Opinion
No. 56363-7-I.
November 6, 2006.
Appeal from a judgment of the Superior Court for Whatcom County, No. 00-2-00592-6, Michael E. Rickert, J., entered April 27 and June 7, 2005.
Counsel for Appellant(s), John C. Belcher, Belcher Swanson Law Firm PLLC, 900 Dupont St, Bellingham, WA 98225-3105.
Counsel for Defendant(s), Gail Raymond Smith, Jones Smith, Po Box 1245, Mount Vernon, WA 98273-1245.
Sandra K. Nicholson (Appearing Pro Se), 3775 Pincher, Bellingham, WA 98226.
Transactions Plus, Inc. (Appearing Pro Se), 8057 Anchor Parkway, Blaine, WA 98230.
Counsel for Respondent(s), Douglas Ross Shepherd, Shepherd Abbott Carter, 114 W Magnolia St Ste 300, Bellingham, WA 98225-4354.
Philip James Buri, Buri Funston PLLC, 1601 F St, Bellingham, WA 98225-3011.
Reversed and remanded by unpublished opinion per Agid, J., concurred in by Ellington and Dwyer, JJ.
Britt M. Lee sued her real estate agent Vera Jones, Coldwell Banker Miller-Arnason L.L.C., and its broker Gragg Miller for breach of contract and professional negligence arising out of six real estate transactions. Both the listings and purchase and sale agreements for these properties contained attorney fee clauses. A jury found in favor of the realtor defendants, but the trial court denied their motion for legal fees on these contracts because it found the contracts were unenforceable. The court also denied their motion for reconsideration. The realtor defendants challenge the trial court's orders, arguing they are entitled to attorney fees and costs as the prevailing parties whether or not the contracts are enforceable.
When a suit is based on a contract with an attorney fee provision, RCW 4.84.330 entitles the prevailing party to recover attorney fees. Under the holding in Labriola v. Pollard Group, Inc., the prevailing party is entitled to contract fees whether or not the contract is invalidated or found to be unenforceable. The trial court therefore erred when it denied the defendants' motion for fees because the contracts were unenforceable. But the realtor defendants can recover fees only for defending against Lee's contract claims. The contracts' fee provisions do not extend to her professional negligence claims. We reverse and remand for an award of attorney fees incurred in defending against any of Lee's contract claims on which the realtor defendants prevailed.
FACTS
Britt M. Lee listed seven properties with real estate agent Vera Jones from the firm Miller-Arnason LLC between 1997 and 1998. The listing agreement included the following attorney fee clause:
At the time the properties were listed, the real estate firm was Miller-Arnason, LLC, and Gragg Miller was one of its brokers. In 1998, during the course of those transactions, Miller-Arnason merged with Coldwell Bank and became Coldwell Banker Miller-Arnason Real Estate, LLC.
In the event either party employs an attorney to enforce any terms of this Agreement and is successful, the other party agrees to pay reasonable attorneys' fees. In the event of trial, the successful party shall be entitled to an award of attorneys' fees and expenses; the amount of the attorneys' fees and expenses shall be fixed by the court. . . .
In late July 1998, Lawrence Page made a full price, cash offer on all seven properties and Lee accepted and signed purchase and sale agreements (PSAs) on all of them. Lee offered Page owner financing for 20 percent of the purchase price. The PSAs contained the following attorney fee clause:
If Buyer, Seller, Listing Agent or Selling Licensee institutes suit concerning this Agreement, the prevailing party is entitled to court costs and a reasonable attorney's fee. In the event of trial, the amount of the attorney's fee shall be fixed by the court. . . .
