Michael-Regan Co., Inc. v. Lindell
| Decision Date | 06 August 1975 |
| Docket Number | No. 73--3152,MICHAEL--REGAN,73--3152 |
| Citation | 527 F.2d 653 |
| Parties | 17 UCC Rep.Serv. 958 CO., INC., a California Corporation, Plaintiff-Appellant, v. Martin LINDELL, a sole proprietor doing business under the firm name of Lindell Enterprises, Defendant and Third-Party Plaintiff-Appellee, v. DAHLKEY, INC., a Washington Corporation, Third-Party Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Before TRASK and CHOY, Circuit Judges, and MURRAY, * District Judge.
This is an action for breach of warranty relating to certain unfinished alder tabletops manufactured by Dahlkey, Inc. (incorporated and principal place of business in Washington) and sold and delivered in Michael-Regan (incorporated and principal place of business of California) by Martin Lindell (a resident of Washington). Jurisdiction arises under 28 U.S.C. § 1332.
Michael-Regan is in the business of manufacturing wood products and marketing unfinished furniture parts to retail outlets. In November, 1970, Michael-Regan contacted Lindell, concerning the manufacture of alder tabletops. Although Lindell was unable to produce the tabletops, it acted as a broker, engaging Dahlkey, Inc., to construct the tabletops. In February, 1971, pursuant to the rather general instructions of Michael-Regan, Dahlkey furnished sample tabletops which were 'sealed with a coating of sealer.'
On March 31, 1971, representatives of the three corporations met in Washington. At this conference Mr. Fink (from Michael-Regan) rejected the design of the February samples, as well as Dahlkey's suggestion that the tabletops be sealed, and provided other specifications. Fink requested that a new set of samples be made out in accordance with a sample he brought to the meeting, instructing that the tabletops would be manufactured as he directed.
Thereafter, in April, 1971, Dahlkey made further samples which were shipped to Michael-Regan. Michael-Regan, on receiving these samples, had opportunity to inspect and test them, and subsequently placed orders for large numbers of tabletops based on the April samples. In September, 1971, representatives of Michael-Regan, Lindell and Dahlkey again met in Washington, at which time Michael-Regan agreed to purchase approximately 3,000 tabletops per month for a six-month period. This agreement enabled Dahlkey to order stock, to manufacture tabletops, and provided Michael-Regan with responably prompt delivery of tabletops ordered. Michael-Regan ceased placing orders in December, 1971, but Dahlkey continued to manufacture tabletops through mid-January, 1972. In February, 1972, in accordance with Michael-Regan's request Dahlkey indicated that it had $4,333.26 of inventory and tabletops on hand. The goods had no salvage value.
The appellant maintains that in January, 1972, it began to receive complaints from its distributors of a severe warpage problem in the tabletops. Michael-Regan brought suit on the 'defective' tabletops in June, 1972.
Michael-Regan, the appellant, contends that the warping was caused by the rigid attachment of the apron and braces to the bottom side of the tabletops, design and construction of which were left to the defendants. The district court concluded that the tabletops were defective because of the failure to seal, a practice ordered by Michael-Regan. In addition, Mr. Fink, the president of Michael-Regan, was found 'not inexperienced' as to the propensity of wood to distort due to change in moisture content, and therefore the responsibility for the warped tabletops rested on the plaintiff. The tabletops were held to be produced in conformance with the plaintiff's specifications and the quality of workmanship was good.
The district court entered a judgment providing that the plaintiff Michael-Regan's complaint regarding the breach of warranty be dismissed with prejudice; that Michael-Regan pay Lindell $13,674 (plus interest at the rate of 12% per annum) on unpaid invoices forming the subject matter of a counterclaim; that Michael-Regan pay Lindell (who would in turn pay Dahlkey) $4,333.26, plus 6% per annum interest, representing tabletops inventory on hand at Dahlkey; and that Lindell recover $18,543.00 as reasonable attorney fees from Michael-Regan. Plaintiff appeals from the judgment in favor of Lindell and Dahlkey on the breach of warranty question, the award for the value ofDahlkey's tabletops inventory, and the award to Lindell of attorney fees and 12% interest rate on the unpaid invoices.
