COUR TOF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NOS. 70524, 70538 WALTER T. SPALDING, JR. Plaintiff-appellant (70538) vs. JOURNAL ENTRY ROBERT COULSON, ET AL. AND Defendant-appellee (70538) OPINION and third-party plaintiff- appellee (70524), and JAMES P. CELEBREZZE Third-Party defendant- appellant (70524) DATE OF ANNOUNCEMENT OF DECISION: SEPTEMBER 3, 1998 CHARACTER OF PROCEEDINGS: Civil appeal from Common Pleas Court Case No. CV-157071 JUDGMENT: Affirmed as Modified in Part, and Reversed and Remanded in Part. DATE OF JOURNALIZATION: APPEARANCES: For Walter Spalding: For James P. Celebrezze: DAVID L. MAST, ESQ. CHARLES H. BRAGG, ESQ. 24500 Center Ridge Road The Courtyard Office Park Suite 175 7055 Engle Road, Suite 1-103 Westlake, Ohio 44145 Middleburg Heights, Ohio 44130 JOAN COULSON, pro se For Robert Coulson: P.O. Box 30136 Cleveland, Ohio 44130 GARY S. OKIN, ESQ. DWORKEN & BERNSTEIN CO. 153 E. Erie Street, Suite 304 Painesville, Ohio 44077 -2- KARPINSKI, J.: These consolidated appeals, the eighth and ninth before this court, are the most recent in a long series of litigation arising from a divorce. After the husband was found to have committed fraud on the court, the dispute was reopened and came to resemble a blood feud. More than a decade of litigation ensued throughout the trial and appellate courts before the parties attempted to resolve the remaining support arrearage and attorney fee obligations. To complete a settlement, the wife's former attorney was required to execute a release, which was not forthcoming, and the funds earmarked to pay overdue support and his fees were released. As a result, the settlement agreement, which the parties had hoped would end the matter, spawned at least three additional actions involving the husband, the wife, her first and subsequent attorneys, and an escrow agent. The present action involves claims for attorney fees and punitive damages. Upon review, we unanimously agree as a matter of law that the record does not support either the compensatory or punitive damage awards. In Part IIIB the main opinion painstakingly sets forth more than two dozen cases consistently applying ordinary principles to the claim for punitive damages. Disagreeing with the Ohio Supreme Court and General Assembly, the concurring and dissenting opinion would liberally expand recovery of punitive damages and grant a second chance to recover them in this case. Its presumption of malice, moreover, is not consistent with existing -3- law and would seriously undermine the reliability and fairness of punitive damage determinations. I. Introduction This matter began twenty-five years ago as a success story. Robert Coulson and Joan Coulson were married in 1963 and had two children. In 1965, they started a single restaurant, with $6,000 from Robert Coulson, which grew during their marriage into the Mr. Hero restaurant franchise business. A. Historical Background 1) The Coulson Divorce Action In July 1975, after approximately thirteen years of marriage, Robert Coulson and Joan Coulson separated. Robert Coulson directed the law firm of his own corporate attorney to represent both himself and Joan Coulson in the divorce action filed in her name. The domestic relations court issued a divorce decree approximately six months after the separation. The decree incorporated a separation agreement which granted Joan Coulson a total property award valued at $143,425, including one Mr. Hero restaurant1 and $31,000 in cash. Joan Coulson received custody of their two children as well as alimony and child support. Robert Coulson failed to comply with the decree, and Joan Coulson retained Walter Spalding as her own attorney. In May 1978, Spalding filed a motion for relief from the divorce decree on the ground that Robert Coulson committed fraud on the court because of 1 The Mr. Hero restaurant, which she later operated as a solely owned corporation (JACC, Inc.), had a net value of $68,925 as of February 10, 1976. -4- the law firm's dual representation of both Coulsons simultaneously. The trial court granted relief. Its judgment was affirmed on appeal to this court, as well as to the Ohio Supreme Court, in Coulson v. Coulson (Feb. 11, 1982), Cuyahoga App. No. 43996, unreported and Coulson v. Coulson (1983), 5 Ohio St.3d 12, respectively. 2) Divorce Proceedings on First Remand On remand, the domestic relations court retained the divorce granted in the prior decree, but set aside the fraudulent separation agreement and reopened various financial matters between the parties. Joan Coulson filed motions to modify child support, to hold Robert Coulson in contempt for non-payment of support, and to reduce an alimony and child support arrearage of $11,900 to judgment. During the subsequent trial on these issues, the parties vigorously disputed, inter alia, the value of the Mr. Hero business, the proper valuation date, and their contributions to its success. The litigation did not go as well as Joan Coulson had hoped. Instead of valuing the Mr. Hero business at $793,000 as Joan Coulson sought, the court valued it at $324,000, the high end of expert opinion offered by Robert Coulson. The trial court did not permit Joan Coulson to present evidence concerning her child support, alimony, and $11,900 support arrearage claims. The immediate net effect of the 1985 Divorce Judgment was to increase the award to Joan Coulson by approximately $77,500 from the prior decree. In addition, the 1985 Divorce Judgment included an order for Robert Coulson to pay the original $31,000 cash -5- judgment, together with interest dating back to the first decree, and to transfer the same Mr. Hero restaurant to Joan Coulson. While Spalding represented her, Joan Coulson executed notes and mortgages on her residence to secure payment of his legal fees. Spalding billed Joan Coulson $56,423.20 for legal services for vacating the original divorce decree through the conclusion of the appeal to the Ohio Supreme Court, and $92,801.92 for services through the trial, for a total amount of $149,225.12.2 In its 1985 Divorce Judgment, the domestic relations court found that many of the legal services Spalding performed, with staffing of five lawyers, were unnecessary or duplicative. The court ordered Robert Coulson to pay Joan Coulson additional alimony of $40,000 to pay for attorney fees. 3) Second Appeal and Partial Assignment of $71,000 Judgment Joan Coulson appealed from this 1985 Divorce Judgment. During the course of the appeal, Joan Coulson assigned Spalding a portion of the 1985 Divorce Judgment, comprised of the $31,000 judgment for the cash award and the $40,000 additional alimony award for attorney fees. On appeal, this court affirmed the trial court's property division, but reversed and remanded its judgment concerning support obligations for the period prior to the decree, because the lower court failed to consider the claims for outstanding child support, alimony, and $11,900 in support 2 The total bill of $149,225.12 to Joan Coulson and JACC for his fees was approximately twice Joan Coulson's entire financial gain (approximately $77,500) from reopening the litigation. -6- arrearages. Coulson v. Coulson (Oct. 20, 1986), Cuyahoga App. No. 50771, unreported. Denying a motion to certify the record, the Ohio Supreme Court did not accept jurisdiction to review the 1985 Divorce Judgment. As of December 1987, approximately two and one- half years later and after more than twelve years of litigation, Robert Coulson did not satisfy, however, any part of the 1985 Divorce Judgment, and the parties continued to litigate outstanding claims concerning additional support and $11,900 in support arrearages. 4) Proceedings Following Second Remand Dissatisfied with Spalding's bills and services, Joan Coulson retained new counsel--Frank Celebrezze of Sindell, Rubenstein, Einbund, Pavlik & Novak (the Sindell Firm ) and James P. Celebrezze--to conclude the divorce action and represent her in her dispute with Spalding. On July 16, 1987, Spalding directly notified Robert Coulson that Joan Coulson had assigned him a portion of the 1985 Divorce Judgment in the principal amount of $71,000 plus interest. Joan Coulson's successor counsel sought simultaneously to negotiate and resolve the remaining financial disputes with Robert Coulson in the divorce action and the attorney fee disputes with Spalding. 5) Malpractice Action and Attorney Fee Counterclaim Joan Coulson was unable to resolve the dispute with her former attorney, Spalding. On November 17, 1987, an attorney from the Sindell Firm filed a complaint in common pleas court Case No. CV- 139803 on her behalf against Spalding for legal malpractice. In a -7- letter dated December 7, 1987, Spalding claimed that Joan Coulson and her corporation JACC . For these attorney fees against Joan Coulson, Spalding filed a counterclaim in the malpractice action.3 6) Divorce Settlement Agreement Negotiations with Robert Coulson concerning the divorce action appeared to proceed more smoothly. Rather than directly paying thenow owed him assigned $71,000 partial judgment due Spalding, and without notice to Spalding, the Coulsons entered into a Settlement Agreement on December 28, 1987, which they hoped would conclude the matter. Robert Coulson agreed to pay money and, in return, Joan Coulson and JACC agreed respectively to settle the remaining support and $11,900 arrearage claims, dismiss the divorce action, and sell to Robert Coulson the Mr. Hero franchise awarded to her. The Settlement Agreement had two major parts. In the first, Robert Coulson agreed to pay $100,000 to James Celebrezze as escrow agent with part of the funds earmarked for satisfying the $71,000 portion of the 1985 Divorce Judgment assigned to Spalding. (Paragraph 1). The Settlement Agreement contained an express 3 As discussed below, this matter remained pending until March, 1991, when the jury returned a verdict for Spalding on the malpractice claim and for $100,000 (approximately half the amount sought) on his counterclaim for attorney fees and interest. Spalding thereafter filed a third action against Joan Coulson, in Case No. CV-238049, to foreclose a judgment lien and mortgages on her residence. This action proceeded to judgment after the filing of the appeals sub judice. The record in this court, therefore, does not contain all the information necessary to calculate what remains due to Spalding, and we discuss the numbers in the appellate briefs for purposes of clarification only. -8- provision that required obtaining an approved release of claims by Spalding against Robert Coulson as a condition for disbursement of the escrow funds.4 The bulk of the Settlement Agreement and specifically the second major part provided for the sale of a Mr. Hero restaurant by Joan Coulson and JACC to Robert Coulson for $110,000. (Paragraph 2a-2o). The parties expressly granted each other a complete release of all other claims and debts of any kind, specifically including past and future support obligations. (Paragraph 3.) The parties consummated the Settlement Agreement: Joan Coulson dismissed her support modification, $11,900 support arrearage claim, and divorce action against Robert Coulson, and Robert Coulson paid the $100,000 into escrow. Unable to resolve the controversies with Spalding, however, James Celebrezze disbursed the funds from the escrow account without obtaining a release. The escrow funds were disbursed as follows: (1) $20,000 to the Sindell Firm trust account, of which $10,000 was thereafter paid to James Celebrezze, (2) $12,900 in two payments to the Sindell Firm trust account to pay Joan Coulson's two experts in the prior divorce action, and (3) $67,777.72 to Joan Coulson in two payments with instructions that she retain the funds to pay Spalding. No funds were paid to Spalding, who never executed or even offered a release and, therefore, was not entitled to payment under the terms of the Settlement Agreement. Joan Coulson and 4 The release was to include not only all claims pursuant to the Assignment, but also claims resulting from Robert's knowledge and failure to pay Spalding directly to satisfy the assigned judgment. (Paragraph 1.) -9- Robert Coulson thereafter completed the sale of the Mr. Hero restaurant. An entry dated June 6, 1988 indicated complete satisfaction of the 1985 Divorce Judgment, without notice or approval by Spalding, to whom $71,000 of the judgment had been assigned. 7) The Instant Action On September 23, 1988, Spalding filed this action5 against Robert Coulson (1) to recover on the $71,000 partial judgment assigned to him by Joan Coulson, and (2) to request compensatory and punitive damages from Robert Coulson for entering into the Settlement Agreement to defeat the assignment of the $71,000 judgment to him and for executing the false June 8, 1988 satisfaction of judgment. Robert Coulson thereafter filed a third- party complaint against Joan Coulson, her company JACC, and James Celebrezze. The trial court granted summary judgment for Spalding against Robert Coulson in the amount of $71,000 without any interest on the principal amount during the years of litigation or accruing on the debt until June 6, 1988. The trial court also granted summary judgment for Robert Coulson against Joan Coulson and James Celebrezze for indemnification of any amounts Robert Coulson ultimately had to pay Spalding. The trial court denied recovery of punitive damages by any party. The matter thereafter came to this court in a series of three consolidated appeals. Spalding v. Coulson (1995), 104 Ohio App.3d 62 ( Spalding I ). 5 Common pleas court Case No. CV-157071. -10- 8) Prior Appeals In Spalding I, this court (1) remanded the matter to the trial court to explain the relationship between its $71,000 judgment for Spalding against Robert Coulson in this action, and the $100,000 judgment Spalding obtained against Joan Coulson in the malpractice action; (2) reversed the order granting Robert Coulson indemnity from Joan Coulson and James Celebrezze; and (3) held that the trial court improperly dismissed Robert Coulson's claims for breach of fiduciary duty and punitive damages against James Celebrezze. Id. No party appealed to the Ohio Supreme Court; consequently, Spalding I became final and conclusively determined all issues that were or could have been raised at that time. Following remand, the trial court found that its $71,000 judgment for Spalding against Robert Coulson on the previously assigned 1985 Divorce Judgment was concurrent with the $100,000 judgment for Spalding against Joan Coulson for attorney fees in the malpractice action. As a result, any payment Spalding recovered from Joan Coulson reduced dollar-for-dollar the amount payable by Robert Coulson. Despite the fact that Robert Coulson did not present any evidence, the trial court also granted him summary judgment for compensatory damages against Joan Coulson in the amount of $67,577.72, which she received from the escrow funds6, and against James Celebrezze for the entire $100,000 balance of the escrow funds. Following a hearing, the trial court also awarded 6 Joan Coulson has not appealed from the judgment entered against her. -11- Robert Coulson $50,000 in punitive damages, along with $54,708.75 in attorney fees, against James Celebrezze. B. Subject of These Appeals Spalding and James Celebrezze have filed separate appeals which have been consolidated. These appeals arise from the following facts: Spalding, who was awarded a total of $100,000 in attorney fees plus interest, complains that the trial court granted Robert Coulson credit for every dollar collected from Joan Coulson and, therefore, Spalding may not be able to collect the entire amount of the indebtedness. Robert Coulson, who has directly paid nothing to Spalding for the assigned judgment, seeks to escape any further obligation despite being awarded $272,286.27 in judgments, including judgment against Joan Coulson for $67,577.52 in compensatory damages and judgment against James Celebrezze for $204,708.75 in compensatory and punitive damages and attorney fees. II. Spalding's Appeal Spalding's sole assignment of error in Appeal No. 70538 relates to the judgment against Robert Coulson: THE TRIAL COURT ERRED IN AWARDING APPELLEE ROBERT COULSON A CREDIT AGAINST HIS OWN JUDGMENT