Transactions Plus handled the escrow work for six of the seven transactions in November and December 1998; Sandra Nicholson was the escrow agent. Shortly after closing, Page defaulted on all six loans to the mortgage holder who foreclosed on all the properties. On January 1, 2000, Page defaulted on all six of the notes Lee held. In 2000, Lee filed suit against Page, Nicholson, Transactions Plus, Coldwell Banker Miller-Arnason, Gragg Miller, and Vera Jones. In her breach of contract and professional negligence claims against the realtor defendants, she claimed the realtors failed to provide a ready, willing and able purchaser as they promised in the listing agreements. Lee asked for attorney fees and costs under the attorney fee clauses. In their answer, the realtors requested attorney fees under the same clauses. Lee sued Nicholson and Transactions Plus for equity skimming under RCW 61.34 and a violation of RCW 19.86, the Washington Consumer Protection Act, and she sued Page for breach of contract.
The seventh transaction never closed. Lee received 80 percent of the purchase price, together with deeds of trust securing Page's notes. Unknown to Lee or the realtor defendants, Transactions Plus misrepresented the transaction by creating two sets of documents: one set showing an all cash transaction that Transactions Plus gave to the lenders, and a second set of closing statements showing the actual 20 percent carry-back it gave to Lee and the realtors.
Gragg Miller, Vera Jones and Coldwell Banker Miller-Arnason are the realtor defendants.
On January 3, 2005, the suit against Page was dismissed.
Only the realtors defended at trial. After a two week trial in January 2005, the jury returned a verdict against Transactions Plus and in favor of the realtors. According to its special verdict form, the jury found the realtor defendants were negligent but were not the proximate cause of Lee's damages.
On April 27, 2005, the court entered judgment against Transactions Plus for $45,458.57 and dismissed Lee's complaint against the realtor defendants with prejudice. At the hearing on the realtors' motion for attorney fees and costs, Lee argued they were not entitled to fees because she did not sign all of the contracts. The court awarded the realtors $200 in attorney fees but denied their motion for fees under the listing agreements or PSAs because it found the underlying contracts unenforceable, stating:
the jury did come back with a finding of negligence on behalf of the defendant realtors, and it just smacks up against the ide[a] of fairness to impose attorneys' fees against Ms. Lee when the defendant realtors certainly should have skulked out of the courtroom, and the jury thought that they did.
It just doesn't seem fair that either side should have to pick up the ticket for the other side in this particular case. I know that's not the law. Sometimes the law isn't fair. But it certainly smacks up against my, or collides violently with my perceptions of fairness if one side or the other would be ticketed with the attorneys' fees for the other side.
So I'll deny the motion for attorney's fees. . . .
The court found that, if fees had been awarded, the realtors' reasonable attorney fees and costs were $113,742.45.
The realtor defendants moved for reconsideration, arguing there was no evidence that the listing agreements and PSAs were not signed, Lee ratified the PSAs when the transactions closed, and the enforceability of the PSAs did not affect their right to recover attorney fees as a matter of law. On June 7, 2005, the court denied their motion for reconsideration. The realtor defendants' appeal both of the court's orders.
DISCUSSION
Generally, a trial court's award of attorney fees is reviewed for an abuse of discretion. But a trial court's decision on legal entitlement to fees and costs under a statute or contract with a fee provision is a question of law reviewed de novo. In an action to enforce or defend a contract that includes an attorney fee provision, the prevailing party may recover attorney fees and costs under RCW 4.84.330 when the action rises out of a contract that is central to the dispute.
Mahler v. Szucs, 135 Wn.2d 398, 435, 957 P.2d 632, 966 P.2d 305 (1998).
Mehlenbacher v. DeMont, 103 Wn. App. 240, 244, 11 P.3d 871 (2000).
Id. (citing Seattle-First Nat'l Bank v. Wash. Ins. Guar. Ass'n, 116 Wn.2d 398, 413, 804 P.2d 1263 (1991)).
Prevailing Parties
Lee asserts the realtors in this case were not prevailing parties because they defended against her negligence claim by arguing the contracts expired before closing but did not prove the contracts were unenforceable at the January 2005 trial. She also asserts they are not prevailing parties because the court found the contracts invalid and ruled against them at the April 27 hearing on attorney fees. We disagree.
