Republic Ins. Co. v. Culbertson, Civ. A. No. 89-0047-A.

• Citation: 717 F. Supp. 415
• Decision Date: 13 June 1989
• Docket Number: Civ. A. No. 89-0047-A.
• Parties: REPUBLIC INSURANCE COMPANY, Plaintiff, v. D. Cecil CULBERTSON, Nancy F. Culbertson, Samuel Glick, Marjorie Glick, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

717 F. Supp. 415

REPUBLIC INSURANCE COMPANY, Plaintiff, v. D. Cecil CULBERTSON¹, Nancy F. Culbertson, Samuel Glick, Marjorie Glick, Defendants.

Civ. A. No. 89-0047-A.

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

June 13, 1989.

John J. Sabourin, Jr., Thomas R. Folk, B. Lee Willis, Alexandria, Va., for plaintiff.

R.E. Dixon, Mark E. Sharp, James R. Hart, Fairfax, Va., for Cecil D. Culbertson and Nancy F. Culbertson.

Daniel K. Moller, Reston, Va., for Samuel Glick and Marjorie Glick.

MEMORANDUM OPINION

CACHERIS, District Judge.

This matter is before the court on the plaintiff's Motion for Summary Judgment and the Defendants Culbertsons' Motion for Judgment on the Pleadings. The plaintiff, Republic Insurance Company ("Republic"), instituted this suit to recover $24,864.37 in legal fees and expenses based on an Indemnity Agreement with the defendants, Cecil and Nancy Culbertson and Samuel and Marjorie Glick. Republic incurred the fees and expenses after a final judgment was entered in a state court action in favor of Republic for recovery of an indemnity award under the Indemnity Agreement. For reasons set forth below, the plaintiff's Motion for Summary Judgment is granted as to liability, and the Defendants Culbertson's Motion for Judgment on the Pleadings is denied.

I. FACTS.

The material facts are undisputed. On February 5, 1980 the defendants executed an Indemnity Agreement in favor of Republic. Pursuant to the Indemnity Agreement, Republic provided two bonds which guaranteed the performance of contracts which related to a subdivision in Fairfax County, Virginia known as Sugar Creek, Section No. 1. In June, 1985 the Fairfax County Board of Supervisors ("Fairfax County") sued Republic on the Indemnity Agreement bonds. Fairfax County brought the suit, Law No. 69951, in Fairfax County Circuit Court. After notice to the defendants, Republic settled with Fairfax County.

Republic also filed cross-claims and third-party claims against the defendants in Law No. 69951, to recover amounts due from the defendants under the Indemnity Agreement. On December 8, 1987 the Fairfax County Circuit Court entered a Final Judgment Order in Law No. 69951 in favor of Republic and against the defendants in the amount of $110,898.11 with interest. The Judgment included attorneys' fees incurred at the time of the suit.

The defendants filed notices of appeal in the Fairfax County Circuit Court, the Culbertsons on December 16, 1987 and the Glicks on December 24, 1987. None of the defendants filed supersedeas bonds. The Culbertsons subsequently filed a petition for appeal in the Supreme Court of Virginia. On December 14, 1988 the Virginia Supreme Court refused the petition.

Republic seeks to recover the $24,864.37 in attorneys' fees and expenses which it allegedly incurred in opposing the defendants' appeal efforts in Law No. 69951 and in its post-judgment collection efforts in the case at bar.² These fees and expenses were not included in the Final Judgment Order in Law No. 69951 because the plaintiff had not yet incurred most of the fees and expenses.

A number of provisions in the Indemnity Agreement concern attorneys' fees and expenses. Paragraph 2 of the Indemnity Agreement provides that the defendants will

indemnify the Company Republic from and against any and all liability, loss, costs, damages, attorney's fees and expenses of whatever kind or nature which the Company Republic may sustain or incur by reason or in consequence of executing any such bond or bonds as surety or co-surety or procuring, upon its full indemnity, the execution thereof as aforesaid....

Other pertinent provisions in the Indemnity Agreement are as follows:

6. That liability hereunder shall extend to and include the full amount of ... any and all disbursements on account of costs, attorneys' fees and expenses as aforesaid, which may be made under the belief that such were necessary, whether necessary or not.

7. That in the event of payment, settlement or compromise of liability, loss, costs, damages, attorneys' fees, expenses, claims, demands, suits and judgment as aforesaid in connection with any such bond or bonds, an itemized statement thereof, sworn to by an officer or officers of the surety or sureties making such payment, settlement or compromise, or the voucher or vouchers, or other evidence of such payment, settlement or compromise, shall be prima facie, evidence of the fact and extent of the liability of the indemnitors in any and all claims or suits hereunder.

....

