Title: Southwick v. City of Rutland

State: vermont

Issuer: Vermont Supreme Court

Document:

2011 VT 105













Southwick v. City of Rutland v.
Vermont Swim Association (2010-372)
 
2011 VT 105
 
[Filed 11-Sep-2011]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions, Vermont Supreme Court, 109
State Street, Montpelier, Vermont 05609-0801 of any errors in order that
corrections may be made before this opinion goes to press.
 
 
2011 VT 105
 
No. 2010-372
 
David
  and Susan Southwick, Individually and as 
Natural Guardians of Addie
  Southwick 
Supreme Court
 
On Appeal from
     v.
Superior Court, Franklin Unit,
 
Civil
  Division
City
  of Rutland
 
 
    v.
 
Vermont Swim Association
 
 
 
May Term, 2011
 
 
 
Ben
  W. Joseph, J.
 
Colin K. McNeil of McNeil, Leddy & Sheahan, P.C.,
  Burlington, for Third-Party 
  Plaintiff-Appellee.
 
John D. Willey, Jr. of Boylan Associates, P.C., Springfield, for Third-Party 
  Defendant-Appellant.
 
 
PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund
and Burgess, JJ.
 
 
¶ 1.            
SKOGLUND, J.   This appeal stems from a written
agreement between the City of Rutland and the Vermont Swim Association (VSA)
granting VSA the right to host its annual swim meet at a facility in a city
park.  VSA appeals the trial court's award of attorney's fees to the
City.  Because the plain language of the parties' contract does not
require VSA to pay attorney's fees incurred by the City in pursuing either
indemnity from VSA or other third-party actions, we reverse and remand.
¶ 2.            
VSA is a not-for-profit organization that hosts an annual summer swim
meet.  On August 4, 2005, the City and VSA executed an agreement granting
VSA the use of a city park and pool facility for their meet (Agreement). 
While attending the meet, a child was injured when she fell from a piece of
playground equipment in the park.  Her parents, the Southwicks,
filed a negligence suit against the City (the Southwick action) seeking damages
for their daughter's injury.  The City sought defense and indemnification
from VSA, which was denied.  The City then brought a third-party complaint
against VSA, alleging that VSA was obligated to defend and indemnify the City
pursuant to the Agreement.  The City also claimed that VSA breached its
obligation under the Agreement to procure insurance naming the City as an
additional insured. The City filed third-party actions against Nautilus
Insurance Company for failure to defend and indemnify, and against Paige &
Campbell, Inc. (P&C) for failing to procure the correct insurance for VSA
and the City per the Agreement.  Prior to trial, the City settled the Southwicks' claims, reserving the right to pursue
reimbursement from VSA for the settlement, plus costs of defense and attorney's
fees.  The trial court entered judgment for the City against VSA in the
amount of $700,000 based on the Agreement's indemnity clause which reads:
  6.
Indemnification and Hold Harmless: [VSA] hereby agrees to defend,
indemnify and hold harmless Rutland, . . . its officers, trustees,
agents and employees from all claims for bodily injury or property damage
arising from or out of the presence of [VSA], including its employees, agents,
representatives, guests and others present because of the event or [VSA's]
activities in or about Whites Park, including the entrances, lobbies and exits
thereof, the sidewalks, streets and approaches adjoining the campus or any
portion of the campus used by [VSA] or any of the above stated.  [VSA]
shall be responsible for all costs of defense, including reasonable attorney's
fees, and shall pay all fines or recoveries against Rutland. 
 
