Before MARIS, GOODRICH and KALODNER, Circuit Judges.
This is an appeal from a judgment by the District Court for the District of New Jersey in litigation growing out of the performance of several contracts pertaining to the erection of buildings at Maguire Air Force Base, New Jersey.
The United States made a contract with Wortmann & Sons, Inc., for the erection of the buildings. Wortmann was the prime contractor. L. & R. Construction Co., Inc., (L & R) was a subcontractor under Wortmann. Frommeyer and Company was a sub-subcontractor under L & R. Frommeyer did work which L & R was obligated to pay for but did not. Frommeyer then sued both L & R and Wortmann*fn1 and recovered judgment against both.*fn2
In the action by Frommeyer, Wortmann filed a cross-claim against L & R, seeking indemnity for the amount that Wortmann was obligated to pay Frommeyer and for attorney fees in connection with the suit by Frommeyer. The basis of Wortmann's claim against L & R was a performance bond executed in Wortmann's favor by L & R (with American Surety Company of New York as surety), conditioned on the performance of the subcontract free and clear of liens and indemnifying Wortmann from loss, costs and damage by reason of L & R's failure to do so.
There is also involved here a cross-claim by L & R against Wortmann for money claimed due it on the subcontract.
The liability of Wortmann and L & R to Frommeyer is not disputed and is not a part of this case. Neither is there any doubt that L & R is liable on its performance bond to Wortmann for the amount of the Frommeyer judgment. The only disputed issues on this appeal are Wortmann's right to recover attorney fees from L & R on the bond*fn3 and the amount owing on the subcontract between L & R and Wortmann.*fn4
In awarding damages the trial court, hearing the case without a jury, awarded $5,000 in attorney fees to Wortmann as part of the expense of defending the Frommeyer action. This award is alleged by the appellant, L & R, to be erroneous. It says that under the law of New Jersey attorney fees cannot be recovered and cites a rule of court and numerous New Jersey decisions for that conclusion. N.J.Rules 4:55-7; State v. Otis Elevator Co., 1953, 12 N.J. 1, 95 A.2d 715; Textileather Corp. v. American Mutual Liability Insurance Co., 1933, 110 N.J.L. 483, 166 A. 214; Verhagen v. Platt, 1948, 1 N.J. 85, 61 A.2d 892, 4 A.L.R.2d 1309.
We think the appellant is confused in making this argument. It is true that, in general, when A sues B and recovers, A's attorney fees are not part of the recovery either as an item of damages or as taxable costs. McCormick, Damages § 61 (1935); Textileather Corp. v. American Mutual Liability Insurance Co., 1933, 110 N.J.L. 483, 166 A. 214. See N.J.Rules 4:55-7.
But this case does not involve the above well-settled proposition. If, in our case above put, B is under obligation to hold A harmless from claims of C, but fails to do so, then A having defended himself against C's claim may recover, as part of his damages in a suit against B, what he has had to pay out because of B's failure to perform his contract. This includes what A has had to pay his lawyer as well as other expenses.
This is a general rule and finds expression in New Jersey cases*fn5 and in federal decisions also.*fn6 See McCormick, Damages § 66 (1935).
The district court was compelled to divide what had been paid out as attorney fees between that which was spent defending the Formmeyer claim and that involving disputes between L & R and Wortmann. This was done as well as possible from the facts before the court. The ...