FOR ANY SUMS COLLECTED FROM APPELLEE JOAN COULSON PURSUANT TO THE JUDGMENT IN CASE NO. [CV-]139803 [THE MALPRACTICE CASE]. This assignment is well taken in part. Spalding argues the trial court improperly coordinated the outstanding judgments against Robert Coulson and Joan Coulson relating to his attorney fees and, as a result, he may not be able to obtain complete payment. The judgment against Joan Coulson was for $100,000 plus costs and interest from December 28, 1987, -12- whereas the judgment against Robert Coulson in this case was fo g omplains that the trial court's order following remand contains a statement that each debtor should receive a credit for any payments made by the other, and that this provision may result in his collecting less than the total debt due him.7 The trial court's opinion states in pertinent part as follows: Spa rr$71,000 plus costs legal fees. (This is the judgment granted Spalding against Joan Coulson on his counterclaim for legal fees in CV139803.) Robert Coulson owed Joan Coulson $71,000.00 based on the judgment issued in the divorce case. Joan assigned her right to the $71,000.00 to Spalding. Robert was notified by Spalding of the assignment. Joan and Robert agreed to settle their disputes and entered into an agreement. The agreement refers to the $71,000.00 judgment and the assignment and sets up an escrow with James Celebrezze. Robert Coulson paid $100,000.00 to James Celebrezze, as escrow agent. Celebrezze paid the money to himself, his brother Frank Celebrezze and Joan Coulson. He did not pay Spalding anything. Despite what happened, Spalding has not lost an additional $71,000.00. Because of the actions of Robert Coulson, who chose to pay the money to James Celebrezze, Spalding lost an opportunity to receive $71,000 to apply against his $100,000.00 judgment. Thus, this court believes that any payments made by Robert Coulson to Spalding or collected by Spalding from Robert Coulson would have to be credited against the $100,000.00 judgment obtained by Spalding against Joan Coulson. Monies recovered by Spalding from Joan Coulson would reduce the $71,000.00 judgment against Robert. In 7 The briefs of Spalding and Robert Coulson on appeal indicate that Spalding collected a significant proportion of the judgment against Joan Coulson, in an amount between $136,600.55 and $142,000, in the CV-238049 foreclosure action. As of the date of the briefs, the balance of the debt to Spalding is approximately $50,000. The language of the trial court's opinion affects what Spalding is able to collect. Because Joan Coulson's payment exceeds Robert Coulson's obligation on the judgment against him for $71,000 plus interest from June 8, 1988, Robert Coulson would have no further obligation to Spalding on the judgment. See n. 10, infra. -13- effect, they are concurrent judgments. The $71,000.00 is not meant to supplement or [sic] in addition to the $100,000 judgment. (Emphasis added). The dispute between Spalding and Robert Coulson relates to the emphasized passage. During Spalding I, Robert Coulson argued that, without properly coordinating the two judgments, Spalding could collect the two judgments for $100,000 and $71,000 plus interest and, therefore, be overcompensated for the $100,000 in attorney fees and interest due him. Spalding v. Coulson, supra at 73-74. On remand, the trial court issued a judgment which gives Robert Coulson full credit for payments Joan Coulson made; the judgment, however, does not indicate whether or how Spalding is able to recover the entire amount of attorney fees and interest due him. We are not persuaded that Robert Coulson should get a windfall and escape his independent obligation to pay any part of the judgment assigned for attorney fees and accrued interest.8 To avoid that end, the trial court's October 24, 1995, nunc pro tunc judgment is hereby modified to provide credit to Robert Coulson for payments made by Joan Coulson but only after the amount of the $100,000-plus-interest-debt to Spalding is reduced by Joan Coulson's payments below the $71,000-plus-interest-judgment that Robert Coulson owes. When it is necessary to coordinate judgments against multiple parties responsible for obligations related to a single 8 Robert Coulson did not seek this result on remand in the trial court; he advocates this incongruous result now only on appeal. -14- indebtedness, the underlying principle is that the injured party be compensated once, but only once, for its injury. Restatement (Second) of Judgments, Section 50, comment e. In his foreclosure action against Joan Coulson, Spalding apparently collected a significant amount, but less than the total judgment. According to the record to date, however, Robert Coulson paid nothing to Spalding on the $71,000 judgment-plus-costs-and-interest against him.9 Despite the fact that Spalding has not been paid in full, Robert Coulson seeks a credit for each dollar Joan Coulson paid toward the indebtedness, to reduce or eliminate completely his own liability. Spalding is entitled to collect the total amount of $100,000 plus costs and interest from December 28, 1987, for attorney fees as adjudicated in the malpractice case. Restatement (Second) of Judgments, Section 50, comment d. To the extent that this indebtedness is not fully satisfied, Spalding may collect the balance from Robert Coulson up to the total amount of the judgment against him. Robert Coulson's maximum liability is $71,000 plus costs and interest from June 6, 1988, but he is not entitled to a dollar-for-dollar credit for all payments Joan Coulson made. Any credit to Robert Coulson from payments by Joan Coulson arises only to the extent that the amount collected from Joan Coulson reduces 9 There is no evidence that Robert Coulson paid any money to Spalding to satisfy either the original assigned judgment or the subsequent judgment against him on the assigned judgment. He asserts by brief, however, that RDC, a corporation apparently controlled by him and not a party to this litigation, paid $1,000 to Spalding by check dated April 26, 1993. -15- the balance of Spalding's judgment against Rober Robert Coulson's citation to Restatement (Second) Judgments, lbalance of Sp credit for every dollar of Joan Coulson's payments is unpersuasive. We note initially that Robert Coulson did not raise this argument in the trial court. More importantly, however, we find that the provision does not apply under the circumstances of this case. Restatement (Second) Judgments, Section 50 provides in pertinent part as follows: When a judgment has been rendered against one of several persons each of whom is liable for a loss claimed in the action on which the judgment is based: * * * (2) Any consideration received by the judgment creditor in payment of the judgment debtor's obligation discharges, to the extent of the amount of value received, the liability to the judgment creditor of all other persons liable for the loss. (Emphasis added). 10 The amount collected from Joan Coulson in the foreclosure action does not appear in the record because the foreclosure occurred after the final judgment in this case. Spalding's brief asserts, however, that he recovered $136,600.55 from Joan Coulson, which reduced the outstanding balance of the judgment for $100,000 plus interest to $53,702.79 as of March 13, 1997. (Spalding's Reply Brief at p.5 n.1.) Robert Coulson's brief contends that Spalding received $142,000 from the foreclosure action, but this figure may not account for costs incident to the foreclosure. (Brief at p.9 n.1.) We make no finding concerning this dispute. We can clarify, however, the general formula: Robert Coulson is obligated to pay only the balance of the $100,000 judgment plus costs and accrued interest (after deducting Joan Coulson's payments applied first to outstanding accrued interest) up to a maximum of the judgment against him for $71,000 plus interest from June 8, 1988. -16- The case at bar does not fall within the scope of this provision because the emphasized condition has not been satisfied. The typical case invoking this provision, like the two cases cited by Robert Coulson,11 involves judgments in different amounts in successive actions against joint tortfeasors liable for the same loss. The issue is whether the obligor in the second case is entitled to a credit for payments made on the first judgment by a co-obligor arising from the same tort injury. Each joint tortfeasor is liable for the identical loss claimed in the action on which the second judgment is based. The same principles apply in contract cases to judgments against parties jointly liable for the same contractual performance. These principles do not apply in the case at bar, however, because Joan Coulson and Robert Coulson are not jointly liable to Spalding for the identical loss or damage arising out of the same transaction or occurrence. Joan Coulson was liable to Spalding for $100,000 on a judgment against her on a contract claim in the malpractice case. Robert Coulson was not liable on this contract claim. Rather, his liability arose under domestic relations law. The judgment against him arose from a $31,000 marital property cash division and $40,000 alimony award to Joan Coulson. 11 St. Clair v. Eastern Airlines, Inc. (2nd Cir. 1962), 302 F.2d 477 and Royal Indemnity Co. v. Olmstead (9th Cir. 1951), 193 F.3d 451. Robert Coulson's brief on appeal recognizes that, unlike the case at bar, the two judgments at issue in each of the cited cases were for the same damages, that is, the same loss. (Brief at p. 7.) -17- The property division and alimony award from Robert Coulson to Joan Coulson was separate and independent from Joan Coulson's contractual obligation to pay Spalding attorney fees. Ohio courts have recognized a significant distinction between liability to a former spouse for alimony and liability to the former spouse's counsel for attorney fees. See Stout v. Stout (1982), 3 Ohio App.3d 279. Even if we ignored this distinction as Robert Coulson requests, however, the separate award of $31,000 cash--apart from the $40,000 additional alimony for attorney fees--reveals the judgment against Robert Coulson was not issued solely to cover Spalding's attorney fees. The fact that Joan Coulson subsequently assigned the judgment on the alimony and property award to Spalding as security for payment of fees does not transform the nature of the original $71,000 judgment into one for attorney fees. Spalding filed this action against Robert Coulson to establish Robert Coulson's liability for non-payment of the $71,000 divorce judgment against him assigned to Spalding. Robert Coulson placed funds in escrow but did not directly pay Spalding to satisfy the assigned judgment. Spalding did not sue Joan Coulson on the assigned judgment; in fact, she was not liable to Spalding on the assigned judgment, because it was payable to her. Joan Coulson's liability to Spalding arose from her own independent obligation to pay Spalding based on her contract with him. Robert Coulson's third party claims against Joan Coulson relating to the Settlement Agreement in this case did not arise out -18- of the same transaction with Spalding. The $67,777.72 judgment against her in this action does not arise from the same loss as the original $71,000 assigned judgment. Thus, regardless of how one casts the theory, Restatement (Second) Judgments, Section 50(2) does not apply. Robert Coulson's final contention that the equities favor his argument is also unpersuasive. Robert Coulson contends that the failure to compensate Spalding completely for the $100,000 in attorney fees and interest under the trial court's judgment would be less inequitable than requiring Robert Coulson to pay twice. This argument is unpersuasive for two reasons. First, Robert Coulson's action throughout this litigation demonstrates unclean hands, which precludes him from raising equitable principles. The Ohio Supreme Court expressly recognized that Robert Coulson committed fraud on the court by directing his corporate law firm to act as attorneys for Joan Coulson while it also represented Robert Coulson. The trial court found that, just to undo this fraud, Joan Coulson incurred more than $56,000 in attorney fees on her successful motion to vacate the original divorce decree, which Robert Coulson continued to challenge by appeal to this court and the Ohio Supreme Court. There is further reason to reject Robert Coulson's request for equity. As between Robert Coulson and Spalding, it was Robert Coulson who created any risk of loss to Spalding by placing the funds in the hands of an escrow agent rather than directly paying Spalding the $71,000 assigned judgment as he was required by law. -19- Under standar should bear the risk of loss because Robert Coulson was partially fault for creating the situation, whereas Spalding was completely innocent.d equitable principles, Robert Coulson, not Spalding,at Accordingly, the sole assignment of error in Appeal No. 70538 is sustained in part, and the trial court's October 24, 1995 nunc pro tunc judgment is affirmed as modified in part. III. James Celebrezze's Appeal A. Compensatory Damages James Celebrezze's first assignment of error in Appeal No. 70524 challenges the award of $100,000 compensatory damages to Robert Coulson as follows: THE TRIAL COURT ERRED AND COMMITTED PREJUDICIAL ERROR IN ITS AWARD OF COMPENSATORY DAMAGES TO THE APPELLEE. This assignment is well taken. James Celebrezze argues that the trial court improperly awarded Robert Coulson the entire amount of the $100,000 escrow fund as compensatory damages. He argues that the trial court should not have granted Robert Coulson's three-and-one-half page motion for summary judgment, because Coulson did not present any evidence that he suffered any monetary loss proximately caused by James Celebrezze's breach of the escrow instructions.12 The trial 12 The motion sought summary judgment on compensatory damages, punitive damages, and attorney fees. One and one-half pages of the motion were dedicated to the issue of compensatory damages. No evidence, except an affidavit concerning attorney fees, was attached to the motion. The trial court originally denied the motion in its entirety, but subsequently granted the motion on the issue of compensatory damages. -20- court initially denied summary judgment on this issue, but su reconsidered its ruling and granted summary judgmen immediately before trial. No party waived their right to jury trial on the issue of compensatory damages. Robert Coulson contends no one disputed the amount of compensatory damages to be awarded because this court stated in Spalding I that [t]he amount wrongfully paid out was $100,000" and that amount, therefore, dictates the compensatory damages as law of the case. He further maintains that the compensatory damagesasponte due him from Celebreeze are completely unrelated to the amount Spalding may collect from him relating to the assigned judgment.13 The standard for granting summary judgment is well established. Summary judgment is warranted only when, after viewing the evidence and inferences therefrom in the light most favorable to the non-moving party, the court finds (1) there is no genuine issue as to any material fact, (2) reasonable minds can come to but one conclusion, and (3) the moving party is entitled to judgment as a matter of law. Civ.R. 56(C); Dresher v. Burt (1996), 75 Ohio St.3d 280. As a result of our review of the record 13 While his recovery is not limited to the compensatory damages payable to Spalding, Robert Coulson's argument has shifted to the opposite of what was the purpose of his initial third-party complaint. Robert Coulson originally filed his claims in this case to recover damages from James Celebrezze and others to satisfy any compensatory damages awarded to Spalding against him. Filing such claims in an underlying case is designed precisely to avoid circuity and inconsistency of results in separate actions. Now, however, Robert Coulson argues to the contrary that his compensatory damages are completely unrelated to the compensatory damages incurred by Spalding as discussed in Section II above. The core elements of these respective claims for compensatory damages, however, overlap. -21- in compliance with this standard, we