Court Opinion

ID: 4216503
Source: CourtListenerOpinion
Date Created: 2017-10-31 17:08:41.658172+00
Date Added: 2024-06-11T14:42:07.023343
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be                                   FILED
regarded as precedent or cited before any                          Oct 31 2017, 9:46 am
court except for the purpose of establishing                            CLERK
the defense of res judicata, collateral                             Indiana Supreme Court
                                                                       Court of Appeals
estoppel, or the law of the case.                                        and Tax Court

ATTORNEYS FOR APPELLANT                                  ATTORNEYS FOR APPELLEES
James P. Fenton                                          Jeremy J. Grogg
David E. Bailey                                          Michael A. Barranda
Eilbacher Fletcher, LLP                                  Burt, Blee, Dixon, Sutton &
Fort Wayne, Indiana                                      Bloom, LLP
                                                         Fort Wayne, Indiana

                                           IN THE
    COURT OF APPEALS OF INDIANA

Gerald F. Wagner,                                        October 31, 2017
Appellant,                                               Court of Appeals Case No.
                                                         02A03-1610-PL-2473
        v.                                               Appeal from the Allen Superior
                                                         Court
Kevin E. Wagner, et al.,                                 The Honorable Craig J. Bobay,
Appellees.                                               Judge
                                                         Trial Court Cause No.
                                                         02D02-1405-PL-156

Bailey, Judge.

Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017     Page 1 of 11
                                          Case Summary
[1]   Kevin E. Wagner (“Kevin”) and WDC Management, Inc. (“WDC”) initiated a

      lawsuit against Gerald F. Wagner (“Gerald”) concerning a contract, which led

      to a bench trial. The trial court entered judgment against Gerald on a portion

      of the claims, modified the parties’ obligations under the contract, and awarded

      attorney fees to Kevin and WDC. Gerald now appeals; Kevin and WDC cross-

      appeal.

[2]   We affirm in part, vacate in part, and remand.

                                                    Issues
[3]   Gerald presents several issues, which we consolidate and restate as:

              I.       Whether the trial court erred in modifying the contract in
                       favor of Kevin and WDC as a remedy for breach; and

              II.      Whether the trial court erred in awarding attorney fees to
                       Kevin and WDC pursuant to a fee-shifting provision.

[4]   On cross-appeal, Kevin and WDC challenge the fee award, arguing that the

      trial court erred by awarding them only one-third of their requested fees. Kevin

      and WDC also ask that we remand for a hearing regarding their entitlement to

      appellate attorney fees under the fee-shifting provision.

      Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017   Page 2 of 11
                            Facts and Procedural History
[5]   Gerald and his son Kevin are general partners in fourteen partnerships that own

      apartment buildings in rural areas; WDC manages the apartments. The

      housing is part of a federal government program regulated by the United States

      Department of Agriculture Rural Development (“Rural Development”).

[6]   A few years before the instant matter, the parties were engaged in litigation

      concerning their business relationship. During the pendency of that litigation,

      Gerald sent a series of letters to Rural Development alleging that WDC had

      misappropriated funds—one such letter was sent to Barry Ramsey (“Ramsey”).

      Subsequently, the trial court issued a preliminary injunction that enjoined

      Gerald from, among other things, publishing statements that would damage the

      reputations of Kevin and WDC. The parties eventually entered a settlement

      agreement (the “Agreement”), the terms of which are central to the instant

      action. One term provides that Gerald, who is a Certified Public Accountant,

      “is to prepare all partnership tax returns for the partnerships in which he is a

      general partner” and submit invoices to WDC in accordance with Rural

      Development guidelines. Id. The Agreement also provides that “[a]ny and all

      protective orders and/or injunctive relief entered by the Court in . . . [certain

      causes] filed and pending . . . shall remain in place until the death of Gerald.”

      Appellee’s App. Vol. II at 63. The trial court approved the Agreement and, in

      its order of dismissal, included verbatim the contract language relating to the

      permanency of injunctive relief.

      Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017   Page 3 of 11
[7]   In 2014, Kevin and WDC filed the instant action, initially alleging that Gerald

      breached the Agreement by failing to prepare the partnership tax returns;

      Gerald maintained that he needed general ledgers to prepare the returns. Kevin

      and WDC later learned that Gerald had again written to Ramsey, seeking a

      meeting to “settle all matters” between Gerald, Kevin, and WDC. Pl.’s Exhibit

      3. Gerald also told Ramsey that a law firm had advised him that “this is a

      criminal case and should be taken to Washington.” Id. Kevin and WDC

      amended their complaint, alleging that Gerald’s actions were not only

      contemptuous but also constituted a breach of the Agreement. Moreover,

      Kevin and WDC added claims of defamation and tortious interference with a

      business relationship. Gerald filed a counterclaim, alleging that Kevin and

      WDC had breached the Agreement by failing to fully pay him for tax services.

[8]   During the pendency of the instant litigation, the trial court entered oral and

      written orders enjoining Gerald from taking actions to interfere with Kevin and

      WDC’s existing business relationships and from communicating with non-

      parties regarding Kevin and WDC. Subsequently, Gerald sent a letter to the

      Internal Revenue Service, Criminal Division, in which he alleged that WDC

      had violated Rural Development rules and had stolen funds. Kevin and WDC

      filed a contempt petition and the trial court determined that Gerald was in

      Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017   Page 4 of 11
       contempt. The trial court ordered Gerald to pay $5,000, which reflected a

       portion of the attorney fees Kevin and WDC incurred due to their petition.1

[9]    A bench trial was held in April 2016, during which Gerald made a Trial Rule

       41(B) motion to dismiss the claims against him. The trial court partially

       granted the motion by dismissing the defamation and tortious interference

       claims, which left only the parties’ respective claims of breach.

[10]   Following the bench trial, the trial court entered a written order. Therein, the

       trial court concluded that Gerald’s claim lacked merit because Gerald had been

       paid the amounts due to him under the Rural Development guidelines. As to

       Kevin’s and WDC’s claims of breach, the trial court stated that “Gerald

       breached the Settlement Agreement by contacting other parties regarding

       WDC.” Appellant’s App. Vol. II at 34. The trial court did not state that

       Gerald breached the Agreement by failing to prepare the partnership tax returns

       (which, by that point, Gerald had filed without penalty). Nonetheless, the trial

       court postponed entry of judgment in anticipation of a hearing on attorney fees

       and, in its subsequent final order, stated that Gerald’s breach involved his

       refusal to prepare the tax returns based upon the materials provided to him.

[11]   The hearing on attorney fees included interpretation of the fee-shifting provision

       contained in the Agreement, which provides that “[i]n the event any proceeding

       1
        The trial court later characterized the letter writing as “ongoing and unfounded for many years.”
       Appellee’s App. Vol. II at 52.

       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017          Page 5 of 11
       is brought to enforce th[e] Agreement, the prevailing party in that proceeding,

       as that term is defined by the United States Court of Appeals for the Seventh

       Circuit, shall be entitled to recover its costs, including attorney[] fees, incurred

       as a result of the proceeding.” Appellee’s App. Vol. II at 64. Following the

       hearing, the trial court entered a final written order determining that Kevin and

       WDC were prevailing parties and entitled to reasonable attorney fees. The trial

       court awarded Kevin and WDC $26,794.51, which reflects one-third of their

       requested fees. In so ordering, the trial court observed that Kevin and WDC

       had engaged in lines of unsuccessful ancillary litigation and “were responsible

       for the generation of much of their own fees.” Id. at 59.

[12]   This appeal ensued.