On appeal, VSA argued that the
indemnity clause did not apply to claims based on the City's own negligence. We
upheld the trial court's award.  Southwick v. City of Rutland, 2011
VT 53, ___ Vt ___, ___ A.3d ___.
¶ 3.            
On March 9, 2010, the City filed a motion for attorney's fees covering
all legal expenses associated with its defense in the Southwick action, as well
as expenses incurred through the litigation of the third-party actions. 
The trial court entered judgment in favor of the City, awarding the entirety of
its requested attorney's fees and expenses totaling over $166,000.  The
court based the award on its finding that "the [Southwicks']
claims and those of the City [for indemnity] are based on a common core of
facts," and that "the indemnification provision in the [Agreement] is all
encompassing."  VSA appeals.
¶ 4.            
VSA argues that the trial court erroneously granted the City's motion
for attorney's fees and expenses because: (1) the Agreement does not require
VSA to pay attorney's fees for indemnity and third-party claims, and (2) the
evidence offered by the City is insufficient to support its claim for
attorney's fees and expenses.*  We
review a trial court's ruling on the amount of attorney's fees awarded for
abuse of discretion.  The Elec. Man, Inc. v. Charos,
2006 VT 16, ¶ 6, 179 Vt. 351, 895 A.2d 193; Human Rights Comm'n
v. LaBrie, Inc., 164 Vt. 237, 251, 668 A.2d 659,
669 (1995).  A decision of a trial court granting attorney's fees as a
matter of law is reviewed de novo on appeal.  Will v.
Mill Condo. Owners' Ass'n, 2006 VT 36, ¶ 5, 179 Vt.
500, 898 A.2d 1264 (citing Concord Gen. Mut.
Ins. Co. v. Madore, 2005 VT 70, ¶ 8, 178 Vt. 281,
882 A.2d 1152).  Here, the issue is whether the
City is entitled to its attorney's fees under the terms of the Agreement and,
if so, the extent of those fees.  These issues are determined as a matter
of law and thus are reviewed de novo.  We agree that the court's award
cannot be sustained and we reverse and remand for further proceedings
consistent with this opinion.
¶
5.            
When addressing a question of attorney's fees, Vermont adheres to what
is called the American Rule: parties must "bear their own attorneys' [sic] fees
absent a statutory or contractual exception."  DJ
Painting, Inc. v. Baraw Enters., Inc., 172 Vt.
239, 246, 776 A.2d 413, 419 (2001).  Here, the parties' Agreement
provides a contractual basis for the award of attorney's fees in certain
situations.  This case turns on whether third-party actions fall within
the ambit of Clause 6 of the Agreement.  Our goal when interpreting
contractual provisions is to give effect to the intent of the parties as it is
expressed in their writing.  Hamelin v. Simpson Paper
(Vt.) Co., 167 Vt. 17, 19, 702 A.2d 86, 88 (1997).  When the
plain language of the writing is unambiguous, we take the words to represent
the parties' intent, id., and the plain meaning of the language governs
our interpretation of the contract.  In re West,
165 Vt. 445, 450, 658 A.2d 1099, 1103 (1996). 
¶
6.            
The plain language of the Agreement makes VSA responsible "for all costs
of defense, including reasonable attorney's fees" incurred by the City
in defending a suit arising out of VSA's use of the park.  When a contract
provides for payment of attorney's fees, a court may depart from the American
Rule only to the extent that the contract provides.  Mt.
Everest Ski Shops, Inc. v. Nordica USA, Inc., 736 F. Supp. 523, 527 (D. Vt.
1989).  None of the City's third-party actions fall within the
parameters of the language of the Agreement.  In this instance, "defense"
refers exclusively to costs expended responding to and settling the Southwick
action.  The scope of the already-narrow term "defense" is reduced even
further by another phrase in Clause 6, which plainly states that VSA agrees to
defend the City "from all claims for bodily injury or property damage."
 The costs contemplated in the Agreement do not include the City's claim
to enforce the indemnity clause against VSA, or its claims against P&C and
Nautilus.  Contrary to the trial court's conclusion, the indemnification
clause is not all encompassing: it limits VSA's obligation to those costs
associated with the City's defense against claims for bodily injury or property
damage.  Therefore, there is no contractual basis for departing from the
American Rule and awarding attorney's fees for time expended on work other than
for defense in the Southwick action.  See Windsor Sch. Dist. v. State,
2008 VT 27, ¶ 28, 183 Vt. 452, 956 A.2d 528 ("An insured is not entitled to
recover attorney's fees incurred in a declaratory-relief action to establish
the insurer's duty to defend or indemnify."); see also Concord Gen. Mut. Ins. Co. v. Woods, 2003 VT 33, ¶ 18, 175 Vt. 212,
824 A.2d 572 (denying insured attorney's fees incurred in defense of insurer's
declaratory action).  
¶
7.            
The trial court based its award of attorney's fees on its finding that
all of the claims were "based on a common core of facts," and that "[t]he
indemnification provision in the [Agreement] is all-encompassing."  As
explained above, the indemnification provision does not encompass third-party
