Todd Smith v. Robert Casali ( 2008 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 07-2684
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Baptist Health, doing business as *
Baptist Health Medical Center, *
*
Plaintiff, *
*
v. *
*
Todd P. Smith, M.D., * Appeal from the United States
* District Court for the
Defendant/Appellee, * Eastern District of Arkansas.
*
v. *
*
Robert Casali, M.D.; *
Central Arkansas Vascular *
Surgery, P.A., *
*
Third Party Defendants/ *
Appellants, *
*
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Submitted: May 12, 2008
Filed: August 5, 2008
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Before WOLLMAN, MURPHY, and SMITH, Circuit Judges.
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SMITH, Circuit Judge.
Dr. Robert Casali and Central Arkansas Vascular Surgery, P.A. (CAVS) appeal:
(1) the district court's1 judgment ordering them to pay contribution to Dr. Todd Smith
on the breach of contract judgment and attorney's fees and costs Smith paid to Baptist
Health Medical Center ("Baptist Health"); and (2) the attorney's fees awarded to Smith
for prevailing in the litigation against them. We affirm.
I. Background
This case returns to our court after a decision on remand from a prior appeal.
The pre-remand facts are adequately set forth in our prior opinion. Baptist Health v.
Smith, 477 F.3d 540 (8th Cir. 2007).2 In Baptist Health, we reversed the prior
judgment for Smith on his indemnity claim, concluding that the alleged letter of
indemnity did not meet the requirements for an indemnity agreement under Arkansas
law, and we remanded the case to the district court for consideration of Dr. Smith's
contribution claim. Id. at 543–44.
On remand, the district court granted Dr. Smith summary judgment on his
contribution claim, noting the general rule that all co-signers of a note must contribute
equally in discharging their common obligation and that the parties' status as
co-borrowers was established in paragraph 13(g) of the Amended and Restated
Promissory Note and Security Agreement, which read: "each of the undersigned
1
The Honorable William R. Wilson, Jr., United States District Judge for the
Eastern District of Arkansas.
2
We note, however, that our prior opinion in this case mistakenly stated that
"[t]he district court entered summary judgment in favor of Dr. Smith after concluding
Dr. Casali's letter was an indemnity agreement . . . ." Baptist Health, 477 F.3d at 542
(emphasis added). In actuality, the district court entered judgment in favor of Dr.
Smith after a two-day bench trial. See Baptist Health v. Smith, No. 04-1243, slip. op.
at 1 (E.D. Ark. Dec. 21, 2005) ("In accordance with the findings of facts and
conclusions of law announced from the bench at the conclusion of the trial of this case
. . ., judgment is hereby entered in favor of . . . Smith, M.D. and against . . . Casali,
M.D. on Dr. Smith's indemnity claim . . .").
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debtors is jointly and severally liable for the repayment of the loan . . . ." Because Dr.
Casali signed the loan agreement both individually and on behalf of CAVS, the
district court ruled that Dr. Casali and CAVS were jointly and severally liable with Dr.
Smith for repayment of the loan, and thus it granted Dr. Smith's contribution claim.
Because Smith had already repaid the loan to Baptist in the amount of $158,770.93,
the court directed CAVS and Dr. Casali to pay Dr. Smith their pro rata share of the
$158,770.93 judgment paid by Dr. Smith, plus interest.
Dr. Smith then filed a motion for attorney's fees, seeking $17,321.00 in
attorney's fees that he purportedly expended in successfully defending against Dr.
Casali's and CAVS's breach of contract claim. The district court ruled that Dr. Smith
was the prevailing party, recognized that attorney's fees were not available for
contribution, concluded that Dr. Smith was entitled to attorney's fees for his successful
defense of the breach of contract claim, and awarded Dr. Smith $12,000 in attorney's
fees against CAVS and Dr. Casali.
