G & D Co. v. Durand Milling Co.

240 N.W.2d 765, 67 Mich. App. 253, 1976 Mich. App. LEXIS 1177

• Court: Michigan Court of Appeals
• Decided: February 10, 1976
• Docket: Docket 22307
• Status: Published

Opinions

N. J. Kaufman, P. J.

On December 4, 1972, plaintiff G&D Company (hereinafter referred to as G&D) filed suit against defendants, Durand Milling Co., Inc. (hereinafter referred to as Du-rand) and Caro Farmers Co-op Elevator Co. On December 22, 1972, pursuant to a motion filed by Durand, the court entered an order which added Farm Bureau Services, Inc. (hereinafter referred to as Farm Bureau) as a third party defendant. G & D then filed an amended complaint which made Durand and Farm Bureau joint and several defendants. The complaint alleged breach of warranties and negligence on the part of each of the defendants in that they manufactured chicken feed, added defective ingredients to said chicken feed or sold defective feed to G & D, resulting in abnormally low egg output by the G & D chickens. Defendants denied liability.

After much discovery, a bench trial began in October, 1973. Between December 5 and December 13, 1973, while Farm Bureau’s expert witness, Dr. Scott, was testifying, the attorneys for Farm Bureau admitted that Farm Bureau was responsible for the defective feed. The trial judge entered a verdict of no cause of action in favor of Durand and Caro and granted judgment in favor of plaintiff G&D against Farm Bureau. The judge also ordered Farm Bureau to pay Durand $10,000 in order to reimburse Durand for attorney fees expended in defending the suit. On motion for judgment notwithstanding the verdict, the court set aside the awarding of attorneys’ fees only because, upon reflection, it felt that Michigan law did not support such an award. Durand appeals that holding to this Court.

It is important to note the limited scope of this appeal. The only issue before us deals with the propriety of awarding attorneys’ fees to defendant Durand. The parties agree that $10,000 represents a reasonable sum, if the fees are awardable.

It is clear that the general rule in Michigan prohibits the awarding of attorneys’ fees as an element of costs or damages. State Farm Mutual Automobile Insurance Co v Allen, 50 Mich App 71; 212 NW2d 821 (1973). However, as Allen, supra, indicates, there are some statutory¹ and judicially created exceptions to this rule. Durand relies on one such exception which, in specific cases, allows recovery of reasonable attorney fees incurred in prior litigation with a third party — not with the defendant. Briefly stated, the rule provides that:

"where the present defendant has by his wrongful conduct, be it tort or breach of contract, caused the present plaintiff to defend or prosecute previous legal proceedings, the law * * * allows the plaintiff to recover all the expense, including counsel fees, reasonably incurred by him in the prior litigation. ” McCormick, Damages, § 66, p 246. (Emphasis supplied.)²

We find this rule inapplicable to the instant case and affirm the trial court’s decision. The rule Durand asks us to supply is an exception to the prevailing doctrine that attorneys’ fees are not recoverable. As such, the rule must be construed narrowly. This narrow construction is especially important here where the Legislature and Supreme Court have seen fit to specifically prescribe, in statute and court rule, those instances where attorneys’ fees may be recovered as part of damages or expenses.

The rule expressly requires that the attorneys’ fees have been incurred in a prior action in which the present defendant was not a party. In the instant case, there is only one action. The requirement of a distinct, prior action is stressed in State Farm Mutual Automobile Insurance Co v Allen, supra, the case on which Durand places principal reliance.

We do not agree with Durand’s contention that the distinction between "prior” and "present” litigation is without merit and, in any event, is not meant to be applied in the instant case. The rule enabling recovery of attorneys’ fees is designed to prevent the injustice of a situation where a blameless party must prosecute or defend an action in which the true party at fault cannot be brought into the litigation and made to indemnify the blameless party. The rule was created to aid the party who must litigate two actions to vindicate his rights: the first because of the wrongful conduct of a third party and the second for indemnity from the wrongdoer. By allowing attorneys’ fees from the first action to be recovered in the second, the blameless party is made whole, put where he would have been but for the wrongful acts.

Where, as here, the party at fault could be joined in the first action, the inequitable situation does not exist. The blameless party has immediate recourse, and application of the rule is unnecessary. In such cases, other jurisdictions have refused to invoke the rule. Armstrong Construction Co v Thompson, 64 Wash 2d 191; 390 P2d 976 (1964), Bonwit Teller & Co of Philadelphia v Frank Staub Furs, 208 Misc 589; 143 NYS2d 801 (Sup Ct, 1955).

