First Nаtional Bank of Bellevue v. NE Port Investments, LLC, et al. [Gene F. & Mary E. Molnar—Appellants/Cross-Appellees]
Court of Appeals No. OT-14-027
IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT OTTAWA COUNTY
Decided: February 13, 2015
[Cite as First Natl. Bank of Bellevue v. NE Port Invests., L.L.C., 2015-Ohio-558.]
JENSEN, J.
Trial Court No. 13 CV 020E
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Barry W. Fissel and Jared J. Lefevre, for appellee/cross-appellant.
Kenneth R. Resar, for appellants/cross-appellees.
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JENSEN, J.
{¶ 1} This case is before the court on cross-appeals filed by defendants-appellants/cross-appellees, Gene F. Molnar, Trustee, and Mary E. Molnar, Trustee, (“the Molnars“), and plaintiff-appellee/cross-appellant First National Bank of Bellevue (“the bаnk“). For the reasons that follow, we find the Molnars’ first assignment of error well-taken and reverse the trial court‘s judgment granting attorney fees to the bank.
{¶ 2} On August 29, 2008, NE Port Investments, LLC (“NE Port“), executed a cognovit promissory note in favor of the bank in connection with its purchase of a $2 million marina in Port Clinton, Ohio. The note was personally guaranteed by Russell White, Betty Oprian, David Barsan, and Anita Barsan. As security, NE Port granted the bank a mortgage on the property in the amount оf the note. The Molnars financed the remaining $800,000 and NE Port granted them a second mortgage.
{¶ 3} NE Port ultimately defaulted on its payments to both the bank and the Molnars. The bank sued on the note and personal guaranties in the Summit County Court of Common Pleas. On March 27, 2012, it obtained a cognovit judgment in the amount of $1,174,669.11, plus interest, against NE Port and the guarantors. It filed collection proceedings against the guarantors through which it garnished funds totaling $387,387.13, deposited with the Summit County Clerk of Courts. Following an unsuccessful attempt by NE Port and the guarantors to vacate the cognovit judgment, final judgment was entered on October 10, 2012, and the garnished funds were released to the bank and applied against its judgment. NE Port and the guarantors took no action to satisfy the remainder of the judgment.
{¶ 4} The Molnars initiated discussions with the bank about possibly purchasing the bank‘s mortgage and the underlying cognovit note. Although they signed a letter of intent in October of 2012, they never signed a purchase agreement.
{¶ 6} NE Port failed to answer the comрlaint and the bank moved for a default judgment, praying “for the relief requested in the Complaint pursuant to
- The Bank‘s Motion for Default Judgment against the NE Port is proper in all respects and is hereby granted;
- The Mortgage is the first and best lien on the Property, subject only to the lien of unpaid real estate taxes, assessments, and penalties;
- The Mortgage is foreclosed;
- Unless, within three (3) days from the date of filing this entry, the Bank is paid thе amount found due, together with the costs and expenses of this action, then the equity of redemption of all defendants in the Property
- An order of sale shall be issued for the Property directing the Sheriff of Ottawa County, Ohio, to appraise and advertise the Property for sale in a paper of general circulation within Ottawa County, Ohio, to sell the Property free and clear of all claims, interests, liens and encumbrances of all of the parties to this action, and to report his proceedings to the Court for further order, all according to law; and
- After deducting the Receiver‘s fees and expenses, the Bank‘s costs and expenses, court costs and fees provided by law, and the real estate taxes, assessments and penalties then due and payable with respect to the Property, the proceeds of the sale of the Property shall be paid to the Bank, with the balance of the sale proceeds, if any, paid to the Clerk of this Court for further determination.
{¶ 7} The default judgment entry contained a
{¶ 8} The Molnars, who had cross-claimed against NE Port, were also granted a default judgment when NE Port failed to answer and defend the case. Pursuant to that order, dated May 29, 2013, the Molnars were entitled to proceеds remaining after deducting the receiver‘s fees and expenses, the bank‘s costs and expenses provided by law, real estate taxes, assessments, and penalties, and the amount remaining due to the bank on its judgment.