Additionally, Dr. Smith filed a renewed motion to amend the judgment, seeking
to have CAVS and Dr. Casali pay contribution on the $14,505.27 in attorney's fees
and costs that Dr. Smith was ordered to pay in Baptist Health's original breach of
contract action. The district court granted Dr. Smith's motion and awarded him
two-thirds of the $14,505.27 from Dr. Casali and CAVS.
II. Discussion
A. Contribution
It is undisputed that on October 7, 2002, Dr. Smith and Dr. Casali signed both
the "Amended and Restated Income Guarantee/Loan Agreement" and the "Amended
and Restated Promissory Note and Security Agreement." Dr. Casali signed both
documents individually and on behalf of CAVS. It is further undisputed that both the
amended and restated agreements were expressly retroactive to July 1, 2002—the date
that Dr. Smith's loan agreement with Baptist Health became effective—and that both
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agreements expressly superseded any prior written agreements. In the amended and
restated loan agreement, Dr. Smith, Dr. Casali, and CAVS are collectively referred to
as the "Borrower," and the agreement states that "the parties desire[d] to amend and
restate" the agreement to add Dr. Casali and CAVS "as parties to the agreement." In
the amended and restated note and security agreement, Dr. Smith, Dr. Casali, and
CAVS are collectively referred to as the "Debtor," with section 13(g) stating: "Each
of the undersigned Debtors is jointly and severally liable for the repayment of the
Loan and Secured Party may pursue any lawful remedy against any one or all of the
Debtors."
Dr. Smith's, Dr. Casali's, and CAVS's signatures made them jointly and
severally liable for the obligations created by the note and loan agreement. See Haley
v. Brewer, 248 S.W.2d 890, 891 (Ark. 1952) (stating that co-makers of a note are
jointly and severally liable for the full amount of the note); Hendrickson v. Carpenter,
199 S.W.3d 100, 103 (Ark. App. 2004) ("Co-makers on a note are jointly and
severally liable"). When Dr. Smith moved to Texas, a default occurred under the loan
agreement and Baptist Health elected to sue Dr. Smith individually for breach of
contract, which it was entitled to do. Haley, 248 S.W.2d at 891; see also Biggs v.
Davis, 43 S.W.2d 724, 725 (Ark. 1931) (stating that joint makers of a note are each
"bound to the payment of the whole amount thereof, so far as the judgment creditor
is concerned, with the right of contribution against the other [joint maker] as between
themselves"). After Dr. Smith paid the note in full, however, he was entitled to seek
contribution from Dr. Casali and CAVS as they were jointly and severally liable under
the loan and security agreements. Hazel v. Sharum, 32 S.W.2d 315, 316 (Ark. 1930)
(concluding that when one co-signer pays the whole amount of the debt for which all
co-signers were jointly liable, he is "entitled to maintain an action for contribution
against the other joint makers of the note"); Hendrickson, 199 S.W.3d at 103 ("A party
is entitled to contribution when he is jointly and severally liable on a note, and
subsequently pays the entire obligation").
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In defense, Dr. Casali and CAVS contend that the district court erred in
awarding Dr. Smith contribution because the equities of the case are not equal. See
Taylor v. Joiner, 24 S.W.2d 326, 327 (Ark. 1930) ("The doctrine of contribution is
founded upon principles of equity, and that relief is granted only when the equities are
equal . . ."); United States Fid. & Guar. Co. v. Aetna Cas. & Sur. Co., 418 F.2d 953,
956 (8th Cir. 1969) ("[I]t is settled law in Arkansas, as well as elsewhere, that
contribution is founded upon principles of equity and that relief is granted only where
the equities are equal"). As contribution is an equitable remedy, we review the district
court's imposition of contribution for abuse of discretion. See Triple Five of Minn.,
Inc. v. Simon, 404 F.3d 1088, 1095 (8th Cir. 2005) ("We review the district court's
equitable remedies for an abuse of discretion"); Morgan v. Ark. Gazette, 897 F.2d 945,
953 (8th Cir. 1990) ("We review the award of equitable relief only for abuse of
discretion").
