Brown v. Gallagher

[Cite as Brown v. Gallagher, 2013-Ohio-2323.]
IN THE COURT OF APPEALS OF OHIO
FOURTH APPELLATE DISTRICT
ROSS COUNTY
JOHN G. BROWN, :
:
Plaintiff-Appellant, : Case No. 12CA3332
:
vs. :
: DECISION AND JUDGMENT
JASON GALLAGHER, : ENTRY
:
Defendant-Appellee. : Released: 05/31/13
_____________________________________________________________
APPEARANCES:
James T. Boulger, Chillicothe, Ohio, for Appellant John G. Brown.
Thomas M. Spetnagel, Chillicothe, Ohio, for Appellee Jason Gallagher.
_____________________________________________________________
McFarland, P.J.
{¶1} John G. Brown (Plaintiff-Appellant herein) appeals the decision
of the Chillicothe Municipal Court dismissing his complaint which sought a
contractual right of indemnification from Appellee. Having reviewed the
record, we find the trial court’s judgment was not in error. Accordingly, we
overrule Appellant’s assignment of error and affirm the judgment of the trial
court.
Ross App. No. 12CA3332 2
FACTS
{¶2} We recount the facts as previously set forth in the first
consideration of this matter, Brown v. Gallagher, 179 Ohio App.3d 577,
2008-Ohio-6270. In 2002, Appellant’s vehicle collided into Appellee in
Union Township, Ross County. At the time, Appellee was employed as a
deputy sheriff with the Ross County Sheriff’s Department. As a result of
injuries he sustained in the incident, Appellee brought a civil suit against
Appellant. Before the case came on for trial, the parties entered into a
settlement agreement. As part of that agreement and in consideration of
$87,500.00, Appellee executed a document entitled “Release of All Claims,”
in which he agreed to indemnify Appellant for “any and all claims, liability,
and expense, including attorney fees, for any claim or demand of any party,
and any claim or demand of any third party” resulting from the auto
collision. The dispute in this case centers around the indemnification
agreement.
{¶3} Subsequent to the civil settlement, Appellant pleaded guilty to a
charge of vehicular assault in the criminal case stemming from the same
auto collision. Appellant was sentenced to 17 months in prison, though he
was granted judicial release after serving only two. As part of Appellant’s
sentence, he was further ordered to pay $7,923.44 in restitution to the Ross
Ross App. No. 12CA3332 3
County Sheriff’s Department for leave payments the department had made
to Appellee during his convalescence. 1
{¶4} As a result of being ordered to pay restitution in the criminal
case, Appellant filed a complaint against Appellee in the Chillicothe
Municipal Court for $7,923.44, based on the indemnification clause of the
civil settlement agreement. Appellee then filed a motion to dismiss the
complaint for failure to state a claim for which relief can be granted pursuant
to Civ. R. 12(B). Appellant failed to respond to the motion. The trial court
subsequently granted Appellee’s Civ.R.12(B) motion and dismissed the
complaint.
{¶5} Appellant filed a timely appeal of the trial court’s decision. This
court agreed with Appellant’s argument that the trial court erred in granting
Appellee’s Civ.R. 12(B) motion for failure to state a claim for which relief
can be granted and sustained Appellant’s assignment of error. Our decision
further noted there is no clear public policy in Ohio preventing the
enforcement of the indemnification clause at issue. The case was remanded
for further proceedings.
1
As noted in Brown v. Gallagher I: “[Due] to a change in the law, the kind of restitution order that gave
rise to[ that appeal, and this one as well,] is no longer likely to occur. The statutory authority allowing a
trial court to include an order of restitution during sentencing is found in R.C. 292918(A)(1). At the time
of Appellant’s vehicular assault, R.C. 2929.18(A)(1) specifically provided that courts could order the
offender to reimburse third parties for amounts paid to the victim. However, on June 1, 2004, the statute
was amended and the references to third-party restitution were largely eliminated.”
