COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 73002 ABRUZZI'S INC., : : Plaintiff-Appellee : JOURNAL ENTRY : and vs. : OPINION : ABRUZZI'S PIZZA, INC., ET : AL., : : Defendants-Appellants : DATE OF ANNOUNCEMENT OF DECISION : JULY 2, 1998 CHARACTER OF PROCEEDING: : Civil appeal from : Berea Municipal Court : Case No. 96-CVF-1804 JUDGMENT : REVERSED AND REMANDED. DATE OF JOURNALIZATION : APPEARANCES: For plaintiff-appellee: Susan L. Funk JONES, DAVIES & FUNK 803 East Washington Street Suite 200 Medina, Ohio 44256 For defendant-appellant: William L. Tomson, Jr. 14400 Pearl Road Strongsville, Ohio 44136 -2- NAHRA, J.: On March 17, 1994, Abruzzi's Pizza, Inc., appellant, entered into a Purchase Agreement to buy Abruzzi's Pizza and Pasta restaurant from Abruzzi's, Inc., appellee. In the Purchase Agreement, the food inventory and paper supplies were to be paid in installments. Appellant did not make the last payment of $1,500.00. Appellee instituted an action in Berea Municipal Court against appellant and its president Lestor Havlik to collect the payment due and appellant counterclaimed for damages in excess of $7,000.00, alleging that appellee breached the terms of the Purchase Agreement. The parties stipulated that appellant and Havlik owed $1,500.00 under the terms of the Purchase Agreement and proceeded to try appellant's counterclaim. In a trial to the court, appellant presented evidence that Victoria Geurink, appellee's president's wife, had been an employee of the restaurant, was offered work with appellant, but instead filed for unemployment compensation. Appellee's president responded to the Bureau of Unemployment Compensation's request for information, Victoria Geurink received unemployment benefits and appellant's unemployment compensation account was taxed in excess of $7,000.00. The only exhibit accepted as evidence was the Purchase Agreement. It contains the following clauses: 1.Sale of business. The Seller shall sell to the Purchaser, free from all liabilities and encumbrances, the restaurant owned and conducted by the Seller at the premises known as Abruzzi's Pizza and Pasta, located at 19570 West 130th Street, Stongsville, Ohio 44212. -3- *** 5. Representations by Seller. *** (h) Th ere are no judgments, liens, actions, or proceedings pending against Seller in any court, nor is it threatened with any suit, action, arbitration, or administrative proceeding. *** 15. Indemnification. Seller will indemnify and hold Purchaser harmless against and in respect of any of the following: (a) Any and all loss, liability or damage resulting from any untrue representation, breach of warranty or nonfulfillment of any covenant by Seller contained herein or in any certificate, document or instrument delivered to Purchaser hereunder; (b) Any and all liabilities of Seller not specifically assumed by Purchaser pursuant to the terms of this Agreement; (c)Any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs and expenses, including, without limitation, legal fees and expenses, incident to any of the foregoing or incurred in investigating or attempting to avoid the same or to oppose the imposition thereof, or in enforcing this indemnity. (d) Upon receipt of any notice of any violation of this indemnification, Purchaser shall immediately notify Seller. The Purchase Agreement assigns March 17, 1994 as a closing date of the transaction; however, the transfer of the business to appellant was contingent upon it procuring the business' liquor license. Accordingly, the business did not transfer to appellant until that time. Following trial, the court journalized the following entry: -4- Trial had on March 27, 1997. Plaintiff sold it's business and assets to defendant, Abruzzi's Pizza, Inc. [appellant] and the agreement was guaranteed by defendant, Lester A. Havlik. All but $1,500.00 of the purchase price was paid. Victoria Geurink owned some of the shares of stock of plaintiff, was the wife of the only other stockholder, worked for plaintiff [appellee] for many years and declined to continue working for the new owner although she was offered a job. None the less, she filed for unemployment compensation and collected over $7,000.00 which ultimately was and will be paid by defendant, Abruzzi's Pizza, Inc. While it appears to this court to be a bizarre and unfair result it also appears there was no fraud on Victoria A. Geurnik, or her husband's part. This was a matter that occurred as an operation of law under the Unemployment Compensation Law and the workings of the Unemployment Compensation Bureau, and its claims handling. To the extent defendants had any remedy it needed to be appealed through the unemployment Compensation Bureau and whatever appeals if any were available there. Therefore Judgment for plaintiff, Abruzzi's Inc., against defendants, Abruzzi's Pizza, Inc. and Lester A. Havlik in the amount of $1,500.00 plus court costs. Judgment for plaintiff, Abruzzi's Inc., against defendants, Abruzzi's Pizza, Inc. and Lester A. Havlik, on the counterclaim. Appellant filed a Civ.R. 59 motion for new trial which motion was denied. Appellant's assignments of error read: I. THE TRIAL COURT ERRED IN NOT APPLYING CONTRACT LAW IN RENDERING ITS DECISION. II. THE TRIAL COURT ERRED IN DENYING APPELLANT'S MOTION FOR A NEW TRIAL. The decision of whether a Civ.R. 59 motion for new trial is to be granted is within the discretion of the trial court and is examined to determine whether or not the trial court abused its discretion. Dawson v. MetroHealth Ctr. (1995), 104 Ohio App.3d 654, 655, 662 N.E.2d 1123. Civ.R. 59 provides in pertinent part: -5- (A) Grounds. A new trial may be granted to all or any of the parties and on all or part of the issues upon any of the following grounds: *** (7) The judgment is contrary to law; *** On a motion for a new trial in an action tried without a jury, the court may open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new findings and conclusions, and enter a new judgment. Appellant argues that the court did not apply the principles of contract law in rendering its verdict. We agree that it is not clear that the trial court applied the proper law. The trial court found that a liability existed in excess of $7,000.00, that there was no fraud committed by appellee, and that the liability to appellant occurred by operation of law. We infer from these findings that the trial court determined that the issue to be decided was one of fault or causation in incurring the liability on the part of appellee; however, issues of fault or causation by appellee must be analyzed within the framework of contract law. In Kotyk v. Rebovich (1993), 87 Ohio App.3d 116, 121, 621 N.E.2d 897, 900, this court, citing Restatement of the Law 2d, Contracts (1978), Section 235(2), stated that Any failure to perform a contractual duty which has arisen constitutes a breach. Once a breach of contract has been shown, the burden is on the breaching party to assert a defense to the breach. See, MatchMaker Int'l. v. Long (1995), 100 Ohio App.3d 406, 654 N.E.2d 161. -6- In this case, the Purchase Agreement provides that appellee was to deliver the business free from all liabilities and encumbrances. Purchase Agreement, Section 1, supra. This section creates a clear duty on the part of appellee. The Purchase Agreement also contains appellee's representation that the business was not threatened with any suit, action, arbitration, or administrative proceeding. Purchase Agreement, Section 6, supra. The Purchase Agreement does not provide any language excusing appellee for not transferring the business free and clear of all liabilities, rather, it contains broad language of indemnification in the event this occurs. See, Purchase Agreement, Section 15, supra. The trial court found that appellant is liable to the Unemployment Compensation Bureau for over $7,000.00. This liability was created after the Purchase Agreement was signed, but before the transfer of the business was finalized. Accordingly, appellee did not deliver the business free from all liabilities. From the journal entry, the trial court apparently interpreted appellee's defense to breach of contract as being an assertion that because it did not cause the liability it could not be held accountable for it. However, the Purchase Agreement does not provide any excuse for appellee's breach of its duty to transfer the business without unassumed liabilities. Additionally, appellee did not present a legal excuse for failing to transfer the business free from liabilities and is therefore in breach of contract. The -7- trial court erred in its verdict in favor of appellee on the counterclaim. Appellant's assignments of error are well taken. Pursuant to App.R. 12(B), we reverse the judgment of the trial court on the counterclaim and enter judgment in favor of appellant. The judgment on appellee's complaint for $1,500.00 was not appealed, and is left undisturbed by this judgment. This cause is remanded to the Berea Municipal Court to hold proceedings pursuant to Civ.R. 59 in order to determine the exact amount of damages incurred by appellant as a result of appellee's breach of contract, set off the $1,500.00 verdict for appellee, and enter a verdict in favor of appellant for that amount. Judgment reversed and remanded for proceedings consistent with this opinion. -8- This cause is reversed and remanded for proceedings consistent with this opinion. It is, therefore, considered that said appellants recover of said appellee their costs herein. It is ordered that a special mandate be sent to said 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. JOSEPH J. NAHRA JUDGE BLACKMON, A.J., and MICHAEL J. CORRIGAN, J., CONCUR. 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 .