[Cite as SST Bearing Corp. v. Twin City Fan Cos., Ltd.,

.]

IN THE COURT OF APPEALS FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO

SST BEARING CORPORATION, : APPEAL NO. C-110611 TRIAL NO. A-0906751 Plaintiff-Appellee, : O P I N I O N. vs. :

TWIN CITY FAN COMPANIES, LTD., :

Defendant-Appellant. :

Civil Appeal From: Hamilton County Court of Common Pleas

Judgment Appealed From Is: Affirmed in Part and Vacated in Part

Date of Judgment Entry on Appeal: June 8, 2012

Dinsmore & Shohl, LLP, Deborah R. Lydon and Robert M. Zimmerman, for Plaintiff-Appellee,

Lindquist & Vennum, PLLP, Jonathan M. Bye and Kirstin D. Kanski, and Taft, Stettinius, & Hollister, LLP, and Ryan C. Edwards, for Defendant-Appellant.

Please note: This case has been removed from the accelerated calendar. OHIO FIRST DISTRICT COURT OF APPEALS

SYLVIA S. HENDON, Judge.

{¶1} This is a contract case. In this action, we must determine what terms

had become part of the contract executed between defendant-appellant Twin City

Fan Companies (“Twin City”) and plaintiff-appellee SST Bearing Corporation

(“SST”), whether the terms of that contract had been breached, and whether the trial

court properly awarded attorney fees and late fees to SST based upon its

determination that Twin City had breached the parties’ contract.

{¶2} For the reasons that follow, we affirm the trial court’s judgment

finding that Twin City had breached the parties’ contract, and we affirm the court’s

award of attorney fees to SST based on the court’s finding that Twin City had acted in

bad faith. But we reverse that portion of the trial court’s entry awarding late fees

because we hold that the provision allowing SST to recover late fees had not become

part of the parties’ contract.

Factual Background

{¶3} Twin City manufactures and sells both industrial and commercial fans.

SST manufactures industrial components, such as bearings, that are used in various

industrial products. Twin City and SST entered into a contract for SST’s production

of six different sizes of pillow block bearings to be used in Twin City’s fans. The exact

terms of this contract are at issue on appeal, and will be discussed below. This

description of the pertinent facts explains the interactions between and documents

exchanged by the parties, and it is not a determination of the definite contractual

terms.

2 OHIO FIRST DISTRICT COURT OF APPEALS

{¶4} In late February of 2008, Twin City sent SST a proposed contract

outlining the parties’ agreement. The contract specified the quantity of each sized

bearing to be ordered, as well as the price per unit for each size of bearing. The

prices set forth in the contract were not the initial prices that had been quoted by

SST. After receiving SST’s initial price per unit based on Twin City’s provided

estimated annual usage per part, Twin City then increased its estimated annual usage

of particular bearings. Based on the increased quantity, SST lowered its price per

unit.

{¶5} The contract further specified that all bearings would be produced

with a particular swivel torque range, which was to be determined at a later date.

Swivel torque is the amount of force necessary to swivel or rotate a bearing within its

housing. The contract was deemed a blanket purchase order against which

shipments were not to be made. Rather, the parts would be shipped in installments

at a later date following separate purchase orders.

{¶6} The contract sent to SST contained the following language “Please

formally accept this order subject to Twin City Fan’s terms and conditions per Form

No. 1-1113 Rev 6-2007.” But the parties dispute whether this form containing Twin

City’s terms and conditions had actually been sent along with the proposed contract.

The form is not contained in the document which both parties agree is an

embodiment of their final contract. An appendix was sent along with the contract,

and this appendix contained similar language stating that all sales by SST were

subject to Twin City’s terms and conditions contained on order form 1-1113. SST

salesman David Lindberg signed the contract on March 20, 2008. When Lindberg

sent the signed contract to Twin City, he included a form containing SST’s terms and

3 OHIO FIRST DISTRICT COURT OF APPEALS

conditions. This form stated “seller hereby accepts, with thanks, your offer to

purchase the goods described on the reverse side hereof on the terms and conditions

specified thereon, and on the additional terms and conditions specified below.”

SST’s terms and conditions specified that any other terms and conditions would have

no force or effect.

{¶7} After receiving the signed contract Twin City did not object to SST’s

inclusion of its own terms and conditions, and the parties began performance under

the contract. In July of 2008, the parties’ determined the applicable swivel torque

ranges, and in the fall of 2008 Twin City approved samples of each sized bearing that

had been manufactured and shipped by SST. On November 14, 2008, Twin City

issued its first installment purchase order for approximately 1,800 bearings sized ¾

inch. This first production run of bearings was received by Twin City in March of

2009. In May of 2009, Twin City informed SST that it had concerns about the

bearings’ looseness and that the swivel torque ranges of the bearings were not in

compliance. Twin City then canceled the entire purchase order for all sized bearings

without providing SST an opportunity to examine, cure, or replace the allegedly

defective bearings.

