Mark E. Troy
Gary E. Pullin
Pullin, Knopf, Fowler & Flanagan
Charleston,West Virginia
Attorneys for the Appellants
David D. Johnson, III
Winter, Johnson & Hill
Charleston, West Virginia
Attorney for the Appellee
JUSTICE ALBRIGHT delivered the
Opinion of the Court.
1. “A circuit court's
entry of summary judgment is reviewed de novo.” Syl. Pt. 1, Painter
v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). 2. “The general principle of implied indemnity
arises from equitable considerations. At the heart of the doctrine is the
premise that the person seeking to assert implied indemnity _ the indemnitee
_ has been required to pay damages caused by a third party _ the indemnitor.
In the typical case, the indemnitee is made liable to the injured party because
of some positive duty created by statute or common law, but the actual cause
of the injury was the act of the indemnitor.” Syl. Pt. 2, Hill v.
Joseph T. Ryerson & Son, Inc., 165 W.Va. 22, 268 S.E.2d 296 (1980).
3.
“Implied indemnity is based upon principles of equity and restitution
and one must be without fault to obtain implied indemnity.”
Syl. Pt. 2, Sydenstricker
v. Unipunch Products, Inc.,
169 W.Va. 440, 288 S.E.2d 511 (1982)
.
4. The requisite elements of an implied indemnity
claim in West Virginia are a showing that: (1) an injury was sustained by
a third party; (2) for which a putative indemnitee has become subject to liability
because of a positive duty created by statute or
common law, but whose independent actions did not contribute to the injury;
and (3) for which a putative indemnitor should bear fault for causing because
of the relationship the indemnitor and indemnitee share. 5. A putative indemnitee is not entitled to reimbursement
of attorneys' fees and expenses under the theory of implied indemnification
when it has not been established that an injury has been sustained by a third
party for which a putative indemnitor bears fault or responsibility.
Albright, Justice: This is an appeal by the West Virginia Department
of Energy, Division of Environmental Protection, and James E. Pitsenbarger,
Chief of Abandoned Mine Lands and Reclamation (hereinafter referred to collectively
as “DEP”), of the December 21, 2000, order entered by Judge A. Andrew
MacQueen (See
footnote 1) of the Kanawha County Circuit Court granting
summary judgment for Ground Breakers, Inc. (hereinafter “Ground Breakers”)
on its cross- claim against DEP, resulting in DEP being held liable for the
cost of Ground Breakers' defense in an underlying civil action in which DEP
and Ground Breakers were named defendants and which was dismissed as having
no merit. DEP argues that the lower court, in deciding that DEP had a duty
to defend and indemnify Ground Breakers in the underlying suit, failed to
properly apply common law and constitutional law as it relates to implied
indemnity and also failed to make sufficient findings of fact for meaningful
appellate review. Upon consideration of the petition for appeal, the certified
record and submitted briefs, we reverse the decision of the circuit court
and remand the case for entry of an order consistent with this opinion.
Following discovery, both DEP and Ground Breakers
filed motions for summary judgment with regard to the reclamation claims.
According to both parties' briefs, Ground Breakers also filed a motion for
summary judgment as to its cross-claim against DEP.
(See footnote 3)
The lower court found the claims in the underlying civil
case to be without merit and, by orders entered on August 22, 1997,
(See footnote 4)
granted the motions for summary judgment filed by DEP and Ground Breakers.
Several months thereafter, the circuit court granted Ground Breakers' summary
judgment motion on the cross-claim against DEP by order dated December 21, 2000.
In the December 21, 2000, summary judgment order,
the lower court concluded as a matter of law that, under the equitable principle
of implied indemnity, the contract between DEP and Ground Breakers created
a special relationship between the entities whereby Ground Breakers, as a
public contractor carrying out the provisions of the contract with the State,
was an indemnitee and should not be required to bear the expense of defending
a legal action when it had committed no wrong. The lower court specifically
noted in its order that “[t]here is no requirement in this State that
there be a finding of wrongdoing on the part of the indemnitor as a prerequisite
to indemnification of the indemnitee who has incurred costs as a result of
the special nature of its relationship with the indemnitor, and through no
fault of its own.” It is from this order that DEP has appealed.