conclude that summary judgment was improperly granted in favor of Robert Coulson in the amount of $100,000 as compensatory damages. It is well established that principles of compensation provide the measure and limit for damage recoveries. To recover compensatory damages in tort actions, the plaintiff must prove that the tortfeasor's breach of duty proximately caused loss to the plaintiff. In the context of this case, Robert Coulson is entitled to recover compensatory damages only for losses caused by the breach of fiduciary duty. Modic v. Modic (1993), 91 Ohio App.3d 775, 785; Pippin v. Kern-Ward Bldg. Co. (1982), 8 Ohio App.3d 196, 198; see also Eaton v. Calig (1982), 4 Ohio App.3d 22. As in all other tort actions, losses incurred must be proximately caused by the breach, that is, noncompliance with the escrow instructions.14 Robert Coulson's argument that he was entitled to the $100,000 deposited into escrow ignores a basic tort requirement: proof that the alleged loss resulted from defendant's conduct. Robert Coulson's argument confuses the concepts of compensa- tory damages and indemnity. In Spalding I, this court held that the remedy of indemnification was unavailable under the circumstances of the case and remanded the matter for a determinationof compensatory damages. Id. at 74-75, 85. The two remedies, however, are closely related. The trial court originally 14 Robert Coulson's motion for summary judgment specifically recognized this principle when he stated as follows: It is well- established that an escrow agent is liable for any loss caused by his disposal of the escrow property in violation of the escrow instructions. (Brief at p. 3.) -22- awarded Robert Coulson indemnity against James Celebrezze for any amount Robert Coulson was obligated to pay Spalding on account of the $71,000 assigned judgment. The alternative remedy of damages, which this court instructed the trial court to apply on remand, refers to the amount of compensation in money for loss or injury caused by one person to another. Under either theory, however, the amount of an award is limited to the actual loss or harm caused by the tortfeasor's wrongful conduct. Nothing in Spalding I held that Robert Coulson could recover as compensatory damages more than the loss or harm caused by the underlying breach of escrow instructions, or that Robert Coulson was not required to prove compensable loss resulting from the tortious conduct. Robert Coulson argued that he suffered $100,000 in compensatory damages simply because he placed that amount of money in escrow and the funds were released contrary to the escrow instructions. However, this argument ignores that Coulson placed the funds in escrow as part of a Settlement Agreement to resolve additional pending alimony, child support, and $11,900 in support arrearage claims and to dismiss the divorce action. Recovery of the entire amount of the funds deposited into escrow is the wrong measure of compensatory damages in this case because part of the fund was for overdue support that had not been paid for more than a decade. On this matter In re Miamisburg Train Derailment Litigation (1993), 92 Ohio App.3d 304, is instructive. In Miamisburg Train Derailment, CSX paid $16 million into court as part of a class -23- action settlement agreement in return for the dismissal of all claims against it. CSX did not retain in the settlement agreement a right to the return of any settlement funds. When the class plaintiffs were subsequently awarded approximately $4 million for their economic losses, CSX sought return of the remaining $10.5 million it had deposited into the fund. The court declined to award CSX the remainder of the fund because the funds were part of the bargained-for consideration for dismissing claims against CSX under the settlement agreement. The court specifically held that returning the funds to CSX would defeat the expectations of the parties and frustrate public policy favoring negotiated settlement of litigation. Id. at 312. The same principles apply here. As in Miamisburg Train Derailment, Robert Coulson's placement of the $100,000 funds into escrow was part of the bargained-for consideration for the Settlement Agreement and he could not have recovered the funds even if the escrow instructions had been followed. The Settlement Agreement specifically provided in pertinent part as follows: 1. *** Robert shall pay to Joan the sum of One Hundred Thousand Dollars ($100,000.00), provided however, that as a result of an Assignment executed by Joan to her former attorney ***, the One Hundred Thousand Dollars ($100,000.00) payment shall be made to James Celebrezze as Escrow Agent to secure proper payment pursuant to the Assignment. *** It is understood that Robert shall have no further right or interest in the funds to be paid pursuant to this paragraph 1 other than to insure that any obligations he may have pursuant to the aforedescribed Assignment have been fully satisfied and discharged. (Emphasis added). Once the funds were deposited and the divorce case and support claims dismissed, Robert Coulson did not retain an unrestricted -24- interest ds . he Settlemenin the $100,000 or any right to recover the remainingfun upon interest in the $100,000 funds and made no provision for any of the funds to revert to him. Because he has not demonstrated that he had any legal right to the return of the $100,000 deposited funds, it is erroneous to characterize the dispersal of these funds as a loss caused by the breach of escrow instructions, and the entire $100,000 deposit is an inappropriate measure of compensatory damages for such breach. If Robert Coulson were to recover $100,000, he would retain without cost the benefit from Joan Coulson's dismissal of her case and her pending claims for child support, alimony, and $11,900 in support arrearages.15 On appeal, Robert Coulson cites one case to support his argument that the proper measure of compensatory damages is the total amount of his deposit. Toro Petroleum Corp. v. Newell (Ill.App. 1975), 338 N.E.2d 491. This case, however, is inapposite. Toro Petroleum involved a bench trial arising from a scam in which $20,000 was deposited into escrow, to be used as a commission for securing a $1 million loan, between parties with no prior relationship. No loan was made to the depositor. However, the escrow agent released the commission to the broker without 15 As noted above, paragraph three of the Settlement Agreement specifically included a release, inter alia, of past and future support and maintenance [and] child support, in addition to the 1985 divorce decree and the judgment of this court in the direct appeal from that decree in Coulson v. Coulson (Oct. 20, 1986), Cuyahoga App. No. 50771, unreported. -25- written instructions signed by the depositor and broker. Under these circumstances the Illinois appellate court found the total measure of damages against the escrow agent to be the entire amount of the deposit. Under circumstances such as those in Toro Petroleum, the total amount of the deposit may be an appropriate measure of damages for breach of escrow instructions. But the circumstances are different here. That difference highlights a key to the case at bar. Toro Petroleum involved placing escrow funds on deposit but not, however, as a result of a litigation settlement agreement and not on the condition that a case and pending claims would be dismissed, which condition and result in fact occurred in the case at bar. The total deposit is not an appropriate measure of compensatory loss when the depositor retains a benefit from dismissing the litigation as in this case. Return of the entire deposit would place the depositor in a better position than if the breach had not occurred, because he retains both the deposit and the benefit of having pending claims in excess of $11,900 and the litigation dismissed. In Toro Petroleum the plaintiff did not retain any benefit from the useless loan application after his deposit was improperly released. The $1 million loan application, moreover, was a deliberate premeditated fraud from the beginning used by the broker to obtain the $20,000 deposit; no loan was ever going to be made. As a result, the entire amount of the deposit improperly given to the broker by the escrow agent provided the true measure of the -26- depositor's loss from the breach of the escrow instructions. Using the amount of the deposit as a measure of compensatory damages is precluded, however, when the funds are deposited under a settlement agreement which does not grant an unconditional right to the return of any of the funds. See In re Miamisburg Train Derailment Litigation, supra. The opinion in Spalding I did not provide guidance concerning the determination or measure of compensatory damages. This court simply affirmed the trial court's finding that a breach of fiduciary duty occurred, id. at 75, and remanded for a determinationof damages. Id. at 85. This court did not specify the measure of compensatory damages or make any express finding regarding what injuries were proximately caused or their extent. The court, however, specifically recognized that both Robert Coulson and James Celebrezze committed wrongful acts that were distinguishable from each other. Robert failed to comply with obligations set forth in the assignment and agreement, whereas J.P. Celebrezze breached a fiduciary duty with regard to the $100,000 escrow account. Coulson and J.P. Celebrezze `acted independently of one another and are, therefore, responsible only for the results of their own negligence.' (Emphasis added.) Spalding v. Coulson, supra at 75. This passage reveals a remaining issue concerning the extent to which the conduct of either or both parties caused or contributed to any loss suffered in this case. On remand, the trial court granted summary judgment for Robert Coulson, in the total amount of his $100,000 escrow deposit, without considering issues of proximate causation. Monetary damages cannot be determined, however, without first evaluating -27- proximate cause. Before determining the amount of the resulting loss, it is necessary first to determine the existence of an injury in fact, that is, the fact of damage. See e.g., Modic v. Modic, supra at 783; Miller v. Marroco (1989), 63 Ohio App.3d 293. The trial court's initial denial of the motion for summary judgment was correct because Robert Coulson did not present any evidence that the amount of his loss equaled the $100,000 amount of his deposit into escrow. The appropriate measure of compensatory damages must be tailored to compensate only for actual losses suffered, rather than to permit recovery of funds the claimant voluntarily surrendered under a settlement agreement and which the claimant had no unrestricted right to recover. The extent of Robert Coulson's compensatory damages is not clear from the record. He has not shown and it does not appear that he has realized any compensable loss solely from the breach of escrow instructions. On remand, the appropriate inquiry for the jury is to determine the total direct loss to Robert Coulson proximately caused by James Celebrezze's breach of the escrow instructions. It would be erroneous to remand the matter for the trial court to recalculate the award of compensatory damages, because it erred by granting summary judgment and the parties have not waived their right to jury trial on these remaining factual issues.16 16 If the parties had waived their right to jury trial and submitted the issue of compensatory damages to the trial judge, there would be no reason to remand anything to the trial court because Robert Coulson failed to prove either compensatory or (continued...) -28- The correct measure of compensatory damages includes only those losses resulting from the improper disposition of the funds and caused by the breach of the escrow instructions. In other words, the core element of Robert Coulson's claim for compensatory damages is the amount of compensatory damages he is required to pay to Spalding as discussed in Section II, supra, found by the jury to have been caused by the breach of escrow instructions and set forth in the formula in the conclusion of this opinion. Accordingly, the first assignment of error in Appeal No. 70524 is sustained. B. Punitive Damages James Celebrezze's second assignment of error in Appeal No. 70524 challenges the award to Robert Coulson for punitive damages and attorney fees as follows: THE COURT'S AWARD OF PUNITIVE DAMAGES AND ATTORNEY FEES WERE AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE. This assignment is well taken. James Celebrezze argues that the award of punitive damages, as well as the award of attorney fees upon which it is based, to Robert Coulson is not supported by the evidence and is contrary to law. Robert Coulson was awarded $104,708.75 for these items, in addition to the $100,000 award discussed above, despite presenting no evidence of any injury or compensatory damages. The claim stems from Celebrezze's breach of instructions governing a settlement escrow established to pay (1) an attorney fee debt to Spalding and 16(...continued) punitive damages. -29- (2) claims for child support, alimony, and $11,900 in overdue support arrearages to Joan Coulson, incurred in the divorce action following Robert Coulson's fraud on the court. Coulson v. Coulson (1983), 5 Ohio St.3d 12; appeal following remand, Coulson v. Coulson (Oct. 9, 1986), Cuyahoga App. No. 50771, unreported. Punitive damage claims frequently raise issues at the intersection of ethics and law. Although there is often considerable overlap between these fields, law differs fundamentally from ethics by requiring proof of injury. It is well established that Ohio does not recognize a cause of action simply for punitive damages. E.g., Bishop v. Grdina (1985), 20 Ohio St.3d 26, 28. As discussed below, consideration of punitive damages, above and beyond compensation, is governed by standards of proving substantial actual harm and malicious wrongdoing--standards not satisfied in this case. The panel unanimously agrees as a matter of law that the award of punitive damages is not supported. The concurring and dissenting opinion, however, would expand liability for punitive damages beyond existing law and give another chance to recover them by ignoring the threshold requirements for proving substantial actual harm and the magnitude of risk necessary to support such claims. Its argument is based on a profound misunderstanding, rejected in Grdinaand several other cases discussed below, that by failing to impose punitive damages one somehow excuses wrongdoing. On the contrary, diluting the standards of proof -30- governing claims for punitive damages is contrary to existing law and blunts the moral force of such awards. 