City of Richmond v. County of Henrico

Hudgins, J.,

delivered the opinion of the court.

The rehearing, granted to the judgment entered on April 22, 1946, pursuant to the principles announced in the opinion published in 185 Va. 176, 37 S. E. (2d) 873, was limited to the question of the costs incurred in this court and in the lower court.

The allowance of costs depends entirely upon statute, as no costs were allowed at common law. 4 Minor’s Institutes, 2 Ed., p. 874. Chapter 185 of the Code of 1849, pages 704-5-6, contains sixteen sections covering the allowance of costs both in the trial and in the appellate courts. Section 8 of this chapter is the pertinent section controlling the allowance of costs in the trial court and is as follows: “Except where it is otherwise provided, the party for whom final judgment is given in any action, or in a motion for judgment for money, whether he be plaintiff or defendant, shall recover his costs against the opposite party; * * * .” This provision is still the law. It was carried in section 3545 of the Code of 1887, and is now a part of section 3525 of the Code of 1919.

This court has consistently held that the provisions of this section are applicable to the costs in the trial court and not to costs in this court.

Plaintiff, in Scott v. Doughty, 130 Va. 523, 107 S. E. 729, brought an action against Doughty to recover the sum of $406.70, the amount of costs expended by him in this court on two appeals in the same case (Whealton v. Doughty, 112 Va. 649, 72 S. E. 112, and 116 Va. 566, 82 S. E. 94). Doughty contended that she was not liable to Scott for any part of the costs expended by him on appeal because, on the third appeal of the same case, this court affirmed the judgment awarded her by the trial court (Scott v. Doughty, 124 Va. 358, 97 S. E. 802). It was held that Scott, under the provisions of Code, sec. 3528, was entitled to recover the amount of costs expended by him on the two successful appeals of the same case, and that, although two judgments in her favor in the same case had been reversed by this court, Doughty was entitled to recover from the plaintiff the total costs expended by her in the three trials of the same case under the provisions of Code, sec. 3525. The amount of the final judgment awarded Scott was the difference between the costs of the three trials and $406.70, the amount of his costs expended on the two appeals. In other words, the party who ultimately prevails in the trial court is entitled to recover the total costs incurred in that court.

The mandatory language of the statute and the former positive decisions of this court establish one incontrovertible fact—that the award of costs in the lower court and the award of costs in this court are two separate and distinct matters and are controlled by different statutes^*

The statute controlling the allowance of costs in this court, as it appeared in the Code of 1819, read: “A clear and concise state of the case of each party, in an appeal, writ of error or supersedeas, with the points intended to be insisted on, signed by his counsel, and printed, (the expense whereof shall be taxed in the bill of costs,) shall be delivered to every judge, time enough before the hearing, for his consideration; but the court, if this be neglected, may nevertheless hear and determine the matter, and may give such decree, or judgment, if it be not affirmed, or reversed in the whole, as the court, whose error is sought to be corrected, ought to have given; (affirming in those cases, where the voices on both sides shall have been equal;) with an allowance of the costs of appeal to the party prevailing, to be certified to the court from which the matter was removed; who shall enter it as their own, and award execution thereupon accordingly.” Revised Code of 1819, vol. 1, p. 194.

The provisions of this act regarding costs were condensed and codified in the Code of 1849, ch. 185, secs. 10 and 11, to read as follows: “10. The laws of costs shall not be interpreted as penal laws; nor shall any thing in this chapter take away or abridge the discretion of a court of equity over the subject of costs, except as follows:

“11. In every case in an appellate court, costs shall be recovered in such court by the party substantially prevailing.”

These sections, as thus codified, have remained unchanged. See Code of 1887, secs. 3547 and 3548; Code of 1919, secs. 3527 and 3528. They apply to suits in chancery as well as to actions at law.

In Ficklen v. Danville, 146 Va. 426, 435, 131 S. E. 689, 132 S. E. 705, which was a suit in equity, Judge Crump, speaking for the Special Court of Appeals, said: “The allowance of costs depends entirely upon statute, no costs being allowed in any case at common law. Section 3528 of the Code of Virginia provides in mandatory terms that, in every case in an appellate court, costs shall be recovered by the party substantially prevailing. No other provision being made for the recovery of costs, they can only ‘be allowed in favor of either party in this court, in cases in which there is an adjudication, and then to the party ‘substantially prevailing.’ Scott v. Doughty, 130 Va. 523, 107 S. E. 729.”

