Connie Scott-Larosa v. Frank Lewis , 44 N.E.3d 89 ( 2015 )

Sep 22 2015, 9:09 am
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Kerry M. Hultquist Jeffrey A. Clark
The Hultquist Law Firm Jeremy J. Grogg
Fort Wayne, Indiana Katherine R. Gould
Burt, Blee, Dixon, Sutton &
Bloom, LLP
Fort Wayne, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Connie Scott-Larosa, September 22, 2015
Appellant, Court of Appeals Case No.
02A05-1410-SC-486
v. Appeal from the Allen Superior
Court
Frank Lewis, The Honorable Jerry L. Ummel,
Appellee Magistrate
Trial Court Cause No.
02D03-1403-SC-4585
Bailey, Judge.
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Case Summary
[1] Constance Scott-LaRosa (“Scott-LaRosa”) filed a small-claims suit against
Frank Lewis (“Lewis”) for breach of contract after Lewis moved out of a leased
residence the two shared. The trial court entered judgment in favor of Scott-
LaRosa and assessed damages against Lewis. Scott-LaRosa filed a motion to
correct error, challenging the judgment and seeking an award of additional
damages. The trial court denied the motion.
[2] Scott-LaRosa now appeals. We affirm.
Issues
[3] Scott-LaRosa identifies several issues for our review. We restate these as:
I. Whether the trial court clearly erred when it concluded
that Scott-LaRosa failed to mitigate her damages; and
II. Whether the trial court clearly erred when it did not grant
Scott-LaRosa’s request for payment of her attorney fees by
Lewis.
[4] We also address sua sponte a matter related to the power of our trial courts to
resolve disputes related to the endorsement and delivery of negotiable
instruments.
Facts and Procedural History
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[5] We take our statement of facts in part from a statement of the evidence entered
pursuant to Appellate Rule 31. 1
[6] Scott-LaRosa and Lewis were involved in a romantic relationship in the
summer of 2012, and decided to live together in an apartment at the West Wind
Apartment Complex in Fort Wayne. Prior to moving in together, Scott-LaRosa
and Lewis “agreed to move in together and split expenses.” App’x at 43.
[7] On July 21, the couple signed a lease for a one-bedroom apartment. The lease
provided for a monthly rent payment of $465.00. The lease required that Scott-
LaRosa and Lewis would be jointly and severally liable to West Wind. The
lease’s term was to run from August 1, 2012 to July 31, 2013. The lease also
included an early termination provision:
Owner [West Wind] and Resident [Scott-LaRosa and Lewis]
agree that this lease may be terminated by either Owner or
Resident at the end of the original term or at the end of any
renewal term… Resident may terminate this lease prior to the
expiration of the above listed lease term by providing one
month’s written notice to Owner and upon paying to Owner,
before vacating the apartment, a termination fee equivalent to
one month’s rent plus rent to the date of the termination of this
lease. Provided that Resident shall comply with such notice and
payment, Owner and Resident mutually agree to cancel this
1
Appellate Rule 31 provides, “[i]f no Transcript of all or part of the evidence is available, a party … may
prepare a verified statement of the evidence from the best available sources,” a motion for certification of
which statement must then be filed with trial court. Ind. Appellate Rule 31(A). An opposing party may file a
verified response, App. R. 31(B), and the trial court must certify a statement of the evidence with “any
necessary modifications.” App. R. 31(C). Once complete, the statement of the evidence becomes part of the
Clerk’s Record. Id.
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lease, and Owner agrees to process any Security Deposit of
Resident held by Owner for refund as if Resident had fulfilled the
terms of the lease.
Ex. 1.
[8] Scott-LaRosa and Lewis lived together in the apartment from August until
December. In December, Lewis moved out of the apartment. Lewis did not
pay any share of the rent from December 2012 through the end of the lease term
in July 2013. Scott-LaRosa remained through the end of the lease term, and
continued to reside in the apartment beyond the end of the lease. Appellant’s
Br. at 4.
[9] On March 31, 2014, Scott-LaRosa, having by this time relocated to Cincinnati,
Ohio, filed suit against Lewis, who had relocated to Oakmont, Pennsylvania.