{¶8} Upon Twin City’s cancellation of the contract, SST commenced this

action. In a trial to the bench, both SST and Twin City argued that its own respective

terms and conditions governed the parties’ dispute. Under Twin City’s terms and

conditions, it had a right to cancel the contract at any time and SST’s recovery was

limited to actual costs incurred at the time of termination. Under SST’s terms and

conditions, it had the right to repair or replace any defective goods, and it was also

entitled to receive late payment charges and attorney fees.

4 OHIO FIRST DISTRICT COURT OF APPEALS

{¶9} The trial court found that Twin City had not canceled the contract for

good cause and that its objections to the bearings produced by SST were without

merit. The court held that Twin City was liable for the full contract price for all sized

bearings, including late fees. The court further held that Twin City must pay all

attorney fees and costs incurred by SST because such fees were provided for in SST’s

terms and conditions and because Twin City had acted in bad faith. The trial court

awarded SST a total judgment of $506,336.65. This amount included $133,314.35

for the invoice amount of the contract following SST’s mitigation efforts, $69,323.46

in monthly late fee payments, and $303,698.83 for SST’s legal costs and fees.

{¶10} Twin City now appeals. In two assignments of error it argues that the

trial court erred in entering judgment in favor of SST and in awarding SST late fees

and attorney fees. Before considering these assignments of error, we must first

determine what terms were included in the parties’ contract.

Contractual Terms

{¶11} Neither Twin City nor SST dispute the contract terms contained on

their blanket purchase order concerning quantity and price of the bearings. But each

party argues that its own respective terms and conditions had become part of the

contract and that the other parties’ terms and conditions had no effect. Twin City

asserts that the contract’s statement “Please formally accept this order subject to

Twin City’s terms and conditions per Form No. 1-1113 Rev 6-2007” incorporated its

terms and conditions by reference and made the document a part of the contract.

But SST argues that its attachment of its own terms and conditions to the signed

contract, in the absence of an objection or response from Twin City, made those the

governing terms and conditions of the contract.

5 OHIO FIRST DISTRICT COURT OF APPEALS

{¶12} R.C. 1302.10, Ohio’s version of UCC 2-207, governs resolution of the

parties’ dispute. R.C. 1302.10 addresses situations in which additional terms are

contained in an acceptance. It provides that “[a] definite and seasonable expression

of acceptance or a written confirmation that is sent within a reasonable time operates

as an acceptance even though it states terms additional or different from those

offered or agreed upon, unless acceptance is expressly made conditional on assent to

the additional or different terms.” R.C. 1302.10(A).

{¶13} In this case, SST’s purported acceptance of Twin City’s contractual

offer included additional terms, namely its own terms and conditions. So we must

determine whether SST’s acceptance was expressly made conditional upon Twin

City’s assent to its additional terms. SST’s terms and conditions stated

Seller hereby accepts, with thanks, your offer to purchase the goods

described on the reverse side hereof on the terms and conditions

specified thereon, and on the additional terms and conditions specified

below. This acceptance is conditioned expressly on buyer’s assent that

any other terms and conditions shall have no force or effect and shall

not constitute any part of the agreement between seller and buyer.

Clearly, SST’s acceptance was expressly conditioned on Twin City’s assent to SST’s

terms and conditions. As such, under R.C. 1302.10(A), SST’s response did not,

standing alone, operate as an expression of acceptance. But R.C. 1302.10(C)

provides that “[c]onduct by both parties that recognizes the existence of a contract is

sufficient to establish a contract for sale although the writings of the parties do not

otherwise establish such a contract. In such case, the terms of the particular contract

consist of those terms on which the writings of the parties agree.”

6 OHIO FIRST DISTRICT COURT OF APPEALS

{¶14} In this case, the parties’ conduct undoubtedly recognized the existence

of a contract. Twin City approved sample bearings sent by SST and placed an

installment purchase order. SST shipped the bearings specified in that purchase

order. Because the parties’ conduct created a contract, the terms of that contract

include only the terms upon which the parties agree. We hold that a contract was

formed between Twin City and SST based on the terms of the blanket purchase

order, and that neither parties’ terms and conditions had become part of the

contract.

The Contract is Breached

{¶15} In its first assignment of error, Twin City argues that the trial court

erred in entering judgment in favor of SST. Twin City specifically asserts that the

trial court’s finding that SST had performed its contractual obligations was in error.

Twin City is essentially attacking the weight of the evidence supporting the trial

court’s decision.

