Court Opinion

ID: 1057850
Source: CourtListenerOpinion
Date Created: 2013-10-09 18:27:29.055328+00
Date Added: 2024-06-11T12:06:22.416363
License: Public Domain

Present: Kinser, C.J., Lemons, Goodwyn, Millette, Mims, and
Powell, JJ., and Koontz, S.J.

DEWBERRY & DAVIS, INC.
                                          OPINION BY
v.   Record No. 111661     SENIOR JUSTICE LAWRENCE L. KOONTZ, JR.
                                      September 14, 2012
C3NS, INC., ET AL.

              FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
                       R. Terrence Ney, Judge

      In this appeal, we consider whether the circuit court

erred in applying an attorneys' fees provision of a contract.

The court determined that the plaintiff, the prevailing party

on both its claim for compensation under the contract and the

defendant's counterclaim for the plaintiff's alleged breach of

the contract, was entitled to only a nominal award of one

dollar in attorneys' fees for its defense of the counterclaim

because the defendant had a "good faith" basis for alleging

the breach.    We further consider an assignment of cross-error

asserting that any award of attorneys' fees on the

counterclaim was subject to a further provision in the

contract for calculating fees in an action to collect

compensation owed under the contract.

                             BACKGROUND

      The material facts are not in dispute and may be

summarized in the following manner.       On May 12, 2008, Dewberry

& Davis, Inc. ("Dewberry"), an engineering firm, entered into

a contract with C3NS, Inc. to prepare a survey and site plan
for the construction of a building on property owned by C3

Holdings, LLC in an industrial park located in Louisa,

Virginia.   The building would house a tire recycling plant to

be operated by C3RS, Inc. 1

     "Attachment B" to the contract included certain "standard

terms and conditions" including a provision that

     [C3] shall furnish [to Dewberry] all plans,
     drawings, surveys, deeds and other documents related
     to the services in your possession and shall inform
     us in writing about all special criteria or
     requirements related to Services . . . . [Dewberry]
     may obtain deeds, plats, maps and any other
     information filed with or published by any
     governmental entity . . . . [C3] agree[s] to give
     prompt notice to [Dewberry] of any development or
     occurrence that affects the scope or timing of
     Services.

     Also included in Attachment B was the following provision

concerning the payment of attorneys' fees and expenses in the

event of litigation arising from the contract ("attorneys'

fees provision"):

          The losing party shall pay the winning party's
     reasonable attorneys' fees and expenses for the
     prosecution or defense of any cause of action, claim
     or demand arising under this Agreement in any court
     or in arbitration. The attorneys' fees payable to
     us for the collection of compensation you owe us
     shall be twenty-five percent of any judgment or
     award against you and our attorneys' fees, expenses,
     and collection costs.

     1
       C3NS, Inc., C3 Holdings, LLC, and C3RS, Inc. are related
entities. We will refer to them collectively as "C3."

                                2
     Under the terms of an addendum signed by C3 on June 15,

2008, Dewberry was required to relocate the proposed building

site from the location originally designated by C3 to "allow[]

for a closer proximity to the Dominion Virginia Power (DVP)

service area" within the industrial park so that the building

would "receive power service from DVP."    The addendum

indicated that C3 was acquiring additional acreage in the

industrial park in order to facilitate this change.

     Prior to the execution of the addendum, Dewberry received

from Rappahannock Electric Cooperative ("Rappahannock

Electric"), the other electric service provider for the

industrial park, materials which purported to show the

division of the service areas of the two providers.    Unknown

to Dewberry, the materials were inaccurate.    However, using

these materials, Dewberry prepared a building site plan that

did not meet the criteria of the June 15, 2008 addendum.

     Also prior to the execution of the addendum, C3 had

received from DVP an aerial photograph which accurately

reflected the service areas of the two electric service

providers.   This photograph showed that no portion of the

building site, including the additional acreage acquired by

C3, was within DVP's service area.   C3, which apparently was

unaware of the photograph's significance, failed to provide it

to Dewberry as required by the contract.