                                  Discussion and Decision
                                         Standard of Review
[13]   Here, the trial court entered sua sponte findings and conclusions, in which case

       the “findings control only as to the issues they cover and a general judgment

       will control as to the issues upon which there are no findings.” Yanoff v. Muncy,

       688 N.E.2d 1259, 1262 (Ind. 1997). A general judgment will be affirmed if it

       can be sustained on any legal theory supported by the evidence. Id. As to

       issues covered by the findings, we will not set aside the trial court’s “findings or

       judgment unless clearly erroneous.” Ind. Trial Rule 52(A). “Findings are

       clearly erroneous only when the record contains no facts to support them either

       directly or by inference.” Quillen v. Quillen, 671 N.E.2d 98, 102 (Ind. 1996). A
       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017   Page 6 of 11
       judgment is clearly erroneous only if the findings do not support the trial court’s

       conclusions or the conclusions do not support the judgment. Id. Moreover,

       “[a] judgment is clearly erroneous if it relies on an incorrect legal standard.”

       Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206, 1210 (Ind. 2000). In

       conducting our review, we give “due regard . . . to the opportunity of the trial

       court to judge the credibility of the witnesses.” T.R. 52(A). Although we do

       not reweigh the evidence and we defer to the trial court’s findings of fact, we

       give no deference to conclusions of law. Menard, 726 N.E.2d at 1210. A matter

       of contract interpretation presents a question of law, which we review de novo.

       State Farm Mut. Auto. Ins. Co. v. Jakubowicz, 56 N.E.3d 617, 619 (Ind. 2016).

                                  Equitable Remedy for Breach
[14]   As an initial matter, Gerald argues that the trial court erred in awarding any

       remedy at all; Gerald contends that Kevin and WDC failed to prove that they

       were damaged by a breach of the Agreement and that, absent proof of damages,

       Kevin and WDC are not entitled to relief. Yet, the trial court determined that

       Gerald breached the Agreement by refusing to prepare the tax returns2—and it

       is “well settled that, where there has been a breach of contract by one of the

       parties, the other is at least entitled to nominal damages,” Hall v. Delphi-Deer

       Creek Twp. Sch. Corp., 98 Ind. App. 409, 189 N.E. 527, 530 (1934), though the

       2
         Gerald argues that the trial court did not identify a breach on this basis because the trial court did not so
       state in its first written order following the trial. However, the trial court postponed entry of judgment and
       ultimately included this basis in its final order from which Gerald now appeals.

       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017              Page 7 of 11
       failure to assess nominal damages is not grounds for reversal. Patton v.

       Hamilton, 12 Ind. 256, 257 (1859). Thus, a successful claim of breach supported

       the trial court’s decision to provide a remedy.3

[15]   Nonetheless, not all remedies are proper. Here, because Gerald breached the

       Agreement by refusing to file the partnership tax returns, the trial court

       determined that Kevin and WDC were entitled to work with a different

       accountant for future tax returns—thus, the trial court modified the parties’

       bargained-for obligations under the Agreement. Put another way, the trial

       court rescinded the discrete part of the contract pertaining to accounting

       services. Yet, contract modification is an extreme equitable remedy that is not

       appropriate under these circumstances. See Meyer v. Marine Builders, Inc., 797
N.E.2d 760, 772 (Ind. Ct. App. 2003) (“[C]ourts may reform written contracts

       only if: (1) there has been a mutual mistake; or (2) one party makes a mistake

       while the other party commits fraud or inequitable conduct.”); see also New Life

       Cmty. Church of God v. Adomatis, 672 N.E.2d 433, 438 (Ind. Ct. App. 1996)

       (“Rescission of a contract is not automatically available. Rather, there must be

       some basis to support the rescission such as fraud, illegality, mutual mistake, or

       3
         Gerald also argues that the trial court erred in determining that he breached the Agreement by his letter
       writing, contending that the obligation to refrain from such communications arose from the injunctive power
       of the court but was not an independent obligation provided for by the contract. However, we need not
       consider this contention because the trial court addressed the letter writing in a contempt proceeding during
       the pendency of the case that resulted in a contempt sanction, and there were no additional damages assigned
       to the letter writing. Moreover, the attorney fees associated with the contempt proceeding were excluded
       during the calculation of the fee award, which itself was greatly reduced.

       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017         Page 8 of 11
       a contract provision providing for rescission.”).4 Thus, we conclude that the

       trial court erred in fashioning its equitable remedy, and we accordingly vacate

       that portion of the order permitting the procurement of a different accountant.