Dr. Casali and CAVS argue that the district court failed to properly consider the
equities between the parties because, among other things, Dr. Smith intentionally
breached the loan agreement with Baptist Health by voluntarily moving to Texas, and
but for Dr. Smith's breach, Dr. Casali and CAVS would not have been liable to Baptist
Health. We reject the contention that the court abused its discretion in awarding
contribution. Both parties presented their evidence on the equities, and the issue
became largely a matter of credibility for the district court. We have no reason to
believe that the district court did not consider the equities in determining that
contribution should be awarded. See Morgan, 897 F.2d at 953 (rejecting appellant's
contention that the district court abused its discretion by not properly considering
circumstances weighing against equitable relief, stating that "[a]ll of the points urged
by the [appellant] were before the court . . . and we have no reason to believe that the
court did not consider them . . ."). We likewise find no abuse of discretion in the
district court's judgment awarding Dr. Smith contribution from Dr. Casali and CAVS
for the attorney's fees and costs that he was ordered to pay to Baptist Health.
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B. Attorney's Fees
After the district court awarded Dr. Smith contribution from Dr. Casali and
CAVS, the district court ordered Dr. Casali and CAVS to pay Dr. Smith $12,000 in
attorney's fees for his successful defense of their breach of contract case, ruling that
Dr. Smith was the prevailing party on the case as a whole. Dr. Casali and CAVS argue
that attorney's fees should not have been awarded to Dr. Smith because looking at the
case as a whole, they (Dr. Casali and CAVS) were the prevailing party because they
prevailed on Dr. Smith's indemnification claim—which sought a greater amount than
the contribution claim—and attorney's fees are not available for contribution actions.
"We review fee awards for abuse of discretion, and we review de novo the
determination of whether a litigant is a prevailing party." Salitros v. Chrysler Corp.,
306 F.3d 562, 576 (8th Cir. 2002).
Arkansas law authorizes an award of attorney's fees to the prevailing party on
a contract claim, see Ark. Code Ann. § 16-22-308 ("In any civil action to recover [for]
. . . breach of contract, . . . the prevailing party may be allowed a reasonable attorney's
fee to be assessed by the court and collected as costs."), but attorney's fees cannot be
awarded on a contribution action. See Halford v. Southern Capital Corp., 650 S.W.2d.
580, 582 (Ark. 1983) (finding court erred in awarding attorney's fees to prevailing
party in action for contribution). "Under Arkansas law, the prevailing party is
determined by analyzing each cause of action and its subsequent outcome." CJ Bldg.
Corp. v. TRAC-10, 249 S.W.3d 793, 796 (Ark. 2007). "In essence, we must look at the
case as a whole to determine whether there was a prevailing party and who that party
is." Id. "[I]n order to be a 'prevailing party,' one must prevail on the merits of the
lawsuit," and "we have construed [the] 'prevailing party' in terms of the entire case and
not in terms of particular issues or actions therein." Id. at 796–97 (citations omitted).
A party that successfully defends against a contract action may be a prevailing party
under § 16-22-308. Id. at 796. Ultimately, "under Arkansas law, the prevailing party
is determined by who comes out 'on top' at the end of the case." Id. (quoting Marcum
v. Wengert, 40 S.W.3d 230, 236 (Ark. 2001)).
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In this case, Dr. Smith asserted two claims against Dr. Casali and
CAVS—indemnification and contribution—and he prevailed on one of those claims
(contribution) while losing on the other. Dr. Casali and CAVS asserted one
counterclaim—breach of contract—and Dr. Smith prevailed on that claim. Thus,
looking at the case as a whole, Dr. Smith prevailed on two of the three issues between
these parties. He, therefore, came out "on top" at the end of the case. Thus, the district
court correctly determined that Dr. Smith was the prevailing party below. Further, the
record shows that the district court recognized that attorney's fees are not available for
contribution. The district court awarded Dr. Smith $12,000 in attorney's fees for
successfully defending against the breach of contract counterclaim. It did not abuse
its discretion in so doing.
III. Conclusion
Accordingly, the judgment of the district court is affirmed in all respects.
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