COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 67585 JOHN E. TAYLOR, ET AL. : : Plaintiffs-appellees : : JOURNAL ENTRY -vs- : AND : OPINION ANNETTE JOHNSON, ET AL. : : Defendants-appellants : : DATE OF ANNOUNCEMENT OF DECISION: MAY 25, 1995 CHARACTER OF PROCEEDING: Civil appeal from Court of Common Pleas Case No. CV-169630 JUDGMENT: Affirmed in part, reversed in part and remanded. DATE OF JOURNALIZATION: APPEARANCES: For Plaintiffs-Appellees: For Defendants-Appellants: DANIEL T. TODT, ESQ. PAUL MANCINO, JR., ESQ. 2000 Standard Building 75 Public Square Bldg. #1016 Cleveland, Ohio 44113 Cleveland, Ohio 44113-2098 - 2 - DYKE, J.: Defendants-appellants, Annette Johnson and Roosevelt Cox appeal a judgment of the Court of Common Pleas granted in favor of Plaintiff-Appellees, John E. Taylor, et al., in their action for fraud, breach of a contract to purchase real property and breach of a fiduciary duty arising from such contract. Appellants advance nine assignments of error on appeal claiming that the trial court (1) erred in finding that appellant Cox breached a fiduciary duty arising from an escrow agency; (2) erred in permitting parol evidence to prove the existence of an escrow agency; (3) erred in granting judgment in the amount of $15,000; (4) erred in failing to dismiss the case based upon the statute of frauds; (5) erred in awarding appellees more than the amount specified in their prayer; (6) erred in failing to award appellants' crossclaim for back rent; (7) erred in awarding attorney fees; (8) erred in awarding interest on attorney fees and (9) erred in awarding fees and costs without conducting a hearing. Upon review, we find appellants' third, fifth and eighth assignments of error to have merit and sustain them. We also sustain appellants' ninth assignment not upon grounds advanced supra, but because the court failed to determine the reasonableness of attorney fees and failed to explicitly specify such determination in its judgment entry. Hence, the judgment of the trial court is affirmed in part, reversed in part and remanded for proceedings consistent with this opinion. - 3 - On or about October 31, 1985 appellees John Taylor, Nemon Hobbs and Benny Dixon entered into an agreement drafted by appellant, Roosevelt Cox, Esq., to purchase certain real and personal property owned by co-appellant, Annette Johnson. Such property included a bar and suite of apartments located at 10401- 04 Harvard Avenue, fixtures and a liquor license associated therewith. On May 15, 1989 appellees filed the instant action. A bench trial was held on April 25, 1991. The court found in favor of the appellees and issued the following judgment entry: The court finds for the Plaintiffs against Defendants, Annette Johnson and Roosevelt Cox, jointly and individually for $15,000.00; that is 1.) $8,000.00 for Pauline Dixon 2.) $3,500 for John Taylor 3.) $3,500 for Myrna Taylor plus interest from October 31, 1985 plus attorney fees inasmuch as: A. Defendant Roosevelt Cox breached his obligation as an escrow/fiduciary; B. Defendant Annette Johnson failed to complete her obligations under the purchase [sic] agrement and breached said agreement. The court further finds for Plaintiffs on Defendants' Counterclaims. (Journal Entry, August 19, 1991, Case No. 169630) On August 21, 1991, appellees filed the following motion for approval of fees and costs: Costs: Filing Fee $50.00 Deposition transcripts $428.50 filed with the Court. Copying Expenses $28.40 Total Costs $506.04 Attorney Fees $7579.04 Total Costs and Attorney fees $8085.94 - 4 - Such motion remained unsigned by the court. On September 16, 1991, appellants filed an appeal which was dismissed pursuant to Civ.R. 54(B) as the trial court failed to specify the amount of fees and costs awarded in its August 19, 1991 journal entry, supra. See, Taylor et al., v. Annette Johnson, et al., (July 6, 1993) Cuyahoga App. No. 62460, unreported. On remand, appellees submitted a "Summation of Costs and Fees Through September 3, 1993 Pursuant To Order Of The Court." On June 17, 1994 the trial court adopted a proposed Judgment Entry submitted by the appellees which was predicated upon the above- cited "Summation." The Judgment Entry reads as follows: The Court finds for the Plaintiffs and against Defendants Roosevelt Cox and Annette Johnson: 1. Defendants Johnson and Cox are jointly and individually liable for all court costs in the case as assessed by the Clerk's Office, and are to pay said amount immediately; 2. Defendant Cox is liable for attorney fees in the amount of $16,401.00 and additional costs of $1,248.59, as said liability was established due to his intentional breach of a fiduciary responsibility as stated in the Judgment of August 21, 1991 plus interest of 18% from the date of Judgment. (Journal Entry, June 17, 1994 Vol. 749 Pg. 254) The above-cited judgments form the basis of this appeal. I THE COURT COMMITTED PREJUDICIAL ERROR IN FINDING AGAINST THE DEFENDANT, ROOSEVELT COX, FOR AN ALLEGED BREACH OF AN OBLIGATION AS AN ESCROW/FIDUCIARY. - 5 - II THE COURT COMMITTED PREJUDICIAL ERROR IN ALLOWING A MODIFICATION OF A WRITTEN CONTRACT OF ORAL TESTIMONY. Appellants' first and second assignments of error are related. Hence, they will be addressed together. The parole evidence rule prohibits the introduction of evidence of a prior or contemporaneous oral statement to vary the terms of a written contract. Norris v. Royal Indemn. Co. (1984), 20 Ohio App.3d 206, 485 N.E.2d 754. A review of the instant purchase agreement demonstrates that it is silent with respect to the issue of an alleged escrow agency. Thus, since there were no terms to vary, testimony regarding the alleged oral representations of Roosevelt Cox were admissible to establish such agency. Moreover, where fraud is alleged, i.e., that misrepresentation induced the parties to enter into the contract, parole evidence is admissible to supplement the contract. Finomore v. Epstein (1984), 18 Ohio App.3d 88; Niehaus V. Haven Park West, Inc. (1981), 2 Ohio App.3d 24. The record demonstrates that appellant, Annette Johnson made several material misrepresentations at the time she entered into the contract with the appellees. Johnson represented that she could transfer the property free and clear of liens and or encumbrances. However, on cross- examination, Johnson admitted that at the time she signed the agreement, she held a mortgage on the property and cashed appellees' checks to pay off the mortgage instead of keeping them in escrow until certain assets, including a liquor license, - 6 - transferred per the oral representations of Roosevelt Cox, her 1 attorney. Johnson also testified that all building defects had 1 Annette Johnson's misrepresentations and Roosevelt Cox's escrow agency were established by John Taylor and Nemon Hobbs who testified as follows: Taylor Testimony: Counsel: Now, were there any representations that were made to you by Mrs. Johnson that were not followed through on? Taylor: Yes. We never received a copy of the sales tax release and we never received a copy of the bulk sales affidavit. Counsel: Okay. And did you -- you heard Mrs. Johnson testify earlier that she in fact had a mortgage on this property. Is that right? Taylor: Right. Counsel: And does she specifically tell you in the agreement that the property is free and clear of all liens? Taylor: That's what it says here. (Referring to purchase agreement) Counsel: Did Mr. Cox hold the money until the complete transaction was completed? Taylor: No. Evidently the money was handed over as soon as we left this office, because the checks were cashed the same day. * * * Counsel: When was it discussed that monies were going to be held? Taylor: Well, Mr. Cox said that he would hold the checks, but he told us to make them out to Annette Johnson. We asked him who should the checks be made out to. He said "Make out the checks to Annette Johnson, but I will be holding the checks." (Tr. 128-129, 127) Hobbs Testimony: Counsel: Okay. Did you have an understanding that Mr. Cox was supposed to be holding these checks? Hobbs: Yes. Counsel: Okay. And what was he supposed to hold them for? Hobbs: He is supposed to hold it, say, so probably until the license was transferred. Counsel: And why is it that you had this understanding? - 7 - been repaired at the time of purchase. However, she admitted receiving actual notice of 14 City of Cleveland Building Code Violations only five days prior to