                                                 Attorney Fees
[16]   Under Gerald’s proffered resolution of this matter, the fee award should be

       eliminated because Kevin and WDC succeeded only in defending Gerald’s

       counterclaim.5 But that is not the case. Rather, Kevin and WDC also

       succeeded in proving that Gerald breached the Agreement. Thus, we agree

       with the trial court that Kevin and WDC were prevailing parties under the

       Seventh Circuit approach, which is the approach provided for in the

       Agreement. See First Commodity Traders, Inc. v. Heinold Commodities, Inc., 766
F.2d 1007, 1015 (7th Cir. 1985) (defining “prevailing party” as the party who

       prevails as to the substantial part of the litigation). We next turn to the

       argument presented on cross-appeal, which is that the trial court erred in

       awarding Kevin and WDC only one-third of their requested attorney fees.

[17]   “We will enforce a contract allowing for recovery of attorney fees, but ‘[t]he

       amount recoverable for an award of attorney fees is left to the sound discretion

       of the trial court.’” Fischer v. Heymann, 12 N.E.3d 867, 874 (Ind. 2014) (quoting

       4
         Moreover, we disagree with Kevin’s and WDC’s contention that modifying the Agreement was justified as
       a use of the trial court’s “inherent power to punish” Gerald. Appellee’s Br. at 25.
       5
           Gerald presents no challenge to the ruling on his counterclaim.

       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017     Page 9 of 11
       Dempsey v. Carter, 797 N.E.2d 268, 275 (Ind. Ct. App. 2003), trans. denied). The

       trial court generally reviews the requested amount for reasonableness. See id.;

       Cavallo v. Allied Physicians of Michiana, LLC, 42 N.E.3d 995, 1002 (Ind. Ct. App.

       2015). Several factors bear on the reasonableness of attorney fees, among them,

       “the amount involved and the results obtained.” Ind. Professional Conduct

       Rule 1.5; see Fischer, 12 N.E.3d at 874 (noting that courts may consider such

       factors as the hourly rate, the result achieved, and the difficulty of the issues).

[18]   Here, the trial court set forth thoughtful remarks regarding its decision to award

       Kevin and WDC only one-third of their requested fees:

               [T]he court notes the many other theories of recovery and
               defensive strategies that Kevin and WDC presented, all of which
               were not terribly successful, but which nonetheless required
               additional expenditure of time and effort, resulting in the
               accumulation of substantial additional attorney[] fees. Much of
               that ancillary litigation was simply not necessary to resolve the
               principal dispute, and as such, Kevin and WDC were responsible
               for the generation of much of their own fees.

       Appellee’s App. at 58-59. Although Kevin and WDC argue that the case

       involved “entangled claims with the same set of operative facts,” Appellee’s Br.

       at 29, and that it would have been “borderline malpractice” not to pursue

       certain claims, id. at 27, we are not persuaded that the trial court abused its

       discretion in awarding $26,794.51 in attorney fees. We accordingly affirm the

       fee award selected by the trial court. Moreover, we acknowledge that “[w]hen

       a contract provision provides that attorney fees are recoverable, appellate

       attorney fees may also be awarded,” Humphries v. Ables, 789 N.E.2d 1025, 1036

       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017   Page 10 of 11
       (Ind. Ct. App. 2003), and so we remand for a determination of the propriety of

       appellate attorney fees in light of our decision in this matter.

                                               Conclusion
[19]   The trial court did not err in finding that Gerald had breached the contract, but

       it was error in these circumstances for the court to fashion an equitable remedy

       that modified the parties’ obligations under the Agreement. The trial court did

       not abuse its discretion in reducing the attorney fee award, and we remand for a

       determination regarding Kevin’s and WDC’s entitlement to appellate attorney

       fees pursuant to the Agreement.

[20]   Affirmed in part, vacated in part, and remanded.

       Brown, J., and Pyle, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 02A03-1610-PL-2473 | October 31, 2017   Page 11 of 11