{¶16} The Ohio Supreme Court has recently clarified and explained the

standard of review to be applied when assessing the manifest weight of the evidence

in a civil case. Eastley v. Vollman, _ Ohio St.3d _,

, _ N.E.2d _. In

Eastley, the court held that the standard of review for the manifest weight of the

evidence established in State v. Thompkins,

,

(1997), is also applicable in civil cases. Id. at ¶ 17-19. Consequently, when reviewing

the weight of the evidence, our analysis must determine whether the trial court’s

judgment was supported by the greater amount of credible evidence, and whether

the plaintiff met its burden of persuasion, which is by a preponderance of the

evidence. Id. at ¶ 19. We are mindful that, in a bench trial, “the trial judge is best

7 OHIO FIRST DISTRICT COURT OF APPEALS

able to view the witnesses and observe their demeanor, gestures and voice

inflections, and use these observations in weighing the credibility of the proffered

testimony.” Seasons Coal Co., Inc. v. Cleveland,

,

(1984). It follows that, “[i]f the evidence is susceptible of more than one

construction, the reviewing court is bound to give it that interpretation which is

consistent with the verdict and judgment, most favorable to sustaining the verdict

and judgment.” Id. at fn. 3, quoting 5 Ohio Jurisprudence 3d, Appellate Review,

Section 60, at 191-192 (1978).

{¶17} To succeed on a claim for breach of contract, a plaintiff must establish

the existence of a contract, performance by the plaintiff, breach by the defendant,

and resulting damages incurred by the plaintiff. Brunsman v. W. Hills Country

Club,

,

,

(1st Dist.). Twin

City contends that SST failed to establish that it performed its contractual obligations

because it proffered no evidence to demonstrate that the bearings it produced

complied with the required swivel torque ranges. Twin City’s assertion is incorrect.

{¶18} First, Twin City approved the sample bearings sent by SST, indicating

that those bearings fell within the required swivel torque ranges. Further, various

SST witnesses testified concerning the procedure used by SST to test the swivel

torque ranges of its bearings. Doug Homan, general manager of SST, testified that

its product assemblers tested the swivel torque of the 1800 bearings shipped to Twin

City. Homan explained that SST’s assemblers tested the bearings by hand to

determine if they fell within the applicable swivel torque range, and he described the

process used to do so. David Lindberg, the SST salesman involved in negotiating the

contract with Twin City, corroborated Homan’s testimony. And SST president and

8 OHIO FIRST DISTRICT COURT OF APPEALS

owner Winfield Scott further explained the process used to test the swivel torque

range of a bearing by hand. Scott testified that SST had certified the swivel torque

ranges of the sample bearings sent to Twin City by testing them with a swivel torque

wrench, and that it had checked by hand the swivel torque range of the first

shipment of bearings sent to Twin City.

{¶19} In addition to testimony from its own witnesses, SST produced at trial

an internal email exchanged between two Twin City employees that indicated that

SST’s bearings had not been defective. Doug Homan identified an email sent from a

Twin City plant manager to Twin City employee Tony Mohr, a purchasing manager

that had been Twin City’s main contact with SST. This email stated “FYI we have not

had any failures on the sst’s we are rejecting them.”

{¶20} To support the argument that SST failed to establish its own

performance, Twin City refers us to the testimony of its witnesses William Detweiler

and Joshua Schwantes. Detweiler had testified as an expert witness for Twin City

and had tested the swivel torque ranges of the bearings, although he did so after

Twin City had rejected the bearings and canceled its contract with SST. Detweiler

testified that a large majority of the bearings he tested had not fallen within the

applicable swivel torque ranges and were not suitable for use in Twin City’s fans. But

the trial court found the testimony of Detweiler to lack all credibility. The court

found that Detweiler had committed his opinions to Twin City prior to conducting

any actual testing of the bearings. It further found that Detweiler had a personal

interest in displacing SST, and it cited Detweiler’s testimony that he had told “a little

white lie” while working as an expert for Twin City. The trial court made a similar

finding with respect to the credibility of witness Joshua Schwantes, who had also

9 OHIO FIRST DISTRICT COURT OF APPEALS

testified that the bearings did not possess the required swivel torque. The court

found that Schwantes was not an expert, and noted that Schwantes’ testing had been

supervised by Detweiler.

{¶21} The trial court’s findings that SST had performed under the contract

and that Twin City had breached the contract by rejecting a product with no defects

was supported by the greater amount of credible evidence and was not against the

manifest weight of the evidence. We give great deference to the court’s judgment on

matters of credibility, and it clearly found Twin City’s witnesses to be incredible.

{¶22} Twin City next argues that the trial court erred in determining that it

had to pay for all bearings other than the ¾ inch bearings that it had rejected. In

support, Twin City cites its terms and conditions, which provided that it could

terminate the contract at any time and that the seller’s remedy was limited to actual

costs incurred at the point of termination. But Twin City’s terms and conditions had

not become part of the contract executed between the parties. Consequently, Twin

City cannot rely on its terms and conditions to justify its breach or limit its damages

owed to SST.