{¶ 10} On January 15, 2014, the bank filed a satisfaction of judgment in the Summit County Court of Common Pleas, representing that its judgment against NE Port and the four guarantors had been satisfied in full. Two weeks later, it filed a motion for attorney fees and expenses in the Ottawa County Court of Common Pleas, alleging that it was entitled to fees under section 18 of the mortgage which, it claimed, was enforceable under
{¶ 11} The Molnars challenged the bank‘s motion. They argued that a substantial portion of the requestеd fees and expenses were not incurred to protect the mortgaged property or in the direct prosecution of the foreclosure action; the bank failed to provide appropriate affidavits and documentation describing the services performed, the dates of services, the professionals providing services, the time expended for each service, and the
{¶ 12} In response, the bank insisted that the claimed fees and expenses were incurred in efforts to reduce the mortgage indebtedness. It indicated that it was willing to submit full invoices for in camera review and maintained that the documentation it provided in support of its attorney fees and expenses was competent, admissible evidence. It disputed that it had waived its right to fees by not pleading it with specificity in its complaint. It claimed thаt by pleading that it was “entitled to all remedies provided at law or equity upon NE Port‘s default,” praying for “such other relief as the Court deems just and equitable,” and attaching a copy of the mortgage to its complaint, it had properly asserted its claim for attorney fees. Even if the complaint was not clear, the bank argued, the motion and proposed order for default judgment explicitly stated that it was owed attorney fees. It referred to its reply brief in support of its proposed confirmation entry, where it explicitly stated that it would be filing a fee motion, and it reminded that its intention to move for fees from the deposited proceeds of the sale was discussed during a pretrial attended by the Molnars’ counsel. It asserted that it would have been impractical to state with specificity the total amount due because damages
{¶ 13} The bank later filed a supplemental memorandum increasing its request for legal fees and expenses to $77,802.41 and $14,122.20, respectively. It urged again that fees incurred in pursuing settlement and negotiating the sale should be recoverable. The Molnars responded by reiterating the arguments they previously made, focusing on the bank‘s failure to request attorney fees and expenses in its complaint.
{¶ 14} In a decision file-stamped on June 17, 2014, the trial court granted the bank‘s motion for attorney fees and expenses, however, it awarded less than the full amount requested. The court held that the bank was entitled to recover attorney fees and expenses which were reasonably incurred to protect its interest in the mortgaged real prоperty, which included the fees and expenses incurred in the action on the underlying note, the garnishment proceedings against the guarantors, and the prosecution of the foreclosure action. It found that the bank‘s right to recover attorney fees and expenses did not include fees and expenses incurred in its attempt to negotiate a resolution with the Molnars, in the attempted foreclosure action in Summit County, or in the proceеdings to collect the fees and expenses. It found that the requested fees were reasonable and customary. The total amount that it awarded was $48,650.66.
{¶ 15} The Molnars appealed this decision and they assign the following errors for our review:
THE TRIAL COURT COMMITTED ERROR WHEN IT GRANTED THE PLAINTIFF/APPELLEE FIRST NATIONAL BANK OF BELLEVUE A MONETARY AWARD IN THE AMOUNT OF $48,650.66 FOR THE PAYMENT OF THE PLAINTIFF‘S ATTORNEY FEES AND EXPENSES WHEN NO CLAIM FOR ATTORNEY FEES AND EXPENSES WAS SET FORTH IN THE BODY OF THE PLAINTIFF‘S COMPLAINT OR IN THE PLAINTIFF‘S PRAYER FOR RELIEF. - THE TRIAL COURT COMMITTED ERROR WHEN IT GRANTED THE PLAINTIFF/APPELLEE FIRST NATIONAL BANK OF BELLEVUE A MONETARY AWARD FOR ATTORNEY FEES AND EXPENSES INCURRED BY THE PLAINTIFF THAT WERE NOT SECURED BY THE PLAINTIFF‘S MORTGAGE ON THE SUBJECT REAL PROPERTY AND ORDERED THE PAYMENT OF SAID AMOUNT FROM THE PROCEEDS RECEIVED UPON THE SALE OF THE PROPERTY.
- THE TRIAL COURT COMMITTED ERROR WHEN IT GRANTED THE PLAINTIFF/APPELLEE FIRST NATIONAL BANK OF BELLEVUE A MONETARY AWARD FOR THE REIMBURSEMENT OF ATTORNEY FEES AND EXPENSES FOR AN UNREASONABLE AMOUNT.
- THE TRIAL COURT COMMITTED ERROR BY DENYING AN AWARD OF FEES INCURRED IN SETTLEMENT EFFORTS.
- THE TRIAL COURT COMMITTED ERROR BY DENYING AN AWARD OF FEES INCURRED IN PROSECUTING THE MOTION FOR ATTORNEY FEES.
B. Law and Analysis
{¶ 17} We begin by addressing the Molnars’ first assignment of error in which they claim that the bank failed to properly plead a claim for аttorney fees. Ohio follows the “American Rule” with respect to attorney fees; that is, each party must pay its own fees, regardless of who prevailed. Somerset Synfuel No. 1, L.L.C. v. Resource Recovery Internatl. Corp., 188 Ohio App.3d 368, 2010-Ohio-3463, 935 N.E.2d 497, ¶ 29 (11th Dist.) There are exceptions to this rule where a statute or an enforceable contract provides to the contrary. Id.