entering into an agreement with the appellees. Johnson further admitted that unpaid taxes prevented transfer of the liquor license but maintained that it was the appellees who were responsible for paying such taxes. With respect to appellees' fraud allegations, it is well settled that the credibility of the witnesses is a matter for the trier of fact. State v. DeHass (1967), 10 Ohio St.2d 230. Hence, Johnson's Hobbs: Well, while the conversation was going on... . It was the understanding ... you know, I will hold the checks and come to find out the checks was cashed on the next day, I think it was. Counsel: And how do you know that your check was cashed the next day? Hobbs: My wife -- we'll what happened was, when we got our blank checks back from the bank, she looked on the back and she was like, wow, this check has been put in already. And we couldn't believe that the check had already went through -- or should I say cashed. (Tr.75) Counsel: Why did you hand your check to Mr. Cox? Hobbs: Well, at the time he said "I will take the checks," after my wife wrote the check, and she was hesitant and she gave me a check, and we said, "Well, what will you do with it?" And Mr. Cox said, "Well, hand me the checks. I will hold the checks." Counsel: By "hold the checks," what did you think he meant by that? Hobbs: He was going to hold it until they made sure the license was clear to be transferred. Counsel: Okay, Did you believe Ms. Johnson when you were told by her that she had the ability to transfer everything over to you? Hobbs: Yes, most definitely. (Tr. 94) - 8 - assertion that it was the appellees' responsibility to pay taxes to permit transfer of the license and Cox's denial of oral representations regarding an escrow agency were matters to be determined by the trial court. Accordingly, there is sufficient evidence in the record to support the court's finding that appellants defrauded appellees; that appellants breached the purchase agreement and further breached a fiduciary duty to hold appellees' checks in escrow until assets specified in the contract transferred. Accordingly, the trial court did not commit prejudicial error in finding against Roosevelt Cox for breach of a fiduciary duty arising from an escrow agency. The court also did not err in permitting parol evidence to prove such agency. Appellants' first and second assignments of error are overruled. III THE COURT ERRED IN GRANTING JUDGMENT AND TOTAL SUM OF FIFTEEN THOUSAND DOLLARS ($15,000.00) WHEN THE ALLEGATIONS AND PROOF DID NOT SUPPORT THAT AWARD. V THE COURT COMMITTED PREJUDICIAL ERROR IN AWARDING THE PLAINTIFFS MORE THAN THEIR PRAYER ON THE BREACH OF CONTRACT CLAIM. In their third and fifth assignments of error, appellants claim that the court erred in granting an award of $15,000 because the award exceeded the amount specified in appellees' prayer and because the award is unsupported by the record. We agree. Civ.R. 54(C) provides in relevant part that: "* * * [A] demand for judgment which seeks a judgment for money shall limit the claimant - 9 - to the sum claimed in the demand unless he amends his demand not later that seven days before the commencement of the trial." The Civil Rules are, of course, the law of this state with regard to practice and procedure in our state courts. Section 5(B), Article IV, Ohio Constitution. Civ.R. 54(C) is clear on its face. No damages awarded may exceed the prayer that is in effect on the sixth day prior to trial. Bishop v. Grdina (1985), 20 Ohio St.3d 26, 28. The record demonstrates that the appellees prayed for $11,500 in their demand for a money judgment. The record also demonstrates no evidence to support an award of $3,500 to Myrna Taylor as is indicated by the following exchange: Counsel: How much money did you lose as far as your investment into this? Taylor: You just talking about the initial investment? Counsel: Yes Taylor: Well, $3,500. Counsel: And was there an investment made by Mr. & Mrs. Dixon, also? Taylor: Yes Counsel: And that was what? Taylor: $8,000. (Tr. 130, 131) Hence, the trial court erred when it awarded $15,000 to the appellees which included an award of $3,500 to Myrna Taylor. On remand the court shall vacate its $3,500 award to Myrna Taylor and