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Buffington v. Sasser

Citations: 363 S.E.2d 2; 184 Ga. App. 800; 1987 Ga. App. LEXIS 2388Docket: 74758

Court: Court of Appeals of Georgia; September 22, 1987; Georgia; State Appellate Court

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Robert Buffington and Robert Sasser, prior owners of separate mechanical subcontracting businesses, formed a joint venture in 1972, incorporating it as Dresco Corporation, with Buffington as president and Sasser as vice-president. Their existing businesses continued to operate independently. Dresco Corporation undertook various projects, including a subcontract at Central State Hospital in Milledgeville, Georgia. However, the joint venture was terminated in October 1972, with a written agreement dividing the remaining work between Buffington and Sasser, assigning the Milledgeville project to Buffington's company. Under the agreement, Buffington indemnified Sasser against liabilities arising from the assigned projects, specifically including performance or payment bonds related to the Milledgeville project.

In 1976, Buffington and his company were named alongside Sasser and Dresco Corporation as third-party defendants in a federal lawsuit stemming from the Milledgeville project. Sasser filed a cross-claim against Buffington, asserting his right to indemnification under their termination agreement. The federal court granted summary judgment in favor of Sasser, affirming Buffington's obligation to indemnify him for any liabilities in the litigation. Both parties were later dismissed from the federal case without prejudice. During the litigation, Sasser was represented by Stokes and Shapiro, while Buffington initially had different counsel before also being represented by the same firm with both parties' consent. Additionally, Buffington placed $34,781.97 in escrow with Stokes and Shapiro to cover any potential judgment or settlement costs related to his obligations to Sasser.

Sasser, after being dismissed from federal litigation without a liability ruling, sought reimbursement from Buffington for his legal expenses. Upon Buffington's refusal, Sasser initiated a lawsuit in Fulton County to recover these attorney fees from an escrow account, naming Buffington and the law firm Stokes and Shapiro as defendants. Stokes and Shapiro counterclaimed against Sasser and cross-claimed against Buffington to clarify their obligations regarding the escrow funds. Buffington's motion to transfer the case to Forsyth County due to improper venue was denied by the trial court, which also rejected his request for interlocutory appeal. Ultimately, the trial court ruled in favor of Sasser, granting his summary judgment motion and denying Buffington's. 

The appellate court affirmed the trial court's denial of the venue transfer, noting that Sasser and the law firm were both residents of Fulton County, making the venue appropriate under Georgia case law. It distinguished this case from a prior case relied upon by Buffington, clarifying that venue in interpleader actions can be proper where at least one claimant resides, regardless of other claimants' locations. 

Buffington also argued that any obligation to indemnify Sasser was contingent on a judgment against Sasser from a third party, and since no such judgment existed, he claimed entitlement to summary judgment. The court dismissed this argument, referencing OCGA § 51-12-32 (c), which establishes that the right to indemnity is not lost by the absence of a judgment or settlement.

In *Accord Independent Mfg. Co. v. Automotive Prods.*, the court established that a cause of action for indemnity can exist prior to a judgment. Similarly, in *Robert Co. Assoc. v. Pinkerton Laws Co.*, it was determined that a judgment fixing liability is not a prerequisite for enforcing an indemnity contract. Consequently, the trial court correctly ruled that Sasser was entitled to enforce Buffington's indemnity obligations under their termination agreement without a prior judgment against him. Buffington's motion for summary judgment, based on this reasoning, was rightly denied.

Buffington challenged the trial court's decision to grant Sasser's motion for summary judgment on three grounds. First, he claimed there was a factual dispute regarding the enforceability of the termination agreement, specifically relating to Sasser's alleged failure to transfer the Milledgeville project subcontract. However, the agreement's explicit language placed the obligation on Buffington to make the transfer, negating claims of Sasser's non-performance.

Second, Buffington raised defenses of payment, release, novation, and accord and satisfaction, based on a settlement agreement from federal litigation. This settlement included language indicating that rights of recovery were contingent on a plaintiff's recovery in that action. Nonetheless, the settlement also contained a reservation of rights clause, clarifying that Sasser's existing recovery rights against Buffington were preserved. The court emphasized that contract interpretation must consider the entire agreement, and in this case, Sasser's claim for indemnification related to costs from the federal lawsuit was already established and not contingent on the settlement's conditions. Therefore, Sasser's claim was not extinguished or diminished by the settlement agreement.

Buffington argues that the indemnity clause in the termination agreement violates public policy and is unenforceable, citing OCGA § 13-8-2 (b), which prohibits indemnifying a promisee for damages arising solely from their own negligence. However, the clause in question only seeks to indemnify Sasser from liabilities related to sub-contracts and does not cover damages caused by Sasser's negligence, nor is such indemnification claimed in the current case. The court aims to interpret the contract in a manner that maintains its validity, as stated in OCGA § 13-2-2 (4), and it is assumed that parties do not intend to break the law. Referencing case law, the court determined that the trial court correctly dismissed Buffington's public policy challenge to the indemnification clause. Consequently, the court affirms the trial court's summary judgment in its entirety, with Carley, J. concurring, and Benham, J. concurring in judgment only regarding Division 3 while fully agreeing with Divisions 1 and 2.