The right to indemnification, be it expressed or
implied, is based on the principle that everyone is responsible for his or
her own negligence, and, thus, anyone held responsible for the actions of
a wrongdoer should be allowed to recover from the wrongdoer. See 41
Am. Jur. 2d Indemnity § 1 (1995). Implied indemnification is an
equitable remedy developed by the courts to address the unfairness which results
when one defendant, who has committed no independent wrong, is held liable for the entire loss of a
plaintiff while another entity, which may or may not be named as a defendant
in the plaintiff's suit to establish liability, would be allowed to escape
liability even though it actually caused or was responsible for causing the
wrongdoing. Id. at §§ 2, 25. As both parties assert, the most complete discussion
of the doctrine of implied indemnification this Court has undertaken is found
in Hill v. Joseph T. Ryerson & Son, Inc., 165 W.Va. 22, 268 S.E.2d
296 (1980). In finding that the remedy of implied indemnity is primarily based
on principles of restitution, this Court in Hill relied on Restatement
of Restitution § 96 (1937), which states: “A person who, without
personal fault, has become subject to tort liability for the unauthorized
and wrongful conduct of another, is entitled to indemnity from the other for
expenditures properly made in the discharge of such liability.” We ultimately
held in syllabus point two of Hill that:
In a later case we further determined that We were not specifically called upon in Hill
or Sydenstricker to definitively set forth the elements which would
support a claim for implied indemnity or to address the propriety of awarding
attorney fees to a putative indemnitee in the absence of a finding of liability
on the underlying claim. Appellee Ground Breakers cites two cases which support
the proposition that wrongdoing by the putative indemnitor is not a necessary
prerequisite to recovery of attorneys' fees by an indemnitee under the doctrine
of implied indemnification: Booker v. Sears Roebuck & Co., 785
P.2d 297 (Okla. 1989); and Heritage v. Pioneer Brokerage & Sales, Inc.,
604 P.2d 1059 (Alaska 1979). In Booker, the Oklahoma Supreme Court
found that one of two putative indemnitees seeking reimbursement for legal
expenses was entitled to such because that indemnitee had conferred a substantial
benefit on the indemnitor by assisting at trial in obtaining a verdict favorable
to the indemnitor. The Supreme Court of Alaska ruled the award of attorneys'
fees to an indemnitee appropriate in Heritage based on its finding
that the indemnitor had a duty to defend the indemnitee in the underlying
products liability suit based on a strict liability theory. However, neither court
provided a clear reason as to why, in the context of an indemnification proceeding,
one innocent party should be held responsible for another innocent party's
attorneys' fees. We recognize that some courts have concluded that
attorneys' fees incurred by indemitees in resisting third party claims are
part of the damages an indemnitee may recover through indemnification proceedings
because the fees are foreseeable consequences of the indemnitor's wrongful
conduct. See e.g., Hanover Ltd. v. Cessna Aircraft Co., 758
P.2d 443 (Utah Ct. App. 1988); Wagner v. Beech Aircraft Corp., 680
P.2d 425 (Wash. Ct. App. 1984); Thermoid Co. v. Consolidated Products Co.,
Inc., 81 A.2d 473 (N.J. 1951); McGaw v. Acker, Merrall & Condit
Co., 73 A. 731 (Md. 1909).
(See footnote 5) Additionally, some courts
have determined that a necessary prerequisite to the recovery of attorneys'
fees by an indemnitee is the establishment that the indemnitor was or would
have been liable in the underlying liability suit. See, e.g., Krasny-Kaplan
Corp. v. Flo-Tork, Inc., 609 N.E.2d 152 (Ohio 1993); Amisub of Florida,
Inc. v. Billington, 560 So.2d 1271 (Fla. Dist. Ct. App. 1990); Blanchard
v. Villeneuve, 454 A.2d 1235 (Vt. 1982); Manning v. Loidhamer,
538 P.2d 136 (Wash. Ct. App. 1975); Bettilyon Const. Co. v. State Road
Commission, 437 P.2d 449 (Utah 1968); Rauch v. Senecal, 112 N.W.2d 886 (Iowa 1962).