Ross App. No. 12CA3332 4
{¶6} On January 14, 2011, Appellant re-filed his complaint for
indemnification.2 Appellee filed a timely answer. Eventually the parties
filed a stipulation of facts for the trial court’s review in rendering a final
adjudication on the merits. The parties supplemented their factual stipulation
with exhibits containing the various court entries in order to make them part
of the evidentiary record. On June 11, 2012, the trial court issued its
decision dismissing the case. The trial court found Appellant had failed to
establish entitlement to recover from Appellee based on: (1) his failure to
provide Appellee notice of the claim for restitution, and (2) Appellant’s
failure to provide Appellee an opportunity to defend against the claim for
restitution. As a result, the current timely appeal ensued.
ASSIGNMENT OF ERROR
I. THE TRIAL COURT ERRED IN DENYING TO MR. BROWN HIS
CONTRACTUAL RIGHT TO INDEMNIFICATION PROVIDED IN
THE AGREEMENT WHICH SETTLED MR. GALLAGHER’S
TORT CLAIMS AGAINST HIM.
A. STANDARD OF REVIEW
{¶7} Review of a trial court’s application of the law to stipulated
facts is de novo. Clark v. Butler, 4th Dist. No. 12CA3315, 2012-Ohio-5618,
at ¶ 9; see Wertz ex rel. Boyer v. Indiana Ins., 9th Dist. No. 21571, 2003-
2
For reasons not entirely clear, Appellant voluntarily dismissed his complaint after the appellate court’s
remand.
Ross App. No. 12CA3332 5
Ohio-5905, at ¶ 4; Wayne Mut. Ins. Co. v. Parks, 9th Dist. No. 20945, 2002-
Ohio-3990, at ¶ 13; Cincinnati Ins. Co. v. Slutz, 5th Dist. No. CA-7109,
1987 WL 18538 (Oct. 13, 1987). In other words, we afford no deference to
the trial court and conduct our own independent review. Clark, supra, citing
State v. Browning, 190 Ohio App.3d 400, 2010-Ohio-5417, 942 N.E.2d 394,
at ¶ 13 (4th Dist.); State v. Poole, 185 Ohio App.3d 38, 2009-Ohio-5634,
923 N.E.2d 167, at ¶ 18 (11th Dist.); White v. Emmons, 4th Dist. No.
11CA3438, 2012-Ohio-2024, at ¶ 9. Upon review of the case sub judice, we
reach the same conclusion as did the trial court.
ASSIGNMENT OF ERROR I
{¶8} Appellant seeks enforcement of the indemnification clause
contained in the Release of All Claims Appellee signed in settlement of the
bodily injury suit underlying this action. Appellant contends the issues arise
only from the four corners of the release and indemnity clause. Appellant
further contends Globe Indemn. Co. v. Schmitt, 142 Ohio St. 595, 53 N.E. 2d
790 (1944), is inapplicable to these facts. In Appellant’s “Conclusion” to his
brief, he asserts: “The trial court erred in applying the Globe requirements
for voluntary settlements to the restitution order.” In doing so, Appellant
mischaracterized the trial court’s application of the general indemnification
principles cited in Globe. We find the trial court did not err in its application
Ross App. No. 12CA3332 6
of the Globe requirements to the release and indemnification clause on
which Appellant bases his claim. We begin our analysis with a review of the
general principles of indemnification contained in Globe and other Ohio
cases.
B. LEGAL ANALYSIS
{¶9} “Indemnity shifts the entire loss from one who has been
compelled to make payment to the plaintiff to another who is deemed
responsible for reimbursing the full amount. The right to indemnity exists
when the relationship between the parties requires one to bear the loss for
the other. This right may arise from common law, contract, or in some
cases, statutes. When a judgment is obtained against the indemnitee, and
indemnitor who has been given proper notice and an opportunity to defend
the action falls in that class of non-parties who are bound by the outcome.”
Portsmouth Insurance Agency v. Medical Mutual of Ohio , 188 Ohio App.3d
111, 2009-Ohio-941, 943 N.E.2d 940, ¶ 16; Blair v. Mann, 4th Dist. No.
98CA35, 1999 WL 228265 (Apr. 8, 1999).
{¶10} Indemnity agreements must be interpreted in the same manner
as other contracts. Portsmouth Insurance Agency, at ¶ 18. See also Worth v.
Aetna Cas.& Sur. Co., 32 Ohio St. 3d 238, 240, 513 N.E. 2d253 (1987).
