Moore & Son, Inc. v. Drewry & Associates, Inc.

• Decision Date: 22 October 1996
• Docket Number: Action No. 2:93cv1118.
• Citation: 945 F.Supp. 117
• Parties: GERALD M. MOORE AND SON, INC., Plaintiff, v. DREWRY AND ASSOCIATES, INC., and Joseph S. Drewry, Jr., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

945 F.Supp. 117

GERALD M. MOORE AND SON, INC., Plaintiff, v. DREWRY AND ASSOCIATES, INC., and Joseph S. Drewry, Jr., Defendants.

Action No. 2:93cv1118.

United States District Court, E.D. Virginia, Norfolk Division.

October 22, 1996.

John Stephen Wilson, John Dinshaw McIntyre, Willcox & Savage, P.C., and Walter Dekalb Kelley, Jr., Willcox & Savage, Norfolk, VA, for Gerald M. Moore and Sons, Inc.

Brian Nelson Casey, Taylor & Walker, P.C., Norfolk, VA, for Drewry and Associates, Inc. and Joseph S. Drewry.

OPINION AND ORDER

MILLER, United States Magistrate Judge.

This matter comes before the Court on defendant Joseph S. Drewry, Jr.'s motion for an order of restitution. All parties have consented to have all proceedings in this case conducted before a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73.

I. FACTUAL AND PROCEDURAL BACKGROUND

In the original action between these parties, plaintiff Gerald M. Moore & Son, Inc. ("Moore") filed a complaint against Joseph S. Drewry, Jr. ("Drewry") and his professional corporation, Drewry & Associates, Inc. ("D &amp A"), for economic damages resulting from negligent performance of a contract. Moore owns and operates an industrial plant in Nassawadox, Virginia. In 1990, Moore entered into a contract with the engineering firm of D & A to engineer, design, and furnish a reduction furnace for Moore's use in the process of thermal remediation of petroleum contaminated soil. The contract was signed by Drewry as President of D & A. Drewry performed all the engineering work required by the contract.

The reduction furnace provided by D & A did not function properly because of design and engineering defects. Subsequently, Moore filed suit against D & A alleging breach of contract, breach of warranties and negligence. By amended complaint, Drewry was added as a defendant in the negligence count.

This Court held D & A liable for breach of contract and both defendants liable for negligence. Moore was awarded damages of $107,182.70 plus costs, based entirely on its economic loss. Both defendants were held jointly and severally liable for the judgment amount.

Drewry appealed this Court's decision to the United States Court of Appeals for the Fourth Circuit. D & A did not appeal. The Court of Appeals certified the following question to the Supreme Court of Virginia: whether Drewry, as president of D & A and the engineer who performed the work called for, was liable for purely economic losses resulting from the negligent performance of the contract.

The Supreme Court of Virginia recognized that under Virginia law, an agent can be held liable for negligent performance of a contract to which he is not a party, but to which his principal is a party. Gerald M. Moore & Son, Inc. v. Drewry and Drewry & Assoc., Inc., 251 Va. 277, 467 S.E.2d 811, 813 (1996). However, as Drewry was not a party to the contract between Moore and D & A there was no privity between Moore and Drewry. Id. The court found "even if the agent's negligence is established, absent privity of contract, Virginia's economic loss doctrine precludes the recovery of damages based on economic loss alone." Id. Thus, the court held that in the absence of privity, a person cannot be held liable for economic loss damages caused by his negligent performance of a contract. Id.

After the Supreme Court of Virginia answered the certified question in the negative, the Fourth Circuit reversed the opinion of this Court holding Drewry individually liable under the economic loss doctrine and issued its mandate on May 15, 1996. Gerald M. Moore & Son, Inc. v. Drewry and Drewry & Assoc., Inc., 81 F.3d 514 (4th Cir.1996).

As Drewry did not post a supersedeas bond to prevent collection of the judgment, Moore executed upon the judgment from this Court while the appeal to the Fourth Circuit was pending and collected $75,339.93¹ from Drewry toward satisfaction of the judgment. Drewry now moves this Court to enter an order of restitution of the monies erroneously paid.

Moore opposes Drewry's motion for an order of restitution on the ground that Drewry is attempting to "circumvent the mandatory procedure of filing a complaint" and "obtain a judgment in disguise." (Pl.'s Opp.Br. at 1, 6.) Moore argues that if Drewry's motion is granted the order would give Drewry the benefits of having a judgment entered in his favor without complying with the Federal Rules of Civil Procedure. (Pl.'s Opp.Br. at 1, 2.) It is Moore's position that this Court may not award the affirmative relief requested without Drewry's initiating an entirely new action. (Pl.'s Opp.Br. at 2.) Moore argues that if district courts were to have the power to order the refund of monies collected during the pendency of appeal, the drafters of the Federal Rules of Civil Procedure would have outlined such a procedure. (Pl.'s Opp.Br. at 4.)

