Coady v. Strategic Resources, Inc.

Present: All the Justices

JERRY J. COADY
OPINION BY
v. Record No. 981857 CHIEF JUSTICE HARRY L. CARRICO
June 11, 1999
STRATEGIC RESOURCES, INC.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Jane Marum Roush, Judge

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

1
In pertinent part, Code § 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

2
 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 § 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

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).

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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 § 14.1-178

(now Code § 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]

4
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

5
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

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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

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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

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.

8
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

9
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

10
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.

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