Capitol Indemnity Corporation v. First Ohio Banc & Lending, Inc. et al

Filing 33

Memorandum of Opinion. For the reasons set forth in this Memorandum, Defendants' 26 motion for summary judgment is granted, Plaintiff's 27 motion for summary judgment is denied and this matter is dismissed in its entirety as to Defendants Erin Doskocil and Kirk Doskocil. Judge John R. Adams on 09/30/2016. (M,TL)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
CAPITOL INDEMNITY CORP.,
Plaintiff,
vs.
FIRST OHIO BANC &
LENDING, INC, et al.,
Defendants.

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CASE NO. 1:14 CV 822

JUDGE JOHN R. ADAMS

MEMORANDUM OF OPINION
(Resolving Docs. # 26 & 27)

This matter is before the Court on the Motions for Summary Judgment filed by
Defendants Erin Doskocil and Kirk Doskocil (Doc. # 26) and by Plaintiff Capitol Indemnity
Corp. (Doc. # 27). For the reasons that follow, Defendants’ Motion is GRANTED; Plaintiff’s
Motion is DENIED.
I.

FACTS
The facts underlying both motions are undisputed. Defendant Kirk Doskocil was the
President of First Ohio Banc & Lending, Inc., a mortgage broker and financial institution as
defined by O.R.C. § 1322.01. Defendant Erin Doskocil is named in and signed the General
Indemnity Agreement attached to the Complaint along with Kirk Doskocil and First Ohio
(collectively “Defendants”).

Plaintiff, Capitol Indemnity (“Plaintiff”), is a Wisconsin

corporation licensed to act as a commercial surety in the State of Ohio. Pursuant to O.R.C. §
1332.05, Defendant First Ohio was required to obtain a surety bond to operate. Plaintiff, as

surety, executed Bond No. LPO745411 (“2000 Bond”) on January 15, 2000, with Defendant
First Ohio as principal and the Superintendent of Financial Institutions for the State of Ohio as
obligee, for a penal sum of $25,000.00. Plaintiff did not produce a copy of the 2000 Bond with
the Complaint or in conjunction with either Motion for Summary Judgment. According to the
affidavit submitted by Ron Wills, acting Senior Bond Claims Specialist for Plaintiff, Plaintiff
issued multiple riders that increased or decreased the penal sum on the 2000 Bond depending on
the number of locations Defendant First Ohio maintained. (Doc. #26, Ex. A.) According to Mr.
Wills, when the 2000 Bond was cancelled by Plaintiff on February 15, 2008, effective April 30,
2008, the penal sum of the Bond was $210,000.00. (Doc. #26, Ex. A.) The copy of Plaintiff’s
cancellation notice attached to Mr. Wills’s deposition indicates that Plaintiff “has elected to
cancel said bond in its entirety” because the “principal no longer meets underwriting criteria.”
(Doc. # 26, Ex. A, Ex. 1.) After cancelling the 2000 Bond, Plaintiff did not issue Defendants any
other surety bonds in the State of Ohio. (Doc. #26, Ex. B “Plaintiff’s Response to Defendant
Request for Admissions.”) According to the Wills Affidavit, although no further bonds were
issued by Plaintiff in Ohio, bonds were issued both before and after the Ohio cancellation in
Florida; Virginia; Maryland; and Connecticut (none of which are at issue herein). (Doc. #28, Ex.
B.)
Approximately two and a half years after the cancellation of the 2000 Bond, Defendants
executed a General Indemnity Agreement, dated November 29, 2010 (“2010 Agreement”).
Although Plaintiff has now produced additional indemnity agreements pre-dating the 2010
Agreement, the Complaint and the Motions before the Court are solely based on the 2010
Agreement. The General Indemnity Agreement obligates Defendants to “hold and save harmless
the Surety against all demands, claims, losses, costs, damages, expenses, and fees including any

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attorneys’ fees whatsoever” incurred due to the execution of Bonds or “prosecuting or defending
any action brought in connection therewith.” (Doc. #1, Ex. A.)
On or about January 6, 2011, Plaintiff was named a defendant in a Lorain County Court
of Common Pleas matter captioned Lynn A. Strickler, et al. v. First Ohio Banc & Lending, Inc.,
identified by case number 07-CV-151964.