order damages in the amount of $11,500 specifying an award of $8,000 to Pauline Dixon, Executrix of the estate of Benny Dixon and - 10 - 2 $3,500 to John Taylor plus applicable statutory interest. Appellants' third and fifth assignments of error are sustained. IV THE COURT COMMITTED PREJUDICIAL ERROR IN NOT DISMISSING THIS CASE AS IT VIOLATED THE STATUTE OF FRAUD. In their fourth assignment of error, appellants argue that the trial court should have granted their motion for a directed verdict because an escrow agency can be established only by a writing. Appellants' fourth assignment of error lacks merit as parole evidence was admissible to supplement the instant agreement to include Roosevelt Cox's oral representations to serve as an escrow agent in the transaction. Appellants' fourth assignment of error is overruled. VI THE COURT COMMITTED PREJUDICIAL ERROR IN NOT AWARDING ANNETTE JOHNSON MONEY FOR USE OF THE PREMISES BY THE PLAINTIFFS. In their sixth assignment of error, appellants claim that the instant purchase agreement constituted an "option to buy" contract which contemplated the payment of rent in the amount of $900 per month. Appellants argue that the appellees used the premises for three to four months and that the court erred in denying their counterclaim for back rent. Appellants' assignment of error is devoid of merit. 2 While Nemon Hobbs' testified that he gave Roosevelt Cox a check for $3,500, Hobbs is unable to recover funds in this action as he has not been named as a party. - 11 - It is a general rule that where one party to a contract has been induced to enter into it through fraud, deceit, and misrepresenta-tion of the other party as to material matters, the defrauded party does not become bound by its terms, notwithstanding the contract contains a provision that there are no agreements or statements binding upon the parties except those contained therein. Fraud which enters into the actual making of a contract cannot be excluded from the reach of law by any formal phrase inserted in the contract itself. 24 Ohio Jurisprudence 2d. 639, Fraud and Deceit, Section 27. It is undisputed that appellants misrepresented their ability to transfer the property free and clear. It is also undisputed that appellees never received a bulk sales receipt or the accompanying liquor license despite the fact that appellants cashed appellees' checks almost immediately. Hence, there was fraud and a 3 complete failure of consideration on the part of the appellants. Accordingly, appellees were under no duty to pay back rent to the appellants. Appellants' sixth assignment of error is overruled. VII THE COURT COMMITTED PREJUDICIAL ERROR AND DENIED DEFENDANT DUE PROCESS OF LAW WHEN IT AWARDED ATTORNEY FEES. It is well settled that absent a statutory provision allowing attorney fees as costs, the prevailing party is not entitled to an award of fees unless the party against whom the fees are taxed was 3 Moreover, appellees testified that there was an understanding that the obligation to pay back rent would accrue only after appellant satisfied her obligation to transfer specified assets. (Tr.162) - 12 - found to have acted in bad faith. See, State ex rel. Crockett v. Robinson (1981), 67 Ohio St.2d 363, 369. Appellants claim that the trial court erred in awarding fees because the court failed to specify the term "bad faith" in its June 17, 1994 judgment entry. Appellants advance a purely semantic argument which is devoid of merit. A review of the court's June 17, 1994 judgment entry demonstrates that the trial court pre- dicated its award of fees upon an explicit finding that Roosevelt Cox intentionally breached a fiduciary duty. Breach of such duty clearly constitutes an act of bad faith and clearly supports an award of attorney fees pursuant to Crockett, supra. See, also, State ex rel. Katabetki v. Stackhouse (1983), 6 Ohio St.3d 55. Appellants' seventh assignment of error is overruled. VIII THE COURT COMMITTED PREJUDICIAL ERROR IN, IN EFFECT, AWARDING ATTORNEY FEES IN ABSENCE OF AN AWARD OF PUNITIVE DAMAGES AND AWARDING AN ILLEGAL RATE OF INTEREST. In their eighth assignment of error, appellants argue that the trial court erred in awarding interest on attorney fees and further