it made the two contested
withdrawals from the BUF. It also claimed that it was entitled to attorney fees and
punitive damages for the breach.
{¶42} The gravamen of ABCI’s claim is that under R.C. 3905.91, Fairmont was a
trustee for the funds deposited in the BUF account. Pursuant to R.C. 3905.91, ABCI
argues, Fairmont was required to act “for the benefit” of the trust’s beneficiary. Without
citation to any other legal authority, ABCI claims that the statute imposed a duty on
Fairmont to limit its BUF withdrawals solely to payments of bond-forfeiture judgments.
{¶43} Contrary to ABCI’s assertion, the statute is silent as to how BUF funds
may be employed. R.C. 3905.91 simply describes the means by which an insurer is to
maintain funds deposited into a BUF account. The only duties that the statute expressly
imposes on an insurer like Fairmont are to make the account available for inspection by
state officials and to maintain an accounting of all the BUF funds. Absent any express
duties imposed under R.C. 3905.91, Fairmont’s obligations to ABCI for the use of the BUF
account would be governed by their written agreement—the PUA. See R.C. 5801.04 and
5810.06 (a trustee is permitted to act in reasonable reliance on the terms of a written
agreement between the parties).
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶44} We held in our resolution of Fairmont’s second assignment of error that
Fairmont could use the BUF to reimburse any losses relating to ABCI’s bail-bond
business, and that Fairmont had not breached any obligation under the PUA regarding
BUF withdrawals. Thus, Fairmont could not have breached any fiduciary duties arising
under those same terms. ABCI was not entitled to any damages or fees sought under
count two of its counterclaim. ABCI’s second assignment of error is overruled.
IV. Attorney Fees
{¶45} In two interrelated assignments of error raised in its cross-appeal,
Fairmont challenges the trial court’s failure to award it attorney fees after entering
judgment in its favor on count one of the second amended complaint, and under the
“prevailing party” provisions of the PUA. We agree.
{¶46} Based upon our resolution of Fairmont’s second assignment of error in its
cross appeal, Fairmont is now the prevailing party on its claims for indemnification and
breach of contract, and on each of ABCI’s counterclaims.
{¶47} Generally, attorney fees are not recoverable in a lawsuit. Ohio courts
follow the “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.). Contractual fee-shifting provisions are
enforceable so long as the fees awarded are fair, just, and reasonable as determined by the
trial court upon a full consideration of all of the circumstances of the case. Nottingdale
Homeowners’ Assn. v. Darby, 33 Ohio St.3d 32, 514 N.E.2d 702 (1987), syllabus; see
Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, 906 N.E.2d 396,¶ 8.
{¶48} We review de novo the trial court’s interpretation of the fee-shifting
provisions. Keal at ¶ 7. Absent ambiguity in the language of the contract, the parties’
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OHIO FIRST DISTRICT COURT OF APPEALS
intent to award fees to prevailing parties must be determined from the plain language of
the document. See id. at ¶ 7. Here, paragraph 30 of the PUA provides that “[s]hould any
litigation arise between the parties hereto related to this Agreement, the prevailing party
shall be entitled to recover reasonable attorney’s fees and costs in addition to any other
relief granted.” Similarly, the indemnification provisions of paragraphs 16 and 17 of the
PUA entitle Fairmont to attorney fees, including those incurred for “legal actions brought
for nonperformance” of the PUA.
{¶49} A prevailing party is one in whose favor the decision or verdict is rendered
and judgment entered. Keal at ¶ 8. But a party may be a prevailing party for fee-shifting
purposes even if it obtains only some of the relief originally sought. See id. Here,
Fairmont succeeded on its principal claims for breach of contract and indemnification.
ABCI prevailed on none of its counterclaims.
{¶50} Therefore, we hold that Fairmont 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. Therefore, for purposes of the fee-shifting agreements in the PUA, Fairmont was
entitled to fees and expenses. Fairmont’s first and third assignments of error are
sustained.
V. Conclusion
{¶51} Having sustained Fairmont’s second assignment of error, we enter
judgment for Fairmont on the first count of ABCI’s counterclaim alleging that Fairmont
breached the PUA by making improper withdrawals from the BUF. The amount of
damages originally awarded ABCI on its counterclaim, $16,181.96, is added to Fairmont’s
damage award for a total award of $35,657.79 on its breach-of-contract and
indemnification claims. This cause is remanded to the trial court with instructions to
award damages to Fairmont in the amount of $35,657.79.
{¶52} Pursuant to our resolution of Fairmont’s first and third assignments of
error, we reverse that portion of the trial court’s judgment which denied and dismissed
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OHIO FIRST DISTRICT COURT OF APPEALS
Fairmont’s claim for attorney fees. The matter is remanded to the trial court for further
proceedings to determine the amount of attorney fees due Fairmont under the PUA. The
trial court’s judgment is affirmed in all other respects.
Judgment accordingly.
HENDON, P.J., concurs.
STAUTBERG, J., concurs in part and dissents in part.
STAUTBERG, J., concurring in part and dissenting in part.
{¶53} I respectfully dissent from the opinion and judgment of the court only
with respect to its resolution of Fairmont’s second assignment of error–specifically the
holding that Fairmont was entitled to indemnification for attorneys fees incurred in the
Roche Surety litigation. The indemnification provision covered “expenses and liabilities
that [Fairmont] may incur in connection with Producer’s performance of his/her/their
bail bond business and the subject matter of this agreement.”
{¶54} I simply do not agree that the language of the indemnification provision
covers fees incurred in a legal proceeding that was not occasioned by the issuance of a bail
bond written by ABC utilizing a Fairmont power of attorney. I otherwise concur in the
opinion and judgment of the court.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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