The nature of an indemnity relationship is determined by the intent of the
Ross App. No. 12CA3332 7
parties as expressed by the language used. Portsmouth Insurance Agency, ¶
18. See also Cleveland Window Glass & Door Co. v. National Surety Co,
118 Ohio St. 414, 161 N.E. 280 (1928). All words used must be taken in
their ordinary and popular sense, Glaspell v. Ohio Edison Co., 29 Ohio St.
3d 44, 47, 505 N.E. 2d 264, 267, and “[w]hen a * * * [writing] is worded in
clear and precise terms; when its meaning is evident, and tends to no absurd
conclusion, there can be no reason for refusing to admit the meaning which
* * *[it] naturally presents.” Portsmouth Insurance Agency at ¶ 18 citing
Lawler v. Burt, 7 Ohio St. 340, 350 (1857); Id at 240-241, 513 N.E.2d 253.
{¶11} “When an indemnitor expressly agrees to indemnify an
indemnitee except in certain specified instances, and it is determined that the
exceptions do not pertain, the indemnitor is obligated to indemnify the
indemnitee under the terms of the agreement.” Portsmouth Insurance
Agency at ¶ 18 citing Allen v. Standard Oil Co., 2 Ohio St. 3d 122, 443 N.E.
2d 497 (1982), paragraph one of the syllabus. Id. at 241, 513 N.E.2d 253.
{¶12} In the case at bar, Appellant’s right to indemnity arises from
the following language contained in the Release of All Claims:
It is further understood and agreed that the undersigned will
indemnify and hold harmless the above-named persons or
parties and their insurers, successors, and assigns from any and
all claims, liability , and expense, including attorneys’ fees, for
any claim or demand of any party, and any claim or demand of
any third party, including those claiming consortium of any
Ross App. No. 12CA3332 8
type or those claiming subrogation rights arising out of
payments made to the undersigned individually, in a
representative capacity, or on behalf of the undersigned as a
result of the occurrence set forth herein. It is further understood
that Plaintiff agrees to satisfy any and all liens, including but
not limited to the Ohio Bureau of Worker’s Compensation,
arising from the claim on behalf of the plaintiff out of the
settlement proceeds. It is further understood and agreed that the
monies paid by Nationwide Mutual Insurance Company on
behalf of John G. Brown’s settlement of Plaintiff’s claims,
pursuant to this agreement, represent all sums due and owing to
Plaintiff, including interest from the date of the agreement to
the settlement to the date indicated below.
{¶13} The language contained in the terms of the release and
indemnification clause at issue here clearly set forth a right to pursue a claim
for indemnification. However, under the general principles of
indemnification, there are other considerations which Appellant asked the
trial court, and now this court, to ignore. The Supreme Court of Ohio has
stated that when an indemnitee settles a claim, instead of litigating it, the
indemnitee is entitled to indemnification if the indemnitee shows (1) that the
indemnitee has given proper and timely notice to the party from whom
indemnity is sought, (2) that the indemnitee was legally liable to respond to
the settled claim, and (3) that the settlement was fair and reasonable.
Portsmouth Insurance Agency at ¶ 19, citing Globe Indemn. Co. v. Schmitt,
142 Ohio St. 595, 53 N.E.2d 790 (1944). “Thus, in a settlement context
under Ohio law, the party seeking indemnification must prove both that the
Ross App. No. 12CA3332 9
right to indemnification applies to the claim and that such a remedy is
appropriate in light of the factual requirements of Globe, supra.”
Portsmouth Insurance Agency at ¶ 19; Blair, supra. We find that Appellant
ostensibly had a right to enforce the indemnification provision of the release
signed by Appellee, however, this is not an appropriate remedy in that
Appellant did not abide by the factual requirements of Globe, i.e., (1)
providing Appellee notice of the restitution hearing; (2) setting forth facts
showing Appellee’s legal liability to respond; and, (3) adducing facts that
the indemnification amount was fair and reasonable. The trial court herein
noted the stipulated facts failed to establish Appellee was given notice of the
restitution hearing regarding payment to the sheriff’s department.