1) Compensatory Damages As a Necessary Predicate It is well established that an award of compensatory damages is a necessary predicate for an award of punitive damages. Punitive damages may not be awarded when a party fails to prove underlying compensatory damages. E.g., Malone v. Courtyard by Marriott L.P. (1996), 74 Ohio St.3d 440, 445, 447; Shimola v. Nationwide Ins. Co. (1986), 25 Ohio St.3d 84, 86-87; Bishop v. Grdina, supra at 27-28; Richard v. Hunter (1949), 151 Ohio St. 185, syllabus paragraph one. In Spalding I, this court cited five Supreme Court cases for this precise proposition, stating specifically as follows: Actual damages in an underlying cause of action must be proven prior to an award of punitive damages. *** [C]ompensable harm stemming from a cognizable cause of action must be shown to exist before punitive damages can be considered. Spalding v. Coulson, supra at 77-78 (citations omitted; emphasis added). The final sentence is a direct quotation from Moskovitz v. Mt. Sinai Med. Ctr. (1994), 69 Ohio St.3d 638, 650. Spalding I cited and discussed at length several cases which applied these principles in actions such as this involving tort claims in which there is also an underlying agreement among the parties. Id.at 78. Because punitive damages are not recoverable in contract, the claimant must prove in such cases alleging independent wilful torts that he suffered harm distinct from the breach of contract and attributable solely to the tortious conduct. -31- Id., citing, inter alia, Shimola v. Nationwide Ins. Co., supra; and Ali v. Jefferson Ins. Co. (1982), 5 Ohio App.3d 105. Both of these cases reversed awards of punitive damages for consumers against large insurance companies specifically because the insureds did not obtain an award for or prove actual damages. Shimola v. Nationwide Ins. Co., supra at 87; Ali v. Jefferson Ins. Co., supra at 108. Application of these principles to the case at bar is simple because plaintiff failed to prove damages of any kind, whether denominated as contract or tort. As noted above in Section III, Part A, supra, we reversed the underlying summary judgment against James Celebrezze specifically because Robert Coulson did not present any evidence to establish the existence or amount of any loss and the trial court awarded, in effect, a $100,000 penalty in excess of any proven actual damages on his compensatory damage claim. The trial court then awarded punitive damages on top of that. Without a proper and necessary predicate award of actual compensatory damages, however, any consideration of punitive damages and attorney fees is contrary to law. E.g., Spalding v. Coulson, supraat 77-78; Moskovitz v. Mt. Sinai Med. Ctr., supra at 650; Shimola v. Nationwide Ins. Co., supra at 86-87; Bishop v. Grdina, supra at 27-28; Ali v. Jefferson Ins. Co., supra at 108.17 The dissent disregards these well-settled principles and would permit the trial court to consider punitive damages without 1) 17 It should be noted, however, that, even without recovery of punitive damages which do not compensate for any harm, plaintiffs may recover more consequential damages in tort than contract. Hadley v. Baxendale (1854), 9 Exch. 341, 156 Eng. Rep. 145. -32- proof of any injury, 2) proof of any loss resulting from the underlying tort, 3) a determination of the amount of loss, or 4) any compensatory award made. It seeks to use the law of the case doctrine as a handy kind of putty to fill the holes and smooth over the defects in Robert Coulson's case.18 However, the argument requires selective misreading of the law of the case from Spalding I: it ignores that this court specifically held contrary to the dissent that it is necessary to establish a proper predicate of compensatory damages before punitive damages can even be considered. Spalding v. Coulson, supra at 77-78. More important, however, we are governed by the holding in Shimolathat the failure to prove compensatory damages precludes an award of additional punitive damages. In Shimola, the Supreme Court of Ohio affirmed this court's reversal of a punitive damage award when, as in the case at bar, the claimant failed to prove tort damages even though, unlike the case at bar, he had already proven contract damages and actual malice. Shimola v. Nationwide Ins. Co., supra; accord Bishop v. Grdina, supra; Ali v. Jefferson Ins. Co., supra. Consideration of punitive damages is reserved as a matter of law for cases involving real substantial injuries that are proven, not those involving elaborate theories conjured up by lawyers. E.g., Davison Fuel & Dock Co. v. Pickands Mather & Co. (1977), 54 Ohio App.2d 177, 181 n.3 (not recoverable even when, 18 Notably, not even Robert Coulson, who unsuccessfully sought to invoke the doctrine to justify his recovery of $100,000 without any evidence of compensatory damages in Section IIIA, attempted to use the doctrine in this context. -33- unlike the case at bar, there has been proof of tort injury and an award of nominal damages). Upholding the windfall is particularly misplaced in this case because Robert Coulson has not paid even one dime more to Spalding than he was obligated to pay under the assignment, but he has recovered a total of $272,286.27 in judgments. James Celebrezze is entitled to judgment in his favor on the claim for punitive damages as any other litigant would be because Robert Coulson failed to sustain his burden of proof at trial. See also Evid.R. 104(B). Despite the fact that the case was remanded for this precise purpose, the sum total of Robert Coulson's efforts was to present one and one-half pages of argument and no evidence of any actual compensatory damages. Nor did he prove or offer any proof of loss from the release of the escrow funds. Robert Coulson elected the manner and mode of litigating this matter and we decline to resuscitate his punitive damages claim again after he has already failed to prove material elements of his case. It has been suggested that the trial judge could correct this defect with a stroke of the pen following remand simply by assessing compensatory damages in some kind of a nunc pro tunc hearing. However, as noted above, neither party waived his right to jury trial on the issue of compensatory damages and, as noted in the prior appeal, there is an issue remaining concerning proximate causation. Section IIA at p. 30-32; Spalding v. Coulson, supra at 75. It is well settled that the right to trial by jury `cannot be invaded or violated by either legislative act or judicial order or -34- decree.' Zoppo v. Homestead Ins. Co. (1994), 71 Ohio St.3d 552, 557. Moreover, we cannot ignore that a trial already occurred. It was not a dress rehearsal; Robert Coulson had the burden to prove his claim then, and he failed to do so.19 It is incongruous to excuse compliance with the conditions precedent to establish a claim for punitive damages set forth in Spalding I, while demanding strict compliance with the escrow instructions as a basis for imposing punitive damages. Additional prejudice would obviously result from such a highly unorthodox practice, which is akin to entering a provisional conviction before an underlying jury verdict. As discussed below, the trial court's findings are insufficient to impose liability for punitive damages in this case. Specifically, the trial judge awarded a total of $272,286.27, including $204,708.75 against James Celebrezze, without proving any kind of loss, compensatory damages, or a requisite finding of actual malice. The introduction of evidence of liability for punitive damages would prejudice future liability and compensatory damage issues in a jury trial. Under the circumstances, we decline to enter this thicket, particularly 19 The dissent's ultimate proposal is to reopen the punitive damage claim on remand. This attempt to turn back the clock appears reminiscent of the infamous 1972 Olympic basketball championship game. More time was added on three successive occasions to the expired game clock. The Soviets finally prevailed after the third replay and three Soviet-bloc countries rejected a challenge to the practice. As in that instance, one can discern no preexisting rules of general application to permit resuscitating the claim in this case. -35- because the dissent has offered no authority or persuasive reason to do so.20 Ohio Supreme Court has instructed appellate courts to carefully determine the appropriate scope of remand and to permit issues tried free from error to stand. E.g., Mast v. Doctor's Hospital North(1976), 46 Ohio St.2d 539; Trauth v. Dunbar (1983), Ohio StThe5 .3d 68. One of the purposes of findings of fact and conclusions of law following a bench trial is to reveal the basis for the trial court's decision precisely to avoid the burden of a new trial or further proceedings when the matter was tried free from error as in this case. E.g., Freeman v. Westland Builders, Inc. (1981), 2 Ohio App.3d 212, 215, which affirmed the dismissal of a claim for punitive damage and remanded for determination of compensatory damages. Failure by litigants to satisfy their burden of proof means that they lose, not that they get a second chance. 2) Finding of Actual Malice Required There is, moreover, an additional sufficient and independent ground to reverse the punitive damage award in this case, apart from the failure to establish the necessary foundation of actual loss or compensatory damages. The trial court's ultimate decision and final judgment entry does not, by its own terms, support its award of punitive damages, because it made no finding of sufficient 20 It should be noted that R.C. 2315.21(B)(2), invoked by Robert Coulson's complaint in this case, see n. 26, further narrows the grounds for recovery beyond the cases cited above by also requiring proof of actual damages or a separate injury resulting from the allegedly malicious act. Because Coulson specifically invoked this statute and made no constitutional challenge to it, the dissent should not simply ignore its provisions. -36- actual malice. This defect in the punitive damage award cannot be cured by remanding the separate bifurcated compensatory damage claim for jury trial.21 Spalding I w agent has breached a fiduciary duty is not an intentional tort. An agent's intent, therefore, is not relevant. Rather, the escrow agent is liable for failing to strictly follow the escrow instructions, regardless of his state of mind. Spalding v. Coulson, supra at 81; Pippin v. Kern-Ward Bldg. Co. supra; Packard v. Provident Nat. Bank (3rd Cir. 1993), 994 F.2d 1039; Restatement, Second, Torts Section 874. In a chapter describing the fiduciary duties of an attorney/escrow agent, an extensive multi-volume 21 tAs noted above Coulson and Spalding. The dissent ignores completely that the trial court's findings concerning Spalding are unfounded. Even if the dissent's argument were otherwise correct, however, the trial court's entire judgment would have to be vacated because the trial court based its decision regarding punitive damages, in part, on findings concerning Spalding--findings totally unsupported by any evidence. See Thompson Electric, Inc. v. Bank One Akron, N.A. (1988), 37 Ohio St.3d 259, 263; Freeman v. Westland Builders, Inc., supra at 215 n.4. In Spalding I, we stated, An escrow is a matter of agreement between parties *** in which the parties understand that the relationship imposed a special trust or confidence between them. Id. at 80-81. Spalding himself never testified, nor did Robert Coulson provide evidence concerning Spalding in this case. Contrary to the trial court's opinion, there was no evidence that Spalding selected James Celebrezze as escrow agent, placed confidence in him, or entrusted him to disburse the funds. Spalding was not a party to the Settlement Agreement, did not seek punitive damages from Celebrezze, did not file a claim as beneficiary of the Settlement Agreement, and could not have recovered on any such contingent interest, because Coulson's evidence unambiguously reveals that Spalding never offered or executed a release. -37- treatise emphasized this distinction under a section captioned intent or motive : Breaches of fiduciary obligations usually are not deliberate, and often occur because the attorney failed to understand the duties of loyalty or confidentiality under the circumstances. 2 Mallen & Smith, Legal Malpractice (4th ed. 1996), Section 14.3 at p. 237. Punitive damages are not a matter of strict liability. It is well established that to warrant an additional award of punitive damages, above and beyond compensatory damages, the plaintiff must prove more than the simple commission of a tort. Liability for punitive damages is reserved for particularly egregious cases involving deliberate malice or conscious, blatant wrongdoing which is nearly certain to cause substantial harm. For example, even fraud (which was not alleged in the case at bar) must be particularly aggravated to warrant such an award. For example, in Logsdon v. Graham (1978), 54 Ohio St.2d 336, the Supreme Court quoted the following: *** a bare case of fraud or constructive fraud does not warrant the assessment of exemplary damages. The general rule is said to be that exemplary damages may properly be awarded where the plaintiff has suffered actual damages as a result of fraud intentionally committed with the purpose of injuring him. Id. at 339 (citations omitted). The opinion in Spalding I specifically recognized, contrary to the dissent's argument, that claims for mere breach of fiduciary duty, like those of bare fraud in Logsdon or the simple tort of bad faith against an insurer as in Shimola, do not per se warrant -38- an award of punitive damages without a sufficient requisite finding of malice. See Spalding v. Coulson, supra at 81, 78; Packard v. Provident Nat. Bank, supra; accord Pippin v. Kern-Ward Bldg. Co., supra.22 In addition to proving an underlying breach of fiduciary duty, the plaintiff must prove that the tortfeasor acted with actual malice in the form of either (1) hatred, ill will, or a spirit of revenge, or (2) a conscious disregard for the rights of others which had a great probability of causing substantial harm. Preston v. Murty (1987), 32 Ohio St.3d 334; Calmes v. Goodyear Tire & Rubber Co. (1991), 61 Ohio St.3d 470. Malice of the conscious disregard variety requires higher culpability than acting knowingly under the Ohio criminal code23, and higher culpability than acting with recklessness under the Restatement, Second, 24actualTorts. The dissent repeatedly ignores this element and, thereby, 22 Zoppo v. Homestead Ins. Co., supra, redefined the tort of bad faith when it overruled the definition of bad faith set forth in Motorists Mut. Ins. Co. v. Said (1992), 63 Ohio St.3d 690. Ohio law still recognizes the distinction, however, between the underlying tort of bad faith and the conduct necessary to obtain punitive damages set forth in Said, Shimola and numerous other cases. 23 R.C. 2901.22(B) provides as follows: A person acts knowingly, regardless of his purpose, when he is aware that his conduct will probablycause a certain result or will probably be of a certain nature. *** (Emphasis added.) 24 Section 908(2) provides as follows: Punitive damages may be awarded for conduct that is outrageous, because of defendant's evil motive or his reckless indifference to the rights of others. *** As noted below, however, Ohio law does not award punitive damages for mere recklessness. -39- blurs the distinction between malicious and non-malicious conduct. The grave magnitude of the risk of harm is the central focus of the Preston standard and permeates both the liability and the amount of punitive damage determinations. In short, to warrant the imposition of additional punitive damages, above and beyond compensatory damages, the tort must be committed with a particularly depraved mental state. In its basest form, it requires showing not only that the tortfeasor intended his act, but also deliberately intended to injure others. Its lesser forms include the tortfeasor's perverse willingness to ignore consciously almost certain injury from his action. The imminent harm disregarded must be substantial. Recklessness, carelessness, or ignorance of the actor do not justify the imposition of punitive damages. Motorists Mut. Ins. Co. v. Said, supra at 698 (recklessness); Calmes v. Goodyear, supra, syllabus paragraph one and pp. 473-474 (mere negligence). That the trial court made no such finding is fatal. Nor can the law of the case be used to gloss over this defect, as the dissent attempts. 