{¶23} Twin City additionally relies on R.C. 1302.70 to support its rejection of

the whole contract. R.C. 1302.70 concerns the breach of an installment contract, and

it provides in relevant part that “[w]henever non-conformity or default with respect

to one or more installments substantially impairs the value of the whole contract

there is a breach of the whole.” R.C. 1302.70(C). Twin City’s argument is misplaced.

This court has already upheld the trial court’s finding that there had been no non-

conformity or defect with respect to the ¾ inch bearings sent to Twin City. It

necessarily follows that, in the absence of impairment with the first installment, the

10 OHIO FIRST DISTRICT COURT OF APPEALS

value of whole contract had not been impaired. Twin City rejected the entire

contract after receiving shipment of only one sized bearing that was not actually

defective. Further, Twin City did not provide SST an opportunity to examine, cure,

or replace the goods that were allegedly impaired. The trial court correctly

determined that Twin City was liable for the entire contract and not just the portion

of the bearings that it had received and improperly rejected.

{¶24} In summary, the trial court’s determination that Twin City had

breached the contract with SST was not against the manifest weight of the evidence.

The court did not err in entering judgment in favor of SST, and the first assignment

of error is overruled.

Attorney Fees and Late Fees

{¶25} In its second assignment of error, Twin City argues that the trial court

erred in awarding SST attorney fees and late fees.

{¶26} The trial court found that Twin City was liable for attorney fees and

late fees pursuant to SST’s terms and conditions. But SST’s terms and conditions

had not become part of the parties’ contract and had no legal force or effect.

Consequently, the terms and conditions cannot be used to support an award of late

fees or attorney fees. However, a further analysis of the court’s award of attorney

fees is necessary.

{¶27} The trial court additionally awarded SST attorney fees because it found

that Twin City had acted in bad faith. The court specifically stated that “[t]he breach

by [Twin City] was in bad faith. [Twin City] did not proceed in good faith when

rejecting product it had not tested, and as such it is liable for attorney fees.” Twin

11 OHIO FIRST DISTRICT COURT OF APPEALS

City argues that the trial court erred in awarding attorney fees on these grounds. It

contends that each party must pay its own fees in a breach-of-contract action.

{¶28} With respect to attorney fees, Ohio has adopted the “American Rule,”

which provides that each party to an action must pay his or her own attorney fees.

Keal v. Day,

,

,

(1st Dist.),

citing Sorin v. Warrensville Hts. School Dist. Bd. of Edn.,

,

(1976). But there are several exceptions to this general rule that allow for

fee-shifting and taxing attorney fees as costs, specifically “(1) if there has been a

finding of bad faith; (2) if a statute expressly provides that the prevailing party may

recover attorney fees; and (3) if the parties’ contract provides for fee-shifting.”

See also Wright v. Fleming, 1st Dist. No. C-070121,

(recognizing that an award of attorney fees may be granted in a contract action upon

a finding by the trial court of bad-faith conduct, but reversing the award of attorney

fees because the trial court had not made such a finding).

{¶29} Here, because SST’s terms and conditions were not a part of the

parties’ contract, the contract did not provide for fee-shifting. Nor is there an

applicable statute that authorizes an award of attorney fees in this case. But the trial

court made a finding that Twin City had acted in bad faith. “When an award of

attorney fees is not authorized by statute or contract, the award is a matter of the

trial court’s sound discretion.” Id. at ¶ 7. The trial court was well within its

discretion to award attorney fees on bad faith grounds. With respect to bad faith, the

following findings by the trial court are relevant: that Twin City had used SST’s price

to obtain leverage with other competitors; that Twin City had attempted to obtain

trade-secret information from SST; that Twin City had canceled the entire contract

12 OHIO FIRST DISTRICT COURT OF APPEALS

with SST prior to testing any of the bearings and had canceled orders for products for

which they could find no fault; and that Twin City had refused to give SST an

opportunity to cure any potential defects. The trial court’s findings are accurate and

are supported by the record.

{¶30} The trial court did not err in awarding SST attorney fees after finding

that Twin City had acted in bad faith. But the court did err in awarding SST late fees,

as the terms and conditions authorizing such an award were not a part of the parties’

contract. The second assignment of error is sustained in part and overruled in part.

Conclusion

{¶31} The trial court properly entered judgment in favor of SST on its claim

for breach of contract. And the court did not abuse its discretion in granting SST an

award of attorney fees based on its finding that Twin City had acted in bad faith. But

the court erred in granting late fees to SST because such an award was not

authorized by contract. Consequently, that portion of the trial court’s entry awarding

SST $69,323.46 in monthly late fees is vacated. The trial court’s judgment is

affirmed in all other respects.

Judgment accordingly.

SUNDERMANN, P.J., and DINKELACKER, J., concur.

Please note: The court has recorded its own entry on the date of the release of this opinion.

13