General Electric Company v. Mason & Dixon Lines, Inc.

• Decision Date: 14 July 1960
• Docket Number: Civ. A. No. 892.
• Citation: 186 F. Supp. 761
• Court: U.S. District Court — Western District of Virginia
• Parties: GENERAL ELECTRIC COMPANY v. MASON & DIXON LINES, INC.

186 F. Supp. 761

GENERAL ELECTRIC COMPANY v. MASON & DIXON LINES, INC.

Civ. A. No. 892.

United States District Court, W. D. Virginia, at Roanoke.

July 14, 1960.

Gentry, Locke & Rakes, Roanoke, Va., John H. Doughty, Knoxville, Tenn., for General Electric Co.

John H. Thornton, Jr. (of Woods, Rogers, Muse & Walker), Roanoke, Va., and Duke Duvall, Oklahoma City, Okl., for Mason & Dixon Lines, Inc.

DALTON, District Judge.

This proceeding is a sequel to the case of General Electric Company v. Kelly C. Moretz and Mason & Dixon Lines, Inc., decided September 16, 1959, by the United States Court of Appeals, Fourth Circuit, reported in 270 F.2d 780, in which a petition for rehearing was filed October 12, 1959, and denied November 25, 1959 (272 F.2d 624), and in which certiorari was applied for and refused in the United States Supreme Court, 361 U.S. 964, 80 S.Ct. 593, 4 L.Ed.2d 545.

Mason & Dixon Lines, Inc., has complied with the mandate of the Circuit Court and has paid to General Electric Company the full amount of the judgment of $35,000, plus accrued interest and taxable costs, amounting to a total of $38,678.46, which covers in full the judgment as awarded by the mandate of the United States Court of Appeals, Fourth Circuit.

The question now to be determined is whether Mason & Dixon Lines, Inc., should also be required to pay the attorneys' fees and expenses incurred by General Electric in the representation of GE's interests throughout this litigation.

Petitions have been filed by Messrs. Gentry, Locke & Rakes of Roanoke, Virginia, and by John H. Doughty, Esq., of Knoxville, Tennessee, attorneys for General Electric Company, seeking the allowance of counsel fees aggregating $17,500, plus $590.54 expenses, total $18,090.54.

Mason & Dixon Lines, Inc., who has been represented throughout the litigation by John H. Thornton, Jr., Esq. (of the firm of Woods, Rogers, Muse & Walker, Roanoke, Virginia), and Duke Duvall, Esq., of Oklahoma City, Oklahoma, deny any liability to pay GE's attorneys' fees and expenses, and thus the issue is joined, which is an issue solely for determination by the Court.

A brief (and probably overly simplified) recital of the factual situation is this:

Moretz, a truck driver for Mason & Dixon, in the course of his employment, was driving a tractor-trailer of his employer, which, because of faulty loading by GE, overturned and injured Moretz. Moretz filed suit against GE, whereupon GE answered denying liability and also brought in Mason & Dixon by a third-party complaint. The result of this litigation was a $35,000 jury verdict for plaintiff against GE, and an affirmative answer by the same jury to an interrogatory saying Mason & Dixon was guilty of negligence, and the end result set forth in the United States Court of Appeals mandate was that "the case is remanded with directions to enter a judgment against Mason & Dixon in favor of General Electric for the amount of the judgment entered against General Electric in accordance with the jury's verdict." 270 F.2d 791.

The petition for allowance of counsel fees is based on the theory of an implied contract of indemnity.

There is no authority of statutory law in the Commonwealth of Virginia for the allowance of attorney's fees in a case of this type, and so far as the Court is able to determine, there is no Federal statute other than 28 U.S.C.A. § 1923 for the allowance of attorney's fees to the winning plaintiff, and the particular statute referred to provides for a taxable attorney's fee of $20.

Therefore, the question of the allowance of petitioners' claim for attorneys' fees and expenses in this proceeding is to be determined by the text books and the case law on the point, and in the determination of this problem, it seems to the Court that four questions are posed:

(1) Does the indemnitee generally have the right to recover attorneys' fees in an indemnity case?

(2) Is there a distinction between the right of recovery on an implied contract of indemnity as distinguished from a written or express contract of indemnity?

(3) Does the recovery of attorneys' fees extend to the legal services rendered in the proof and recovery of the indemnity?

(4) Does the timeliness of the demand affect the right of recovery?

The Text Books.

At the outset, it is to be noted that the English rule of allowing attorney's fees to be taxed as costs is not followed as a general rule in America.