This statutory distinction governing costs in the trial court and in the appellate court is emphasized in the statute providing the procedure for cities and towns to enlarge their corporate limits. The pertinent language is found in Code 1942 (Michie), sec. 2957, which provides: “Whenever a city or town asks for the annexation of any such territory, said fees and all other court costs shall be paid by said city or town except such as may be incurred on appeal, when the court shall determine by whom said appellate costs may be paid.” This mandate is repeated in section 2961, which allows an appeal from the final judgment of the annexation court and provides that “the costs in the Supreme Court of Appeals shall be awarded to the party substantially prevailing.” When we awarded the costs in the case of Henrico County v. Richmond, 177 Va. 754, 15 S. E. (2d) 309, we were simply following the mandate of the statute. But because we held that the city of Richmond substantially prevailed and therefore was entitled to recover its costs expended in this court, such holding did not relieve the city of its obligation to pay all costs incurred in the lower court.

These were the well settled rules governing the allowance of costs when the General Assembly, in 1940, adopted chapter 390, amending and enlarging the statute pertaining to the annexation of territory by cities with a population in excess of 150,000. This act is carried in Code 1942 (Michie) as section 5222k, and provides, among other things, that when the works of public improvement or utility have been installed in any subdivision of the county according to plans and specifications approved by certain city officials, and subsequently such subdivision is annexed to the city, all such improvements and utilities shall become the property of the city free and clear of all liens and encumbrances. It is also provided that such city shall pay the owners the “fair value” of such improvements and utilities “as of the effective dáte of such annexation.”

The city and the owners of such improvements and utilities are given six months in which to reach an agreement upon the fair cash value. In the event that no such agreement is made within that time, the owners are given the right to file a petition in the pending annexation cause to recover from the city the fair cash value of such improvements and utilities. Upon the filing of such petition, the three-judge annexation court is authorized, as in condemnation proceedings, to appoint appraisers who shall determine and report to the court the fair cash value of the properties involved. The court may increase, decrease or affirm the award of the appraisers. The pertinent provision of this act governing the allowance of costs is as follows: “Said appraisers shall receive such compensation as the court of their appointment shall fix, which, together with all other costs incident to such proceedings, shall be borne as such court in its discretion may determine.”

No agreement was reached within the six months. Windsor Farms, Inc., and the Grove Improvement Corporation, acting under the authority of the statute, filed their petition in the case of Richmond v. County of Henrico. Among other things, the Grove Improvement Corporation, in paragraph four of its petition, alleged that it “caused to be constructed approximately 8,825 feet of water lines and a like amount of gas lines, the approximate fair value of which was as of December 31, 1941 (the date of the final order in the annexation proceedings), about $36,000.00, and 9,368 feet of sewer lines, the approximate fair value of which was as of December 31, 1941, about $17,000.00, and all of which said works are public improvements or: utilities and are of that nature which the City of Richmond had theretofore owned or operated within its limits, and nearly all of which are located in or under streets or alleys made a part of said City by the said annexation decree of this Court which became effective at midnight on December 31, 1941, and that on that date all of said public improvements or utilities became the property of said City free of all liens and encumbrances, and that it owes your petitioner therefor with interest from said last named date.”

To this petition the city of Richmond filed an answer and, among other things, said: “The City of Richmond is not advised as to the truth or falsity of the. allegations contained in paragraph 4 of said petition, and calls for strict proof of the same, except that the City of Richmond expressly denies that the approximate fair value of water lines and gas lines described therein was as of December 31, 1941, about $36,000.00, and expressly denies that the approximate fair value of the sewer lines therein decreed was as of the same date about $17,000.00, and expressly denies that it owes petitioner any interest, and except that the City of Richmond admits that the public improvements or utilities therein described became the property of the said city free of all liens and encumbrances as of midnight December 31, 1941.”

Similar issues were joined in the pleadings filed by Windsor Farms, Inc., and the City of Richmond.

These were actions for money judgments against the city of Richmond on a specific liability created by law. The city did not specifically deny its liability nor did it admit that it was due either of the parties any sum certain. It did not pay, or offer to pay, any sum into court. The general rule is that, when a defendant admits liability for an amount less than that alleged against him, he may tender or pay into court the full amount that he admits to-be due plaintiff, plus the costs incurred to that date. If, upon final adjudication, plaintiff recovers no greater sum than defendant has paid into court, he is awarded no costs, but if he recovers a sum larger than that admitted to be due, all costs are awarded to him.