According to Plaintiff, pursuant to this 2010

Agreement, on January 21, 2013 Plaintiff made a demand on Defendants for the attorney fees
and expenses it had incurred in the Lorain County suit. Plaintiff alleges, and Defendants
concede, that payment was not forthcoming. Plaintiff now seeks the costs associated with the
suit and damages due to Defendants’ alleged breach of the 2010 General Indemnity Agreement,
as well as “common law indemnification” and specific performance of the 2010 Agreement.
(Doc. #1.) Defendants do not dispute the existence and cancellation of the 2000 Bond, the penal
amount of the 2000 Bond at cancellation, or the existence and their execution of the 2010
Agreement. Defendants contend that the 2010 Agreement does not apply to create liability for
losses associated with a bond that was cancelled more than two years before the agreement was
executed.
II.

LEGAL STANDARD
Summary judgment is appropriate when the “pleadings, depositions, answers to

interrogatories and admissions on file, together with the affidavits, if any, show that there is no
genuine issue of material fact and that the moving party is entitled to judgment as a matter of
law.” Estate of Smithers v. City of Flint, 602 F.3d 758, 761 (6th Cir. 2010). A fact must be
essential to the outcome of a lawsuit to be ‘material.’ Anderson v. Liberty Lobby Inc., 477 U.S.
242, 248 (1986). Summary judgment will be entered when a party fails to make a “showing
sufficient to establish . . . an element essential to that party’s case.” Celotex Corp. v. Catrett, 477

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U.S. 317, 322-23. “Mere conclusory and unsupported allegations, rooted in speculation, do not
meet [the] burden.” Bell v. Ohio State Univ., 351 F.3d 240, 253 (6th Cir. 2003).
Summary judgment creates a burden-shifting framework. See Anderson, 477 U.S. 250.
The moving party has the initial burden of showing there is no genuine issue of material fact.
Plant v. Morton Int’l, Inc., 212 F.3d 929, 934 (6th Cir. 2000). Specifically,
A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by:  

(A) citing to particular parts of materials in the record, including depositions,

documents, electronically stored information, affidavits or declarations,
stipulations (including those made for purposes of the motion only), admissions,
interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce admissible evidence to
support the fact.
Fed.R.Civ.P. 56(c)(1).
The burden then shifts to the nonmoving party to prove that there is an issue of material fact
that can be tried. Plant, 212 F.3d at 934. If this burden is not met, the moving party is then
entitled to a judgment as a matter of law. Bell, 351 F.3d at 253. When evaluating a motion for
summary judgment, the Court construes the evidence and draws all reasonable inferences in the
light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). The non-moving party may not simply rely on its pleadings; rather it
must “produce evidence that results in a conflict of material fact to be resolved by a jury.” Cox v.
Kentucky Dep’t of Transp., 53 F.3d 146, 150 (6th Cir. 1996). A fact is “material” only if its
resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986).

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III.

ANALYSIS
a) Breach of Contract
Because this matter was filed pursuant to this Court’s diversity jurisdiction, state law