A trial was conducted on June 25, 2014.
[10] On July 1, 2014, the trial court entered judgment. In its order, the trial court
found that the parties had entered into a one-year lease for the West Wind
apartment and that Lewis vacated the premises in December 2012 and failed to
pay rent from January through July 2013. The court stated further:
3. An examination of the lease shows that the lease could be
terminated by paying a one (1) month penalty.
4. Under Indiana law the Plaintiff had a duty to mitigate any
damages in the situation once she knew that Mr. Lewis
had vacated the premises. The Court finds that Defendant
is liable for one-half of rent for the month of January and
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an additional full month’s rent as the penalty that should
have been paid to terminate the lease.
5. The Plaintiff failed to prove that the Defendant owes her
any additional funds. From the evidence presented at
trial, it would appear that the Plaintiff is entitled to the
deposit. A check has been issued in the name of both
parties but the parties cannot agree on how to negotiate
the check. The Court cannot order either party to
negotiate the check.
Judgment to the Plaintiff against the Defendant in the sum of
$697.50. Costs to Defendant.
App’x at 6.
[11] On July 31, 2014, Scott-LaRosa filed a motion to correct error. In the motion,
Scott-LaRosa challenged the trial court’s determination of damages, arguing
that the trial court erred when it awarded her only 1 ½ months’ rent rather than
payment of Lewis’s portion of the rent for January through July 2013. Scott-
LaRosa also sought an order awarding attorney’s fees under equitable and
contract theories. The trial court denied the motion to correct error on
September 15, 2014.
[12] This appeal ensued.
Discussion and Decision
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Standard of Review
[13] Scott-LaRosa appeals the trial court’s denial of her motion to correct error,
which in part sought additur vis-à-vis the trial court’s original judgment of July
1, 2014, and in part sought payment of attorney’s fees. We review a trial
court’s order on a motion to correct error for an abuse of discretion. Eagle
Aircraft, Inc. v. Trojnar, 983 N.E.2d 648, 657 (Ind. Ct. App. 2013). An abuse of
discretion occurs when the judgment is contrary to the logic and effect of the
facts and circumstances before the court, or when the court erred on a matter of
law. R.L. Turner Corp. v. Town of Brownsburg, 963 N.E.2d 453, 457 (Ind. 2012).
Decisions on requests for attorney’s fees are also reviewed for an abuse of
discretion. Id.[14] Underlying the motion to correct error is the trial court’s judgment in this case,
which was presented as and conducted in the small-claims court. In small-
claims actions, “[j]udgment shall be subject to review as prescribed by relevant
Indiana rules and statutes.” Ind. Small Claims Rule 11(A).
In the appellate review of claims tried by the bench without a
jury, the reviewing court shall not set aside the judgment “unless
clearly erroneous, and due regard shall be given to the
opportunity of the trial court to judge the credibility of the
witnesses.” Ind. Trial Rule 52(A). In determining whether a
judgment is clearly erroneous, the appellate tribunal does not
reweigh the evidence or determine the credibility of witnesses but
considers only the evidence that supports the judgment and the
reasonable inferences to be drawn from that evidence. City of
Dunkirk Water & Sewage Dep’t v. Hall, 657 N.E.2d 115, 116 (Ind.
1995). A judgment in favor of a party having the burden of proof
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will be affirmed if the evidence was such that from it a reasonable
trier of fact could conclude that the elements of the party’s claim
were established by a preponderance of evidence. Id. This
deferential standard of review is particularly important in small
claims actions, where trials are “informal, with the sole objective
of dispensing speedy justice between the parties according to the
rules of substantive law.” Ind. Small Claims Rule 8(A); City of
Dunkirk, 657 N.E.2d at 116. We presume that the trial court
correctly applied the law and give due regard to the trial court’s
opportunity to judge the credibility of the witnesses. Bonecutter v.
Discover Bank, 953 N.E.2d 1165, 1171 (Ind. Ct. App. 2011), reh’g
denied, trans. denied. However, “this deferential standard does not
apply to the substantive rules of law, which are reviewed de novo
just as they are in appeals from a court of general jurisdiction.”