{¶14} Appellant urges reliance on Motorist Insurance
Companies v. Shields, 4th Dist. No. 00CA26, 2001-Ohio-2387, 2001
WL 243285 (Jan. 29, 2001). Shields was involved in an automobile
accident. At the time of the accident, she was insured by Grange
Mutual Casualty Company. Grange paid Shields $5,000.00 under its
med pay coverage. Shields’ policy with Grange also provided a right
of subrogation. Shields subsequently received $105,000.00 after
settling with the tortfeasor’s insurance company, Motorist. As part of
the settlement with Motorist, Shields executed a release and indemnity
Ross App. No. 12CA3332 10
agreement. After Motorist settled with Shields, Shields refused to
reimburse Grange. Grange looked to Motorist for reimbursement and
Motorist reimbursed the $5,000.00 Grange paid pursuant to the med
pay coverage. Motorist eventually filed a complaint against Shields in
which Motorist alleged that pursuant to the release and indemnity
agreement, Shields were obligated to indemnify Motorist in the
amount of $5,000.00 plus attorney fees. Eventually, the case was
resolved by summary judgment in which the trial court found that “by
virtue of the terms of [appellants] policy with Grange Insurance and
the terms of [appellants’] release and indemnity agreement with
[Motorist] and others, [appellants] are liable to [Motorist] in the sum
of $5.000.00.” Appellants filed an appeal, arguing, among various
other assignments of error, that the release and indemnity agreement
in the matter explicitly provided for indemnification of attorney fees
did not override appellants’ right to have the issue submitted to a jury.
After reviewing the language of the indemnity agreement, this Court
held the attorney fee provision to be enforceable and the trial court’s
determination that empaneling a jury to determine Motorist’s
entitlement to attorney fees was unnecessary, to be a proper
determination. In its discussion of the issue, this Court noted basic
Ross App. No. 12CA3332 11
principles regarding review of contract language and determination of
attorney fees. That was as far as this Court delved into discussion of
the basic principles of indemnity law. The requirements of notice
and opportunity to defend were not at issue in Shields.
{¶15} The particular fact pattern we are confronted with is
somewhat unique. We have not discovered another case wherein the
Plaintiff/Appellant pursues a claim of indemnity from the “victim” of
a negligent act after obtaining the benefit of judicial release upon
voluntary agreement to make restitution in a criminal proceeding,
which restitution amount now constitutes the claim for
indemnification. Based on the criminal “twist” of this fact pattern,
Appellant has argued that Globe is inapplicable to the restitution order
and further, that he has not discovered another case in 68 years since
Globe which applies the notice requirements. We have found one
other Ohio case where the notice requirement of the indemnification
rules was discussed.
{¶16} In Grace v. Howell, 2nd Dist. No. 20283, 2004-Ohio-
4120, Plaintiff-Appellee Grace sued Howell for personal injuries
arising from an automobile accident. The court referred the case to
arbitration. The arbitration panel awarded Grace $55,000.00 on her
Ross App. No. 12CA3332 12
claim. Local rule provided a time for appeal of the report and award
and in the case, one was never filed. The trial court subsequently
granted judgment on the award in favor of Grace. However, before
the court granted judgment on the award, the parties agreed to settle
Grace’s claims.
{¶17} The court eventually filed an agreed order of dismissal
with prejudice, signed by the parties’ attorneys. The terms of the
settlement agreement were not set forth in the dismissal. Six months
later, Howell filed a motion to enforce the settlement agreement. She
attached to her motion a copy of the written settlement agreement.
The agreement stated that in exchange for payment of $65,000.00
from Howell and her insurer, Grange, receipt of which was
acknowledged, Grace agreed to indemnify and hold Howell and/or
Grange harmless on any claims arising from the accident, including
any “subrogation claims by any other party.” Howell’s motion
argued that subsequent to the court’s dismissal order, Grange had paid
Grace’s own insurer, State Farm, over $9,000.00 on a subrogated
claim for medical expenses, and that Grace refused to indemnify
Grange. Howell’s motion asked the court to require Grace to perform
on her promise to indemnify.