governs the substantive issues and federal law governs the procedural issues. Gass v. Marriott
Hotel Servs., Inc., 558 F.3d 419, 425–26 (6th Cir. 2009). “Under Ohio law, the elements of a
breach of contract claim are: (1) the existence of a contract; (2) performance by the plaintiff; (3)
breach by the defendant; and (4) damage or loss to the plaintiff as a result of the breach.” V & M
Star Steel v. Centimark Corp., 678 F.3d 459, 465 (6th Cir. 2012) (citing Savedoff v. Access Grp.,
Inc., 524 F.3d 754, 762 (6th Cir. 2008) (applying Ohio law) inter alia). The interpretation of
written contract terms, including the determination of whether those terms are ambiguous, is a
matter of law for initial determination by the court. Parrett v. Am. Ship Bldg. Co., 990 F.2d 854,
858 (6th Cir. 1993) (applying Ohio law). “If a contract is clear and unambiguous, then its
interpretation is a matter of law and there is no issue of fact to be determined. However, if a term
cannot be determined from the four corners of a contract, factual determination of intent or
reasonableness may be necessary to supply the missing term.” Inland Refuse Transfer Co. v.
Browning–Ferris Indus. of Ohio, Inc., 15 Ohio St.3d 321, 474 N.E.2d 271, 272–73 (1984).
“The role of courts in examining contracts is to ascertain the intent of the parties.” City of
St. Marys v. Auglaize Cty. Bd. of Commrs., 115 Ohio St.3d 387, 875 N.E.2d 561, 566 (2007).
“The intent of the parties is presumed to reside in the language they choose to use in their
agreement.” Graham v. Drydock Coal Co., 76 Ohio St.3d 311, 667 N.E.2d 949, 952 (1996);
accord State ex. rel Petro v. R.J. Reynolds Tobacco Co., 104 Ohio St.3d 559, 820 N.E.2d 910,
915 (2004). “Where the terms in a contract are not ambiguous, courts are constrained to apply
the plain language of the contract.” City of St. Marys, 875 N.E.2d at 566. “[W]here the terms in

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an existing contract are clear and unambiguous, this court cannot . . . create a new contract by
finding an intent not expressed in the clear language employed by the parties.” Alexander v.
Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146, 150 (1978)). Extrinsic evidence is
admissible “to ascertain the intent of the parties when the contract is unclear or ambiguous, or
when circumstances surrounding the agreement give the plain language special meaning.”
Graham, 667 N.E.2d at 952; accord R.J. Reynolds, 820 N.E.2d at 915. Nevertheless, a court “is
not permitted to alter a lawful contract by imputing an intent contrary to that expressed by the
parties” in the terms of their written contract. Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216,
797 N.E.2d 1256, 1261–62 (2003).
Contractual language is ambiguous “only where its meaning cannot be determined from
the four corners of the agreement or where the language is susceptible of two or more reasonable
interpretations.” Covington v. Lucia, 151 Ohio App.3d 409, 784 N.E.2d 186, 190 (2003).
“[C]ourts may not use extrinsic evidence to create an ambiguity; rather, the ambiguity must be
patent, i.e., apparent on the face of the contract.” Id. at 190. In determining whether contractual
language is ambiguous, the contract “must be construed as a whole,” Tri–State Group, Inc. v.
Ohio Edison Co., 151 Ohio App.3d 1, 782 N.E.2d 1240, 1246 (2002) (quoting Equitable Life Ins.
Co. of Iowa v. Gerwick, 50 Ohio App. 277, 197 N.E. 923, 926 (1934)), so as “to give reasonable
effect to every provision in the agreement.” Stone v. Nat'l City Bank, 106 Ohio App.3d 212, 665
N.E.2d 746, 752 (1995). “The meaning of a contract is to be gathered from a consideration of all
its parts, and no provision is to be wholly disregarded as inconsistent with other provisions
unless no other reasonable construction is possible.” Burris v. Grange Mut. Co., 46 Ohio St.3d
84, 545 N.E.2d 83, 88 (1989) (quoting Karabin v. State Auto. Mut. Ins. Co., 10 Ohio St.3d 163,
462 N.E.2d 403, 406 (1984)). “[C]ommon words appearing in the written instrument are to be