3)The Judge's Findings are not Contrary to the Law of the Case Count two of Robert Coulson's complaint in this case alleged that paying Joan Coulson and/or JACC, Inc. from the escrow funds without obtaining a release from Spalding constituted a breach of fiduciary duty. (Paragraphs 17 and 18.) It also contained the additional allegation that such payment was done in wanton disregard of *** Robert Coulson's rights. (Paragraph 18.) The -40- trial judge originally dismissed outright this claim for punitive damages, but this court reversed that determination in Spalding I. This court held in Spalding I that Robert Coulson's allegation of wanton disregard sufficiently stated a claim for punitive damages to proceed on the merits and remanded the matter for further proceedings. Spalding v. Coulson, supra at 79. It is hornbook law, however, that rulings concerning the sufficiency of a complaint do not predict or preordain success on the merits or indicate that the claimant should prevail. Johnson v. Morris (1995), 108 Ohio App.3d 343, 348-349; 18 Wright & Miller, Federal Practice & Procedure, Section 4478 (1982). In a motion to dismiss, the court is required to view all matters in the light most favorable to the pleader. In a trial, however, without such indulgence the party may fail to convince the trier to adopt its best case scenario.25 The dissent contends that the trial judge was compelled by the law of the case from Spalding I to make different findings. However, the law of the case doctrine applies to questions of law, not findings of fact which had not been made prior to an appeal or reviewed in a prior appeal. E.g., McCoy v. Engle (1987), 42 Ohio App.3d 204. For precisely this reason, the dissent's 25 In responding to a motion to dismiss the role of the court, like that of a battlefield surgeon, is to sort the hopeful from the helpless. Iacampo v. Hasbro, Inc. (D.R.I. 1996), 929 F.Supp. 562, 567. The court looks only to the face of the complaint and tests the legal sufficiency of the statement of claim, liberally construed with all doubts resolved in favor of the pleader. Like a battlefield surgeon, the court does not warrant ultimate survival or recovery. -41- reliance on the post-Civil War era case of Pennsylvania Company v. Platt (1890), 47 Ohio St. 366, is misplaced. In that case, the prior appeal construed the terms of a written contract, and thus the decision presented a question of law, rather than a finding of fact. Id. at 379-380. Whether an actor's intent was malicious, however, is a question of fact, not a question of law. It is well established, contrary to the dissent's argument, that the law of the case doctrine does not dictate that the party who obtained reinstatement of a claim prevail on the merits in subsequent trial court proceedings. Johnson v. Morris, supra. Subsequent trial court proceedings frequently involve different evidentiary records, for example, and/or different legal issues and standards than in the prior appeal. Such differences appear in the case at bar. The Ohio Supreme Court has recognized that reversing and remanding a dismissed complaint merely reinstates the matter where it was left off: It is basic law that an action of the Court of Appeals in reversing and remanding the case to the Court of Common Pleas for further proceedings has the effect of reinstating the case to the Court of Common Pleas in statu quo ante. The cause is reinstated on the docket below in precisely the same condition that obtained before the action that resulted in the appeal and reversal. Armstrong v. Marathon Oil Co. (1987), 32 Ohio St.3d 397, 418 (citation omitted). Moreover, this court expressly declined in Spalding I, contrary to the dissent's argument, to evaluate or prejudge the evidence concerning punitive damages. When it reversed the -42- judgment in favor of Celebrezze on the punitive damages claim, it expressly observed there was no indication that the trial court converted the motion to dismiss into a motion for summary judgment. Id. at 76-77. The Court did not assume or presume any facts, comment on the evidence, or compel any inferences, findings, or particular outcome. This case is distinguishable from Nolan v. Nolan (1984), 11 Ohio St.3d 1, cited by the dissent, precisely because it does not involve a rehearing following remand. The trial court never heard the evidence prior to the first appeal; we remanded the matter for the trial court to hear and evaluate the evidence for the first time.26 What would be the point of a trial if Spalding I deprived the fact-finder of its prerogative to evaluate the evidence, to exercise its own independent judgment and discretion, and compelled particular findings? Second, it is erroneous as a matter of law to construe an order remanding a claim for further proceedings as an instruction that the trial court must award relief. It is contrary to Ohio law for any court to instruct that an award of punitive damages is mandatory under any circumstances. See e.g. Motorists Mut. Ins. Co. v. Said, supra at 694 n. 2. This error is compounded by the facts of this case. Although Spalding I discussed the requirements 26 The record unambiguously shows that Robert Coulson did not fully prove his claims, although the dissent contends he did, because he voluntarily abandoned and dismissed without prejudice the claims in his complaint against JACC. Moreover, as discussed below, the trial court did not find that the evidence supported the allegations, because it did not find actual malice through a conscious disregard for the rights of others which had a great probability of causing substantial harm. -43- for pleading actual malice necessary to state a claim fo Coulson's complaint, reviewed in ically f punitive damages occurred after the adoption of R.C. 2315.21(C)(3), which raised the standard to require clear and convincing evidence.27 Evidence presented at the subsequent trial and therefore unknown to this court in Spalding I, however, revealed different payment dates. Conceivably the first payment, torpunitive damag Celebrezze, may have been completed before the statutory change, although the date the check cleared the bank is undecipherable. Because of these differences concerning the evidentiary record and governing legal standards, Spalding I does not and cannot dictate any particular findings under the law of the case. 28 27 Robert Coulson's complaint specifically alleged that the relevant events occurred in February of 1988," which would fall within the scope of R.C. 2315.21, enacted November 5, 1987 and effective January 5, 1988. In addition to the allegations in his complaint considered in Spalding I, his brief in the appeal at bar continues as follows: In order for punitive damages to be awarded in Ohio, a court must find by clear and convincing evidence that the defendant intentionally and with actual malice injured the plaintiff without lawful justification or excuse. (Brief p. 12; emphasis added.) 28 Although a strict reading of Robert Coulson's complaint and Spalding I would dictate applying the statutory requirements rather than the common law, we have given him the benefit of any doubt and analyzed the record in light of the most favorable legal requirements, but found the record insufficient to support the award. It should be noted, however, that the trial court's findings concerning the different animus governing the last four payments provide an additional reason to apply the statutory standards at least to them. Compare Akron-Canton Waste Oil, Inc. (continued...) -44- Perhaps the simplest explanation why the law of the case does not govern the award of punitive damages here is that determining the actor's animus is a question of fact which requires evaluating the evidence presented. Contrary to the dissent's argument, simply proving that an act was done or that the funds were released from escrow in this case is not enough. As Justice Oliver Wendell Holmes, Jr. recognized in his famous example, the difference between stumbling and kicking is a distinction that even a dog understands. The Common Law (Howe ed. 1963) at p. 7. Although the outward manifestation and impact are the same, the quality of the act turns on the animus of the person doing it. The fact- finder must determine animus by evaluating the actor's subjective motivation. Malone v. Courtyard by Marriott L.P., supra at 446. It is well established that punitive damages may not be awarded without a factual finding that the actor, with actual malice, consciously disregarded the rights of others which had a great probability of causing substantial harm. The trial court in this case made no such finding. Instructing the fact-finder that it must presume malice as the dissent repeatedly suggests, e.g. infra at 9, or that we must do so on appeal despite the fact- finder's failure to make such a finding, infra at 11, would invade its prerogative to determine the actor's animus and deny due process of law on the central issue of the case. 28(...continued) v. Safety-Kleen Oil Services, Inc., supra. -45- The United States Supreme Court has recognized unanimously that instructing the fact-finder to presume an intent to harm is plainly at odds with prior decisions of this Court. E.g. Carella v. California (1989), 491 U.S. 263, 265 (citation omitted). Fact- finders must be free to evaluate the evidence to determine the actor's state of mind free from such presumed intent instructions. Moreover, contrary to the dissent's argument, reviewing courts cannot simply construe a verdict as if the fact-finder made a factual determination of intent to harm that it did not make or that the fact-finder made such a hypothetical finding by the appropriate burden of proof. Id. (Scalia, J., concurring). This is particularly true in this case because the trial judge did not return a general verdict; instead, the judge expressly made specific factual findings but did not make any finding of the necessary conscious disregard of the rights of others which disregard had a great probability of causing substantial harm. This court and others have likewise held, contrary to the dissent's argument, that it is improper to presume fiduciaries have an intent to harm. Riegle v. State (1933), 45 Ohio App. 251, is instructive because it involved even more aggravated allegations than in the case at bar. Riegle, an attorney, director, and president of a bank, was charged with misapplying banks funds by taking them to buy a worthless bond from himself that had been issued by another corporation for which he served as a director. The trial court instructed the jury, as the dissent would have us rule here, that if it found the facts to be as alleged, then it -46- must presume he committed the acts with intent to defraud or injure the bank. Id. at 257-259. The court of appeals held that such instruction was improper, however, because it altered the burden of, and eliminated the requirement for, proof on the central element of the case. See also e.g., Weitz v. State (1934), 48 Ohio App. 421, 426-427 (cannot presume intent to defraud by bank secretary making false report); Crobaugh v. State (1932), 45 Ohio App. 410, 417-418 (cannot presume intent to deceive); accord e.g., General American Life Ins. Co. v. Ofner (9th Cir. 1992), 972 F.2d 1339 (cannot presume malice for purposes of determining punitive damages). Spalding I did not, contrary to the dissent's argument, instruct or suggest that malice be presumed if the fact-finder concluded the escrow funds had been released contrary to the instructions. Neither of the two cases cited in 49 O.Jur.3d Fiduciaries Section 13, relied on by the dissent, involved presuming the prohibited mental state for purposes of imposing punishment or punitive damages.29 For these reasons, the law of the case doctrine did not require the trial judge in the case at 29 In re Trusteeship of Stone (1941), 138 Ohio St. 293 and Manchester v. Cleveland Trust Co. (1953), 95 Ohio App. 201. -47- bar to find the requisite actual malice and cannot be used to overcome its decision not to do so. 4) Evidence Presented at Trial & Trial Judge's Findings During the bench trial on the issue of punitive damages, following remand and the denial of his motion for summary judgment on this claim, Robert Coulson presented copies of correspondence, financial records, and testimony of James Celebrezze as if on cross-examination. No evidence from any other participant in the transaction was presented. James Celebrezze testified, and the correspondence also indicates, that he did not draft the Settlement Agreement, which defined the terms of escrow and appointed him escrow agent. The settlement was proposed by Robert Coulson. The Agreement was drafted by non-litigation counsel for Robert Coulson and reviewed by Frank Celebrezze. Furthermore, neither the Settlement Agreement nor the settlement check was sent to James Celebrezze. Both were sent to Frank Celebrezze, who acted as lead counsel for Joan Coulson. James Celebrezze's only role at the outset was to witness Joan Coulson's signature on the Settlement Agreement. Moreover, although the check was made out to him as escrow agent, he signed as TR[ustee] for Joan Coulson and deposited the proceeds in a trust account. James Celebrezze, who had limited experience in private practice and had never previously acted as an escrow agent, stated that he treated the proceeds in the account as a personal injury settlement: He paid litigation expenses and ultimately paid the -48- balance to Joan Coulson, with instructions that she retain th to obtain the release and amicably resolve th attorney fee dispute with Spalding, however, were unsuccessful.30 Inefunds to pay Spalding. Efforts release, according to correspondence which Robert Coulson's counsel drafted and introduced into evidence. The parties had expressly stipulated during trial that James Celebrezze did not act with actual malice in the form of hatred, ill will, or a spirit of revenge. There was, moreover, no evidence to the contrary. What was needed, therefore, was a finding that James Celebrezze acted with actual malice in the form of a conscious disregard for the rights of others which had a great probability of causing substantial harm. Robert Coulson's own evidence presented at trial undermined such a determination. His argument for punitive damages at trial was obscure and made no distinction between the conduct constituting the breach of fiduciary duty and the necessary grounds for awarding punitive damages. Nor did the trial court make the necessary finding in its opinion. As a basis for this award, the trial court sought to distinguish the animus necessary for punitive damages from the 30 Spalding sought to recover from Joan Coulson at least $189,320.99 in attorney fees and interest despite the domestic relations court's finding that much of the services, with staffing of five lawyers, was unnecessary and duplicative. At the same time, he also sought to recover from Robert Coulson the $71,000 assigned judgment and additional compensatory and punitive damages. -49- underlying breach of fiduciary duty on the grounds that James Celebrezze paid funds to himself and his brother. Contrary to the dissent's argument, the trial court specifically determined that paying himself is the dispositive fact that warranted punishment. The court did not award punitive damages based on any other payments, for example, to Joan and her creditors, payments made with a different animus.31 The court's opinion specifically focused on James Celebrezze's payment of $20,000 to the Sindell Firm (from which James Celebrezze himself received $10,000), and reasoned that paying the Firm and himself first from the escrow funds, contrary to the instructions, constituted sufficient grounds to warrant punitive damages. (Id. at p. 8.) This correctly identified the primary concern of favoring oneself in the context of fiduciary breach. However, notably absent from the trial court's opinion was any finding that by doing so James Celebrezze consciously disregarded a great probability of causing substantial harm. Under the circumstances, the trial court's findings are insufficient to impose punitive damages. 