                                3
     When C3 learned that the site plan prepared by Dewberry

would not place the building within the DVP service area, it

withheld payment to Dewberry on the balance owed under the

contract.   Dewberry subsequently obtained a mechanic's lien on

the property to secure this debt.

     On May 21, 2009, Dewberry filed in the Circuit Court of

Fairfax County, C3's principal place of business, a complaint

against C3 seeking to collect the balance owed on the

contract.   On November 10, 2009, C3 filed in the same circuit

court a complaint against Dewberry alleging, among other

things, breach of contract and seeking 1.5 million dollars in

damages allegedly incurred as a result of the tire recycling

plant not being located within DVP's service area.   Both

parties sought an award of attorneys' fees and expenses under

the contract.   Ultimately, the suits were consolidated for

trial with C3's complaint nominated as a counterclaim.

     Following an extended period of discovery and pre-trial

motions, the case was set for a bench trial, limited to the

issue of liability on the complaint and counterclaim.    In this

regard, the court had entered a consent order reflecting the

parties' agreement that neither party would be required to

present evidence concerning attorneys' fees until after a

judgment had been rendered on the merits of the asserted

claims.   The consent order stated that "[a]ttorney[s'] fees

                                4
and expenses may be awarded in accordance with" the attorneys'

fees provision of Attachment B.       (Emphasis added.)

     The trial commenced on February 28, 2011, and evidence in

accord with the above recited facts was received by the

circuit court.   At the conclusion of the trial on March 10,

2011, the court entered an order awarding Dewberry judgment

for $49,459.85 on its claim.   In its summation, the court

concluded that even if Dewberry had breached the contract by

failing to discover the inaccuracy in the information obtained

from Rappahannock Electric and, thus, not providing a site

plan in accord with the criteria of the June 15, 2008

addendum, C3 could not recover on its counterclaim.       The court

reasoned that this was so because C3 had been the first to

breach the contract by failing to provide Dewberry with the

aerial photograph provided by DVP.       The court further stated

that it would consider an award of attorneys' fees, "[b]ut it

strikes [the court] that this was a legitimate, good-faith

dispute, a difference of opinion, and without making any

decision, [the court is] not likely to shift fees absent any

other evidence presented."

     On April 15, 2011, citing the attorneys' fees provision,

Dewberry filed a motion, supported by numerous billing records

and other documentation, for an award of attorneys' fees and

expenses for both the prosecution of its complaint and the

                                  5
defense of the counterclaim.   Dewberry calculated the award

due for collection of compensation owed under the second

sentence of the attorneys' fees provision to include 25% of

the judgment in addition to attorneys' fees and expenses of

$5,795.50, while it claimed $338,356.60 in attorneys' fees and

expenses for successfully defending the counterclaim.

     In response, C3 contended that although the attorneys'

fees provision required that "[t]he losing party shall pay

. . . reasonable attorneys' fees and expenses," the use of the

term "may" in the consent order had modified the contract and

allowed the circuit court the discretion to decline awarding

attorneys' fees to Dewberry.   (Emphasis added.)   C3 noted that

the court had observed that the suit involved a "legitimate,

good-faith dispute," and, thus, it contended that an award of

attorneys' fees would be a "windfall for Dewberry," while

penalizing C3 for pursuing a legitimate, though ultimately

unsuccessful, claim for breach of contract.

     C3 further contended that the attorneys' fees provision

limited any recovery by Dewberry to that available under its

second sentence.   C3 maintained that where a contract provides

for an award of liquidated cost of collection damages that

includes attorneys' fees, such an award necessarily includes

the cost of the defense of any counterclaim.

                                6
     Lastly, C3 contended that Dewberry's request for

attorneys' fees included amounts that were "unrecoverable"

because these fees related to "claims" on which Dewberry had

not prevailed.   These "claims" were "unsuccessful defenses

[that] were outside the scope of the [attorneys' fees] clause

or were unreasonable," including a pre-trial motion for

partial summary judgment and motions to compel discovery.