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given their plain and ordinary meaning unless manifest absurdity results or unless some other
meaning is clearly intended from the face or overall contents of the instrument.” Alexander, 374
N.E.2d at 150. If the language in the contract is ambiguous, the court should generally construe it
against the drafter. Mead Corp. v. ABB Power Generation, Inc., 319 F.3d 790, 798 (6th Cir.
2003) (applying Ohio law).
Defendants contend that the plain language of the 2010 Agreement operates only
prospectively for the purpose of obtaining bonds in the future and for potential forbearance
against cancelling such future bonds. Defendants assert that the recital describing “bonds” limits
the 2010 Agreement to any bond obtained on or after the date of the agreement. Defendants urge
that the agreement should be limited to a single category of bonds, those dated
contemporaneously with or later than the execution of the 2010 Agreement. Plaintiffs, by
contrast, contend that the 2010 Agreement should cover three categories of bonds: those issued
and cancelled in the past, those issued that continue in existence on the date of the indemnity
agreement, and those issued on or after the effective date of the indemnity agreement. While the
parties differ in the full extent of the 2010 Agreement’s coverage, they are in agreement as to its
application to bonds executed on or after the date of the Agreement. The Court agrees with this
uncontested point: the 2010 Agreement applies to any bond executed contemporaneously with or
subsequent to the execution of the agreement and prior to any cancellation of the agreement.
With regard to the disputed extent of the 2010 Agreement’s application to bonds
executed prior to the date of the agreement, this Court is required to first determine whether, as a
matter of law, the agreement is clear and unambiguous on this issue. City of St. Marys, supra, at
566. Where the “terms in an existing contract are not ambiguous, courts are constrained to apply
the plain language of the contract.” Id. Nothing in the 2010 Agreement suggests ambiguity.

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The words themselves are generally common, as such they are “to be given their plain and
ordinary meaning unless manifest absurdity results or unless some other meaning is clearly
intended from the face or overall contents of the instrument.” Savedoff, supra at 764, citing
Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146, 150 (1978).
The language of the 2010 Agreement begins with an unambiguous, forward looking,
arrangement whereby “the Surety now or in the future” may execute or procure bonds or may “in
its sole discretion continue the Bond(s) heretofore executed and may at its sole option forbear
cancellation of such Bond(s).” (Doc. #1, Ex. A, p. 1.) Consistent language is used throughout
the agreement when describing what the agreement is intended to cover and why:
WHEREAS, the Undersigned . . have a substantial interest in the Principal
obtaining bonds; and, the Principal and/or the Undersigned may desire to
or be required to furnish certain bonds, undertakings, or instruments of
guarantee (all of which will hereinafter be included within the term
“Bond” or “Bonds”)
WHEREAS, at the request of the Undersigned and upon the express
precondition of the execution of this Instrument, and in further
consideration of the Surety now or in the future executing or procuring the
execution or has previously executed or procured the execution, of such
Bonds; and, the Surety may in its sole discretion continue the Bond(s)
heretofore executed and may at its sole option forbear cancellation of such
Bond(s).
NOW, THEREFORE, in consideration of the recitals above which are
incorporated herein and of the execution of any such Bond(s) or the
forbearance of cancellation of existing Bond(s) and as an inducement to
such execution or forbearance, we, the Undersigned, jointly and severally,
agree to and hereby bind ourselves . . . as follows: . . .
Section 2 – Indemnification. The Undersigned shall and will at all times
defend, when requested by the Surety to do so, and shall and will
indemnify, and keep indemnified, and hold and save harmless the Surety
against all demands, claims, loss, costs, damages, expenses and fees
including any attorney fees whatsoever, and for and from any and all
liability therefore . . . by reason of executing . . . any said Bond(s) . . .
which maybe[sic] already or hereinafter are executed for or at the request

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of the Principal or the Undersigned or any of them, or renewal or
continuation thereof . . .
(Doc. #1, Ex. A, p.1). In every instance “previously executed” bonds are addressed as existing
obligations that Plaintiff may elect to renew, continue, or forbear from cancelling. Although
Defendants urge a contrary interpretation, it is clear that the 2010 Agreement applies to bonds
“heretofore” or previously executed that are continued or otherwise forborne from cancellation
“upon the express precondition of the execution of this Instrument.” (Doc. #1, Ex. A.) Thus, the
2010 Agreement does apply to bonds executed prior to the date of the agreement.
However, this Court finds the 2010 Agreement does not apply so broadly as to revive
bonds cancelled before the agreement was executed. The 2010 Agreement explicitly refers to
“previously executed” bonds in the context of their continuation or renewal where the “surety,”
Plaintiff, forbears from cancelling an obligation.

