Zenner v. Holcomb

• Decision Date: 16 June 2009
• Docket Number: No. 35034.,35034.
• Citation: 210 P.3d 552,147 Idaho 444
• Parties: Bradley J. ZENNER and Allason M. Zenner, Plaintiffs-Respondents, v. Lance D. HOLCOMB and Jennifer K. Holcomb, d/b/a Holcomb Construction, Defendants-Appellants.
• Court: Idaho Supreme Court

210 P.3d 552

147 Idaho 444

Bradley J. ZENNER and Allason M. Zenner, Plaintiffs-Respondents, v. Lance D. HOLCOMB and Jennifer K. Holcomb, d/b/a Holcomb Construction, Defendants-Appellants.

No. 35034.

Supreme Court of Idaho, Lewiston, April 2009 Term.

June 16, 2009.

Edwin Lee Litteneker, Lewiston, argued for appellants.

Clark & Feeney, Lewiston, for respondents. Paul Thomas Clark argued.

BURDICK, Justice.

This appeal arises out of the district court's award of actual attorney fees and costs to Respondents Bradley and Allason Zenner (the Zenners) pursuant to Paragraph 20 of the construction contract entered into between the Appellants Lance and Jennifer Holcomb (the Holcombs) and the Zenners. The Holcombs appeal from the award, arguing the Zenners are not the prevailing party and, therefore, are not entitled to costs and attorney fees under the contract. Alternatively, the Holcombs argue that even if the Zenners are the prevailing party, the district court should have determined the amount of costs and attorney fees to be awarded pursuant to the criteria set forth in I.R.C.P. 54(d) and (e) respectively, rather than awarding them all of their costs and attorney fees pursuant to the contractual language. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

On June 19, 2002, the parties entered into a contract for the Holcombs to build a house on the Zenners' property. After construction was complete, the Zenners were unsatisfied with the house and made a list of several items that were defective or unfinished. Mr. Holcomb returned to the house several months later and addressed some items from the Zenners' list; however, several issues remained unresolved, including the Zenners' claims of deviations from architectural plans and water collection under the house. Mr. Holcomb refused to fix the defects.

On December 30, 2003, the Zenners filed a complaint for breach of contract against the Holcombs and requested costs and attorney fees pursuant to I.C. §§ 12-120 and 12-121. The Zenners later requested attorney fees and costs pursuant to Paragraph 20 of the contract. Paragraph 20 provided: "Attorney's fees. Should any kind of proceeding including litigation or arbitration be necessary to enforce the provisions of this agreement the prevailing party shall be entitled to have it's [sic] attorney's fees and costs paid by the other party." On August 22, 2007, after extensive discovery and mediation attempts, the Holcombs offered judgment for $25,000. The Zenners declined. On September 11, 2007, the Holcombs offered another judgment for $35,000. Again, the Zenners declined. At this point in the case, the Zenners had incurred attorney fees in excess of $46,000.

Trial began on October 1, 2007 and lasted ten days. Although the Zenners sought damages in the amount of $120,000, the jury awarded them only $40,000. On October 18, 2007, the district court entered a judgment on the verdict, ordering the Holcombs to pay the "sum of $40,000.00 with interest thereon at the statutory rate until paid, together with Plaintiff's costs and attorney fees." That same day, the Holcombs filed an objection to the court's judgment, arguing that any award of attorney fees and costs must be pursuant to I.R.C.P. 54(d)(1)(B), 54(d)(1)(F) and 54(e)(1).

On October 24, 2007, the Zenners filed a Memorandum of Costs and Affidavit of Attorney Fees pursuant to I.R.C.P. 54(d)(5). The Zenners requested $107,239.29 in attorney fees pursuant to Paragraph 20 of the contract, $8,075.12 in costs as a matter of right, and $6,140.52 in discretionary costs. In response, the Holcombs filed a Motion to Disallow Attorney Fees and Costs on November 6, 2007. On November 13, 2007, the Zenners filed the supplemental affidavit of Paul Clark, which stated that some of the attorney fees associated with this case were mistakenly entered in their Memorandum of Costs and Affidavit of Attorney Fees. As such, the Zenners amended their request for attorney fees to $106,049.29 while their request for costs remained the same.