Ross App. No. 12CA3332 13
{¶18} The trial court denied Howell’s motion, reasoning that
the amount paid by Grange was an amount that had been determined
in an inter-company arbitration proceeding between State Farm and
Grace, to which Grace was not a party. As such, Grace was not bound
by her indemnification promise to pay Grange. The 2nd District
appellate court agreed the amount of indemnification Grange sought
was not enforceable against Grace because she lacked notice and an
opportunity to defend in the inter-company arbitration proceeding
between Grange and State Farm. The appellate court wrote at ¶ 17:
“Generally, in an action to recover from an indemnitor on
account of a demand upon which there has been a judgment
against the indemnitee, the indemnitor is bound by such
judgment if he or she had due notice of the suit in which it was
rendered and had an opportunity to defend; such a judgment is
conclusive evidence against the indemnitor as to the amount of
damages sustained.” 18 Ohio Jurisprudence 3d., Contribution,
Indemnity, and Subrogation, Section 45, pp. 279-280.
{¶19} The appellate court also noted Grace was not
relieved of the duty to indemnify Grange, but that Grace was not
bound by the arbitration panel’s finding of the value of the subrogated
claim and thus a new proceeding must be commenced by Grange to
determine and enforce its right of indemnification.
{¶20} Appellant urges the concepts of notice and opportunity
to defend are illusory issues in this context. Appellant contends
Ross App. No. 12CA3332 14
Appellee’s entire argument rests on the single premise that the order
of restitution entered in the criminal case as part of the sentence is the
functional equivalent of a voluntary settlement for purposes of the
Globe requirements. We are not persuaded the trial court’s decision
leads to this broad generalization. Nor are we convinced that applying
the Globe requirements in this context is peculiar, as per Appellant’s
notion that giving Appellee notice of the restitution hearing would
have been futile and unnecessary. In, albeit, another civil case, the
Supreme Court of Ohio has stated:
“In Miller v. Rhoades, 20 Ohio St. 494, [1870 WL 59 (1870)],
an action upon a bond given by a creditor to indemnify an
officer for the sale of property held by him upon execution, but
claimed by another- a judgment having been recovered against
the officer, it was held that ‘the creditor having due notice of
the action, and an opportunity to defendant against it, the
judgment is conclusive evidence against the obligor of the
amount of damages sustained.’ We have become familiar with
the application of this doctrine to one who is liable over to
another on a warranty of title to land, it being accepted as the
established law that the warrantee may charge the warrantor
with the consequences of an action to evict by giving him
timely notice of the suit, with an offer of opportunity to defend.
It is an extension of the doctrine that all who are parties to a
judicial record are bound by the judgment, and it rests
upon the same foundation- the necessity that there be an
end of litigation… The reason for the doctrine does not
suggest that there should be any limit to its application
because of the nature of the obligation over of the person
notified. Upon examination of numerous decisions in other
states and in the federal courts, it appears that the doctrine
is of general application, without regard to the nature of the
Ross App. No. 12CA3332 15
liability over of the person notified, whether it arises out of
contract or by operation of law.” (Emphasis added.). First
Nat. Bank of Mt. Vernon, Ohio, v. First Nat. Bank of Lincoln,
Ill., 68 Ohio St. 43, 67 N.E. 91 (1903).
{¶21} Appellant sought indemnification pursuant to the four
corners of the release he obtained, and he must abide by the usual
rules in pursuing this claim, regardless of the nature of the obligation,
i.e., here, the restitution order. He did not do so. As such, we agree
with the decision of the trial court and overrule Appellant’s
assignment of error.
JUDGMENT AFFIRMED.
Ross App. No. 12CA3332 16
JUDGMENT ENTRY
It is ordered that the JUDGMENT BE AFFIRMED and costs herein
be assessed to Appellant.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing
the Chillicothe Municipal Court to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated as of
the date of this entry.
A certified copy of this entry shall constitute the mandate pursuant to
Rule 27 of the Rules of Appellate Procedure.
Exceptions.
Harsha, J. & Abele, J.: Concur in Judgment and Opinion.
For the Court,
BY: ____________________
Matthew W. McFarland
Presiding Judge
NOTICE TO COUNSEL
Pursuant to Local Rule No. 14, this document constitutes a final
judgment entry and the time period for further appeal commences from
the date of filing with the clerk.