Kessler v. Gleich, 2009–390.

• Decision Date: 10 November 2010
• Docket Number: No. 2009–390.,2009–390.
• Citation: 13 A.3d 109,161 N.H. 104
• Parties: Dr. Seymour KESSLERv.Aaron GLEICH, Individually and as General Partner of Fire House Block Associates, L.P.
• Court: New Hampshire Supreme Court

161 N.H. 104

13 A.3d 109

Dr. Seymour KESSLER

v.Aaron GLEICH, Individually and as General Partner of Fire House Block Associates, L.P.

No. 2009–390.

Supreme Court of New Hampshire.

Argued: May 4, 2010.Opinion Issued: Nov. 10, 2010.

Upton & Hatfield, LLP, of Concord (Charles W. Grau and Matthew R. Serge on the brief, and Mr. Serge orally), for the plaintiff.Howard & Ruoff, P.L.L.C., of Manchester (Mark E. Howard on the brief and orally), for the defendant.HICKS, J.

The defendant, Aaron Gleich, individually and as general partner of Fire House Block Associates, L.P. (FHBA), appeals an order of the Superior Court ( Nicolosi, J.) requiring him to indemnify the plaintiff, Dr. Seymour Kessler, for the attorney's fees and costs he incurred in this declaratory judgment action and to pay him the attorney's fees incurred by the New Hampshire Housing Finance Authority (NHHFA) in a related action. We reverse in part, vacate in part and remand.

The record reveals the following facts. The plaintiff is one of several limited partners of FHBA. Kessler v. Gleich, 156 N.H. 488, 490, 938 A.2d 80 (2007). FHBA was created to construct, own and operate a “Section 8” housing development in Concord. Id.

FHBA financed the housing development through the NHHFA. Id. As the sole general partner of FHBA exercising complete control over the management of the development, the defendant executed a regulatory agreement, as well as a mortgage and promissory note with NHHFA. Id. These documents required the defendant to contract with an approved managing agent for the property. Id.

Between 1997 and 2004, the defendant was repeatedly notified by NHHFA that FHBA was in violation of the regulatory agreement for failing to have an approved managing agent in place. Id. NHHFA further informed the defendant that if FHBA did not comply with the terms of the regulatory agreement, NHHFA would foreclose on the property. Id. After several additional notifications, on October 1, 2004, NHHFA began foreclosure proceedings. See id.

The defendant, however, never notified the limited partners of the default or the commencement of foreclosure proceedings. Id. The plaintiff learned of the foreclosure through his attorney and intervened to enjoin the sale of the property at auction. Id. at 490–91, 938 A.2d 80. The foreclosure auction was temporarily enjoined. Id. at 491, 938 A.2d 80.

In 2004, the plaintiff filed suit against the defendant seeking a declaration that the defendant willfully breached the fiduciary duties he owed the plaintiff and the other limited partners. Id. The trial court ruled in the plaintiff's favor, finding that the defendant willfully breached his fiduciary duty of loyalty by violating the partnership agreement and by allowing the partnership to be defaulted by NHHFA for lack of a proper managing agent. Id. We affirmed the trial court's decision on the merits. Id. at 489–90, 938 A.2d 80.

Thereafter, the plaintiff, as the prevailing party, renewed his motion in superior court for an award of attorney's fees and costs. Following a hearing, the trial court granted the plaintiff's motion and awarded him $288,281.20 in attorney's fees and costs. These fees included $75,406 for legal fees and expenses incurred by NHHFA in the foreclosure action. This appeal followed.

“A prevailing party may be awarded attorney's fees when that recovery is authorized by statute, an agreement between the parties, or an established judicial exception to the general rule that precludes recovery of such fees.” Tulley v. Sheldon, 159 N.H. 269, 272, 982 A.2d 954 (2009) (quotation omitted). We will not overturn a trial court's award of attorney's fees unless it is an unsustainable exercise of discretion. Id. In applying this standard, we are mindful of the substantial deference given to the trial court's decision on attorney's fees, and we will uphold the decision if the record provides some support for it. Id.