Trinity Homes, LLC v. Fang, 848 N.E.2d 1065, 1068 (Ind. 2006).
“Similarly, where a small claims case turns solely on documentary
evidence, we review de novo, just as we review summary
judgment rulings and other ‘paper records.’” Id. (emphasis
added).
Eagle Aircraft, 983 N.E.2d at 657.
Mitigation of Damages
[15] Scott-LaRosa argues that Lewis was liable for the entirety of his share of the
lease payments, and that trial court erred when it concluded otherwise. To the
extent Scott-LaRosa’s argument focuses on questions of contract law, we note
that interpretation of a contract is a pure legal question, and we review a trial
court’s construction of contract provisions de novo. Claire’s Boutiques, Inc. v.
Brownsburg Station Partners, LLC, 997 N.E.2d 1093, 1097 (Ind. Ct. App. 2013).
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[16] The trial court found that there were two agreements: one imposing joint and
several liability to West Wind upon Scott-LaRosa and Lewis, and a second
between Scott-LaRosa and Lewis. The agreement between Scott-LaRosa and
Lewis contemplated “mov[ing] in together and sharing expenses,” without “any
meeting of the minds regarding additional specific terms of any oral
agreement.” App’x at 43.
[17] Scott-LaRosa argues that Lewis’s failure to terminate his liability to West Wind
mandates that he remain liable to Scott-LaRosa for the full amount of the West
Wind lease. The judgment and award of damages to Scott-LaRosa amounts to
a finding that Scott-LaRosa would have been eligible for contribution from
Lewis and, because Lewis breached the agreement between the two of them, he
was liable to her for breach of that agreement separate from any consideration
of the West Wind lease’s early termination provisions.
[18] However, Scott-LaRosa challenges the trial court’s finding that she failed to
mitigate damages. Based upon this finding, the trial court limited Scott-
LaRosa’s recovery on the agreement with Lewis to one-half of a month’s rent
and one full month of rent, the latter as the termination fee Scott-LaRosa would
have had to pay to terminate the lease she signed with Lewis.
[19] Upon breach of a contract, the non-breaching party has “a right to damages for
the loss actually suffered as a result of the breach,” but not a right “to be placed
in a better position than [she] would have been if the contract had not been
broken.” Fischer v. Heymann, 12 N.E.3d 867, 871 (Ind. 2014) (citations and
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quotation marks omitted). A non-breaching party generally also has a duty to
mitigate its damages. Id. The duty to mitigate damages is a common-law duty
independent of the terms of the underlying contract, and it requires the non-
breaching party to “make a reasonable effort to act in such a manner as to
decrease the damages caused by the breach.” Id. (citations and quotation marks
omitted). Proving the failure to use reasonable diligence to mitigate damages is
a burden placed upon the breaching party. Id. Whether the non-breaching
party made reasonable efforts to mitigate damages occurred is a question left to
the fact finder at trial. Id. at 870, 871.
[20] Scott-LaRosa raises several arguments in her challenge to the trial court’s
conclusion that she did not mitigate damages. First, she argues that for Lewis
to avoid full liability to Scott-LaRosa for his portion of the rent on the West
Wind lease, Lewis should have availed himself of the early termination
provision of the West Wind lease. Because he did not, Scott-LaRosa insists,
Lewis remained bound under the lease and thus was liable to Scott-LaRosa for
half of each month’s rent through July 2013. To the extent the trial court
decided otherwise, Scott-LaRosa claims, the trial court erred by confusing
liability under the West Wind lease to liability under the couple’s separate
agreement.
[21] Scott-LaRosa also argues that the trial court’s finding that she should have
taken action to mitigate her damages was in error, arguing that the trial court’s
conclusions that she could have terminated her lease, requested a less expensive
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apartment, or found a roommate were speculative, impractical, or would have
required her to breach the West Wind lease by seeking its termination.