31 James Celebrezze did not receive any benefit from these other payments. Moreover, as noted above, an additional reason for treating the last four payments differently was that they were made after the effective date of R.C. 2315.21, which raised the standard for recovering punitive damages. The trial court specifically entered judgment against Joan Coulson for $67,577.72 in escrow funds she received but did not retain for Spalding. -50- 5) No Finding of Sufficient Requisite Actual Malice While we agree that this $20,000 payment breached the escrow instructions, it establishes the underlying tort claim of breach of fiduciary duty against James Celebrezze and does not by itself establish the legal requirements necessary to award punitive damages. The Ohio Supreme Court has specifically admonished the courts that finding the tortfeasor consciously disregarded a great probability of substantial harm is essential to support punitive damage awards. Motorists Mut. Ins. Co. v. Said, supra explained this requirement as follows: Preston observed that actual malice requires consciousnessof the near certainty (or otherwise stated `great probability')that substantial harm will be caused by the tortious behavior. Any less callous mental state is insufficient to incur that level of societal outrage necessary to justify an award of punitive damages. Therefore, it is evident that a reckless actor, who only has knowledge of the mere possibility that his or her actions may result in substantial harm, is not behaving maliciously. See generally, Prosser & Keeton, The Law of Torts (5 Ed.1984), 212-214, Section 34. In regard to actual malice Preston made the following observation: `The concept requires a finding that the probability of harm occurring is great and that the harm will be substantial. A possibility or even a probability is not enough as that requirement would place the act in the realm of negligence. A requirement of substantial harm would also better reflect the element of outrage required to find actual malice.' Id. at 698 (Emphasis added; citation omitted.); Conde v. Veliscol Chemical Corp. (S.D. Ohio 1992), 816 F.Supp. 453, aff'd, (6th Cir. 1994), 24 F.3d 809. Ohio appellate courts have consistently adhered to this standard, contrary to the dissent, even when evaluating findings following bench trials on the issue of punitive damages: -51- In this case, the trial court made a specific finding that White's conduct displayed a conscious disregard for the rights and safety of Doe, which had a great probability of causing her substantial harm. Doe v. White (1994), 97 Ohio App.3d 585, 593. The dissent consistently ignores this basic requirement and, if followed, would significantly expand recovery of punitive damages in future cases contrary to Supreme Court authority. The focus is on the actor's disregarding, consciously, an almost certain risk of substantial harm. This is precisely the aggravating circumstances that distinguish malicious from non- malicious conduct. An actor has the requisite malice only when he deliberately intends to cause harm or consciously disregards a great probability of substantial harm. The Ohio Supreme Court has specifically rejected the dissent's argument that mere knowledge or appreciation of a risk--something short of a great probability-- constitutes actual malice, even when it involves a risk of serious bodily injury or death rather than financial loss as in this case. Id.; accord Calmes v. Goodyear, supra (specifically holding that proof of a mere probability, possibility, or foreseeability of harm is insufficient to support punitive damages). Under the dissent's theory, punitive damages would be awarded in every tort action because they all involve disregarding some type of risk and harm. In the cases cited above, Goodyear and Motorists Mutual disregarded risks and harm resulted, but the Supreme Court specifically held this was an insufficient basis to award punitive damages. The risk must be of such magnitude that it is nearly certain to cause substantial harm. Goodyear actually -52- knew of similar prior physical injuries from the use of its products and lawsuits against it. Id. at 478-479. However, as in the case at bar, any risk of injury from the use of its products was dependent on many factors, including some over which it had no control. Under such circumstances, Goodyear's conduct did not create a great probability of substantial harm. In other words, to warrant punitive damages, it is not enough to show merely that James Celebrezze and the Sindell Firm received compensation or were paid first. See Packard v. Provident Nat. Bank, supra, in which the Third Federal Circuit Court of Appeals vacated a trial court's award of punitive damages against a large national bank acting as fiduciary trustee that had feathered its own nest by taking allegedly unreasonable compensation not expressly provided by contract and not adequately disclosed as required by subsequent statute. The dissent prefers to evaluate the evidence and recovery of punitive damages differently than the trial judge. However, the ultimate conclusion to award punitive damages is not consistent with the trial court's own prior findings. Nor is it consistent with the undisputed evidence, because the payment of the $20,000 by itself did not create a great probability of causing substantial harm to Robert Coulson. As noted above, Robert Coulson paid $100,000 into escrow with James Celebrezze. However, this was not a standard escrow -53- transaction involving the simple exchange of documents and money. e f $71,000 for attorney fees and (2) Joan Coulson both to resolve the pending child support, alimony, and $11,900 arrearage claims and to dismiss the divorce case. The amount to be paid to Spalding in exchange for the necessary release depended on further negotiations with James Celebrezze and could have ranged anywhere from $0 to $71,000 plus interest.33 T32Th funds were to pay (1) Spalding for the assigned judgment ohe amoun on several factors, including the claim for interest on the judgment, the amount Joan Coulson paid to Spalding, and the total debt owed to Spalding, who was entitled to only one satisfaction. Robert Coulson presented no evidence at trial regarding the value of the assigned judgment. James Celebrezze testified that he believed it had a maximum value of the $71,000 face amount. The domestic relations judge had already found that much of the work for Spalding by five lawyers, was unnecessary and duplicative. The court awarded only $40,000 for attorney fees. The entire gain to Joan from reopening the case after Robert Coulson's fraud on the 32 As noted in Section I Part A, the parties agreed to dismiss the divorce case in return for the deposit. Celebrezze was thereafter required to (1) negotiate a release of the assigned judgment and any claim arising from Robert Coulson's failure to pay the same directly, (2) draft a release document and present it for approval to Robert Coulson's counsel, and (3) obtain Spalding's execution of the approved release prior to disbursing the funds. 33 For example, nothing would have been due on the assigned judgment if Joan Coulson paid the entire amount of fees to Spalding from the $110,000 she received from Robert Coulson under the Settlement Agreement along with the $67,777.72 she received in escrow funds. -54- court was only $77,500. The claim for interest on the assigned judgment was also uncertain.34 Prior to Spalding I, and before trial, the trial court conclusively determined that Robert Coulson's maximum liability to Spalding on the assigned judgment was only $71,000, with no interest accrued or accruing until after the Settlement Agreement. Spalding v. Coulson, supra at 83-84. Specifically, on December 22, 1992, the trial court granted Spalding's motion for summary judgment on his claims under the assigned judgment in the amount of $71,000 plus interest and costs. The trial court clarified this entry by nunc pro tunc order on February 12, 1993, awarding interest on the $71,000 judgment from only June 6, 1988. Spalding I specifically affirmed the limited interest award on appeal. Spalding v. Coulson, supra at 84-85. Finally, as noted above in Section II at p. 14, following remand the trial court specifically stated as follows: Because of the actions of Robert Coulson, who chose to pay the money to James Celebrezze, Spalding lost an opportunity to receive $71,000 to apply against his $100,000 judgment. 34 Contrary to the dissent's argument, determination of interest was not a matter of simple calculation. It was particularly complicated because the original judgment for $31,000 in the 1976 decree was vacated. Interest typically begins on the date of the second judgment when the first is vacated. E.g., Kaiser Aluminum & Chemical Corp. v. Bonjorno (1990), 494 U.S. 827, 835-836. The subsequent 1985 decree purportedly granted postjudgment interest on this amount retroactive to 1976, and did not expressly provide for interest on the $40,000 attorney fee component. Furthermore, judgment creditors do not invariably recover interest pending appeal when they unsuccessfully appeal the adequacy of the judgment and are responsible for delay in payment. See Annotation, Interest Pending Appeal (1967), 15 A.L.R.3d 411; Finley v. Parent (C.P. 1973), 4 O.O.3d 191. -55- Only three months of inte ate of 10% o , f 20,000 of threst, or approximately $1,875 at an annualr n the $71,000 to satisfy the assigned judgment, which he believed and the trial court determined to have a maximum value of $71,000, upon execution of an approved release. The payment of $20,000 by itself, therefore, did not create or involve a great probability of causing substantial harm to Robert Coulson, because the remaining $80,000 in escrow funds was sufficient to cover the debt to Spalding, including the interest.35 Although disbursing the $20,000 funds in this manner violated the escrow instructions, there was no claim or showing of deliberate wrongdoing such as fraud, embezzlement, or theft. The case at bar did not involve, for example, the sort of opportunistic scheme set up to obtain the deposited funds like that used by the 35 The dissent's argument that the value of the assigned judgment exceeded the entire amount of the $100,000 settlement because of accumulated interest ignores that Joan Coulson dismissed claims in excess of $11,900 for support arrearages and the trial court's express findings. As noted above, this court specifically addressed the limited award of interest in Spalding I, and no party challenged either the $71,000 principal amount of the judgment or the failure to impose accrued interest. Id. at 83-84. Accordingly, these matters have been conclusively determined and cannot be modified by the current appeal. It should be noted that even if there were some possibility that the assigned judgment had a value greater than $71,000, however, by not awarding interest the trial court determined as a matter of law that it was not a great probability. In fact, the current value of this debt appears to be even less than $71,000 because Joan Coulson paid the bulk of Spalding's attorney fees. See n.7. -56- broker in Toro Petroleum, supra oreover, it administrative expenses, fees, and costs before paying beneficiaries. See e.g. Restatement, Second, Trusts, Section 242, comment e. This is true even when the parties' agreement did not provide for the compensation as noted by the Third Federal Circuit Court of Appeals in Packard v. Provident Nat. Bank, supra. Under the circumstances, paying the $20,000 compensation did not prevent the possibility of settling the case or cause a great probability of substantial harm to Robert Coulson.36 The evidence showed that complete performance of the Settlement Agreement required actions of third-parties and was prevented by circumstances over which James Celebrezze had no Robert Coulson's own evidence revealed that, cited by Robert Cou never even offered a release. To obtain payment, Spalding was required not only to release the underlying $71,000 assigned judgment, but also all additional claims37 arising from Robert 36 A finding to the contrary like that posited by the dissent would be against the manifest weight of the evidence in this case. E.g., Olbrich v. Shelby Mut. Ins. Co. (1983), 13 Ohio App.3d 423 (reversing an award of punitive damages against an insurance company when the trial court actually made a finding of actual malice which was not supported by the manifest weight of the evidence following a bench trial). As noted above, the record contains no substantial, competent, credible evidence of actual damages. Moreover, the trial court did not record a firm belief or conviction of actual malice because it made no finding by clear and convincing evidence, or even a preponderance of the evidence, of a conscious disregard of great probability of causing substantial harm. 37 These additional claims included claims for entering into the Settlement Agreement to defeat the partial assignment to (continued...) -57- Coulson's refusal to pay him directly. Without such a release, ence reveals was never offered, litigation etween Spalding and Robert Coulson was inevitable. Therefore, any harm that resulted from such litigation, such as attorney fees or interest, is not attributable, as the dissent contends, to Celebrezze. Ali v. Jefferson Ins. Co., supra; see also Davison Fuel & Dock Co. v. Pickands Mather & Co., supra.38 6) Malicious misconduct distinguished from mere legal error The blurring of the line between malicious and non- malicious conduct is untenable. As noted above, a leading awhich the undisputed evidbuthority discussing the obligations of attorneys acti agents has observed that [b]reaches of fiduciary obligations usually are not deliberate, and often occur because the attorney failed to understand the duties of loyalty or confidentiality under the circumstances. 2 Mallen & Smith, Legal Malpractice, Section 14.3 at p. 237. Celebrezze breached the escrow instructions by treating the matter as an ordinary litigation settlement agreement. Nor would returning the fund to Robert Coulson, as was suggested, 37(...continued) Spalding and for the executing of false satisfaction of judgment, in addition to the claim for punitive damages asserted by Spalding against Robert Coulson. 38 The award of attorney fees cannot be sustained without the underlying award of punitive damages and Coulson has never sought and cannot now recover them under any other theory, Spalding v. Coulson, supra at 78. It is not necessary, therefore, to address in detail the recovery of attorney fees in this case. However, a few items of the attorney fees sought appear to be related to different matters. Much stems from the litigation between Spalding and Robert Coulson concerning the assigned judgment, rather than Robert Coulson's claims against James Celebrezze. -58- have been a solution. On the contrary, it would have made him subject to a claim by Joan Coulson for breach of escrow instructions and punitive damages. Escrow agents owe each party to the escrow a duty to follow the instructions. As noted above in Section IIIA at pp. 25-28, once Joan Coulson dismissed her child support and $11,900 arrearage claims and Robert Coulson deposited the funds, each party had a right for the funds to be held in escrow. Returning all the funds to Robert Coulson, after Joan Coulson paid consideration by dismissing her case, would violate her right to have the funds held in escrow. See Pippin v. Kern-Ward Bldg. Co., supra; In re Miamisburg Train Derailment Litigation, supra. The sole case cited by the dissent, from 41 O.Jur.3d Escrows Section 7, involved a real estate sales agreement that specified the return of a downpayment. [U]nder the provision of said contract providing for a refund of said money in the event the owners of said property could not deliver a deed, [the escrow agent] was bound to refund the money when that fact became established. Kloser v. Davidson (1937), 24 Ohio Law Abs. 338. No such provision was contained in the litigation Settlement Agreement in this case. The Agreement did not grant Robert Coulson a right to unconditional return of the funds. On the contrary, absent further joint instructions, the escrow agent was instructed to hold the funds in escrow until satisfactorily resolving Spalding's claim. Presuming malice, as the dissent repeatedly does, is akin -59- to presuming theft rather than mistake when a man picks up another man's umbrella. Attorneys are not punished for ignorance of the law or even malpractice, and there is little published case law involving attorneys acting in the dual role as escrow agents. Because of its unique provisions, the Settlement Agreement in this case should not have been treated as a typical personal injury settlement. Even if one does not believe the defense that the breach of escrow instructions was a mistake, however, the absence of mistake does not prove Robert Coulson's claim that it was malicious. The trial court found that the escrow agent was aware of the assigned judgment and what an escrow was. Even with such knowledge, however, as the case law clearly states, one can breach the escrow instructions in practice without malice. A lack of credibility in the defense of mistake is no substitute for an affirmative finding that the agent maliciously breached his instructions. That is why what the case turns on is not credibility, as the dissent erroneously contends, but the trial court's failure to find actual malice. We assume as true all the trial court's findings, including its discussion regarding credibility, but observe no finding of actual malice, nor has the dissent pointed to any such finding. 