9. That if the surety or sureties executing any such bond or bonds shall bring suit, action or proceeding to enforce any of the covenants or agreements herein contained, the cost, charges and expenses, including attorneys and counsel fees incurred by such surety or sureties in prosecuting such suit, action or proceeding shall be included in any judgment or decree that may be rendered against the indemnitors therein.

....

13. That separate suits may be brought hereunder as causes of action accrue, and suit may be brought against all of the indemnitors or any one or more of them; and the bringing of suit or suits upon one or more causes of action, or against one or more of the indemnitors, shall not prejudice or bar the bringing of subsequent suits against all of the indemnitors, or any one or more of them on any other cause or causes of action, whether theretofore or thereafter accruing.

II. DISCUSSION.

Summary judgment "`should be granted only where it is perfectly clear that no issue of fact is involved and inquiry into the facts is not desirable to clarify the application of the law.'" Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.1979) (citation omitted). Furthermore,

the burden is on the moving party to `show' that there `is no genuine issue as to any material fact' and that he `is entitled to judgment as a matter of law.' In determining whether this showing has been made, we must assess the evidence as forecast in documentary materials before the court in the light most favorable to the party opposing the motion.

Id. (citations omitted).

Moreover, a non-moving party bearing the ultimate burden of persuasion at trial must bring forward specific facts as to every essential element challenged by the moving party in order to avoid summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

A Rule 12(c) motion for judgment on the pleadings is appropriate when all material allegations of fact are admitted in the pleadings and only questions of law remain. 5 C. Wright & A. Miller, Federal Practice & Procedure § 1367, at 685 (1969); see King v. Gemini Food Servs., Inc., 438 F.Supp. 964, 966 (E.D.Va.1976) (judgment on pleadings appropriate when viewed in light most favorable to nonmovant, no issue of material fact and case can be decided as matter of law), aff'd on other grounds, 562 F.2d 297 (4th Cir.1977), cert. denied, 434 U.S. 1065, 98 S.Ct. 1242, 55 L.Ed.2d 766 (1978).

The issues in this case are as follows: (1) whether the defenses of res judicata or merger bar a plaintiff from bringing an action for attorneys' fees and expenses incurred after judgment is entered in the underlying suit, whether such defenses may be waived, and whether the Indemnity Agreement provides for waiver of those defenses;³ and (2) whether, despite a waiver of res judicata and merger, a party may be barred from recovering attorneys' fees for appellate work when a contract contains a broad provision for attorneys' fees.

A. Res judicata, merger, and waiver.

In Sands v. Roller, 118 Va. 191, 86 S.E. 857 (1915), the Virginia Supreme Court held that the doctrine of merger bars a suit for attorneys' fees and expenses incurred in obtaining and enforcing a judgment. Sands, 118 Va. at 192-93, 86 S.E. at 858; accord Citizens Bank of Windsor v. Landers, 570 S.W.2d 756, 764 (Mo.Ct.App. 1978); Annotation, Contractual provision for attorneys' fees as including allowance for services rendered upon appellate review, 52 A.L.R.2d 863, 871 (1957); but see 8B Michie's Jurisprudence, Former Adjudication or Res Judicata § 49, at 211 (1977) (res judicata only bars claim that could have been brought in prior action).

The Sands case is similar to the case here. In Sands, the plaintiff first sued the defendant to recover for a default on a note which provided for attorneys' fees. The plaintiff then brought a second suit for fees and expenses incurred in obtaining and enforcing the judgment. The Court barred the plaintiff from recovery even though the plaintiff had not yet incurred the enforcement expenses at the time of the first suit.⁴ See Sands, 118 Va. at 192-93, 86 S.E. at 858.

Republic argues that the merger defense is inapplicable to this case because this case involves a new cause of action, separate from the cause of action in Law No. 69951. Such a conclusion, however, does not comport with Sands. In holding that merger barred the second suit for enforcement expenses, the Sands Court implicitly concluded that a suit on an underlying contract and a suit for enforcement expenses constitute one cause of action, even though the expenses were not incurred at the time of the first suit. The Sands Court necessarily had to have drawn this conclusion because the merger doctrine bars the splitting of a single cause of action and does not bar the filing of a new, separate cause of action. See Gary Steel Prod. Corp. v. Kitchin, 197 Va. 471, 474, 90 S.E.2d 120, 122 (1955) (split cause of action prohibited). The Sands Court could not have applied the merger doctrine if it had concluded that the second suit for enforcement expenses constituted a new cause of action.

The ruling in Sands is consistent with more recent cases which expressly set forth the elements of a cause of action. The essential elements of a cause of action are a legal obligation, a breach, and consequential damage. A cause of action does not accrue until an...