     In response, Dewberry maintained that the consent order

was not intended as a novation of the contract, but merely

provided for the manner of conduct of the trial.   Dewberry

further contended that because it had prevailed on all issues

regarding liability, it was entitled to recover all attorneys'

fees related to both the prosecution of its complaint and the

defense of the counterclaim and that it would be an abuse of

discretion for the circuit court not to enforce the attorneys'

fees provision as written.

     Thereafter, the circuit court held a hearing on the

motion for attorneys' fees.   On June 14, 2011, the court

issued an order with an incorporated opinion letter.    The

court first concluded that "the only logical purpose of the

[c]onsent [o]rder was to bifurcate the attorneys' fees issue

from the trial on the merits."   Nonetheless, the court further

concluded that "the 'may' versus 'shall' argument is

ultimately a distinction without a difference [because, while]

                                 7
the language of the [c]ontract is mandatory, under Virginia

law, this Court must still be satisfied that fees should be

awarded."

     The circuit court then discussed the nature of the

counterclaim, concluding that "this was a good faith dispute."

Thus, although "C3 [did] not dispute" that "Dewberry's fees

for its defense of C3's [c]ounterclaim standing alone are fair

and reasonable," the court nonetheless concluded that "given

the nature of the dispute, shifting [the burden of attorneys'

fees] to C3 is not warranted."    However, recognizing that the

attorneys' fees provision was "mandatory," the court awarded

Dewberry attorneys' fees of $18,160.46 for the prosecution of

its complaint and one dollar for the defense of the

counterclaim. 2   The circuit court did not address C3's

arguments that Dewberry could recover only under the second

sentence of the attorneys' fees provision and that Dewberry

was barred from recovering fees associated with the pre-trial

motions on which it had not prevailed.

     Dewberry filed a motion for reconsideration of the award

of one dollar as attorneys' fees and expenses for its

successful defense of the counterclaim.    Dewberry maintained

     2
       The record is not clear regarding how the amount of the
award was calculated with regard to Dewberry's complaint.
However, that issue is not presented in this appeal.

                                 8
that the court had improperly rewritten the parties' contract

through its "adoption of [a] 'good faith dispute'" standard.

Dewberry asserted that it was entitled to an award of

reasonable attorneys' fees for its successful defense of C3's

counterclaim, regardless of whether C3 had a good faith basis

for asserting that claim.

     Having previously suspended the order entered June 14,

2011, the circuit court issued a final order with an

incorporated opinion letter on July 8, 2011 denying Dewberry's

motion for reconsideration.   The court stated that while its

prior opinion letter had "take[n] into consideration the

nature of the dispute, it was to explain the circumstances

that led to the result of the dispute."   In the court's view,

although "Dewberry may have prevailed in the trial . . . it

still plainly breached its contract . . . because it failed to

provide C3 access to [DVP's service area] as it had agreed."

Thus, because both parties had breached the contract and

Dewberry had prevailed on C3's counterclaim only because C3

had been the first to breach the contract, the court reasoned

that "based on the result of the dispute, the . . . decision

to award Dewberry its attorneys' fees of $1.00 is reasonable."

     We awarded Dewberry an appeal on the following assignment

of error:

                                9
     The trial court erred by abusing its discretion in
     awarding Dewberry only $1.00 in attorneys' fees and
     expenses for its successful defense of [C3's]
     Counterclaim in contravention of clear contract
     language directing recovery by a prevailing party of
     reasonable attorneys' fees and expenses for the
     prosecution or defense of any claim.

     We also awarded an appeal to C3 on its assignment of

cross-error: 3

     The trial court incorrectly construed the contract
     when it failed to find that the second sentence of
     section twenty two of the standard terms of the
     Contract, which states "The attorneys' fees payable
     to us [Dewberry] for the collection of compensation
     you [C3] owe shall be twenty-five percent of any
     judgment or award against you and our attorney's
     fees, expenses, and collection costs," did not cover
     all of Dewberry's Attorneys' fees, including defense
     of counterclaims filed in response to Dewberry's
     action.

                          DISCUSSION

     At no time have the parties contended that the attorneys'

fees provision is ambiguous, nor is there any dispute that

Dewberry was the "winning party," as that term is used in the

contract on both its complaint and C3's counterclaim.   Under

these circumstances, this Court applies a de novo standard of

review to interpret an unambiguous provision of a contract.