We should not blindly apply a rule designed to be construed narrowly. Carried to its logical extreme, the attorney’s fee rule will cause the results propounded by our Brother Kelly’s dissent and by the panel in Dassance v Nienhuis, 57 Mich App 422; 225 NW2d 789 (1975). Both cases artificially divide a single action into separate actions to fit within the rule. In Dassance, an alleged tortious interference with contract caused an action for specific performance of a contract to purchase realty. Plaintiffs amended their complaint to add the alleged wrongdoer with a claim in tort. The cases were consolidated and tried together. This Court allowed attorneys’ fees for the specific performance action because it deemed it a "prior action”. What if the interference with contract suit had been instituted first? Although the posture of the litigation would be the same, according to the panel’s reasoning, attorneys’ fees could then not be recovered.

In the instant case, Judge Kelly would hold that Durand may collect for fees incurred before Durand impleaded Farm Bureau. With such precedent, a future party in Durand’s position would be foolish to implead an indemnitor. The longer the alleged wrongdoer remains out of the case, the more attorneys’ fees could be charged against him. If the other party to the action did not bring in the third party wrongdoer or if the third party could not intervene pursuant to GCR 1963, 209, needless and repetitious litigation would be encouraged.

We find equally as important the fact that the attorney’s fee rule is intended to be applied where the party at fault is guilty of malicious, fraudulent or similar wrongful conduct, not of simple negligence as is claimed here. The few relevant cases in this jurisdiction bear out this distinction: Oppenhuizen v Wennersten, 2 Mich App 288; 139 NW2d 765 (1966) (fraud), Fleischer v Buccilli, 13 Mich App 135; 163 NW2d 637 (1968) ("unlawful acts”, "fraud and malice”, at 139), and State Farm Mutual Automobile Insurance Co v Allen, supra (fraud and forgery). The Restatement of the Law, Torts, §914, in explaining the attorney’s fee rule offers three examples, all concerning fraud.

That allegations of negligence should not require the application of the attorney’s fee rule is demonstrated by the instant facts. It seems to us that, in the instant case, Farm Bureau was under no duty to Durand. As a defendant and as a third party defendant, Farm Bureau had every right to require both defendant Durand and plaintiff G&D Company to prove their cases. The burden of proof rested on Durand and G&D, not on Farm Bureau. Durand had the same opportunity to discover, through interrogatories and depositions, the evidence which exculpated it as did Farm Bureau. We should not reward Durand for its inability to discover this evidence on its own. In addition, whether Durand was released from liability was a matter within plaintiff’s power and was not up to Farm Bureau. Because both Durand and Farm Bureau could each be liable under warranty theory, if G & D had sought to recover from Durand alone, Farm Bureau could do nothing to get Du-rand out of the case.

Affirmed. Costs to Farm Bureau.

J. H. Gillis, J., concurred.

1 "By statute or court rule, Michigan has provided for the recovery of attorneys’ fees in special classes of litigation e.g., GCR 1963, 726 (divorce or separate maintenance); GCR 1963, 749.4, 750.4 (partition); MCLA 451.810(a)(2); MSA 19.776(410)(a)(2) (Blue Sky Law suits for rescission); MCLA 570.12; MSA 26.292 (mechanic’s liens); MCLA 600.2431(2); MSA 27A.243Í(2) (foreclosure by advertisement); MCLA 600.2435; MSA 27A.2435 (judgment creditor proceedings); MCLA 600.2425(1); MSA 27A.2425(1) (action to abate a nuisance commenced without reasonable ground or cause; 'attorneys’ fees are proper costs’); GCR 1963, 526.7, 116.5, 117.3 (filing an affidavit opposing a motion for summary or accelerated judgment without good faith and for purposes of delay); GCR 1963, 306.7 (failure of moving party to subpoena witness to be deposed or to attend and proceed with deposition); and GCR 1963, 313.1(3) (refusal to admit facts and genuineness of documents); GCR 1963, 111.6 (unwarranted allegations and denials); GCR 1963, 816.5 (vexatious appeals).” State Farm Mutual Automobile Insurance Co v Allen, 50 Mich App 71, 75; 212 NW2d 821, 824 (1973). (Footnote omitted.)

2 See also Anno: Right to Recover as Damages Attorneys’ Fees Incurred in Earlier Litigation with a Third Person Because of Involvement Therein Through a Tortious Act of Present Adversary, 45 ALR2d 1183, Anno: Attorneys’ Fees Incurred in Litigation with Third Person as Damages in Action for Breach of Contract, 4 ALR3d 270, Restatement of the Law, Contracts, §334, Restatement of the Law, Torts, § 914.