Federal courts are required to apply state law in diversity actions with regard to the allowance or disallowance of attorney fees. Peacock & Peacock, Inc. v. Stuyvesant Insurance Co., 332 F.2d 499 (8th Cir. 1964); Hardware Dealers Mutual Fire Insurance Co. v. Smart, 293 F.2d 558 (10th Cir. 1961); Stokes v. Reeves, 245 F.2d 700, 702 (9th Cir. 1957). Because there is no specific statutory authorization for recovery of attorney fees in these circumstances, the measure and mode of attorney's compensation is to be decided by the agreement of the parties. R.C.W. § 4.84.010 and § 62A.1--102. The only reference to a contractual provision for attorney fees is found in the lower left hand corner of the face of the Lindell invoices, which states: 'In case of suit, buyer agrees to pay attorney's fees and interest.'
The appellant argues that California rather than Washington law ought to be applied to the question of attorney fees. Michael-Regan failed to raise the conflicts issue before the district court, and it will not be considered for the first time on appeal. 1 Siletz Trucking Co. v. Alaska International Trading Co., 467 F.2d 961, 964 (9th Cir. 1972); Pellerin Laundry Machinery Sales Co. v. Reed, 300 F.2d 305, 309--310 (8th Cir. 1962).
Michael-Regan maintains that the only reasonable construction of the invoice language is that attorney fees are to be granted in case of suit to collect amounts due on the invoices, but in no event is it rational to hold that the provision means the buyer is responsible for attorney fees in a breach of warranty action whether it wins or loses. The appellant maintains that attorney fees incurred by Lindell must be apportioned between the counterclaim for amounts due on unpaid invoices and the defense of the action for breach of warranty. As authority for this conclusion, the appellant cites National Bank of Washington v. Myers, 75 Wash.2d 287, 450 P.2d 477 (1969). Myers is a rather complicated case involving both an action by a bank to recover on a promissory note and a counterclaim by the defendant charging a breach of promise by the bank chich adversely affected the security for the loan. The lower court granted judgment for the bank on the note, dismissed the counterclaim, and awarded the bank attorney fees pursuant to a provision in the note for attorney fees if suit were necessary to collect on the note. The defendant appealed on the dismissal of the counterclaim and the bank appealed the award of attorney fees, charging that they were inadequate.
The appellate court found that the trial court erred in dismissing the counterclaim and ordered a new trial on that issue. The court also affirmed the award of attorney fees on the grounds that most of the effort and time consumed in litigation was not in proving the execution of the note, the amount due, and that it had not been paid. The real time-consuming controversy hinged on the counterclaim for damages 'sustained by reason of the Bank's failure to keep its promise to foreclose the chattel mortgage.' Id. 450 P.2d at 485. The appellate court clearly indicated that it was the 'Bank's own responsibility for the time spent in this litigation (Id. at 486),' and thus refused to grant a larger attorney fee award.
Thus, Myers may be distinguished from the case at bar in that the majority of attorney fees in Myers was attributed to the fault of the party seeking attorney fees. In the instant case, Lindell, the party requesting the attorney fees, in not responsible for precipitating the litigation. The finding of the district court that there was no breach of warranty is affirmed here, and hence Lindell should not have to pay for securing adequate representation to defend the charge. 2
The appellees contend that Washington courts have frequently allowed recovery of attorney fees for services rendered in conjunction with a case involving a claim and counterclaim, citing as an example, Ranta v. German, 1 Wash.App. 104, 459 P.2d 961 (1969). In Ranta, the plaintiff brought suit on a promissory note; the defendants, although admitting the execution of the note, raised 'fraud in the inducement' as an affirmative defense and counterclaim. The trial court dismissed the counterclaim and entered judgment for the plaintiff on the note, together with $1,000 reasonable attorney fees. Although there is no discussion of apportionment of fees between the claim and counterclaim, the admission of the defendants of the note is an indication that most of the time and effort spent on the case related to the counterclaim of fraud. Yet on appeal, the decision of the lower court was affirmed, including the award of attorney fees, the appellate court reasoning:
In cases where a note contains contractual provisions for a reasonable attorney's fee, if it is necessary to collect the note, the party suing thereon would be entitled to reasonable attorney's fees on the appeal as well as in the trial court. . . . 'Such a fee is as much a part of the obligation of the contract as any other...
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