The agreement contains no reference to

“cancelled bonds.” Nothing in this language can be read to revive an obligation the surety has
extinguished through cancellation prior to the date of the agreement. The consistent scope
described within the four corners of the 2010 Agreement is evident in the provision that
preserves Plaintiff’s right of indemnity, even after the cancellation of the indemnity agreement:
Section 18 – Continuing Obligation, Release of Indemnity. The
Undersigned understand, recognize and agree that this Agreement is
continuing obligation . . . until this Agreement shall be cancelled
according to its terms. . . . PROVIDED HOWEVER, that as to any and all
such Bonds executed or authorized by the Surety prior to effective date of
such notice [of cancellation] and as to all and all renewals, continuations
and extensions thereof or substitutions therefore regardless of when the
same were or are executed, renewed, extended or continued, the
undersigned shall be and remain fully liable therefore, as if said notice [of
cancellation] had not been served.

(Doc. #1, Ex. A., p. 4) The Continuation Clause expressly holds that bonds “executed or
authorized” during the effective dates of the 2010 Agreement will continue to be indemnified
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under the terms of the agreement, regardless of when their renewal, continuations, or extensions
are executed. Thus, the consistently prospective nature of the agreement and its particular
application to execution, renewal, continuation, or extension of bonds are made clear. Plaintiff’s
belief that “previously executed bonds” should be read to implicitly include past, cancelled,
bonds as well the existing obligations that Plaintiff may, as the agreement expressly
contemplates, forbear from cancelling, extend, continue or renew, would impermissibly expand
the “four corners” of the agreement as written. Inland Refuse, supra.
While Defendants’ construction of the 2010 Agreement is clearly too narrow, Plaintiff’s
is too broad. This Court finds that the language used in the 2010 Agreement consistently refers
to two categories of obligations, those previously executed that exist to be continued, renewed
or otherwise extended, and those new bonds issued pursuant to the terms of the 2010 Agreement,
either on the same date or thereafter. This is entirely consistent with Plaintiff’s description of
“standard practice among sureties” to require additional indemnity agreements to secure any
new credit when existing indemnitors seek to renew or request additional bonds. (Doc. #28,
Ex. B, ¶ 5.) Accordingly, this Court concludes that the 2010 Agreement does not apply to the
2000 Bond, as it was cancelled more than two years prior to the agreement and was not
extended thereunder. Plaintiff is not entitled to indemnification for an action on the 2000
Bond under the 2010 Agreement.
b.)

Common Law Indemnification and Specific Performance

Having found that the November 29, 2010 General Indemnity Agreement does not apply
retroactively to bonds cancelled before the contract was executed, Plaintiff’s remaining causes of
action, arising out of the same contract, are DISMISSED.

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IV.

CONCLUSION
For the reasons set forth herein, the Motion for Summary Judgment (Doc. #26) filed by

Defendants Erin Doskocil and Kirk Doskocil is GRANTED.

The Motion for Summary

Judgment (Doc. # 27) filed by Plaintiff Capitol Indemnity Corp. is DENIED. This matter
is DISMISSED in its entirety as to Defendants Erin Doskocil and Kirk Doskocil.
IT IS SO ORDERED.
s/John R. Adams______________
JUDGE JOHN R. ADAMS
UNITED STATES DISTRICT
COURT

DATED: SEPTEMBER 30, 2016

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