Moore has filed a separate suit in equity in state court attempting to "pierce the corporate veil" of D & A and thereby hold Drewry liable for the debts of his personal corporation. (Pl.'s Opp.Br., Exh. 1.) Moore argues that if Drewry's motion for an order of restitution is granted by this Court, the outcome of those state court proceedings will be compromised. (Pl.'s Opp.Br. at 4.) Moore contends that Drewry should file a separate suit for restitution so that Moore's state claim may be asserted as a compulsory counterclaim and all related issues will be settled by this Court in a unified fashion. (Pl.'s Opp. Br. at 4.) In short, it appears that Moore is claiming that it has a "defense" to Drewry's right to restitution by virtue of this pending suit in equity.

Moore further argues that while this Court initially had jurisdiction over the parties in this suit, this Court lost that jurisdiction upon Drewry's appeal to the Fourth Circuit. (Pl.'s Opp.Br. at 5.) When the Fourth Circuit reversed the judgment against Drewry, it did not remand the case to this Court for further proceedings. The mandate simply stated "reversed." Accordingly, Moore contends that this Court no longer has jurisdiction to enter the order sought by Drewry. (Pl.'s Opp.Br. at 5.)

Drewry urges this Court to enter an order of restitution requiring Moore to restore the monies collected from Drewry while the appeal was pending. Drewry contends that if, pending an appeal, the appellant has paid the judgment that is being appealed, appellant, upon reversal of the judgment, is entitled to restitution of the money paid. (Def.'s Supp. Br. at 1.) Drewry argues that this Court has the authority to order Moore to restore to Drewry the monies collected in execution of the reversed judgment without Drewry's initiating a new cause of action.

After a review of the memoranda submitted by the parties, and the applicable case law, the Court concludes that defendant Drewry's motion for an order of restitution should be GRANTED.

II. ANALYSIS

A person who has conferred a benefit upon another in compliance with a judgment is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable or the parties contract that payment is to be final. Restatement (First) of Restitution § 74 (1996).

The power to make restitution lies within the inherent equitable jurisdiction of the Court. In Arkadelphia Milling Co. v. St. Louis Southwestern Ry. Co., 249 U.S. 134, 145-46, 39 S.Ct. 237, 242, 63 L.Ed. 517 (1919), the Supreme Court held a claim for restitution is allowable upon:

the principle, long established and of general application, that a party against whom an erroneous judgment or decree has been carried into effect is entitled, in the event of a reversal, to be restored by his adversary to that which he has lost thereby. This right, so well founded in equity, has been recognized in the practice of the courts of common law from an early period. Where plaintiff had judgment and execution and defendant afterwards sued out a writ of error, it was regularly a part of a judgment of reversal that the plaintiff in error `be restored to all things which he hath lost by occasion of the said judgment'; and thereupon, in a plain case, a writ of restitution issued at once, but if a question of fact was in doubt, a writ of scire facias was first issued. The doctrine has been mostly fully recognized in the decisions of this court.

That a course of action so clearly consistent with the principles of equity is one proper to be adopted in an equitable proceeding goes without saying. It is one of the equitable powers, inherent in every court of justice so long as it retains control of the subject matter and of the parties, to correct that which has been wrongfully done by virtue of its process.

See also Northwestern Fuel Co. v. Brock, 139 U.S. 216, 219, 11 S.Ct. 523, 524, 35 L.Ed. 151 (1891) (power to order restitution is "one of the equitable powers, inherent in every court of justice so long as it retains control of the subject matter and of the parties, to correct that which has been wrongfully done by virtue of its process"); Johnson v. Alexandria Scrap Corp., 445 F.Supp. 1171, 1173 (D.Md. 1977) ("a federal district court has jurisdiction in the same case or in a subsequent case to correct its own errors").

Later, in Porter v. Warner Holding Co., 328 U.S. 395, 402, 66 S.Ct. 1086, 1091, 90 L.Ed. 1332 (1946), the Supreme Court reiterated that restitution is "within the recognized power and within the highest tradition of a court of equity." The Court held that "[p]ower is thereby resident in the District Court, in exercising [its equitable] jurisdiction, to do equity and to mould each decree to the necessities of the particular case." Id. at 398, 66 S.Ct. at 1089. The court may act so as to adjust and reconcile competing claims and to accord full justice to all parties in interest. Id. In addition, the court may decide whatever other issues and give whatever other relief may be necessary under the circumstances. Id. "Only in that way can equity do...