The annexation court appointed three outstanding experts on public improvements and utilities, who, after personal inspection and hearing voluminous testimony, filed a report fixing the fair cash value of the properties involved. For the purpose of reducing the amount of its liability, as determined by the appraisers, the city of Richmond filed the following exceptions to the appraisers’ report:

“1. The findings of the appraisers are contrary to the law as contained in the instructions of the court and are not based on or supported by the evidence introduced before them.

“2. The conclusion of the appraisers that the depreciated reproduction cost of the utilities as of December 31, 1941, under conditions then existing, was the sole criterion of fair value, is erroneous.

“3. It is the function of the court and not the appraisers to interpret the law applicable to the finding of fair value. The appraisers, therefore, erred in attempting to interpret Chapter 468 of the Acts of 1924, as amended by Chapter 390 of the Acts of 1940. The construction placed upon the aforesaid act was likewise erroneous.

“4. It is the function of the court and not the appraisers to interpret the law applicable to the finding of fair value. The appraisers, therefore, erred in attempting to interpret the ordinance of the Council of the City of Richmond approved February 12, 1925, and the contract made pursuant thereto by Windsor Farms, Incorporated, and the City of Richmond. The construction placed upon the aforesaid ordinance and contract was likewise erroneous.

“5. The appraisers erred in concluding that the fair value of the utilities in question was based solely on the physical properties going to make up those utilities.

“6. The appraisers erred in interpreting and applying the instructions of the court, especially Instruction No. 4, wherein they were told that they should consider all the facts and circumstances which reasonably throw light on the ascertainment and determination of fair value, in that they disregarded undisputed factors relating to fair value proven by uncontradicted evidence.

“7. The amounts ascertained by the said appraisers to be the fair value of the said utilities are grossly in excess of the actual and true fair value of the said utilities.”

Each of the seven exceptions was overruled and several exceptions filed by the owners to the report were sustained.

The fact that the liability of the city is created by law and not by its specific promise to pay does not distinguish this case from any other in which one side in good faith is seeking to recover as large a sum as possible and" the other side in good faith is seeking to prevent any recovery or to minimize its liability. If the general statutory rule governing the allowance of costs is applied, the city clearly is liable for costs incurred in the trial court.

However, it is contended that the general rule does not apply because the statute creating the liability provides that all -costs “shall be borne as such court (the annexation court) in its discretion may determine.” This three-judge court, exercising the sound judicial discretion expressly imposed upon it, declared: “The landowners having substantially prevailed, the City of Richmond will pay the cost of this proceeding.”

It will be noted that the discretion as to costs is to be exercised by the three-judge court and not by the Supreme Court of Appeals of Virginia. This discretion, when exercised, cannot be disturbed by this court unless such discretion has been abused or “palpable error” is apparent.

“When the awarding of costs is discretionary with the trial court and if no abuse of discretion is disclosed by the record, an appellate court will not disturb a judgment which awards costs” to either litigant. 14 Am. Jur., p. 19.

Judge Prentis, in Gilmer v. Fleenor, 151 Va. 117, 124, 144 S. E. 458, said: “It is contended that the court should not have required the defendants to pay the costs. It may be, in view of the facts of this case, that the costs should have been apportioned, or paid out of the partnership funds. # # # This court rarely revises the discretion of the trial courts as to costs, and we perceive no sufficient reason for making this case an exception.”

Lord Mansfield said that discretion, “when applied to a court of justice, means sound discretion guided by law. It must be governed by rule; it must not be arbitrary, vague and fanciful, but legal and regular.” Harris v. Harris, 31 Gratt. (72 Va.) 13.

The statute imposes no greater duty upon the landowners to agree with the city than upon the city, to agree with the landowners. The communications of the parties, in an attempt to reach an agreement, were not pertinent to the controversy, nor were they made a part of the record. It is just as logical to surmise that it was the fault of the city as it is to surmise that it was the fault of the landowners that the parties did not reach an agreement within the six-months’ period. In either event, at whose door to lay the blame is nothing more than a surmise or a guess.

The amounts of the judgments were neither as large as the landowners sought to obtain, nor were they as small as the city tried to make them. The three-judge court considered the appraisers’ report, the evidence submitted therewith, the arguments of counsel on the exceptions, and evidently reached the conclusion that both parties to the litigation had acted in good faith in presenting their claims and evidence to support them. On the record thus made, it determined that the landowners were the prevailing parties and, as such, entitled to recover the costs.

“The ‘prevailing party’, within the meaning of the general rule that such a party is entitled to costs, is the party in whose favor the decision or verdict in the case is or should be rendered and judgment entered, and in determining this question the general result should be considered, and inquiry made as to who has, in the view of the law, succeeded in the action.” 20 C. J. S., Costs, section 8, p. 268.