The trial court ruled that the plaintiff was entitled to fees pursuant to the indemnity provision of the parties' partnership agreement (section 6.8), which provides:

No General Partner shall have any liability or obligation to the other General Partners, the Limited Partners or the Partnership for any decision made or action taken in connection with the discharge of his duties hereunder, if such decision or action is made or taken in good faith. Moreover, the General Partners shall not be liable to the Limited Partners because of the disallowance or adjustment by any taxing authority of any deduction or credits claimed in any tax return filed by the Partnership. The General Partners shall not be liable to the Partnership or the Limited Partners for any negative amount in their capital account, provided same shall not have arisen out of their borrowing money from the Partnership, any such borrowing being prohibited. Notwithstanding the foregoing, each General Partner shall indemnify and save harmless the Partnership, the Limited Partners and the other General Partners from and against any claim, loss, expense, liability, action or damage, including, without limitation, reasonable costs and expenses of litigation and appeal (and the reasonable fees and expenses of counsel) ari[s]ing out of his fraud, bad faith, gross negligence, or his willful failure to comply with any representation, condition or other agreement herein contained.

The companion to section 6.8 is section 6.7, which provides:

The Partnership will indemnify and hold harmless each of the General Partners and their successors and assigns from any claim, loss, expense, liability, action or damage resulting f[ro]m any act or omission performed or omitted by any of them in their capacities as General Partners, including, without limitation, reasonable costs and expenses of litigation and appeal (and the reasonable costs and expenses of attorneys engaged by the General Partners in defense of such act or omission), but no General Partner shall be entitled to be indemnified or held harmless for any act or omission arising from his fraud, bad faith, gross negligence, or his willful failure to comply with any representation, condition or other agreement herein contained. Any indemnity under this Section 6.7 shall be provided out of and to the extent of Partnership assets only, and no Limited Partner shall have any personal liability on account thereof.

On appeal, the defendant first argues that the trial court erred by interpreting section 6.8 to require him to pay the plaintiff's attorney's fees and costs in the declaratory judgment proceeding. The defendant contends that this provision applies only to claims brought by third parties against the limited partners and does not apply to claims brought by a limited partner against a general partner. As the defendant explains: “The prepositions ‘from and against,’ juxtaposed as they must be against the language ‘indemnify and save harmless,’ can only mean that the parties intended that the general partner will protect the limited partners ‘from’ the action of another, or save harmless ‘against’ the claim of another made against them.”

When there is an express contract for indemnity, as there is here, the rights of the surety are not to be determined by general indemnity principles, but by the letter of the contract for indemnity. Gulf Ins. Co. v. AMSCO, 153 N.H. 28, 34, 889 A.2d 1040 (2005). The meaning of a contract is ultimately a question of law for this court to decide. Id. Thus, we review the trial court's decision de novo. Id. at 34–35, 889 A.2d 1040.

We interpret indemnity agreements in the same way that we interpret contracts generally. Id. at 34, 889 A.2d 1040. We look to the parties' intent at the time the agreement was made, considering the written agreement, all its provisions, its subject matter, the situation of the parties at the time the agreement was entered into, and the object intended. Dunn v. CLD Paving, 140 N.H. 120, 122, 663 A.2d 104 (1995). We assign the words and phrases used by the parties the common meaning that would be given to them by a reasonable person. AMSCO, 153 N.H. at 34, 889 A.2d 1040. Unless the agreement contains ambiguous terms, we limit our review to the four corners of the document itself. Dunn, 140 N.H. at 122, 663 A.2d 104. We construe express indemnity agreements strictly, particularly when they purport to shift responsibility for an individual's own negligence to another. See Merrimack School Dist. v. Nat'l School Bus Serv., 140 N.H. 9, 12, 661 A.2d 1197 (1995).

The defendant's assertion that the indemnification provision at issue, in its entirety, applies only to third party claims is broader than necessary to resolve this appeal. This appeal concerns only the award of attorney's fees and costs, specifically whether such fees and costs are recoverable in first party litigation. We limit our analysis of the indemnification provision accordingly.

We have previously addressed the recovery of attorney's fees pursuant to indemnification agreements. In Town of Nottingham v. Newman, 147 N.H. 131, 136–37, 785 A.2d 891 (2001), we ruled that the agreement between one of the defendants and the Town required her to pay the Town's legal expenses incurred in enforcing their agreement. The agreement stated that the defendant understood that if she defaulted, thereby requiring the Town to remove her two mobile homes, she would be responsible for all of the costs, attorney's fees and legal expenses the Town would incur. Newman, 147 N.H. at 132–33, 785 A.2d 891. We held that this language obligated the defendant to pay the Town's attorney's fees incurred to enforce the parties' agreement. Id. at 136–37, 785 A.2d 891.

By contrast, in Merrimack School District, 140 N.H. at 14–15, 661 A.2d 1197, we held that the parties' agreement did not obligate the indemnitor to pay the indemnitee's attorney's fees incurred to enforce the indemnification agreement. The language in that agreement was that the indemnitor...