[22] With respect to both of Scott-LaRosa’s contentions concerning termination of
the West Wind lease by either her or by Lewis, proper exercise of the
termination clause by either her or Lewis would not have constituted breach of
the lease. The termination clause expressly states, “Provided that Resident
shall comply with such notice and payment, Owner and Resident mutually
agree to cancel this lease.” That is, so long as appropriate notice was provided,
rent was current, and the termination fee was paid, the lease would not have
been violated; indeed, the West Wind lease does not indicate that West Wind
reserved any discretion to itself to decide not to terminate the lease if the
contractual termination procedure was followed. To the extent Scott-LaRosa
insists that Lewis could have terminated the West Wind lease, then, she is
correct. But to the extent Scott-LaRosa insists—inconsistently with her
contentions regarding Lewis’s responsibilities—that the court penalized her for
not violating the terms of the lease because she did not attempt to terminate the
West Wind lease, she is incorrect.
[23] Thus, either Scott-LaRosa or Lewis could have sought to terminate the lease
without breaching it. Lewis did not do so; but as the non-breaching party to her
separate agreement with Lewis, Scott-LaRosa had a duty to attempt to mitigate
the damages Lewis might owe her. There is no evidence Scott-LaRosa made
any such efforts.
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[24] Scott-LaRosa objects that the trial court’s examples for possible efforts at
mitigation of damages were inappropriate, unlikely, or impossible for her to
attempt. But the measure of mitigation is not the reasonableness of the trial
court’s proposed alternatives—it is whether the non-breaching party made
reasonable efforts to mitigate damages. See Fischer, 12 N.E.3d at 871. Yet,
again, there is nothing in the statement of evidence indicating that Scott-
LaRosa undertook any efforts at mitigation. She simply remained in the
apartment that she and Lewis shared through the end of the lease term.
[25] The trial court found that Scott-LaRosa took no action to mitigate damages,
though she had a separate duty to do so. Scott-LaRosa has not demonstrated
how that finding was clearly erroneous. We accordingly leave the judgment
undisturbed in this respect.
Attorney’s Fees
[26] Finally, we turn to Scott-LaRosa’s request for payment of attorney’s fees.
[27] “[T]here are two basic attorney fee schemes: the English rule (‘loser pays’) and
the American rule (‘every man for himself’).” State Bd. of Tax Comm’rs v. Town
of St. John, 751 N.E.2d 657, 658 (Ind. 2001). While in the United States the
American rule is prevalent, “[c]ourts in varying American jurisdictions have
sought a middle ground by using the inherent equitable powers to carve out
exceptions to the American rule.” Id. The Indiana General Assembly has
provided that trial courts have discretion to award attorney’s fees to a prevailing
party when an opposing party (1) brought or defended the action on a frivolous,
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unreasonable, or groundless basis; (2) continued to litigate after the claim or
defense clearly became frivolous, unreasonable, or groundless; or (3) litigated
the action in bad faith. I.C. § 34-52-1-1(b).
[28] Scott-LaRosa recognizes the limitations of the American Rule, but claims that
her case falls into two exceptions that entitle her to collect attorney’s fees. First,
she argues that her case against Lewis is akin to a subrogation claim so that she
is entitled to attorney’s fees as provided in the West Wind lease. Second, Scott-
LaRosa contends that she is entitled to attorney’s fees under what has been
termed the “third-party litigation exception.” Masonic Temple Ass’n of
Crawfordsville v. Ind. Farmers Mut. Ins. Co., 837 N.E.2d 1032, 1038 (Ind. Ct. App.
2005).
[29] As to her first argument, Scott-LaRosa makes a bald claim that her case is at
bottom a subrogation claim. Yet Scott-LaRosa cites to no authority in support
of that proposition, merely likening her position to that of an insurance
company. We accordingly decline to entertain her contention in this regard.
See App. R. 46(A)(8)(a).
[30] We turn to Scott-LaRosa’s second contention under the third-party litigation
exception. This doctrine provides that a prevailing party may be entitled to
attorney’s fees when:
(1) the plaintiff became involved in litigation either because of a
breach of contract by the defendant, or because of defendant's
tortious conduct, that is, that the party sought to be charged with
the fees was guilty of a wrongful or negligent act or breach of
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agreement; (2) the litigation was with a third party, not with the
defendant from whom the fees are sought to be recovered; and
(3) the attorneys fees were incurred in that third-party litigation.