“The true and only test of liability for costs depends upon the nature of the final judgment, and the party cast in the suit is the one upon whom the costs must fall.” Ritchie v. Ritchie, 192 N. C. 538, 135 S. E. 458, 459.

The following is a summary of the city’s defensive tactics:

(1) The city failed, within the six months’ period, to pay to the owners the fair cash value of the property involved;

(2) the city, in its pleadings, did not admit, pay or offer to pay any part of its liability; (3) it introduced evidence tending to show and argued that the property had no fair cash value within the meaning of the statute; (4) the city was unwilling to pay the amounts determined by the appraisers to be the fair cash value; and (5) it filed exceptions to the report and strenuously contended before the three-judge court that the sums fixed by the appraisers should be reduced. Each and every one of these defenses was rejected, but the city, in making these defenses, and the landowners, in meeting them, found it necessary to incur taxable costs of approximately $10,000. The final result was that two judgments were entered against the city, one in favor of Windsor Farms, Inc.,-for $275,521, with interest from July 1, 1942, and the other in favor of Grove Improvement Corporation for $35,217, with interest from July 1, 1942. Under these circumstances, it is clear that the landowners are the parties “substantially prevailing” in the trial court.

After the city’s defenses had been rejected and the three-judge court had entered its judgments, the city decided to pay into court the amount of the award entered against it for Windsor Farms, Inc., and to seek a reversal of that part of this judgment that allowed interest on the principal sum. The city also sought a reduction of the principal amount and a disallowance of any interest awarded to Grove Improvement Corporation. On review, this court sustained the city’s contentions. This brings us to the question of the allowance of $614.10, the costs incurred by the city in this court. As stated, the allowance of costs in the appellate court is fixed by statute, which declares that “in every case in an appellate court, costs shall be recovered in such court by the party substantially prevailing.” Code, sec. 3528.

The language of Code, sec. 5222k, giving the right to the city or the landowners to appeal in this class of actions, does not affect or change the general rule governing costs incurred in this court. This court, on the appeal, modified the judgments of the trial court to the extent that the city was relieved of paying interest from July 1, 1942, on either judgment, a saving to the city of approximately $67,000 on the judgment awarded Windsor Farms, Inc., and approximately $8,452 on the judgment awarded Grove Improvement Corporation. In addition, the judgment of $35,217 awarded-Grove Improvement Corporation was reduced to $28,945, a reduction of $6,272. These facts bring the city within the purview of the statute as the “party substantially prevailing” in the appellate court.

Where a final judgment is rendered on appeal for the appellant, he is entitled to recover his costs both in the lower court and in the appellate court, because, under section 3525, there is no final judgment against him in the trial court and he is the “party substantially prevailing” in the appellate court within the meaning of section 3528.

No final judgment was entered on appeal. This court remanded the case and directed the trial court to enter a judgment against the city for Windsor Farms, Inc., in the sum of $279,521 without interest and to enter a judgment against the city for the Grove Improvement Corporation in the sum of $28,945 without interest. In any view of the case, these two private corporations were the successful litigants in the trial court and, in that sense, they were the prevailing parties, each of whom obtained judgment in a substantial sum against the city.

While the Virginia statute on the subject is controlling, it is interesting to note how the courts have construed pertinent statutes on costs. See 20 C. J. S., Costs, sections 310, et seq.; and 14 Am. Jur., Costs, sec. 95.

“In many jurisdictions it has been held that where appellant succeeds in reducing the amount of the judgment and the reduction is a substantial one, he will ordinarily be allowed the costs of appeal, as the prevailing party, * * (Italics supplied.) 20 C. J. S., Costs, section 323, pp. 569, 570. See notes 34, 35 and 36.

“The fact that an appellant has secured a modification of the judgment will not entitle him to recover the costs of the trial below, where he made no tender there of the amount for which recovery was finally adjudged; * * * .” 20 C. J. S., Costs, section 323, p. 571. See note 34, p. 569.

The landowners are entitled to recover of the city the full amount of the costs, without interest, incurred in the trial court, and the city is entitled to recover the entire costs, without interest, incurred in this court: To this extent only the former opinion and judgment are modified.

Modified and remanded.

* For the construction, of Code, secs. 3521 and 3522, regarding costs on the award of a new trial by the trial court, see Southern R. Co. v. Hansbrough, 107 Va. 733, 60 S. E. 58; Lemons v. Harris, 115 Va. 809, 80 S. E. 740.