On November 21, 2007, a hearing was held regarding the Zenners' request for attorney fees and costs. The district court held that the Zenners were the prevailing party and were entitled to their actual costs and attorney fees pursuant to the contract. Accordingly, the district court signed an amended judgment on the verdict on January 11, 2008, awarding the Zenners the full amount of attorney fees and costs requested. The Holcombs now appeal from the district court's award of attorney fees and costs.

II. ANALYSIS

The Holcombs argue the district court abused its discretion in determining that the Zenners were the prevailing party. Alternatively, the Holcombs argue that even if the Zenners were the prevailing party, the district court should have determined the amount of costs and attorney fees to be awarded pursuant to the criteria set forth in I.R.C.P. 54(d) and (e) rather than awarding them actual costs and attorney fees under the language of the contract. Each issue will be discussed in turn.

A. Prevailing Party

The Holcombs contend the district court erred in determining that the Zenners were the prevailing party. A trial court's determination of whether a party prevailed is a matter of discretion. Lettunich v. Lettunich, 141 Idaho 425, 434-35, 111 P.3d 110, 119-20 (2005). "A district court's exercise of discretion will be upheld absent a showing of abuse of discretion." Schneider v. Howe, 142 Idaho 767, 771, 133 P.3d 1232, 1236 (2006). The boundaries of the district court's discretion are guided by I.R.C.P. 54(d)(1)(B), which provides: "In determining which party to an action is a prevailing party and entitled to costs, the [district] court shall in its sound discretion consider the final judgment or result of the action in relation to the relief sought by the respective parties." To determine whether an abuse of discretion occurred, we consider (1) whether the district court correctly perceived the issue as one of discretion; (2) whether the district court acted within the outer boundaries of its discretion and consistently with the applicable legal standards and (3) whether the district court reached its decision by an exercise of reason. Sun Valley Shopping Ctr., Inc. v. Idaho Power Co., 119 Idaho 87, 94, 803 P.2d 993, 1000 (1991).

The district court began its prevailing party analysis by explaining that, even though I.R.C.P. 68 provides that an unaccepted offer of judgment is deemed withdrawn and is not admissible as evidence except in a proceeding to determine costs, the court could consider the Holcombs' offer of judgment since both parties argued its amount in consideration of whether or not the Zenners were the prevailing party. The district court went on to state:

In exercising ... discretion I consider whether or not the jury decided in the Zenners' favor, how the jury award compared to what was sought, what other damages were recoverable in addition to the jury award, the extent to which the Zenners had a choice in proceeding to trial, and what is fair considering all of these factors.

The court then stated, "[t]here is no question that the Zenners recovered. Mr. Holcomb initially did not want to pay anything for repairs. He argued for minimal damages at trial." In support of its proposition that the Holcombs were seeking minimal damages, the district court referred to the Holcombs' second offer of judgment, which was ultimately rejected by the Zenners. The court pointed out that under Rule 68(a), an offer of judgment includes "all claims recoverable, including any attorneys fees awardable under Rule 54(e)(1), and any costs awardable under Rule 54(d)(1), which have accrued up to the date of the offer of judgment," and the contract provided that the prevailing party was entitled to costs and attorney fees. As such, the district court found that the Holcombs' $35,000 offer of judgment included costs and attorney fees. Because the $35,000 offer of judgment was less than the Zenners' attorney fees alone (which at that point in the case were in excess of $46,000), the district court determined that the Holcombs sought minimal damages.

The Holcombs argue the district court was prohibited from considering their rejected Rule 68 offer of judgment in support of its prevailing party analysis for the purpose of awarding attorney fees. Rule 68 states:

(a) At any time more than 14 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, which offer of judgment shall be deemed to include all claims recoverable, including any attorneys fees awardable under Rule 54(e)(1), and any costs awardable under Rule 54(d)(1), which have accrued up to the date of the offer of judgment. The offer of judgment shall not be filed with the court, except as stated herein. If within 14 days after the service of the offer the offeree serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof, and thereupon the judgment shall be entered for the amount of the offer without costs. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. The fact that an offer is made but not accepted does not preclude a subsequent offer. When the liability of one party to another has been determined by verdict, order or judgment, but the amount or extent of the liability remains to be determined by further proceedings, the party adjudged liable may make an offer of judgment, which shall have the same effect as an offer made before trial if it is served within a reasonable time not less than 14 days prior to the commencement of hearings to determine the amount or extent of liability.

(b) In cases involving claims for monetary damages, any costs under...