erred in awarding such interest at the rate of 18%. Upon review, we find that the trial court did not err in awarding interest on appellees' attorney fees but erred in awarding interest at a rate of 18% R.C. 1343.03(A) provides for interest to be accrued by operation of law not only upon all judgments but upon "... orders of any judicial tribunal for the payment of money arising out of - 13 - tortious conduct, or a contract or other transaction... ." Thus, the plain language of R.C. 1343.03(A) is broad enough to include the trial court's order for the payment of attorney fees. However, we find that the trial court erred in ordering interest at a rate of 18% as the contract executed between counsel and appellees, Taylor and Dixon on March 30, 1989 demonstrates no provisions whatsoever with respect to interest. (See, "Summation Of Costs And Fees Through September 3, 1993 Pursuant To Order Of The Court, "Contract For Legal Services," Exhibit 5) The "contract" which counsel cites in his appellate brief in support of his claim for 18% interest is merely a contract "form." It is blank and has not been executed by the appellees. (See, Exhibit 11 included within Exhibit B of Appellees' Appellate Brief) Hence, the proposed judgment entry submitted by counsel and signed by the court on June 17, 1994 indicated an interest rate of 18% which was erroneous and unsupported by the record. Appellants' eighth assignment of error is sustained in part. On remand the trial court shall award interest on appellees' reasonable attorney fees at a rate of 10% per annum from the day of judgment to wit., August 19, 1991 pursuant to R.C. 1343.03(A) until the matter is resolved on remand. IX THE DEFENDANTS WERE DENIED DUE PROCESS OF LAW WHEN THE COURT PROCEEDED TO AWARD ATTORNEY FEES AND ADDITIONAL COSTS WITHOUT A HEARING. - 14 - Appellants' ninth assignment of error is devoid of merit as appellants failed to object to the alleged lack of hearing on the matter of fees and costs. Appellees' initial motion to approve fees remained unopposed and appellants' brief in opposition to appellees' summation of fees focused primarily on the propriety of the award and not upon the lack of a hearing. Hence, appellants have waived such error on appeal. However, we remand this cause on the issue of fees because the trial court failed to affirmatively state in either of its judgment entries any findings with respect to the reasonableness of attorneys fees. We also remand this cause because the trial court erroneously awarded deposition and xerox copying expenses as costs. See, Centennial Ins. Co. v. Liberty Mut. Ins. Co., 69 Ohio St.2d 50, 51; Vance v. Roedersheimer (1992), 64 Ohio St.3d 552 and Wiltsie v. Teamor (1993), 89 Ohio App.3d 380, 387 (holding that costs are purely statutory and that deposition expenses cannot be taxed as costs as a matter of law.) On remand the trial court shall conduct a hearing not to determine whether an award of attorney fees in favor of the appellees is proper as such award has already been affirmed in our resolution of appellants' seventh assignment of error. On remand the court shall conduct a hearing to determine the reasonableness of attorney fees incurred pursuant to account statements provided to the appellees from July 31, 1989 until this matter is resolved on remand. Such determination shall be conducted pursuant to the guidelines set forth in Swanson v. - 15 - Swanson (1976), 48 Ohio App.2d 85 and DR 2-106(B), Code of Professional Responsibility and such award shall be exclusive of all deposition expenses, all xerox copying expenses and any other non-statutory expenses. Appellants' ninth assignment of error is overruled. The judgment of the trial court is affirmed in part, reversed in part and remanded for proceedings consistent with this opinion. It is so ordered. - 16 - This cause is remanded to the lower court. It is ordered that appellants and appellees share equally the costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. PORTER, P.J., AND O'DONNELL, J., CONCUR ANN DYKE JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announce- ment of decision (see Rule 26). Ten (10) days from the date hereof, this document will be stamped to indicate journalization, .