Masonic Temple, 837 N.E.2d at 1038. Central to the inquiry under the third-
party litigation exclusion is determining “whether the action for which the
attorney fees are claimed is brought or defended by a third party, a party that is
not part of the contract, agreement, or events that caused the original litigation
to arise.” Id. at 1038-39. This ensures that the American Rule on fees for
prevailing parties in litigation is kept distinct from a doctrine intended to protect
parties who are drawn into litigation due to the wrongful conduct of third
parties. Id. at 1038.
[31] Scott-LaRosa concedes that her case does not fit within the second element
because the litigation was not with a third party. Nevertheless, she argues that
because she saved Lewis the cost of attorney’s fees that would have been paid to
West Wind in the event of a breach, she is entitled to have her attorney’s fees
paid. She does not identify how she is entitled to attorney’s fees under the
third-party litigation exception, other than to claim she saved Lewis the expense
of litigation involving another party. This does not fall within the scope of the
third-party litigation exception.
[32] We accordingly find no error in the trial court’s denial of attorney’s fees.
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Security Deposit
[33] We address sua sponte an issue that remains outstanding in the trial court’s
order: the question of negotiation of the check representing repayment of the
security deposit. The trial court concluded that the funds from the security
deposit rightfully belonged to Scott-LaRosa, and Lewis does not dispute this on
appeal. However, the court observed that the parties could not agree on how to
negotiate the instrument and found, “The Court cannot order either party to
endorse the check.” App’x at 6.
[34] Trial Rule 70 provides:
If a judgment directs a party to execute a conveyance of land, or
other property or to deliver deeds or other documents or to perform any
other specific act and the party fails to comply within the time
specified, the court may direct the act to be done at the cost of the
disobedient party by some other person appointed by the court and the act
when so done has like effect as if done by the party. On application of
the party entitled to performance, the clerk shall issue a writ of
attachment, writ of assistance, or sequestration against the
property of the disobedient party to compel obedience to the
judgment. The court may also in proper cases adjudge the party
in contempt and may award damages for disobedience of the
order. If real or personal property is involved, the court in lieu of
directing a conveyance thereof may enter a judgment divesting
the title of any party and vesting it in others and such judgment
has the effect of both a judgment and of a conveyance executed
in due form of law.
T.R. 70(A) (emphasis added).
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[35] Given the trial court’s decision that Scott-LaRosa was entitled to the funds from
the security deposit and the apparent requirement for negotiation that both
Scott-LaRosa and Lewis endorse the instrument, the trial court would likely
have been within its authority to order endorsement and delivery in a manner
suitable to ensure that Scott-LaRosa received the funds. This might have
included appointing the Clerk of the Court to serve as an endorser or transferee.
[36] In disputes over the negotiation of checks such as the one presented here, a
timely order from a trial court is particularly important given the Uniform
Commercial Code’s provision that “[a] bank is under no obligation to a
customer having a checking account to pay a check, other than a certified
check, which is presented more than six (6) months after its date.” I.C. § 26-1-
4-404. While the comments to this U.C.C. provision indicate that “a bank will
normally not pay such a check without consulting the depositor,” payment of
such a check is not a foregone conclusion, and a delay in endorsement and
negotiation imposes risk of loss upon Scott-LaRosa. It is all the more
troublesome when an Indiana trial court may have contributed unnecessarily to
such delay.
[37] Neither party presented as error the trial court’s finding of its inability to
address the question of endorsement and negotiation of the check for the
security deposit. We have no evidence in the record to indicate whether or how
the security deposit check may have been negotiated; we write here only to
remind counsel and our trial courts of the power of the courts to address
impasses such as the one identified by the judgment in this case.
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Conclusion
[38] The trial court’s finding of liability as to Lewis, its finding that Scott-LaRosa
failed to mitigate her damages, and its conclusion that Scott-LaRosa was not
entitled to attorney’s fees were not clearly erroneous. We take the opportunity
in this case to remind trial courts of their powers to address certain impasses
with respect to the endorsement, delivery, and negotiation of checks and other
forms of commercial paper.
[39] Affirmed.
Baker, J., and Mathias, J., concur.
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