PMA Capital Ins. Co. v. US Airways, Inc., 271 Va. 352, 357-58,

626 S.E.2d 369, 372 (2006).   Moreover, the contract is to be

     3
       C3 also filed a cross-appeal addressing the merits of
the underlying case. We refused C3's petition for appeal by
order. C3NS, Inc. v. Dewberry & Davis, Inc., Record No.
111778 (December 19, 2011).

                               10
"construed as written, without adding terms that were not

included by the parties."   Id. at 358, 626 S.E.2d at 372.

     "Under the so-called 'American rule,' a prevailing party

generally cannot recover attorneys' fees from the losing

party."   Ulloa v. QSP, Inc., 271 Va. 72, 81, 624 S.E.2d 43, 49

(2006).   This rule, however, does not prevent parties to a

contract from adopting provisions that shift the

responsibility of attorneys' fees to the losing party in

disputes involving the contract.    Id.

     A prevailing party who seeks to recover attorneys' fees

pursuant to a contractual provision such as the one at issue

here has the burden to present a prima facie case that the

requested fees are reasonable and necessary.   Chawla v.

BurgerBusters, Inc., 255 Va. 616, 623, 499 S.E.2d 829, 833

(1998); see also Seyfarth, Shaw, Fairweather & Geraldson v.

Lake Fairfax Seven Ltd. P'ship, 253 Va. 93, 96, 480 S.E.2d
471, 473 (1997).   We have identified several factors that are

relevant to the determination of this issue:

     [A] fact finder may consider, inter alia, the time
     and effort expended by the attorney, the nature of
     the services rendered, the complexity of the
     services, the value of the services to the client,
     the results obtained, whether the fees incurred were
     consistent with those generally charged for similar
     services, and whether the services were necessary
     and appropriate.

                               11
Chawla, 255 Va. at 623, 499 S.E.2d at 833; accord Ulloa, 271

Va. at 82, 624 S.E.2d at 49.

     Dewberry asserts that the circuit court misapplied the

guidance given in Chawla by inferring that the "whether the

services were necessary and appropriate" language permitted

the court to consider the "nature of the dispute" and apply a

"good faith" requirement to limit the prevailing party's

recovery.   Dewberry contends that a trial court's

consideration of the reasonableness of the attorneys' fees

requested should be limited to the substance and relationship

of the fees to the prosecution or defense of a claim, without

consideration of whether the opposing party had a good faith

basis for taking an adverse position at trial.   Thus, because

the court determined that the fees and expenses Dewberry

submitted for the defense of C3's counterclaim were otherwise

"fair and reasonable," Dewberry asserts that the court abused

its discretion in limiting Dewberry's recovery of attorneys'

fees for the defense of the counterclaim because it found that

the counterclaim arose from a "legitimate dispute."   We agree.

     In its June 14, 2011 opinion letter, the circuit court

expressly stated that it was limiting Dewberry's recovery

because "given the nature of the dispute, shifting [the burden

of attorneys' fees] to C3 is not warranted."   Although the

court subsequently clarified that it had "take[n] into

                               12
consideration the nature of the dispute . . . to explain the

circumstances that led to the result of the dispute," the

result of the dispute is relevant only to determining under

the contract which party is the "winning party" and therefore

entitled to seek an award of attorneys' fees.    Moreover, the

court reasoned that not shifting the burden of the attorneys'

fees to C3 was "warranted" because Dewberry had prevailed on

the counterclaim only by virtue of the affirmative defense

that C3 had first breached the contract.    This reasoning is

plainly wrong.   It is not in accord with the contract

provision providing that the "losing party shall pay the

winning party's reasonable attorneys' fees and expenses for

the . . . defense of any . . . claim . . . under this

Agreement."

