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COADY v. STRATEGIC RESOURCES, INC.


COADY

v.

STRATEGIC RESOURCES, INC.


June 11, 1999

Record No. 981857

JERRY J. COADY

v.

STRATEGIC RESOURCES, INC.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY

Jane Marum Roush, Judge

Present: All the Justices

OPINION BY CHIEF JUSTICE HARRY L. CARRICO


This appeal involves a "Consulting Agreement"
entered into on April 22, 1996, between Strategic Resources, Inc.
(SRI) and Jerry J. Coady (Coady) whereby SRI retained Coady as a
consultant to perform services at a rate of $50.00 per hour in
connection with "SRI’s contract with the Food and Drug
Administration (FDA) Center for Drug Evaluation and
Research." The focus of the controversy is this provision of
the Consulting Agreement:

CONSULTANT shall indemnify SRI . . . and
hold [it] harmless from any and all claims, suits,
proceedings, costs, losses, expenses, damages and
liabilities, including but not limited to attorney’s
fees and court costs, caused by or arising out of, or in
connection with, CONSULTANT’S performance or
non-performance under this Agreement.

The record shows that Coady submitted an invoice to SRI for
his work during the month of September 1996 in the amount of
$7,700.71. SRI refused to pay the amount billed and sent Coady a
check in the amount of $3,350.95 accompanied by a letter dated
January 13, 1997, stating as follows: "This check covers all
approved hours and expenses for all projects per our discussions.
This will now settle your account with SRI." Coady wrote on
the front of the check "Accepted as Partial Payment Balance
due $3450.00." On the back, he endorsed the check "For
Deposit Only" and below his signature wrote "Accepted
as partial payment of account."

Coady requested payment of the $3,450.00, but SRI refused. On
July 22, 1997, Coady filed a warrant in debt against SRI in the
General District Court of Fairfax County alleging that SRI owed
him $3,450.00 plus interest, costs, and attorney’s fees for
services performed under their contract. SRI answered the warrant
in debt and also filed a counterclaim alleging breach of contract
and breach of warranty on Coady’s part and requesting
damages in the amount of $30,000.00.

Prior to commencement of the trial in the district court, SRI
moved to dismiss the warrant in debt on the ground of accord and
satisfaction. The court dismissed both the warrant and the
counterclaim "on the basis that an accord and satisfaction
had been reached by the parties pursuant to Section 8.3A-311 of
the Code of Virginia."[1]

With leave of the district court, SRI subsequently filed a
motion for attorney’s fees based upon the indemnification
provision of the Consulting Agreement. The court allowed SRI
$3,228.00 in attorney’s fees, and Coady appealed this award
to the Circuit Court of Fairfax County. In its final order, the
circuit court awarded SRI the same amount in attorney’s fees
and an additional $305.00 for the fee of an expert witness SRI
presented in the circuit court. We awarded Coady this appeal.

In an argument that ignores the indemnification clause of the
Consulting Agreement, Coady cites three of our earlier decisions
applying what is now Code Sect. 17.1-604, which allows the
recovery of costs in this Court by the "party substantially
prevailing." [2] Those decisions recognize the
principle that when a case becomes moot while an appeal is
pending, the controversy ceases to exist and there is no
prevailing party. Coady asserts that because the claims of both
the parties in this case were dismissed in district court on the
ground of accord and satisfaction, the "controversy ceased
to exist" and there was no prevailing party. Hence, Coady
concludes, neither party should be liable for the other’s
attorney’s fees and costs.

Further, quoting United States v. One Bally Golden Gate,
225 F.Supp. 552 (W.D. Va. 1964), Coady argues that the
"`general principle of Anglo-Saxon jurisprudence has always
been that the loser of a lawsuit had to pay the taxable court
costs but that other costs incurred by the winner (legal fees,
expert witness fees, etc.) are not such costs as can be charged
to the loser.’" Id. at 554. Finally, Coady
argues that under Code Sect. 14.1-178 (now Code
Sect. 17.1-601), "the party for whom final judgment is
given in an action or motion shall recover his costs against the
opposite party." Here, Coady says, "neither party
obtained a judgment against the other in the underlying cases
and, therefore, neither should be granted costs against the
other."

The difficulty with these arguments is that the outcome of
this case is controlled not by the statutes Coady cites or
Anglo-Saxon jurisprudence but by the indemnification clause of
the Consulting Agreement. There is nothing in the language of the
indemnification clause that hinges the allowance of
attorney’s fees and costs upon a determination whether SRI
was the prevailing party or not, was a winner or not, or was
given a final judgment or not. The allowance depends upon whether
the attorney’s fees and costs SRI claimed were "caused
by or [arose] out of, or in connection with, [Coady’s] performance or non-performance under" the Consulting
Agreement.

