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.