     A trial court may, when determining the reasonableness of

the fees and expenses claimed by a prevailing party, deduct

from the award any fees and expenses associated with claims

and defenses the court views to be frivolous, spurious, or

unnecessary.   Chawla, 255 Va. at 624, 829 S.E. 2d at 833;

Ulloa, 271 Va. at 83, 624 S.E.2d at 50.    However, "[c]ourts

will not rewrite contracts; parties to a contract will be held

to the terms upon which they agreed."     The Bank of Southside

Virginia v. Candelario, 238 Va. 635, 640, 385 S.E.2d 601, 603

(1989).   Here, the award of one dollar as reasonable

                               13
attorneys' fees essentially required the circuit court to

rewrite the parties' contract.    It takes no analytical leap to

conclude that an award of one dollar was not contemplated by

the parties' contract.   Accordingly, we hold that the circuit

court abused its discretion in limiting Dewberry's recovery of

attorneys' fees and expenses for its successful defense of

C3's counterclaim to one dollar.

     We turn now to consider C3's assignment of cross-error.

The thrust of C3's various assertions is that Dewberry was

limited to one award of attorneys' fees rather than two and

the amount of that award was limited by the provisions of the

second sentence in the attorneys' fee provision of the

parties' contract.

     C3 maintains that Dewberry's complaint was "for the

collection of compensation" as contemplated by the second

sentence of the attorneys' fees provision and would have

included the costs of the necessary efforts to dispute C3's

claim that Dewberry had breached the contract and, thus,

excused or mitigated C3's lack of payment of compensation

otherwise due to Dewberry.   C3 contends that the costs of

these efforts would have been incurred by Dewberry even if C3

had not also sought an "affirmative recovery" through its

counterclaim.   C3 thus maintains that because there was only

one action for the collection of compensation, Dewberry was

                                 14
limited to one award of attorneys' fees and the award was

limited to "twenty-five percent of any judgment . . . against

[C3] and [Dewberry's] attorneys' fees, expenses, and

collection costs."

     C3's assertions are flawed on multiple grounds.    First,

C3's assertion that Dewberry would have been required to

respond to the claim that it had breached the contract even if

C3 had not asserted its counterclaim and sought an

"affirmative recovery" belies the fact that C3 actually sought

to recover damages for Dewberry's alleged breach that were

well in excess of those claimed in Dewberry's complaint.    The

counterclaim did not seek merely to mitigate or alleviate C3's

liability, but to impose a significant liability on Dewberry

as well.   By increasing the magnitude of the amount in

controversy, C3 necessarily increased the costs to defend a

claim that otherwise would have been presented only as an

affirmative defense to a much smaller amount in controversy.

     Second, the nature of the counterclaim expanded the scope

of the litigation far beyond a collection of compensation

dispute.   An examination of the record shows that the greater

portion of the lengthy discovery process and the nine-day

trial was devoted to the prosecution and defense of the

counterclaim.   In this context, there was never any real

dispute that Dewberry was owed compensation under the

                               15
contract, only whether it had breached the contract in a

manner that would bar it from collecting the balance due.

Indeed, while a claim of $338,356.60 in attorneys' fees for

contesting an affirmative defense to the claim for

compensation of less than one-sixth that amount would be

excessive and unreasonable, a different calculus would apply

where the same amount is expended in defending against a claim

for $1,500,000 in damages.

     Accordingly, we do not agree with C3 that because the

facts asserted to support its counterclaim might also have

served as a defense to the complaint, the entire matter was

"for the collection of compensation" and, thus, all fees to be

awarded would be subject to the second sentence of the

attorneys' fees provision.   We hold that the defense of the

counterclaim was not part of the collection action and the

circuit court did not err in failing to find that an award of

attorney's fees and expenses to Dewberry on the counterclaim

would be controlled by the second sentence of the attorneys'

fees provision. 4

     Having determined that the circuit court erred in

limiting the award of attorneys' fees and expenses for

     4
       In light of this holding, we need not address C3's
further assertion concerning the method for calculating an
award under the second sentence of the attorneys' fees
provision.

                               16
Dewberry's successful defense of C3's counterclaim to one

dollar and that the calculation of the award is not subject to

the "for the collection of compensation" clause of the

attorneys' fees provision, we must now consider what result

should obtain in this Court.   Dewberry contends that because

the court determined that the claim for $338,356.60 in

attorneys' fees and expenses was "fair and reasonable," we

should remand with instruction to award that amount.    Dewberry

further requests that upon remand it be permitted to seek an

award of attorneys' fees and expenses for the prosecution of

this appeal and defense of the assignment of cross-error.