But, Coady argues, "[t]he indemnification clause in this
contract does not mean that the party agreeing to indemnify the
other is indemnifying it from a suit to enforce the provisions of
the contract." The answer to this argument is found in Chesapeake
& Potomac Telephone Co. v. Sisson & Ryan, Inc.
, 234
Va. 492, 362 S.E.2d 723 (1987). There, the telephone company (C
& P) entered into an agreement with a contractor (S & R)
for the site work incident to the construction of several
buildings. When one of the buildings collapsed, C & P sued S
& R for its damages and also made a claim for its
attorney’s fees. The trial court denied the fee claim, and C
& P appealed. The contract between the parties contained this
provision:

To the fullest extent permitted by law, the Contractor
shall indemnify and hold harmless the Owner and the
Architect from and against all claims, damages, losses
and expenses, including but not limited to
attorneys’ fees, arising out of or resulting from
the performance of the Work. . . .

Id. at 501, 362 S.E.2d at 728. S & R contended that
the indemnification provision was "one of indemnity against
liability for property damage sustained by third parties"
and that "indemnification does not operate between
parties to a contract in a dispute involving those parties."
Id. at 502, 362 S.E.2d at 728. Dismissing this argument
and holding that C & P was entitled to recover its
attorney’s fees, we said: "We are committed to the view
that parties may contract as they choose so long as what they
agree to is not forbidden by law or against public policy. S
& R contracted . . . to pay C & P’s
attorneys’ fees in certain situations, and we think the
present situation falls fairly within the terms of that
agreement." Id. at 503, 362 S.E.2d at 729.

The remaining question, therefore, is whether SRI’s
attorney’s fees and costs were "caused by or [arose] out of, or in connection with, [Coady’s] performance
or non-performance under" the Consulting Agreement.
(Emphasis added.) Coady says that his original warrant in debt
was not a proceeding in connection with his performance or
non-performance but rather one in connection with SRI’s
non-performance, i.e., not paying Coady for the services
he rendered. Coady also says that although SRI’s
counterclaim alleged his non-performance, the counterclaim was
dismissed and decided in his favor and, accordingly, "the
indemnity cannot be construed to apply to the Counterclaim either
because it certainly cannot include claims by SRI against Coady
in which SRI is not successful."

For Coady to say that his original warrant in debt was not a
proceeding in connection with his performance or non-performance
under the Agreement is pure sophistry. While the warrant did not
mention Coady’s performance or non-performance as such, he
cannot deny that what he sought recovery for in the warrant was
his performance under the Agreement during the month of September
1996, as shown by a bill of particulars he filed. If that did not
make the warrant proceeding one in connection with Coady’s
performance or non-performance, the answer and grounds of defense
SRI filed to the warrant certainly did. SRI not only denied
liability for Coady’s claim but also asserted as grounds of
defense unclean hands, fraud, misrepresentation, breach of
contract, and lack of authorization, all obviously related to
Coady’s performance or non-performance under the Consulting
Agreement.

The terms of the indemnification clause are broad and
all-encompassing. The clause permits of no conclusion other than
that SRI’s attorney’s fees were incurred in connection
with Coady’s performance or non-performance under the
Agreement.

Coady contends, however, that "[a]ttorney’s fees of
$3,228.00 are not reasonable and necessary in a case where the
defendant is being sued for $3,450.00." Coady says that,
although the hourly rate of SRI’s attorney is reasonable,
"the amount of hours spent to defend a claim of $3,450.00 is
not reasonable." Coady states that the case was heard in
general district court on SRI’s motion to dismiss on the
ground of accord and satisfaction in approximately fifteen
minutes; had SRI filed the motion immediately after the warrant
in debt was served, all the necessary preparation for trial could
have been avoided. Coady says that the fact "this motion was
not filed makes the amount of attorney’s fees unreasonable
and unnecessary."[3]

We disagree with Coady. An award of attorney’s fees rests
within the sound discretion of the trial court. Ingram v.
Ingram
, 217 Va. 27, 29, 225 S.E.2d 362, 364 (1976). In Mullins
v. Richlands National Bank
, 241 Va. 447, 403 S.E.2d 334
(1991), we said:

Where [a contract] provide[s] for attorney’s
fees, but [does] not fix the amount thereof, a fact
finder is required to determine from the evidence what
are reasonable fees under the facts and circumstances of
the particular case. . . . In determining
a reasonable fee, the fact finder should consider such
circumstances as the time consumed, the effort expended,
the nature of the services rendered, and other attending
circumstances. . . . Ordinarily, expert
testimony will be required to assist the fact finder.