7)Judgment is Warranted on the Trial Court's Specific Findings The failure of proof in this case becomes even more glaring if one considers Robert Coulson's assertion that Ohio law requires actual malice to be proven by the heightened standard of clear -60- and convincing evidence to warrant imposing punitive damages. (Brief at p. 12); Cabe v. Lunich (1994), 70 Ohio St.3d 598. This standard requires proof beyond the usual preponderance of the evidence. The evidence must produce a firm belief or conviction that the tortfeasor acted with actual malice. It takes quite a stretch to conclude the trial court had the requisite firm belief or conviction of actual malice in this case because it did not even make such a finding. Rather than respect the specific findings by the trial judge, the dissent would presume malice to make a finding on appeal that the trial court did not make. Appellate courts, however, are bound by the facts as found by the trial judge and may not indulge in appellate fact-finding or substitute their view of the evidence. E.g., Casto v. State Farm Mut. Auto. Ins. Co. (1991), 72 Ohio App.3d 410, 415 ( When the findings of fact leave some material fact undetermined, a reviewing court will presume that the issue of fact was not proved by the party having the burden of proof. ); see also Walker v. Cadillac Motor Car Division (1989), 63 Ohio App.3d 220, 223 ( [w]here the trial court's factual findings are silent with regard to a fact material to either party's case, we presume that such fact did not exist. ) Ignoring the trial court's specific evaluation of the evidence, the dissent contends there was a certainty of harm to Robert Coulson once all the funds were released. As noted above, however, this argument ignores Spalding I, several specific trial court findings, the trial court's reasoning, and undisputed -61- evidence in this case. Quite simply, the trial court was not required to find actual malice by the escrow agent for making payments he did not receive or punish the agent because of such payments even if it had. It is well established, contrary to the dissent's argument, that a fact-finder cannot ignore its own inconsistent findings or undisputed evidence. Moreover, if it did, an appellate court would be compelled to reverse a judgment plainly inconsistent (1) with facts conclusively established or (2) with undisputed evidence. E.g., Kennard v. Home Storage & Van Co. (1948), 54 Ohio Law Abs. 341, 344; Richmond Homes, Inc. v. Lee-Mar, Inc. (1969), 20 Ohio App.2d 27, 32. Spalding demanded payment of the assigned judgment from Robert Coulson before Celebrezze was ever appointed escrow agent, and Spalding never even offered a release relating to this debt. Robert Coulson failed to offer testimony from Spalding or anyone else that Spalding knew about the lack of funds or that it had any effect on his decision not to offer a release. This omission is fatal to Coulson's claim of punitive damages. The hope to settle the matter by obtaining a release simply did not materialize. Weigel v. Hardesty (Colo. App. 1976), 519 P.2d 1335, involved a similar situation. A husband and wife entered into a divorce settlement agreement providing for the wife's attorney to withhold delivery of a deed to the marital residence until after she executed a mortgage in favor of a third-party. As in the case at bar, the wife and third-party were unable to agree on the terms of the mortgage, but the attorney nevertheless delivered and recorded -62- the deed. Without executing the mortgage, the wife subsequently sold the property and obsconded with the funds. Finding that the attorney was not an escrow agent and did not act with malice or fraud in the transaction, the court completely denied any recovery when the husband sued the wife's attorney. Although the cases differ insofar as Celebrezze was deemed to be an escrow agent, the case is instructive concerning the lack of any finding of malice. Even when acting as a fiduciary for the claimant, the mere failure to follow the terms of an agreement of which one is aware, does not provide a sufficient basis to award punitive damages. The Third Federal Circuit Court of Appeals recognized this principle in Packard v. Provident Nat. Bank, supra, even under the Restatement recklessness standard for awarding punitive damages, which is less than the actual malice standard required by Ohio law. In other cases involving the misdelivery of all or a significant amount of deposited funds under circumstances similar to the case at bar, we have reached similar results denying the recovery of punitive damages, attorney fees, and new trials. See Foster v. RTA West Federal Credit Union (Aug. 29, 1991), Cuyahoga App. Nos. 58939 and 58941 (credit union); Calhoun v. McCollough (Apr. 25, 1991), Cuyahoga App. No. 60721, unreported (escrow agent); Smith v. Fortado (Sep. 21, 1994), Summit App. No. 16559, unreported (attorney). Claims involving the mishandling of funds are a serious matter. We emphatically disagree with the dissent, as the Supreme -63- Court did when reviewing more serious claims of fraud and bad faith in Bishop, Shimola, Said, Calmes, and other cited cases, that we excuse improper conduct when we apply ordinary legal principles. The prospect of paying compensatory damages, as in this case, generally deters fiduciaries from breaching their obligations. In short, they must perform or fully compensate. Awarding additional punitive damages without sufficient findings of actual malice, however, is contrary to public policy and, in this context, also detracts from the strong public policy encouraging settlement of disputes. Attorneys will be deterred, furthermore, from acting as escrow agents to settle litigation if punitive damages are imposed in every case involving the misdelivery of funds, particularly when they involve obstinate litigants as in this case. We are unable to affirm the award of punitive damages because the trial court did not find, by clear and convincing evidence or even a mere preponderance of the evidence, that James Celebrezze consciously disregarded the rights of others which disregard had a great probability of causing substantial harm. This case did not involve a scheme by the fiduciary to obtain the funds. The funds were placed in a separate account, and the agent began performing the agreement. He sought to resolve the dispute and to negotiate the necessary release, but it was not forthcoming. As noted above in Section IIA, this is not a case of complete nonperformance of the agreement; rather, Robert Coulson obtained some benefits under -64- it. Moreover, there were no subsequent acts to cover up the events.39 The dissent offers no reason why it is inappropriate to enter judgment based on the trial court's specific findings. Spalding I remanded this matter for determination of this precise issue. The parties were afforded a full and fair trial, and no one has alleged any error in the trial proceedings. The trial court heard all evidence and legal arguments offered by the parties. The trial court applied the correct legal standard, but was not convinced, however, to adopt Robert Coulson's best case scenario. Robert Coulson elected to stand on the trial court's findings and did not request the trial court amend or make different findings under Civ.R. 59(A). Narrowing the focus of litigation that has spanned decades is particularly warranted when the precise issue has already been specifically remanded once for trial. Unlike the erroneous summary judgment ruling, which completely prevented the parties from litigating the issue of compensatory damages, the trial court's decision on punitive damages resulted from a full blown bench trial in which no error occurred. The findings following trial were simply insufficient to warrant punitive damages. As noted above, it is contrary to Supreme Court precedent to send a case back for retrial so that a party may have a second chance to get it right, if he can. 39 Under the circumstances, a more appropriate remedy in this case might have been to proceed by summary enforcement of the Settlement Agreement. -65- We have previously held under similar circumstances that granting a new trial on the grounds that a litigant might prevail under a different theory following a second appeal if given another chance to prove his case is contrary to the interests of justice and judicial economy by further prolonging the litigation. See Blackwell v. Int'l Union, U.A.W. (1984), 21 Ohio App.3d 110, 112. These concerns are particularly appropriate in this case because approximately two decades have elapsed since the fraud on the court which gave rise to the attorney fees providing the basis for this dispute. Accordingly, James Celebrezze's second assignment of error in Appeal No. 70524 is sustained. IV. Conclusion Following this opinion, Spalding is entitled to collect from Robert Coulson the entire remaining debt for attorney fees and interest owed to Spalding, provided that the amount does not exceed a maximum of the $71,000-judgment-plus-interest from June 6, 1988 against Robert Coulson. This amount provides a basis for the compensatory damage claim against James Celebrezze, as follows: Total debt ($100,000 plus statutory interest on the unpaid balance from December 28, 1987) Less Total payments to Spalding ($1,000 payment by RDC on April 26, 1993 plus the net amount collected from Joan Coulson in the foreclosure action plus other payments, if any) -66- = Total amount of Robert's obligation, up to a maximum of $71,000 plus interest from June 8, 1988.40 The jury should be instructed that this amount, together with any other legally cognizable loss proximately caused by the breach of escrow instructions, provides the measure of compensatory damages to be awarded to Robert Coulson if the jury makes a finding of liability against James Celebrezze. Judgment affirmed as modified in part, and reversed and remanded in part for further proceedings on the issue of compensatory damages. Judgment accordingly. 40 Payments should be applied first to unpaid accrued interest and then to principal. The trial court should consider how to apportion interest which accrued on this obligation during the litigation between Robert Coulson and James Celebrezze. -67- It is ordered that appellee and appellants shall share the costs equally. 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. BLACKMON, P.J., CONCURS; PORTER, J., CONCURS AND DISSENTS (SEE CONCURRING AND DISSENTING OPINION). DIANE KARPINSKI JUDGE N.B. This entry is an announcement of the court's decision. See App.R. 22(B), 22(D) and 26(A); Loc.App.R. 27. This decision will be journalized and will become the judgment and order of the court pursuant to App.R. 22(E) unless a motion for reconsideration with supporting brief, per App.R. 26(A), is filed within ten (10) days of the announcement of the court's decision. The time period for review by the Supreme Court of Ohio shall begin to run upon the journalization of this court's announcement of decision by the clerk per App.R. 22(E). See, also, S.Ct.Prac.R. II, Section 2(A)(1). COURT OF APPEALS OF OHIO EIGHTH DISTRICT COUNTY OF CUYAHOGA NOS. 70524, 70538 WALTER T. SPALDING, JR. : : Plaintiff-appellant : (70538) : : -vs- : C O N C U R R I N G : ROBERT COULSON, ET AL. : A N D : Defendant-appellee (70538) : D I S S E N T I N G and third-party plaintiff- : appellee (70524) : O P I N I O N : -and- : : JAMES P. CELEBREZZE : : Third-party defendant-appellant : (70524) : DATE: SEPTEMBER 3, 1998 JAMES M. PORTER, J., CONCURRING AND DISSENTING: I concur in the majority's judgment only for disposition of appellant Spalding's sole assignment of error and cross-appellant Celebrezze's Assignment of Error I. I must respectfully dissent from the majority's action sustaining cross-appellant's Celebrezze's Assignment of Error II and denying any punitive damages or attorney fees for his breach of fiduciary duties as an escrow agent. The majority's analysis of the punitive damages issue states the well-recognized rule that punitive damages may not be awarded when a party fails to prove underlying compensatory damages. -2- (Maj. Opn. at 34). Despite the repeated mischaracterizations of my position (Maj. Opn. at 34, 36, 37, 38, 39), I have no disagreement with that proposition. On remand, Coulson must prove his right to compensatory damages to a jury before he can recover punitive damages. However, the majority's ruling today denying any punitive award for lack of compensatory damages (Maj. Opn. at 32-40) is illogical and premature. The majority itself has noted that the extentof Robert Coulson's compensatory damages is not clear from the record and expressly remands Coulson's compensatory damages claim against Celebrezze for determination by a jury. (Maj. Opn. at 31-32, 74-75). I would remand the punitive damage issue to the trial court pending determination of the award of compensatory damages because one of the factors in determining the amount of punitive damages is the principle that exemplary damages must bear a `reasonable relationship' to compensatory damages. BMW of North America, Inc. v. Gore (1996), U.S. , 116 S.Ct. 1589, 1601. If, of course, Coulson fails on remand in proving his claim for compensatory damages, no punitive damages may be awarded. Conversely, if he proves his right to compensatory damages, the trial court may fix the amount of punitive damages since the parties waived their right to jury trial on the punitive damages issue in open court. (Tr. 5, Civ.R. 39(A)(1)). Where liability for punitive damages is affirmed, the cause may be remanded solely to determine the amount of punitive damages. Zoppo v. Homestead Ins. Co. (1994), 71 Ohio St.3d 552, 558. This is clearly within the spirit of permitting -3- issues tried free from error to stand *** as in this case. (Maj. Opn. at 40). I disagree with the majority's conclusion that the punitive damages claim is barred as a matter of law because the trial court did not find by clear and convincing evidence or even a mere preponderance of the evidence, that James Celebrezze consciously disregarded the rights of others which disregard had a great probability of causing substantial harm. (Maj. Opn. at 72). This holding is untenable. The trial court squarely held: The court finds that Celebrezze consciously disregarded the rights of Robert Coulson and Spalding and caused them substantial harm. (Trial Court Decision and Final Judgment March 19, 1996 at 8). The trial court thus clearly made the required finding of actual malice which I agree is necessary to an award of punitive damages. Furthermore, in addressing the punitive damage issue, the majority disregards the Law of the Case doctrine which the trial court was mandated to follow (and did follow) upon remand from this Court in Spalding v. Coulson (1995), 104 Ohio App.3d 62 (Spalding I). The Law of the Case doctrine was fully stated in Nolan v. Nolan (1984), 11 Ohio St.3d 1, 3-4 as follows: A consideration of these arguments requires a brief review of the doctrine of the law of the case. Briefly, the doctrine provides that the decision of a reviewing court in a case remains the law of that case on the legal questions involved for all subsequent proceedings in the case at both the trial and reviewing levels. *** -4- The doctrine is considered to be a rule of practice rather than a binding rule of substantive law and will not be applied so as to achieve unjust results. *** However, the rule is necessary to ensure consistency of results in a case, to avoid endless litigation by settling the issues, and to preserve the structure of superior and inferior courts as designed by the Ohio Constitution. *** In pursuit of these goals, the doctrine functions to compel trial courts to follow the mandates of reviewing courts. *** Thus, where at a rehearing following remand a trial court is confronted with substantially the same facts and issues as were involved in the prior appeal, the court is bound to adhere to the appellate court's determination of the applicable law. *** * * * As we have already noted, the law of the case is applicable to subsequent proceedings in the reviewing