                                                                  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.




Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015             Page 1 of 16
                                           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



      Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 2 of 16
[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.

      Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015                    Page 3 of 16
                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

       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 4 of 16
                        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



       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015    Page 5 of 16
                                          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

       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 6 of 16
               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).




       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 7 of 16
[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


       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 8 of 16
       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



       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 9 of 16
       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.



       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 10 of 16
[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,

       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 11 of 16
       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

       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 12 of 16
               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.




       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 13 of 16
                                             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).




       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 14 of 16
[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.

       Court of Appeals of Indiana | Opinion 02A05-1410-SC-486 | September 22, 2015   Page 15 of 16
                                                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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