Id. at 449, 403 S.E.2d at 335.

Here, the trial court heard the testimony of SRI’s
president and an expert witness called by SRI. The expert
testified that "the amount of the attorney’s fees was
necessary and reasonable." In addition, the court had
available to it the time records submitted by SRI’s counsel.
Coady submitted no countervailing evidence. Under the
circumstances, we cannot say that the trial court abused its
discretion in fixing the amount of attorney’s fees it
awarded to SRI.

Finally, Coady objects to the trial court’s allowance of
$305.00 as a fee for SRI’s expert witness. Coady says there
was no prayer for expert witness fees in SRI’s counterclaim
filed in general district court and, therefore, that it cannot be
recovered.

SRI says it did not move for expert witness fees in the
general district court because it did not employ an expert
witness in that proceeding. SRI states, however, that it
"moved for its expert witness fees at the outset of the
trial in the Circuit Court and the issue was fully litigated
between the parties." SRI also says "that it is within
the discretion of the trial court to allow amendments of
pleadings, including a party’s ad damnum, at any time
before a verdict is rendered."

This suggests that SRI sought and was granted an amendment.
However, there is nothing in this record resembling a motion for
amendment or an order allowing an amendment. Furthermore, the
record discloses no motion by SRI for expert witness fees at the
outset of the trial in the circuit court or at any other time.
Accordingly, we will disallow the award of $305.00 to SRI for the
fee of its expert witness. "In Virginia, a plaintiff cannot
recover more than he sues for though he can recover less." Powell
v. Sears, Roebuck & Co.
, 231 Va. 464, 469, 344 S.E.2d
916, 919 (1986).

Accordingly, we will reverse the award of $305.00 to SRI for
the fee of its expert witness, affirm the award to SRI of
attorney’s fees in the amount of $3,228.00, and enter final
judgment in favor of SRI for the latter amount.

Affirmed in part, reversed in part, and final judgment.


JUSTICE KINSER, with whom JUSTICE KOONTZ joins, dissenting.

I am not persuaded that the indemnification clause of the
"Consulting Agreement" between Jerry J. Coady and
Strategic Resources, Inc. (SRI), is applicable in the factual
context of this case. Moreover, even if the indemnification
clause applies as the majority concludes, I would reverse the
circuit court’s award of attorney’s fees to SRI because
I believe that the circuit court abused its discretion in
awarding a reasonable fee.

In Mullins v. Richlands Nat’l Bank, 241 Va. 447,
403 S.E.2d 334 (1991), we said that, in determining a reasonable
fee, a court should consider several factors, including "the
effort expended, the nature of the services rendered, and other
attending circumstances." Id. at 449, 403 S.E.2d at
335. In the present case, these factors do not support the award
of attorney’s fees in an amount that almost equaled that of
Coady’s claim for services rendered. The general district
court dismissed both the warrant in debt and the counterclaim on
the basis of accord and satisfaction. SRI waited until just prior
to the commencement of the trial in that court to present its
motion to dismiss. The grounds for the motion were not
complicated, and the motion could have been presented with
minimal effort before SRI filed its counterclaim.

For these reasons, I conclude that the circuit court abused
its discretion with regard to the amount of attorney’s fees
awarded to SRI and, therefore, respectfully dissent from that
part of the majority opinion affirming the award of
attorney’s fees to SRI.

 

FOOTNOTES:

[1] In pertinent part, Code Sect. 8.3A-311
provides that "[i]f a person against whom a claim is
asserted proves that (i) that person in good faith tendered an
instrument to the claimant as full satisfaction of the claim,
(ii) the amount of the claim was unliquidated or subject to a
bona fide dispute, and (iii) the claimant obtained payment of the
instrument . . . the claim is discharged if the person against
whom the claim is asserted proves that the instrument or an
accompanying written communication contained a conspicuous
statement to the effect that the instrument was tendered as full
satisfaction of the claim."

[2] The cases cited by Coady are Ficklen v. City
of Danville
, 146 Va. 426, 131 S.E. 689, reh’g denied,
146 Va. 436, 132 S.E. 705 (1926), Wallerstein v. Brander,
136 Va. 543, 118 S.E. 224 (1923), and Branscome v. Cunduff,
123 Va. 352, 96 S.E. 770 (1918).

[3] Coady asserts on brief that
SRI’s "statement of attorney’s fees also included
time to establish the right of indemnity" and that SRI
should not have received an allowance of fees for such time. SRI
has not included the statement of attorney’s fees in the
appendix, but, assuming the statement did include time for
establishing the right of indemnity, we find no objection by
Coady to the allowance on that ground. Rule 5:25.

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