First, Lee's assertion that Jones and the realtor defendants were not prevailing parties is misdirected. Under RCW 4.84.330, the term "prevailing party" means the party in whose favor the final judgment is entered. The realtors became the prevailing parties when the jury returned a verdict in their favor at trial. It is of no consequence that the realtors argued the contracts were unenforceable at trial because they bore no burden to prove the contracts were unenforceable. Second, the court held the April 27 hearing to determine whether the realtor defendants were entitled to fees based on the verdict at trial. By that time, they had already prevailed at trial. The court's findings and conclusions at this hearing have no effect on whether the realtors were the prevailing parties on the substantive issues at trial.
Phillips Bldg. Co. v. An, 81 Wn. App. 696, 702, 915 P.2d 1146 (1996).
Awards of Attorney Fees on a Contract
Both parties raise several arguments about the trial court's determination that the agreements were not enforceable. We need not reach this issue because we agree with the realtor defendants that the enforceability of the contracts does not affect their entitlement to attorney fees under RCW 4.84.330 and the parties' agreements under the holding in Labriola v. Pollard Group, Inc.
152 Wn.2d 828, 100 P.3d 791 (2004).
Lee argues Labriola supports her assertion that the realtor defendants were not entitled to attorney fees on appeal, apparently contending the court held Labriola was entitled to attorney fees only because he proved the agreement that was central to his claim was invalid. But Lee misunderstands the holding in Labriola. When an action is based on a contract containing an attorney fee clause, RCW 4.84.330 entitles the prevailing party to a fee award. It is not a matter of trial court discretion. Under the statute, if a contract "specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract or lease, shall be awarded to one of the parties, the prevailing party . . . shall be entitled to reasonable attorney's fees in addition to costs." And Labriola held that the statute applies even if the underlying contract is later found invalid or unenforceable. There, the court invalidated a non-compete agreement Labriola signed five years after he was hired because his employer failed to give him separate consideration. The agreement contained an attorney fees clause, and the Supreme Court held that, as the prevailing party, Labriola was entitled to a fee award under RCW 4.84.330 "regardless of whether the contract is invalidated in whole or in part."
In any action on a contract or lease entered into after September 21, 1977, where such contract or lease specifically provides that attorney's fees and costs, which are incurred to enforce the provisions of such contract or lease, shall be awarded to one of the parties, the prevailing party, whether he is the party specified in the contract or lease or not, shall be entitled to reasonable attorney's fees in addition to costs and necessary disbursements. RCW 4.84.330 (emphasis added).
See also Mt. Hood Beverage Co. v. Constellation Brands, Inc., 149 Wn.2d 98, 121-22, 63 P.3d 779 (2003); Herzog Aluminum, Inc. v. Gen. Am. Window Corp., 39 Wn. App.188, 196-97, 692 P.2d 867 (1984).
Labriola, 152 Wn.2d at 839-40 (citing Mt. Hood, 149 Wn.2d at 121-22).
Similarly, in this case the realtor defendants could be entitled to attorney fees even if the trial court properly ruled that the contracts were unenforceable. But this does not end our inquiry. The realtor defendants are entitled to fees expended defending against Lee's contract claim but not against her professional negligence claims. It appears from the record that Lee abandoned her contract claims at trial when she conceded the contracts were unenforceable, and the parties tried the case on a negligence rather than a contract theory. If this is correct, the realtor defendants would not be entitled to fees at trial.
We hold the trial court misapplied the law when it ruled on the realtors' attorney fees request based on its perception of fairness rather than applying the statute and the holding in Labriola. We therefore remand to the trial court to determine what fees, if any, the realtor defendants incurred in defending against Lee's contract claims. Because we conclude fees must be limited to those arising under the contracts, the trial court is not bound by the ruling it made on the amount of potential fees at the April 27 hearing. The court should enter findings and conclusions supporting its fee determination on remand.
CONCLUSION
We reverse and remand for further proceedings consistent with this opinion.
DWYER and ELLINGTON, JJ., concur.