actions.  Nor do we agree that all claims were based on "a common core of
facts."  In L'Esperance v. Benware, we affirmed a trial court's conclusion that
the plaintiffs' lawsuit was not one "which can be viewed as a series of
discrete claims so that the hours expended can be divided on a claim by claim
basis."  2003 VT 43, ¶ 24, 175 Vt. 292, 830 A.2d 675.
 In L'Esperance, tenants brought claims
for negligence, wrongful withholding of their security deposit, and for
violation of the Consumer Fraud Act against their landlord based on serious
deficiencies with the property.  The tenants prevailed before a
jury.  They then sought and were awarded attorney's fees under the Vermont
Consumer Fraud Act.  On appeal the landlord argued that the tenants were
entitled to recover attorney's fees only for work on the consumer fraud claim
and not on the negligence and security deposit claims.  Despite the fact
that only the consumer fraud claim was statutorily exempted from the American
Rule, we affirmed the award, accepting the court's conclusion that all claims
derived from a common core of facts.  Id. ¶ 24-28.  See also The
Elec. Man, Inc., 2006 VT 16, ¶ 10 (holding that apportionment of fee award
was abuse of discretion because claims shared common core of facts).  Such
is not the circumstance now before the court.  
¶
8.            
While the Southwicks' action and the City's
third-party claims might have been set in motion by the same event, they are
not based on a common core of facts. The Southwicks'
claim was for negligence, the adjudication of which required facts regarding
the design, construction, and maintenance of the playground equipment. 
The third-party claims hinged on the language of the agreement itself and its
reasonable interpretation.  The Southwick action and the third-party
action filed by the City are distinct, and the hours expended on each should be
easily divisible. 
¶
9.            
The City correctly asserts that courts may use their equitable powers to
award attorney's fees "in exceptional cases and for dominating reasons of
justice."  Sprague v. Ticonic
Nat'l Bank, 307 U.S. 161, 167 (1939).  The City argues that but
for VSA's failure to honor the Agreement's terms it would not have been
necessary for the City to incur legal fees and expenses to protect its
interests.  It relies for this proposition on this Court's decision in In re Gadhue, where
we upheld an award of attorney's fees on the basis of bad faith.  149 Vt. 322, 328-29, 544 A.2d 1151, 1154-55 (1987).  In
Gadhue, a litigant was compelled to appear
twice before this Court "in order to obtain relief which should have been
forthcoming after the first appearance."  Id. at 328, 544 A.2d  at 1154.  The situation in Gadhue
is not present in this case.  Indemnification against the City's own
negligence is a contractual right over which there was reasonable disagreement.
 Indemnification by VSA was not a defined and established right within the
meaning of Gadhue.  Thus, VSA's refusal
to indemnify does not rise to the level of bad-faith conduct, which is the
intended target of this exception. Taken to its logical end-point, the City's
argument would result in the awarding of attorney's fees to whichever party
prevailed in a legitimate action involving contract interpretation and
enforcement.  We could not adopt such a position without effectively
abandoning the American Rule.  There is no equitable basis for awarding
the City attorney's fees related to its third-party actions.   
¶
10.        
VSA argues that the evidence presented by the City to support its claim
for attorney's fees is insufficient.  Specifically, VSA argues that there
is inadequate description in the City's billing records to distinguish
attorney's fees and expenses related to its defense against the Southwick
action from those related to its indemnity and third-party actions.  In
defending the sufficiency of its records, the City cites Perez v. Travelers
Ins. ex rel Ames Dep't Stores, Inc., in which we
stated that "time entries must be accurate and allow the court to assess
whether the work performed was related to the litigation at issue, but they
need not reach the level of detail and justification required in federal
bankruptcy proceedings."  2006 VT 123, ¶ 13, 181 Vt. 45,
915 A.2d 750.  There has been no determination that the City has
met this requirement.  In response to concern regarding the lack of detail
and specificity in its records, the City submitted revised records which may,
upon remand, ultimately help differentiate expenses incurred in defense of the Southwicks' action from those incurred as a result of the
third-party actions.  
Reversed and remanded.
 
 
 
 
FOR THE
  COURT:
 
 
 
 
 
 
 
 
 
 
 
Associate Justice
 

*  VSA also
argues, based on its appeal in Southwick v. City of Rutland, that
because the Agreement did not provide for indemnity for injuries and property
damage caused by the City's negligence, it cannot provide for attorney's fees
arising out of such negligence. 2011 VT 53, ¶ 6. Given
our contrary decision in that case, this argument is moot, and we need not
discuss it further.  Id. ¶ 15.