{¶ 18} In this case, the mortgage agreement, a copy of which was attached tо the bank‘s complaint, contains the following provision:
18. EXPENSES; ADVANCES ON COVENANTS; ATTORNEYS’ FEES; COLLECTION COSTS. Except where prohibited by law, Mortgagor agrees to pay all of Lender‘s expenses if Mortgagor breaches any covenant in this Mortgage. Mortgagor will also pay on demand all of
Lender‘s expenses incurred in collecting, insuring, preserving or protecting the Property or in any inventory, audits, inspections or other examination by Lender in respect to the Property. Mortgagor agrees to pay all costs and expenses incurred by Lender in enforcing or protecting Lender‘s rights and remedies under this Mortgage, including, but not limited to, attorneys’ fees, court costs, and other legal expenses. Once the Secured Debt is fully and finally paid, Lender agrees to release this Mortgage and Mortgagor agrees to pay for any recordation costs. All such amounts are due on demand and will bear interest from the time of the advаnce at the highest rate in effect, from time to time, as provided in the Evidence of Debt and is permitted by law.
{¶ 19} Under
If a contract of indebtedness includes a commitment to pay attorneys’ fees, and if the contract is enforced through judicial proceedings or otherwise after maturity of the debt, a person thаt has the right to recover attorneys’ fees under the commitment, at the option of that person, may recover attorneys’ fees in accordance with the commitment, to the extent that the commitment is enforceable under divisions (C) and (D) of this section.
{¶ 21}
{¶ 23} We applied these principles in Fors v. Beroske, 6th Dist. Fulton No. F-12-001, 2013-Ohio-1079. In Fors, the plaintiff brought an action to partition the partiеs’ interests in a resort timeshare. In her complaint, plaintiff demanded partition, appointment of a commissioner to facilitate sale of the property, appraisal, advertisement and sale of the property, and distribution of the proceeds of sale, in addition to attorney fees, litigation expenses, and costs. Id. at ¶ 13. As part of the relief granted following entry of default judgment, the trial court awarded monetary damages of $6,500 аnd ordered the defendant to hold plaintiff harmless from all debts and obligations associated with the mortgage loan and other expenses related to the property. Id. at ¶ 2. Because
{¶ 24} The bank, in its complaint, prayed for the following relief:
- That a Receiver be appointed over NE Port and to manage the Property;
- That the defendants named herein be required to answer and set up any claim that they may have in the Property or be forever barred;
- That the equity of redemption of all defendants in the Property be foreclosed;
- That all liens on the Property be marshaled in accordance with their priority;
- That the Bank be found to have a valid and subsisting lien on the Property for the amount owed on the Judgment;
- That the Property be ordered appraised, advertised, and sold according to law, and that from the sale proceeds the Bank be paid the amount due it; and
- For such other relief as the Court deems just and equitable.
{¶ 25} It did not specifically pray for attorney fees and expenses. The bank claims that paragraph (G) is broad enough to encompass a request for fees and expenses, аnd it points out that in paragraph 16 of its complaint, it alleged that it was “entitled to all
{¶ 26} First,
{¶ 27} Second, the Summit County judgment that the bank sought tо satisfy, attached as an exhibit to its complaint, awarded it only $1,174,669.11 plus 8.5 percent interest per annum. It did not award attorney fees.
{¶ 29} Fourth, while the bank asserts that it made a “plain request for attorney fees” in its motion for default judgment, no such request appears. To the contrary, the motion makes no mention of attorney fees, and requests only “the relief demanded in the Complaint.” We acknowledge that the proposed entry of default (submitted by the bank and ultimately adopted by the court), while failing to explicitly order fees, includes a
{¶ 30} We further note that the bank‘s conduct in (1) filing a notice of satisfaction of judgmеnt in Summit County and (2) filing a motion for the award of attorney fees following confirmation of the sale of the marina, belies its contention that attorney fees were requested in the complaint and granted in the entry of default judgment.
{¶ 31} The bank argues that
{¶ 32} Finally, we address the bank‘s argument that the Molnars’ appeal of the attorney fees award is untimely. The bank contends that by reciting the standard of review for default judgments, the Molnars have implicitly conceded that the order they аppeal is the April 16, 2013 default judgment entry. As such, it argues, under
{¶ 33} Accordingly, we find the Molnars’ first assignment of error well-taken.
III. Conclusion
{¶ 34} We find the Molnars’ first assignment of error well-taken and reverse the June 17, 2014 order of the Ottawa County Court of Common Pleas. In light of this decision, we need not consider the remaining assignments of error identified in the Molnars’ appeal and the bank‘s cross-appeal. The costs of this appeal are assessed to the bank pursuant to
Judgment reversed.
A certified copy of this entry shall constitute the mandate pursuant to
Mark L. Pietrykowski, J. _______________________________ JUDGE
Thomas J. Osowik, J. _______________________________ JUDGE
James D. Jensen, J. CONCUR. _______________________________ JUDGE
This decision is subject to further editing by the Supreme Court of Ohio‘s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court‘s web site at: http://www.sconet.state.oh.us/rod/newpdf/?source=6.