court as well as the trial court. Thus, the decision of an appellate court in a prior appeal will ordinarily be followed in a later appeal in the same case and court. *** [Citations omitted.] Recently quoted and followed in Pipe Fitters Union Local No. 392 v. Kokosing Constr. Co., Inc. (1997), 81 Ohio St.3d 214, 218. In our 1995 Spalding I decision, this Court reversed the dismissal of the punitive damage claims against Celebrezze and held that third-party plaintiff Coulson's punitive damage factual allegations were sufficient as a matter of law to state a cause of action: Robert's third-party complaint alleged sufficient facts to state a cause of action for breach of fiduciary duty and punitive damages. Robert's allegation that J.P. Celebrezze disbursed the $100,000 to unintended parties, including himself and F. Celebrezze's law firm, alleges a conscious disregard for the rights and safety of others -5- which results in the strong probability of substantial harm to affected persons. Based on the foregoing, the trial court erred in dismissing Robert's claims for attorney fees and punitive damages. Civ.R. 12(B)(6); Ali; Kelly. (Spalding I at 79-80). The trial court below on remand expressly noted our determination in its March 19, 1996 Final Judgment at 4: The trial court had previously dismissed the claim for punitive damages and attorney fees. Generally, you cannot receive punitive damages in a breach of contract action. An exception to the rule is when the actions which constitute the breach of contract also amount to an independent willful tort. The court of appeals held that Robert's amended third-party complaint alleged sufficient acts to state a cause of action for breach of fiduciary duty and punitive damages. The factual allegation was: *** Celebrezze disbursed the $100,000.00 to unintended parties, including himself and F. Celebrezze's law firm, demonstrates a conscious disregard for the rights and safety of others, which results in the strong probability of substantial harm to affected persons. Once the trial court found the evidence supported the allegations, it properly applied the law of Spalding I because it was confronted with substantially the same facts and issues as were involved in the prior appeal. Nolan, supra, at 4. Notwithstanding the majority's discourse on hornbook law (Maj. Opn. at 46-50), the factual allegations that this Court previously found sufficient to state a cause of action for punitive damages as a matter of law were fully substantiated by the evidence before the trial court on remand as its findings illustrated. The majority got it exactly right when it states (Maj. Opn. at 45): The Judge's Findings are not Contrary to the Law of the Case. -6- Nevertheless, the majority would reverse the trial court once again, but this time for following the law we directed it to apply in Spalding I. The majority simply overrules the Law of the Case in Spalding I, ignoring the principle that the law of the case is applicable to subsequent proceedings in the reviewing court as well as the trial court. Nolan, supra, at 4. We are not free to disregard our prior legal rulings simply because the punitive damage issue in Spalding I was decided on a motion to dismiss. As stated in Pennsylvania Company v. Platt, et al. (1890), 47 Ohio St. 366, paragraph one of syllabus: When it has been determined by this court that the petition in a case states a cause of action, and the case afterwards comes before the court for the review of alleged errors occurring at the trial, the court will follow the prior decision, unless very clearly satisfied that it is erroneous. It is undisputed that James Celebrezze was an escrow agent; he accepted and deposited a check for $100,000 from Robert Coulson payable to him as escrow agent; he signed the Settlement Agreement as a witness pursuant to which the escrow payment was made for the benefit of satisfying Spalding's attorney fees claims. As the trial court expressly found: However, the parties acknowledged that as a result of the assignment executed by Joan to Spalding on October 17, 1985, the $100,000 would be paid to Celebrezze, Joan's attorney, as escrow agent to ensure that proper payment was made to Spalding pursuant to the assignment. (Final Judgment, March 19, 1996 at 5). Paragraph 1 of the December 28, 1987 Settlement Agreement unambiguously specified that Celebrezze's duties as an -7- escrow agent were to use the $100,000 to settle Spalding's claims by obtaining a release of the assigned judgment and for no other purpose: 1. On or before December 31, 1987, Robert shall pay to Joan the sum of One Hundred Thousand Dollars ($100,000), provided however, that as a result of an Assignment executed by Joan to her former attorney on October 17, 1985 (a copy of which Assignment is annexed hereto as Exhibit B), the One Hundred Thousand Dollars ($100,000) payment shall be made to James P. Celebreeze as Escrow Agent to secure proper payment pursuant to the Assignment. Said funds shall be held by Mr. Celebreeze in an interest bearing account and shall be retained by him until such time as he obtains a complete written and executed release and discharge from the assignee named in the aforedescribed Assignment of all claims and demands which he may have against Robert pursuant to the Assignment and resulting from Robert's knowledge thereof. Said document of release and discharge shall be submitted to Robert and/or his attorneys for review prior to release of the escrowed funds, and such release and discharge and the form and substance thereof, shall be satisfactory to Robert and/or his attorneys who shall acknowledge their approval thereof in writing prior to the release of any funds from escrow, which approval shall not be unreasonably withheld. It is understood that Robert shall have no further right or interest in the funds to be paid pursuant to this paragraph 1 other than to insure that any obligations he may have pursuant to the aforedescribed Assignment have been fully satisfied and discharged. Although the majority generously credits Celebrezze's explanation of why he did what he did (Maj. Opn. at 54-56), the trial court found his explanation incredible given Celebrezze's legal background. (Final Judgment at 6). [W]here the decision in a case turns upon credibility of testimony, and where there exists competent and credible evidence supporting the findings and -8- conclusions of the trial court, deference to such findings and conclusions must be given by the reviewing court. Myers v. Garson (1993), 66 Ohio St.3d 610, 614. The trial court found it was incredible for Celebrezze to claim he was ignorant of his escrow duties. This Court has no business substituting its judgment for that of the trier of fact. Id. at 615. In accepting a trust, the trustee is presumed to know the obligations and limitations connected with his high office, and if he transgresses, must abide the consequences. 49 O.Jur.3d Fiduciaries, S13 at 72. After a review of the critical evidence, the trial court did precisely what the majority contends (Maj. Opn. at 50-51) the factfinder must do - determine animus by evaluating the actor's subjective motivation. The trial court stated: *** Given these letters and all the other facts and circumstances in evidence it is preposterous for Celebrezze to claim that he was not aware of the assignment. What did Celebrezze do after receiving the $100,000.00? He deposited the $100,000.00 check to an account at TransOhio Bank on December 29, 1987 (See Exhibit G). On December 30, 1987, he wrote a check to Sindell, Rubenstein's (his brother's law firm) Escrow Account for $20,000 (Exhibit H) in violation of the escrow agreement. On the same date, Sindell, Rubenstein wrote him a check for $10,000.00. He wrote other checks (see Exhibits I, J, and K) and then gave Joan Coulson the balance remaining of $62,577.72. (Exhibit K is a check to Joan for $5,000.00). THE COURT FINDS THAT CELEBREZZE CONSCIOUSLY DISREGARDED THE RIGHTS OF ROBERT COULSON AND SPALDING AND CAUSED THEM SUBSTANTIAL HARM. [Emphasis added.] Robert Coulson and Spalding placed confidence in Celebrezze. They entrusted him to disburse the $100,000.00 in accordance with the agreement. Who would -9- expect a lawyer, a former judge (both trial and court of appeals), a justice of the Supreme Court, to do what he did? Because of the trust placed in him, he had $100,000.00 totally under his control. He completely violated his fiduciary duty of loyalty and honesty. Whether Mrs. Coulson owed him attorney fees or not, this money was not paid to him for his benefit. It was paid to him as a fiduciary! The parties went to great pains to not only mention the assignment, but to require approval of Coulson's attorneys of the language of the release to be signed by Spalding so that their client would be protected. In looking at the question of punitive damages, a court might conclude no actual malice if the money had just been paid to Mrs. Coulson and her creditors. But Celebrezze enriched himself and his brother. This court finds that Robert Coulson should be awarded $50,000.00 in punitive damages against Celebrezze. (Decision and Final Judgment, March 19, 1996 at 7-8). As noted, although the majority constantly repeats (Maj. Opn. at 41, 43, 45, 48, fn. 26, 51, 52, 53, 55, 56, 64, fn. 36, 68, 69, 72) that the trial court did not make the necessary finding of conscious disregard of substantial harm, it can not fail to see the emphasized statement contained above in the trial court's Final Judgment. Quite aside from the Law of the Case, the majority also breaches our appellate obligation to defer to the trial court's findings on punitive damages. Our review of a trial court judgment as being against the manifest weight of the evidence is extremely limited. The standard for reviewing such a claim is set forth in Karches v. Cincinnati (1988), 38 Ohio St.3d 12, 19: In reviewing the court's judgment, we are guided by the principle that judgments supported by competent, credible evidence -10- going to all the material elements of the case must not be reversed, as being against the manifest weight of the evidence. C.E. Morris Co. v. Foley Construction Co. (1978), 54 Ohio St.2d 279, 8 O.O.3d 261, 376 N.E.2d 578. Every reasonable presumption must be made in favor of the judgment and the findings of facts. Seasons Coal Co. v. Cleveland (1984), 10 Ohio St.3d 77, 10 OBR 408, 461 N.E.2d 1273. Finally, if the evidence is susceptible of more than one construction, we must give it that interpretation which is consistent with the verdict and judgment, most favorable to sustaining the trial court's verdict and judgment. Seasons Coal Co., supra; Gates v. Bd. of Edn. of River Local School Dist. (1967), 11 Ohio St.2d 83, 40 O.O.2d 91, 228 N.E.2d 198; Ross v. Ross (1980), 64 Ohio St.2d 203, 204, 18 O.O.3d 414, 415, 414 N.E.2d 426, 428. Although the majority pays lip service to the time-honored standard of review that [a]ppellate courts, however, are bound by the facts as found by the trial judge and may not indulge in appellate fact-finding or substitute their view of the evidence (Maj. Opn. at 69), its lengthy reformulation of the facts and skewed view of the evidence (Maj. Opn. at 50-74) inexplicably violate that principle in practice. The majority's efforts to put a different face on the facts is all the more baffling in view of its acknowledgment that the parties were afforded a full and fair trial, and no one has alleged any error in the trial proceedings. *** The trial court applied the correct legal standard but was not convinced, however, to adopt Robert Coulson's best case scenario. (Maj. Opn. at 73). If this is true, there is no reason to hold, as a matter of law, that punitive damages were not proved. The majority emphasizes (Maj. Opn. at 56, 63) that the trial court's focus on the $20,000 payment to the Celebrezze firm was not -11- sufficient for punitive damages since a balance of $80,000 remained, sufficient to satisfy the assigned [$71,000] judgment payable to the assignee Spalding. What the majority completely overlooks is that within six weeks after receiving the $100,000 escrow fund dedicated to satisfying the Spalding obligation, Celebrezze had dissipated the entire fund, none of which went to the designated beneficiary/assignee Spalding. By February 16, 1988, there wasn't any $80,000 left - there was nothing left. Furthermore, accrued statutory interest on the assigned $71,000 judgment dating from July 18, 1985 amounted to more than $30,000. R.C. 1343.03(A). That is why the parties put $100,000 in escrow to settle Spalding's claims, not $71,000. By December 28, 1988, the date of the Settlement Agreement, the $71,000 judgment had a total value with interest in excess of $100,000. The assignment executed from Joan Coulson to Spalding on October 17, 1985 encompassed interest accrued, i.e., interest on $31,000 from 1976 as awarded in the 1985 Divorce Judgment. ($31,000 x 6% x 11 years = $20,460; $40,000 x 10% x 2/ years = $10,000). The majority's painstaking reconstruction of the facts and ex post facto explanation about interest on later judgments (Maj. Opn. at 59-64, fns. 32-36) is contrary to what the parties bargained for at the time of the assignment and the Settlement Agreement. The assigned judgment had at least a $100,000 value by the time of the Settlement Agreement. That also explains why the trial court made the express finding that the $100,000 would be paid to Celebrezze, Joan's attorney, as escrow agent, to ensure that proper payment was -12- made to Spalding pursuant to the assignment. The majority ignores this finding and postulates various scenarios which deconstruct the $100,000 to $71,000 (Maj. Opn. at 59-65). If a fiduciary misappropriates a portion of an escrow fund and misdirects the balance of the entire fund, as was undisputedly done here, there is certainty (i.e., high forseeability ) by clear and convincing evidence that the parties for whose benefit the fund was established and secured will suffer substantial harm. The pathetic history of this case demonstrates that Celebrezze's misconduct has contributed to the past eight years of continuing litigation, running of interest and mounting attorney fees. Notwithstanding the majority's strained exculpation, Celebrezze had no right to pay himself, his brother or his client out of the fund. No provision for such payments was made. It is no excuse to say, as the majority does, that Spalding did not offer a release (Maj. Opn. at 41, fn. 21, 55, 65, 70) because where the condition provided for in the escrow agreement is unfulfilled, the depository is bound to return the funds. 41 O.Jur.3d Escrows, S7, 408. If Celebrezze could not settle Spalding's claims, he should have sought instructions from the parties as to its disposition, not disbursed it to himself, his brother and his client. See Pippen v. Kern-Ward Bldg. Co. (1982), 8 Ohio App.3d 196, 198: The depositary under an escrow agreement is an agent of both parties, as well as a paid trustee with respect to the purchase money funds placed in his hands. *** The depositary may not perform any acts with reference to handling the deposit, or its disposal, which are not authorized by the contract of deposit. -13- ***. 20 Ohio Jurisprudence 2d 215, Escrows, Section 8. The policy for awarding punitive damages in Ohio *** has been recognized *** as that of punishing the offending party and setting him up as an example to others that they might be deterred from similar conduct. Preston v. Murtry (1985), 32 Ohio St.3d 334, syllabus. As practicing lawyers know, there is a common practice in this community of using attorneys for the respective parties to act as escrow agents or trustees for settlement funds in return for a release. This has long been a convenient and salutary method of effecting settlements by assuring a quid pro quo. The trust inherent in such an escrow practice must not be lightly compromised. No attorney before today would assume that the attorney/escrow agent in such a trust relationship could, with impunity, pocket the trust funds or give them to his client simply because the opposing party did not offer a release. I would overrule Celebrezze's Assignment of Error II and remand the punitive damages issue to the trial court, subject to a .