     C3 responds that we should remand the case to the circuit

court with "instruction regarding [the] attorneys' fees that

can be awarded against" C3, but without specifically directing

the court to award the amount claimed by Dewberry.   C3

conceded at trial that it was not challenging the

reasonableness of the hourly billing rate nor the number of

hours billed by Dewberry's counsel for defense of the

counterclaim.   However, C3 maintains that it did not concede

the necessity of all the charges at trial and that the court

made no express ruling on this issue.   The record supports

this contention.   During oral argument of this appeal, counsel

explained that "there had been no reason" to contest the

necessity of individual elements of the fees in light of the

                               17
court's ultimate award of only one dollar.    Accordingly,

counsel expressly requested at the conclusion of oral argument

that the issue be remanded with instruction for the circuit

court to receive evidence as to whether all the fees claimed

were necessary to the defense of the counterclaim.

       In its opposition to Dewberry's motion for attorneys'

fees, at trial C3 clearly contested the necessity of some of

the fees claimed, specifically asserting that Dewberry should

not recover for unsuccessful motions related to discovery and

an unsuccessful motion for partial summary judgment on the

counterclaim.   While we have held that a party entitled to

recover attorneys' fees may do so only for those issues on

which it prevailed and which relate to the contract, Ulloa,

271 Va. at 83, 624 S.E.2d at 50, heretofore we have not

required the party to show that it was successful in every

aspect of its prosecution or defense related to those issues

on which it prevailed, and we decline to adopt such a rule

now.

       Rather, the question is whether, given the factors set

forth and explained in Chawla, Ulloa, and their progeny, the

fees were reasonable, necessary and appropriate to the

particular circumstances of the litigation.    Chawla, 255 Va.

at 623, 499 S.E.2d at 833; Ulloa, 271 Va. at 82, 624 S.E.2d at

49.    Merely because a party loses a pre-trial motion related

                                18
to an issue on which the party ultimately prevails does not

mean that the pre-trial motion was not appropriate at the time

it was filed and under the circumstances of the case.   It is

the province of the trial court to determine whether fees for

these services were necessary.

     We are of opinion that the circuit court's finding that

"[attorneys'] fees for [Dewberry's] defense of [C3's]

counterclaim standing alone are fair and reasonable" did not

resolve the issue whether all of those fees were necessary.

"Fair" and "reasonable," the terms used by the court in its

opinion letter, are synonymous in meaning.   Here, no evidence

was received concerning the necessity of those fees and no

express ruling on that issue was made by the court.

Undoubtedly this was because of the court's erroneous ruling

limiting the recovery of attorneys' fees on the counterclaim

to one dollar.   Moreover, we are further of opinion that the

trial court should be afforded the opportunity to exercise its

discretion to resolve this issue in the first instance rather

than for this Court to resolve the issue in this appeal.

Accordingly, we hold that while the reasonableness of the

hourly rate of Dewberry's claim for attorneys' fees and

expenses will not be subject to challenge upon remand, the

court may receive evidence on the issue whether all the fees

charged with respect to the defense of the counterclaim were

                                 19
necessary applying the guidance found in Chawla and Ulloa as

discussed herein.

                           CONCLUSION

     For these reasons, we will reverse the judgment of the

circuit court awarding one dollar in attorneys' fees and

expenses to Dewberry for its successful defense of C3's

counterclaim.   We will remand the case to the circuit court

for further proceedings to determine a proper award to

Dewberry for attorneys' fees and expenses for its successful

defense of C3's counterclaim.   Additionally, upon remand,

Dewberry may submit to the circuit court a claim for

additional attorneys' fees and expenses, and the court shall

award such fees and expenses that it determines to be

reasonable and necessary for the successful prosecution of

this appeal and defense of C3's assignment of cross-error

thereto.

                                         Reversed and remanded.

                                20