(See footnote 6) The fundamental rationale
for the requirement that the liability or likely liability of a putative indemnitor
on the underlying claim must first be established was stated by the Utah Supreme
Court in Bettilyon: We find the reasoning advanced by the Utah court
in Bettilyon persuasive and particularly relevant to the case before
us since neither of the parties to the contract between DEP and Ground Breakers
has been found at fault. To this point, each of those parties has borne its
respective attorneys' fees and costs. We see no compelling reason to transfer
the costs of defending the law suit from one innocent party to another. The
risk of defending law suits arising in the ordinary course of doing business
one has freely contracted to perform is, as the Utah court indicated, an unfortunate
hazard of life. It appears just as unfair to shift that burden from an innocent
independent contractor, Ground Breakers, to the other innocent party, DEP, as it would be to attempt to shift DEP's attorneys' fees and
costs to the independent contractor, Ground Breakers. If we pursued the course
Ground Breakers proposes, all parties contracting with independent contractors,
regardless of fault, would surely be unnecessarily mired in multiple claims
for representation or reimbursement such as we find here. The State, like
many businesses and individual citizens, uses independent contractors extensively
to carry out diverse projects and activities.
The subject of this appeal is a cross-claim which was
raised in a suit initiated by the plaintiffs below
(See footnote 2) in which the plaintiffs alleged
that they sustained injuries as a result of the improper reclamation activities
of DEP, as the state entity responsible for mine reclamation, and of Ground
Breakers, as the independent contractor with which DEP contracted to carry out
the reclamation of the subject property. When Ground Breakers answered the complaint,
it filed a cross-claim against DEP seeking to have DEP assume the defense of
Ground Breakers in the underlying suit and to have DEP held responsible for
indemnifying Ground Breakers in the event that a judgment was made against Ground
Breakers in that suit.
As set forth in syllabus point one of Painter v.
Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994), “[a] circuit court's entry
of summary judgment is reviewed de novo.” We note additionally that
our review of questions of law is de novo. Syl. Pt. 1, Chrystal R.M. v. Charlie
A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995). With these standards in mind,
we turn to the issues of this appeal.
The pivotal issue we are called upon in this appeal
to consider is whether the lower court properly applied the law of this State
with regard to implied indemnity when it ruled that attorneys' fees and expenses
may be recovered pursuant to an implied indemnity theory even though the underlying
liability claim was dismissed and it was not established in that suit that an
injury has been sustained or a wrong has been committed against a third party.
The general principle of implied
indemnity arises from equitable considerations. At the heart of the doctrine
is the premise that the person seeking to assert implied indemnity _ the indemnitee
_ has been required to pay damages caused by a third party _ the indemnitor.
In the typical case, the indemnitee is made liable to the injured party because
of some positive duty created by statute or common law, but the actual cause
of the injury was the act of the indemnitor.
Id. at 22, 268 S.E.2d at 299.
One of the hazards of life
which everyone is exposed to is the possibility of being required to defend
a lawsuit. In a free country such as ours where it is the privilege of anyone
to sue anyone else to seek redress of wrongs, real or imagined, we know of
no way this hazard can be eliminated. Such consolation as there is in such
a situation can be taken from the fact that if the suit is without merit it
can be defeated. But the fact that the party charged may be innocent of the
claimed wrong and can successfully defend against such a suit does not entitle
him to pass the burden on to some equally innocent [] party.
Bettilyon Const. Co. v. State Road Commission, 437 P.2d at 450.
In light
of this determination, we find that the principles enunciated in Hill
and Sydenstricker,
compel the conclusion that the requisite
elements of an implied indemnity claim in West Virginia are a showing that:
(1) an injury was sustained by a third party; (2) for which a putative indemnitee
has become subject to liability because of a positive duty created by statute
or common law, but whose independent actions did not contribute to the injury;
and (3) for which a putative indemnitor should bear fault for causing because
of the relationship the indemnitor and indemnitee share. Applying these elements
to the case sub judice, Ground Breakers' claim for indemnification must fail
because it was not shown that an injury was sustained by a third party for which
anyone has been subjected to liability. Ground Breakers prevailed below on its cross-claim
for attorneys' fees by convincing the lower court that the doctrine of implied
indemnification should be expanded to include representation or reimbursement for the cost of defending claims
for which no injury, fault or liability to a third party has been established.
As noted, we do not agree. In light of the foregoing discussion, we find that
the lower court erred as a matter of law and hold that a putative indemnitee
is not entitled to reimbursement of attorneys' fees and expenses under the
theory of implied indemnification when it has not been established that an
injury has been sustained by a third party for which a putative indemnitor
bears fault or responsibility. Accordingly, we reverse the decision of the
circuit court.
(See footnote 7)