A fair statement of the general law applicable is set forth in two leading authorities as follows:

In 27 Am.Jur., Indemnity § 27, the following statement is found:

"Reasonable counsel fees which have been incurred in resisting the claim indemnified against may be recovered as a part of the damages and expenses when an action is brought to recover indemnity either upon a right of indemnity implied by law or arising under a contract."

In 42 C.J.S. Indemnity § 24:

"Interest, fees, costs, and expenses. Where a person is obliged to defend against the act of another, against whom he has a remedy over, he may, if such other has notice of the suit and an opportunity to defend, hold him liable not only for the amount of damages recovered against himself and which he is compelled to pay, together with interest thereon, but also for all reasonable and necessary costs and expenses incurred in such defense, including attorney's fees.

"While there is some authority to the contrary, it has been held that where it does not appear that the indemnitor was notified of the action against the indemnitee, and had not participated in such action, the measure of the indemnitee's damage against the indemnitor is limited to the amount which he has paid on the judgment recovered against him, together with interest thereon, and does not include the costs and expenses of defending the action; nor can such costs and expenses be recovered where it does not appear that the defense was solely against an act of the indemnitor. The indemnitee cannot recover over the costs of an appeal which is taken by him at his own instance."

The Case Law.

4th Circuit.

In the case of Rolax v. Atlantic Coast Line R. Co., 4 Cir., 1951, 186 F.2d 473, 481, in which Judge Parker wrote the opinion, it was held that the allowance of counsel fees in a reasonable amount was a matter for the sound discretion of the Court, but there is a qualification in the opinion which reads:

"* * * Ordinarily, of course, attorney's fees, except as fixed by statute, should not be taxed as part of the costs recovered by the prevailing party; but in a suit in equity where the taxation of such costs is essential to the doing of justice, they may be allowed in exceptional cases * * *".

2nd Circuit.

The case of Shannon v. United States, 2 Cir., 1956, 235 F.2d 457, 459, (which this Court views as somewhat controlling in this decision) holds:

M. P. Smith & Sons, a Stevedore concern, employer, contracted to do rigging on a ship owned by the United States. An employee of Smith was injured by reason of a defective cable and brought suit against the United States Government. The Government paid $11,000 by way of compromise settlement to the employee, Shannon, and thereupon the Government sought to recover from M. P. Smith & Sons upon the theory of an implied contract of indemnity, the opinion reciting:

"For Smith had expressly agreed with the owner to `rig and unrig the ship's gear' which Smith used. That agreement, we think, included, as a promise implied in fact, the following: If Smith knew of a defect in any such gear, Smith would either remove the defect or notify the owner. This express undertaking constituted an agreement to indemnify the owner for any loss resulting from a breach by Smith".

Held:

"The government is therefore entitled to recover from Smith the amount it paid him, together with its reasonable attorneys' fees and reimbursements in preparing to defend against Shannon's claim."

The decision in the Shannon case seems to resolve one of the questions that has disturbed the Court in this case, namely: Is there a distinction between a written contract of indemnity for attorneys' fees and expenses and an implied contract of indemnity?

This decision, which incidently is cited with approval in the case of A/S J. Ludwig Mowinckels Rederi v. Commercial Stevedoring Co., 2 Cir., 1958, 256 F.2d 227, seems to indicate that no such distinction is made by the Courts. We therefore proceed on the assumption that if one is entitled to be indemnified, then in such event an implied contract of indemnity has the same legal status as a written contract of indemnity.

Continuing, it is to be noted that in the case of A/S J. Ludwig Mowinckels v. Commercial Stevedoring Co., above referred to, there was an indemnification contract between Mowinckels and Commercial under which Commercial undertake to perform all stevedore operations for Mowinckels at the port of New York. The contract provided that Commercial should be responsible for all damages, injuries, etc. Amadore, an employee of Commercial was injured and sued the Mowinckels shipping concern. The Court of Appeals held that the ship owner was liable to the employee, and Mowinckels, after payment to the employee, sought indemnity from the Commercial Steve. Co., which indemnity was allowed and the Court stating 256 F.2d 232:

"Mowinckels is entitled to recover not only the amount paid Amadore (employee), but also its reasonable attorneys' fees, costs, and expenses in defending against his claim. Shannon v. United States, 2 Cir., 235 F.2d 457, 459."

5th Circuit.

A relatively recent case on this subject is reported from the 5th Circuit, B. & G. Electric Co. v. G. E. Bass & Co., 5 Cir., 1958, 252 F.2d 698. Here the situation was that an injured employee of subcontractor, B. & G. Electric Co., sued G. E. Bass & Co., prime contractor. There was an indemnity provision to the effect that the subcontractor should indemnify the contractor from loss caused by negligence of the...